Does anyone have an opinion about what extent a Form 5310 determination letter provides plan document reliance? A GUST amendment is of course required to get the 5310 favorable letter. The determination letters I have received usually mention the GUST amendment in the letter. If you have a favorable 5310 letter, is it overkill to restate the plan into a GUST document?

A daughter complained to her father about her life and how things were so hard for her. She did not know how she was going to make it and wanted to give up. She was tired of fighting and struggling. It seemed as one problem was solved a new one arose.

Her father, a chef, took her to the kitchen. He filled three pots with water and placed each on a high fire. Soon the pots came to a boil. In one he placed carrots, in the second he placed eggs, and the last he placed ground coffee beans. He let them sit and boil, without saying a word. The daughter sucked her teeth and impatiently waited, wondering what he was doing. In about twenty minutes he turned off the burners. He fished the carrots out and placed them in a bowl. He pulled the eggs out and placed them a bowl. Then he ladled the coffee out and placed it in a bowl.

Turning to her he asked. "Darling, what do you see."

"Carrots, eggs, and coffee," she replied.

He brought her closer and asked her to feel the carrots. She did and noted that they were soft. He then asked her to take an egg and break it. After pulling off the shell, she observed the hard-boiled egg. Finally, he asked her to sip the coffee. She smiled as she tasted it and smelled its rich aroma. She humbly asked, "What does it mean Father?"

He explained that each of them had faced the same adversity, boiling water, but each reacted differently. The carrot went in strong, hard, and unrelenting. But after being subjected to the boiling water, it softened and became weak. The egg had been fragile. Its thin outer shell had protected its liquid interior. But after sitting through the boiling water, its inside became hardened. The ground coffee beans were unique, however. After they were in the boiling water, they had changed the water.

