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?

Hello,

I have a question about FSA(flexible speinding account).

In year 2000 I decided to put some money to FSA. In May

2000 my company joined another one and on 06-01-2000

we switched insurance to a new insurance company and

new FSA plan.

So, by 06-01-2000 I had some money allocated in FSA, but

my major medical spendings occured in July.

New insurance company doesn't have access to my FSA money and old insurance company is telling me that

I can't use FSA money to cover copayments for services occured after 06-01-2000.

Is it true? I thought money I'm allocating my money into

FBA for the entire year. Am I wrong?

Can FSA money be transferred between insurance

companies/plan administrators?

Thank you.

-- Aleksandr Rainchik

We have a top heavy 401K plan which has a last day of year requirement to receive matching or profit sharing contributions. Does this have any effect on whether employees receive a top heavy contribution? (ie if participant terminated by the end of year and thus doesn't receive a match or PS contribution, do they still have to receive a top heavy contribution?)

When I resigned from my previous employer, I rolled my 401 K balance (about $70K) into a traditional IRA. I am 27. I have been doing a great deal of research on Roth IRAs and find that this a more attractive option. I realize the markets have not been performing well lately (my current balance has hit about $50K), but I should take a long term approach. I asked my CPA about recharacterizing. He suggested letting the traditional IRA in place, and simply opening up a separate Roth IRA. Is this a good idea, or should I convert portions of my Trad to a Roth each year in order to minimize tax penalties? Thanks! Kris J

I converted a regular IRA valued at $8,000 to a Roth on 12/31/00. The current value is $7,000. I filed my 2000 tax return and included the $8,000 of conversion income. Is it to late to recharacterize the $8,000 and at what value? Do I amend my return? What steps do I take to report it?

I'm new to the retirement plan administration world and I have questions about determining my employees maximum contribution to our 403(B) plan.

1. We have a 403 (B) plan that our employees contribute to through salary reduction agreements. This plan is with TIAA-CREF. We also have a 401 (a) profit sharing plan that the company contributes 12% to each year. This plan is with AmSouth Bank. The employees do not contribute to the 401 (a) plan and the company does not contribute to the 403 (B) plan. Do I have to take the company 401 (a) contributions into account when figuring the employee's max contribution to the 403 (B)?

2. In 1997 we formed a new company. All the employees were terminated from the old company and hired by the new company. The two companies have common board members, but one is not a subsidiary of the other. The old company does not have any employees. For purposes of determining max contributions for 2001, do I use the employees' actual hire date or the date they became employees of the new company? As for prior contributions, do I go all the way back and take into consideration contributions made under old company or just contributions made under new company?

3. I would like a plain English defination of 402(g) limit, 403(b)exclusion allowance, 415©(1) limit.

Any help is greatly appreciated. Thank you.

If a takeover DB plan is not safe-harbor and has never passed the general test, should the enrolled actuary sign the Schedule B? Or even before it gets to that point - should a valuation be done before the plan defects are corrected?

I'm just curious how other administrators or enrolled actuaries would handle this situation.

And also let's assume the prior actuary is deceased.

A related question would be - If this plan were ineligible for a favorable determination letter, would it nevertheless be appropriate for the actuary to sign the Schedule B; after all, the statement above the signature line on the B doesn't require the plan to be "qualified" ???

Any thoughts are appreciated !!!!!!!!!!!!!

Is it true that an employee of a rural cooperative could possibly defer up to as much as $19,000 ($8,500 in 457 plan and $10,500 in a 401(k))? I see in the Code where Rural Cooperative Plans are excluded from coordination as are others. And could not find anything that says otherwise.

Can a safe harbor 401(k) plan matching formula be structured as follows: 100% of the first 3% of compensation deferred, and 50 cents on the next 3% of compensation deferred (all of which will be matched on a payroll period basis); plus a year-end discretionary match of an additional 50 cents on deferrals above 3% of pay nd up to 6% of pay?

In other words, can any portion of the formula be discretionary? The payroll by payroll match satisfies the safe harbor rules, but does the additional match screw the whole thing up?

Alternatively, could the employer make a match of 100% of the first 3% of compensation deferred, and 50 cents on the next 3% of compensation deferred (all of which will be matched on a payroll period basis); plus a year-end match equal to each employees match in excess of 3% of pay (up to 6%) times a discretionary percentage between 0 and 100?

Can the common stock of a non-US company be used as "employer securities" for an ESOP? The stock would be the common stock of a foreign public company whose stock is trading on the Taiwanese exchange. Any thoughts would be appreciated.

Where can I find a good explanation of how to calculate the RMD's based on the new law?