In counting employees to see if the employer has less than 100 employees and may offer a SIMPLE IRA plan, does any one know of any guidance which would allow a U.S. subsidiary (which is part of a control group with a foreign entity) to disregard the foreign employees who are employed outside the U.S.?

As I read IRS Notice 98-4, Q & A B-1, employees who can be excluded from participation in the SIMPLE under Code Section 410(B)(3) (union employees, and nonresident aleins with no US source income) still have to be counted for purposes of the 100 employee threshold. This would preclude the U.S. sales office of a foreign corporation from offering such a plan.

What policy purpose can be served by precluding a small sales office of a foreign entity from offering a SIMPLE?

Employer has an 10/31/99 plan year end. We added 401(k) provisions (safe harbor 401k) effective 7/1/1999. I'm wondering if we have a problem. The regs say that safe harbor is effective for plan years beginning in 1999. Since we tried to do for only part of the plan year (7/1/99-10/31/99) do we have a problem? If so, exactly what?

Are we not really a safe harbor and must pass ADP? If we made the 3% safe harbor nonelective contribution and now have to test for ADP and fail (only by $26.50), can we use the 3% as a QNEC to pass ADP?

Any suggestions?

I opened a Roth IRA account this year and have saved up enough cash to pay for the taxes to convert my traditional IRA into a Roth IRA. Is that allowed?"

Can anyone tell me how I can calculate how much money (approximately)I will have in my deferred comp when I retire? $100.00 every 2 weeks for the next 20 years, Also how much do you recommend putting in a deferred comp plan? I have a pension plan with the State of Illinois 80% of salary at retirement so it's not my only means of retirement funds...

We have a situation where the spouse of the owner has worked for the company for 20 years without compensation (worked full time 40 hours a week). As of /1/1/2000 she started drawing a salary. What is her service for eligibility, vesting, accrual?

Company sponsors a DC with outstanding loans. I don't think it matters, but it could be a 401(k) or a PSP. Company shuts down and files a 5310 for its plan. During the waiting period for an approval letter, how are loan repayments handled? There is no more payroll.

Here are a couple of thoughts:

1) Amend the plan to provide that, as soon as administratively possible following the plan termination date, any participant with an outstanding loan will receive a partial distribution in an amount sufficient to offset the amount due, and the remaining portion will be distributed after IRS approval. (Participant is fully vested, of course, due to plan termination.) It seems we would have a valid distributable event - plan termination - and we would be following the plan's terms (as amended) to distribute to a segment of the participants.

Possible problems - would this distribution option have to meet the 410(B) BRF test? Would this idea be any better if a full distribution (and offset) was made to participants with loans?

2) Another idea - suspend payments until 5310 approval. Unless there is an exception to the regs, the cure period would most likely expire before IRS approval of the 5310.

There is no new plan to roll in to.

What can be done?

I would appreciate any insights from out there in "Loan Land."

I have a client with a 401(k) plan who was self-employed from 1/1 - 3/31 and then he incorporated 4/1. He will have Schedule C income through 3/31 and wages through 12/31. If he earns over $170,000 from 4/1 - 12/31 do I have to do any self-employment calculations for the portion of the year that he was self employed? In other words can he allocate and deduct his 2000 plan year contribution under the corporation only or is it prorated between self employment income and corporate income?

I cannot find anything on this topic, but I am inclined to think that I need to prorate for the period that he was self employed.

Thank you.

I am student completing a major in Administration of Human Resources, and what I would like to know are some general advantages and disavantages of the 401k retirement plan.

A non-owner plan participant terminates employment past age 70-1/2 and is now required to take the minimum required distribution from the Plan. This person also has money in a traditional IRA. Does the MRD have to be calculated and taken separately from both the Plan and the IRA, or can they be taken entirely from either the Plan or the IRA? Does it matter if the IRA is a Roth IRA?

We have two employees who are convinced that if we give them

the amount the employer paid for LTD premiums for the year

they can include the amount as taxable income on their W-2

and pay the taxes on that income, thereby rendering any LTD

benefits received in future non-taxable.

I have my doubts. Any thoughts?

Can a COBRA QB (the former Employee) with COBRA family coverage drop a QB spouse at any time (adversarial situation, but not a divorce or legal separation)? Only at Open Enrollment? With or without the QBspouse's knowledge and consent? What is the Plan's responsibility to notify the QB spouse of being dropped from COBRA coverage at Open Enrollment? Or anytime? What are the "dopped" QB spouse's legal right to continue COBRA coverage?

If a government plan is over-funded, do the employers and/or employees have any right to the excess contributions?

2001 ERISA OUTLINE Book, ELECTIVE TRANSFERS page 6.42. This discussion of elective transfers is not a scenario that our company has been exposed to. It is not clear from the examples as to when this type distribution would occur.

Is it only when the employer maintains more than 1 qualified plan?

Does anybody know a good site where you can check the state taxability of retirement or IRA distributions? I couldn't remember if IRA distributions were taxable in Virginia (I'm from Illinois), and could not find a place to check whether or not they were.

Thanks for any replies.

Are the release of new 457 regs imminent? If so, will plan loans and taxability of distributions pursuant to domestic relations orders be addressed?

David

Does HIPAA, specifically pre-existing condition exclusion, apply to individual health plans when an employee who was covered under the group plan is terminating and wants to convert directly to the individual plan? This employee has a work-related illness and is being told she cannot get individual coverage due to the pre-existing condition.

Kathy

Do the new rules for calculating RMDs apply to distributions to beneficiaries when the IRA owner died before 2000? I was under the impression that they did, but have heard that there are some people who think they don't.

In a top heavy DC plan with multiple entry dates, can the TH minimum allocation be based on 415 (or W-2) compensation as a participant, rather than a full year comp.?

The ability to do this is not in the 416 regs. Is there a specific cite for allowing this?

Is there a private letter ruling from IRS, permiting the use of a governmental trust to provide tax advantages for assets set aside for eligible medical expenses in retirement? ie, a retirement health savings program that is pre-funded. Who do I call or where can I research this topic??? Thanks!

-----

The Safe Harbor if 3% can be used in cross testing as long as integration is not imputed on it. This means a spread sheet to add different pieces together - 401(K) plus SH plus (PSP with integration) for ABPT, drop the 401k but keep SH for rate group test.

-------

Somebody posted the above message, I believe it was rcline46.

The posting concerns me, we pay a service company for legal advice and they provided us counsel such that:

SH is not included in the rate group/classification test but it is included in the ABPT?

Can I please get 2nd, 3rd, and 4th opinions?

Which way do you think? And where in the regs can I find documentation to back it up?

I am extremely new to cross-testing and very concerned that I may do it wrong.

All opinions welcomed!

Thank you - ZM