"Which are you," he asked his daughter. "When adversity knocks on your door, how do you respond? Are you a carrot, an egg, or a coffee bean?"

~~~~~~~~~~~~~~~~~~~

How about you?

Are you the carrot that seems hard, but with pain and adversity do you wilt and become soft and lose your strength?

Are you the egg, which starts off with a malleable heart? Were you a fluid spirit, but after a death, a breakup, a divorce, or a layoff have you become hardened and stiff. Your shell looks the same, but are you bitter and tough with a stiff spirit and heart?

Or are you like the coffee bean? The bean changes the hot water, the thing that is bringing the pain. When the water gets the hottest, it just tastes better. If you are like the bean, when things are at their worst, you get better and make things better around you.

How do you handle adversity? Are you a carrot, an egg, or a coffee bean?

Author Unknown

I have a question regarding calculation of 401k deductions when there is also a pre-tax medical deduction. My wifes employer deducts her medical insurance pre-tax premium first and then calculates her 15% 401k contribution based on her gross salary minus the medical premium. Is this correct?

Not only does it result in a slightly less contribution each paycheck to the 401k account but the employers match is also reduced.

Any input would be appreciated...

thanks

Seems to me these are underutilized for small start-up companies. No consulting firm that I know of wants to talk about them. Brokers don't want them because there's little money.

So, I would think that means the only people selling or advocating them them may be pushing for clients to do alternatives. Any programs out there that offer these plans with reasonably objective advice?

Anybody out there do business by advising on such programs?

I use Quantech 6.0. I am working on a non-standard age weighted profit sharing plan. Two employees terminate with less than 500 hours so I don't include them in 410(B). When I tests Quantech correctly identifies the employees included in coverage tests under 410(B), however, when Quantech actually runs the tests it includes the 2 people who termed with less than 500 hours.

Has anyone run into this problem? If so, how do I fix?

Thanks for any help.

Same Desk Rule

One corporate member of a brother sister controlled group is sold and the employees who participated in the contolled group's 401k Plan continue in the same job with the purchaser. Thus they are "same desk" employees. The purchaser is then sold to a third company and the employees continue in their same job. It appears to me that the "same desk" status remains. Any comments.

When using new rules to excude <21<1yr service EE's from test, when is an employee who satisfies statutory requirement included in test. For example, EE#1 hired July 20, 1999. Plan has quarterly entry. Do we count his comp and deferrals from October 1 2000 forward only toward the 2000 test, or do we need to count entire years worth toward test since he became eligible in year, or is there a way we don't have to count him until next year, or is ot handled in another way altogether?

A friend of mine converted her Traditional IRA to a Roth IRA in 1998 to take advantage of the 4 year spread to report the income. As the market is now in the tank, she is considering recharacterizing the Roth back to Traditional, in order to not to have to continue to pay taxes on the higher conversion amount.

Is this allowable? I have read my various resources and cannot come to a definitive conclusion. I would think that she could do this, and avoid paying the 2000 installment of the conversion, as I believe you have until the due date of your 1040 to accomplish this.

Any help would be appreciated.

Does anyone have a sample letter which they send to terminated participants (with less than $5,000 vested), which gives them a certain number of days to provide instructions on how they want their account distributed--otherwise they'll have their account paid out? (Could you e-mail me this?)

Employer has both a MPPP and PSP. Employer has funded the maximum 30,000 for the owner in the PSP then nothing in the MPPP because of 415 limits. Seems to me they should have funded the MPPP first because of minimum funding requirements then funded any additional in PSP. Is what they did ok?

Can an LLC have both a SEP and a regular 401(k) plan peacefully coexist? There is only the owner eligible for the SEP contribution (relatively new company), and the 401(k) has lots of participants. He was only able to defer about 3000 in 2000 due to ADP restrictions. He would like to make up the balance in the SEP. Is this ok? He wants to kill the SEP plan next year before any participants become too close to becoming eligible for a contribution. Something sounds fishy but I'm not sure what.

Calendar year safe harbor 401(k) Plan currently matches, on a payroll period basis, 100% of the first 3% of pay deferred (automatically invested in employer stock), and 50% of the next 3% of pay deferred (to be self-directed by the participant). Plan sponsor satisfied the notice requirement prior to the start of the year. Now, plan sponsor wants to increase the second-tier match to 100% of the next 3% deferred, and will give employees at least 30 days written notice in accordance with the safe harbor guidance (so that they can adjust deferral elections if appropriate). I can't see anything wrong with this. Does anyone see a problem?

A few days ago I heard a news commentary stating that the Treasury is not currently selling short-term notes, and may cease (or temporarily cease) selling 30-year bonds. Any comments on this, especially with respect to the various indexes we use that derive from treasury yields?

Love and Daffodils Forever

by Nicolle Woodward

They had just celebrated their 39th anniversary in April when Bill went for his annual checkup. Always in perfect health, he was unprepared for what the doctor found. Symptoms Bill had ignored as "old age" led to questions, palpations, more questions, and finally instructions for a battery of tests.

"Just to be on the safe side," the doctor said. When Bill took the news home to Constance, she refused to consider that it could be something serious.

Fortunately, it was April and the gardens beckoned. There was more than enough work needed to prepare the beds for the coming season, and they threw themselves into the now-familiar yearly routine. They spent their days, as always, surrounded by trays of flowers and bags of mulch, wielding their favorite trowels.

As the summer progressed, 30 years of gardening rewarded them with a showplace of color. Benches and swings were placed amid the bounty of flowers, and they spent nearly every evening during the summer relaxing and basking in the beauty.

