I'm confused about the meaning of "prospective" as it applies to Section 125. Does "prospective" mean the date of the request to change the election or the date of the event that's causing the change? For example, if an employee gets married on 3/1, but doesn't notify the employer until 3/15, then would the effective date of the new spouse be 3/1 or 3/15?

If it's 3/15, could the employee be allowed a retroactive effective date to 3/1 if the salary reductions for 3/1 thru 3/14 are taken on an after-tax basis?

Hi, Under the top heavy regs, a frozen db plan must continue top heavy accruals (2%). Does this in any way prevent a frozen db plan from excluding new participants? In general is there any problem with freezing a top heavy db plan to prevent new participants from entering the plan? Thanks

I have the following situation. Company sponsors 401(k) plan and mirror 401(k) plan. Mirror plan takes deferrals and matching contributions limited by 415 and 401(a)(17) - extra monies are automatically credited to nonqualified plan. Company discovers after end of qualified plan year that it made administrative error and did not properly limit 401(a)(17) contributions for year. This causes excess deferrals (pursuant to terms of qualified plan) and excess matching contributions in qualified plan. Company wants to transfer monies (plus earnings) to their proper place as credited in non-qualified plan (where monies would have been if error had not occurred). Third-party administrator claims PLRs state that must return monies to employee. However, I cannot find the alleged PLRs and believe they dealt with situations where ADP and ACP tests were violated which is not the case here -- it is a failure to follow plan terms. Is there a problem with distributing money out to credits in non-qualified plan (plus earnings). I feel this is equivalent to PLRs dealing with situation where monies are originally put in non-qualified plan and then post plan year transferred to qualified plan (without earnings). Any thoughts would be much appreciated.

I have the following situation. Company sponsors 401(k) plan and mirror 401(k) plan. Mirror plan takes deferrals and matching contributions limited by 415 and 401(a)(17) - extra monies are automatically credited to nonqualified plan. Company discovers after end of qualified plan year that it made administrative error and did not properly limit 401(a)(17) contributions for year. This causes excess deferrals (pursuant to terms of qualified plan) and excess matching contributions in qualified plan. Company wants to transfer monies (plus earnings) to their proper place as credited in non-qualified plan (where monies would have been if error had not occurred). Third-party administrator claims PLRs state that must return monies to employee. However, I cannot find the alleged PLRs and believe they dealt with situations where ADP and ACP tests were violated which is not the case here -- it is a failure to follow plan terms. Is there a problem with distributing money out to credits in non-qualified plan (plus earnings). I feel this is equivalent to PLRs dealing with situation where monies are originally put in non-qualified plan and then post plan year transferred to qualified plan (without earnings). Any thoughts would be much appreciated.

For cross tested plans that only define allocation groups but do not specify percentages (which may change from year to year), is a Summary of Material Modification required each year, even though there is no corresponding plan amendment? How will each participant be notified of the percent allocated to his group?

an employee recently left a company and was provided distribution paperwork on request. after submitting the completed paperwork and a written request for distribution a reply was received citing distributions to terminees only occurred 60 days the close of the plan year in which termination occurred. this would be acceptable except that the owners wife rec'd her full distribution from the plan in aug after terminating from the co. in july. Isn't there something about that if a precendent has been set the trustee/administrator has essentially created a new policy requiring plan amendment/notification? how should the newly terminated employee proceed at this point?

What is the maximum length of time a 401(k) loan can be taken for the purchase of a primary residence?

I have a Roth IRA with Vanguard and have two funds in it. If I want to add another fund to it, do I have to meet the $3000 initial investment fee, the $1000 IRA fee, or would the new fund be considered an additional investment into my IRA (minimum is $100) and I can invest, say, $500 in it? If I had to meet the $3000, that wouldn't make sense because then I'd be over my $2000 contribution limit for the year. I'm still learning so thanks again for all your help.

Person Z owns 100% of Company A and 5% of Company B. There are no controlled group or affiliated service group issues. In 1999 Person Z defers $10,000 into Company B's plan and $10,000 into Company A's plan. Is Company A deemed to have notice of the 402(g)excess by virtue of Person Z's ownership? If it is we must distribute, if not we can't distribute.

In error, a participant is sent two distribution checks. He received 2x the amount he should have received. He cashed both checks and refuses to return overpayment.

Employer has already returned the overpayment to the plan.

How should this be reported on 1099R?

