Can anyone point me to some legal authority for the proposition that when an employer amends a plan, the plan amendment will not apply to those persons who have terminated employment prior to the plan amendment. In our situation the plan document was silent on this issue, but I would assume there are cases or something of the like out there that would support this finding that an amendment would not apply to former employees.

The real issue is that the term "compensation" was amended to include several more items than the plan originally did (which was in effect when the employee terminated employment). The employee is now ready to begin receiving benefits under the plan and wants to include in "compensation" the items that the new plan permits, as opposed to what the original plan permitted while he was employed.

Thanks to all who respond!

A plan has life insurance policies as part of the assets of the profit sharing plan. Can an individual elect to cash out his life insurance policy into the profit sharing source of the plan? The profit sharing source is participant-directed. Does this depend on the plan document, or is this action prohibited? If the action could be acceptable, would the plan document have to specifically provide for it?

Here's my story. Can anyone tell me what to do now? I can't afford to hire a lawyer, and I need the distribution soon. I would be forever grateful--I am at my wits end!

My mom died in October of 1999. I have been trying to get a distribution on her account since November of 1999. In November of 1999, I wrote to an HR person in the Fortune 500 company she worked for. I informed him of my mom's death and enclosed a certified copy of my mom's death certificate. He responded with a letter advising me that I am the beneficiary of my mom's account, and enclosing a distribution election form. He also advised that I get tax advice before distribution. I did that in January 2000.

My financial advisor began calling both this HR person and another in that company, trying to get distribution information. They were unable to provide plan guidelines, and unable to answer my financial advisor's questions regarding distribution. My financial advisor called and left numerous messages from February through the middle to latter part of the year. At that point we decided to just leave the money in the account, since I didn't really need it, and I had other financial matters to handle at the time.

In January of this year, I decided that I would buy a house by summertime, and would use the money for a down payment. My financial advisor called the HR department once again. We knew that the company had gone through a merger last year, so he just kept trying, and leaving messages, etc. The correspondence that had been sent to my mom indicated that the retirement accounts would be accessible once the conversion was complete in early January. Finally, he called and spoke to the head of HR.

The head of HR was both courteous and helpful, and said the matter would be resolved. We sent him a letter with a certified copy of my mom's death certificate, on January 21st, requesting a full distribution, as per his phone discussion with my financial advisor. At that point, the date of distribution was the end of February. No check arrived. No letter confirming distribution by a certain date, arrived either. So we called again. Again, another answer saying it's coming, it should be there by the end of the week. (That would make it March 9th) It's been almost 6 weeks since we sent the distribution request. Thusfar, the head of HR keeps extending the date the check should arrive, citing computer problems associated with the merger. We've left messages with him again.

The head of HR finally called me back. He was unable to tell me whether or not the computer problem was resolved, and if my distribution check was coming. He believed that the employees’ “blackout period” was over. I asked if I could get verification in writing as to when that money is coming for mortgage purposes. He said he didn't think that he could do that. He also said that he wasn't sure if my paperwork was in order, or, if the beneficiary forms were complete. I told him that was news to me, since we had sent him a letter in January requesting distribution, because that was what he told my financial advisor. He said he would check into things and call me back (i.e. Tuesday, the 13th).

Today, I heard that yes, the beneficiary form is on file, my paperwork is in order, the blackout period is indeed over for the computer systems, so I should be getting my money. However, he's unable to tell me when exactly that will be, because that's dependent on the bank. He's checking with his supervisor if he can send me a letter confirming that, I am the beneficiary, and that I will receive this money, for my mortgage application.

What should I do? I can't believe this guy anymore, and something seems fishy here. Again, I can't afford an attorney! And I need the distribution soon or I can't close on my house! Any advice would be wonderful. Thanks so much to anyone willing to help me out.

A plan document has a provision in the participant loan section about terminated participants. Terminated participants are allowed to get a loan from the plan only if they are a "party-in-interest" as defined in ERISA. Is this an allowable provision in a qualified plan? The provision seems like it would be discriminatory in favor of Highly Compensated Employees. If a terminated HCE requests a loan, does it have to be given to them due to how the plan document reads, or should the plan sponsor refuse to give the terminated HCE the loan because it would be discriminatory?

I have a client that went bankrupt. Everything was turned over to a bankruptcy attorney who appointed a bankruptcy trustee. The bankrupt client has no assets. The bankruptcy trustee did not know the employer even had a 401(k) plan until we called him. The trustee of the plan is no where to be found. In the meantime, the participants are knocking down our door wanting their money. We have no aurthorization to distribute. How do we go about terminating this plan and distributing the assets when we can not find the trustee and the bankruptcy trustee is of no help??? Not to mention the several payrolls that never went into the plan.

I have a client who is submitting a VCR for a large plan. Has anyone ever requested/been granted a "pre-submission" conference with an examiner concurrent with the application's submission?

I have a client who is submitting a VCR application. Have you ever requested or been granted a "pre-submission" conference with an examiner in the National office?

X opened and funded a SEP for himself in 1997, not understanding that employees had to be covered. Rather than retroactively covering them, he wishes to remove the contribution he made for himself.