As they worked, Constance began to notice a subtle change in Bill. He seemed to tire more easily, had difficulty rising from his knees, and had little appetite. By the time the test results were in, she was no longer so sure of a good prognosis.

When the doctor ushered them into his office, she knew. His demeanor was too professional, too unlike the friend they had known and trusted for so many years. There was no easy way to say it. Bill was dying, with so little hope of curing his illness that it would be kinder to not even try. He had perhaps six months left, time enough to put his house in order, but little time for anything else.

They decided he would stay at home, with help from visiting nurses and hospice when the time came. Their children were both far away, one in Oregon and the other in Chicago. They came for extended visits, but with jobs and children, neither could come permanently. So Bill and Constance spent the ending time as they had spent the beginning time, alone together. Only now they had their beloved gardens, a great comfort to them both for that entire summer.

By September, Bill was fading fast and they both knew the end was near. For some reason Constance couldn't understand, he seemed to be pushing her to get out more. He urged her to call old friends and have lunch, go shopping, see a movie. She resisted until he became so agitated that she conceded and began making her calls. Everyone was more than willing to accompany her, and she found she did take some comfort in talking over lunch or during the long ride to the mall.

Bill passed away peacefully in October, surrounded by his family. Constance was inconsolable. No amount of knowing could have prepared her for the emptiness she felt. Winter descended upon her with a vengeance. Suddenly it seemed dark all the time. Then the holidays came, and she went to Oregon for Thanksgiving and to Chicago for Christmas. The house was cold and empty when she returned. She wasn't quite sure how she could go on, but somehow she did.

At long last, it was April again, and with April came the return to longer and warmer days. She would go from window to window looking out at the yard, knowing what needed to be done, but not really caring if she did it or not.

Then, one day, she noticed something different about the gardens. They were coming to life sooner than they had in the past. She went out and walked all around and through the beds. It was daffodils. Hundreds and hundreds and hundreds of daffodils. She and Bill had never put many spring plants in their gardens. They so enjoyed the colors of summer that they had only a few spring daffodils and hyacinths scattered here and there.

'Where did they come from?' she wondered as she walked. Not only did the blooms completely encircle each bed, they were also scattered inside, among the still-dormant summer plants. They appeared in groups all over the lawn, and even lined the driveway to the street. They ringed the trees and they lined the foundation of the house. She couldn't believe it. Where on earth had they come from?

A few days later she received a call from her attorney. He needed to see her, he said. Could she come to his office that morning? When Constance arrived, he handed her a package with instructions not to open it until she returned home. He gave no other explanation.

When she opened the package, there were two smaller packages inside. One was labeled "Open me first." Inside was a video cassette. Suddenly Bill appeared on the screen, talking to her from his favorite chair, dressed not in pajamas but in a sweater and slacks. "My darling Constance," he began, "today is our anniversary, and this is my gift to you."

He told her of his love for her. Then he explained the daffodils.

"I know these daffodils will be blooming on our anniversary, and will continue to do so forever," Bill said. "I couldn't plant them alone, though." Their many friends had conspired with Bill to get the bulbs planted. They had taken turns last fall getting Constance out of the house for hours at a time so the work could be done.

The second package held the memories of all those friends who so generously gave of their time and energies so Bill could give her his final gift. Photographs of everyone came spilling out, images captured forever of them working in the garden, laughing, taking turns snapping pictures and visiting with her beloved husband, who sat bundled in a lawn chair, watching.

In the photo Constance framed and put by her bed, Bill is smiling at her and waving his trowel.

Here's what I think is an easy one, but I want to make sure. You have an owner of two car dealerships, each with its own plan. They pass coverage. They are a controlled group. The owner has pay of about $600K in one and about $75K in the other (both LLC's). I think we must prorate the $170,000 pay limit between the two plans. I further think we would prorate it based on the total pay from both companies. In other words, 600/675 X 170,000 = pay in company 1 and 75/675 X 170,000 = pay in company 2. Agree? Disagree?

I am interested in establishing a vacation purchase plan. Can this be set up on either an after-tax or before-tax basis and which method would you recommend? If we elect after tax, how would could calculate and deduct the vacation purchase payroll deduction?

Is the maximum contribution limit for employees of a non-profit with a 401(k) 25% as opposed to the traditional 15%?

Seeking article or other source citing approximate percentage of non-compliant 403(B) plans. Thanks.

I'm working on a merger where one of the companies has a leveraged ESOP. In connection with the merger, can the ESOP eliminate the participant's right to demand a distribution of employer stock under Reg. 1.411(d)-1 Q-2(d)(1)(iv)? Specifically, does a merger qualifies as a "sale of substantially all of the stock of the employer"? I assume it does but was hoping for a second set of eyeballs on this issue. Also, would the general right to modify distribution options on a non-discrim. basis under Sec. 411(d)(6)© also is enough to support eliminating the participants' right to demand a distribution of employer stock?

Non-Qualified Status Change

The employer provides up to $500 to be “spent” for health plan coverage or cash. An employee elects single coverage at $200/month and elects to receive the remaining $300/month in cash (taxable income). Subsequently, the employee marries, but fails to add the spouse within the 30 election window for a Qualified Status Change. The employee wishes to change to family coverage (at $500/month) which the health plan will permit. Since the election does not satisfy the requirements for a Qualified Status Change, the additional premium must be paid post-tax as well as the initial $300 cash election. Is there any legal way that the additional $300 in premium could be paid pre-tax?