Consider an old style contributory DB plan. You know, after-tax contributions that were required to get a pension benefit. But there's a twist. I have a client with this type of plan, but they changed it so that no new contributions are required and that existing employees would henceforth receive their regular plan benefit (1% of pay per years of service) PLUS their contributions and interest. Interest is being credited to the employees "contribution account" as actual investment earnings earned by the overall plan assets.

A 65-year-old retiring participant is now due a pension from the 1% per year of service formula. The lump sum value of this pension is $10,000 (lump sums are permitted in the plan). In addition, he contributed $3,000 in after-tax dollars to the plan; with $5,000 interest, this now totals $8,000.

So the participant is due $18,000.

My question is: what can be rolled over into an IRA. Clearly the $10,000 is taxable, but can be rolled over. Also, the $3,000 is not taxable, and cannot be rolled over. What about the $5,000. It would be taxable, but can it be rolled over?

HELP!

I have had a 401k for five years. Lets say there is $10,000 in it at end of 2000. Can I take $5000 of this money from my 401k and Roll it into a Traditional IRA then immediately convert it to a Roth Rollover. I am aware I will have to pay the taxes due (how is that calculated, I'm in a 28% tax bracket)... but I would like to start doing this each year so that I don't have a huge 401k at retirement and alot in my Roth Rollover IRA. I am also contributing $2000 a year in my personal Roth IRA a year and plan on having a separate Rollover Roth IRA if I can do it. I am 45 years old. Is there any publication I can read about this procedure.

If you own common stock in your Roth Ira, can you sell this stock and use the cash to choose another investment option like a mutual fund? If so, are there any sort of implications for doing this?

If an employer has a Section 125 plan which includes pre-tax health benefits, Sec. 105 medical savings account benefits, and sec. 129 benefits that is offered to full time employees and wishes to offer only pre-tax health benefits to part-time employees, would it make nondiscrimination testing easier if the employer creates a separate plan for the benefits offered to part-time employees instead of just amending their current plan?

We are a North Carolina based employer with 45 employees. Most are in North Carolina but a few are scattered across the United States. Does anyone know of a health insurance company that offers a nationwide PPO network which covers the entire USA. The name of an insurance company that may be able to help would be greatly appreciated.

Has anyone obtained a copy from the IRS of a plan sponsor's prototype document? My client adopted a prototype 401(k) plan sponsored by Continental Benefits Administrators, Inc. ("CBA") out of Atlanta. CBA went out of business in 2000. My client is in need of Walk-In CAP, but does not have a copy of the plan document as required in 2000-16. So far I have been unsuccessful in getting a copy of the document from the attorney handling the winding up of CBA. I am going to try to contact someone at the IRS to help me out with getting a copy of the prototype document that was submitted by CBA for approval. Just wondering if anyone has run into this situation before...... Thanks.

I have a situation where the wife is self-employed and maintains a SEP. Her husband owns a business with employees and has a qualified plan. Since this is a controlled group and she has to offer the SEP to the employees of his business (And, obviously has not), what is the easiest way to clean this up?

Thanks in advance for your help . . .

This may be a very simple question but I am new to financial planning. I contributed to a Roth (Mom's gift) a few years ago when I earned much less than the AGI limit. It was a one time contribution. I now earn more than the limit - what do I do with this Roth? May I keep it there? Invest with it? Or do I have to move it to something else?

Thank you,

SRajan

Under the NEW proposed minimum distribution regulations, is it possible to have multiple beneficiaries of a single IRA establish separate accounts after the Owner's death if the Owner dies after his required beginning date? For example Owner names Child and Grandchild as 50% beneficiaries of his IRA and dies after his required beginning date. May Child and Grandchild establish separate accounts, so Grandchild can use his longer life expectancy, even though Owner did not do so by his RBD? Proposed Reg. 1.401(a)(9)-8, Q&A 2(B) seems to be limited to either (i) lifetime distributions (whether before or after RBD), or (ii) after-death distributions where the Owner dies before his RBD. It would certainly be convenient if Owner did not have to worry about separating his IRA into two pieces by his RBD. But it looks to me like this is still a concern. Does anybody have a different reading of the new regulations?

Our plan has been joined (in California) in a divorce case. We haven’t received an order. We have received a pleading on joinder. The attorney for the spouse (the alternate payee) says we are on notice of a claim for a portion of the participant’s account and participant cannot receive a distribution or a hardship withdrawal. Can they do that without submitting a domestic relations order for our review? If we ignore the notice and distribute benefits if the participant, for example, terminates service, the attorney says our plan will have to pay the spouse’s interest anyway. Is he right?