It appears to me from Code section 408(d) that, once his 1997 1040 is amended to eliminate the SEP deduction, he can remove the excess without paying tax on it. It does not appear that income need be withdrawn.

Is this analysis correct? And will the 6% excess contribution excise tax of section 4973 apply rather than the 10% excise tax of section 4972?

Thanks for your help.

I am performing a cross-test, including contributions under a money purchase pension plan and profit sharing plan. I've run the test excluding benfitting employees with less than the statutory 1 YOS and/or age 21 from the rate group and the ABT. I am trying to find guidance on this in the regs. There are no HCEs in the "otherwise excludable" group so this part is passing 401(a)(4) and 401(B) automatically. Is this considered a "component plan" and is that why I am able to carve this group out of the main test?

I remebering hearing quite a bit last year about the government chainging the maximum investing amounts for IRAs. Eventually getting to $5000 a year instead of the $2000 currently. Anybody have some good info?

Thanks, P

Other than TD Waterhouse, does anyone know any other brokerage house(s) that charges the least fees in terms of up-front fees to open the IRA/Roth IRA

account, yearly maintenance fees, and any transfer fees?

If spouse is one of multiple beneficiaries, but whose life expectancy is the shortest for purposes of determining the applicable distribution period following IRA's owner's death, how is spouse's life expectancy calcuated? Is life expectancy determined in year following death and then reduced by one for each year thereafter or is special spousal recalculation applied?

Could anyone point me to the cite, regulation, ruling etc. which specifically states that as long as both the distributing and accepting plan have provisions which allow for direct rollovers of loans from one qualified plan to another, it is permissible to roll over loan balances.

Can anyone point me to articles on the internet or elsewhere which discuss issues relating to the merger of a 401(k) plan and an esop into a ksop?

I have a profit sharing plan that is in the process of terminating. The plan holds warrants that do not expire until April, 2002. All assets have been distributed except for these warrants. Any ideas on what to do about this asset or are we just stuck until the expiration date comes up?

FACTS:

I have a three owner LLC who sponsors a 401(k) plan. Net earnings from self employment for one of the partners is negative (the use of guaranteed payments to partners allows self employment earnings to be different between the shareholders, even though the profit/loss split is 1/3 1/3 1/3). This partner deferred. My understanding is that in this situation, he should not have deferred because he had no "compensation" from which to defer.

QUESTIONS:

I presume the deferrals and appropriate earnings should be distributed. Can this be done via self correction?

Because he had no "compensation" for the year - is it correct that he is not reflected on the ADP test at all?

A curiosity question - how are other people handling the fact that self employment earnings is not usually known prior to the March 15th testing deadline - e.g. how do you handle damage control for a client who wants refunds prior to 3/15 but can't get them because their CPA won't provide me w/ net earnings from self employment in time to run the test?

Thanks for any help!

My wife and I recently found out (by using TurboTax)that we shouldn't have contributed to a Roth IRA in 2000. It says we will get a penalty because our income was over the limit (due to selling stocks). We have "backed out" the $2K Roth and have received the $2K. What, if any, is the penalty for this? Will we even get a penalty since the Roth was basically dissolved? Or was it dissolved too late since we contributed in 2000 but dissolved it in 2001?

Thanks for any advice.

I have a 401(k) plan where, during 2000, a number of employees were reported to the recordkeeper as terminated, when in fact they had only transferred to another division. About 100 of these actually took impermissible distributions. We are now trying to correct this.

Unfortunately the recordkeeper was changed (from one major bundled provider to another) as of January 1. The taxes were remitted and 1099-R's issued by the old recordkeeper. Needless to say, they refuse to have anything to do with the cleanup.

My two concerns are (1) getting back the withheld taxes remitted by the prior recordkeeper under their own tax ID number, assuming that the participant repays the portion he/she received; and (2) dealing with the 1099-R situation if the person repays. There may also be participant loans involved, and those will need to be dealt with on a case by case basis.

Does anyone have any suggestions as to how to deal with these issues?

Is there any notice that is required to be given to a terminated participant who has requested a distribution that the plan assets have been revalued as of a certain date? Our current administrative forms do provide for informing the participant that "as of _________ (date), the value of your account under the XYZ Plan was $??????" . I would think that it would be sufficient to reflect the interim valuation date within that blank and answer any participant questions that may arise rather than notifying all participants that an interim valuation was done as of ???? date and for the following reasons: 1,2,3,4,5,....

Anyone have any comments? Thanks in advance.

A client maintains a self insured medical plan subject to the 105(h) discrimination rules. They want to cover one group of employees (Group A) after 90 days, while making another group of employees (Group B)wait 1 year.

Under the Code and the Regulations, this would seem to be OK, since we are allowed to disregard all employees with less than 3 years of service in applying the 105(h) test. However, I know that there were a series of PLRs in the early 1980s which said otherwise(8432036, 8411050, 8411051, 8336065). The IRS argued in those rulings that while the plan met the eligibility test, it failed the discrimination in benefits test in any case where a HCE received benefits early (in this case, before 1 year).

My question is, does anyone know whether this is still the IRS position? Are they enforcing it on audit? Anyone seen any litigation on this issue? It seems that some plans are ignoring the issue, since different eligibility provisions are fairly common.