Corporation A sponsors a 401(k) plan. Corporation B, a wholly-owned subsidiary of A, participates in the plan, along with several other subsidiaries of A. In 1999, Corporation A sells Corporation B to an unrelated purchaser. In connection with the sale, the parties agree to spinoff the assets of the 401(k) plan relating to B's employees to a new plan sponsored by B. The parties also agree that all forfeitures in A's plan as of the date of the spinoff will be allocated to participants' accounts as of that date.

When the transfer of assets to B's plan occurs, A's plan inadvertently transfers too much to B's plan. The excess relates to forfeitures that should have been allocated to employees of other subsidiaries of A not involved in the sale and spinoff--thus, those amounts should have remained in A's plan and should have been allocated to participants in A's plan. How and why the error occurred is not clear. The error is not discovered until approximately a year after the transfer.

Now that the error has been discovered, the parties agree that B's plan owes to A's plan an amount equal to the amount of the excess transfer, plus an earnings factor based on what that amount would have earned in A's plan to date.

The question is, can existing forfeitures in B's plan be used to cover the earnings amount that must be paid to A's plan, or must Corporation B come up with the cash to cover the earnings amount?

Can anyone think of any advantages for a church plan to elect ERISA coverage?

An employer mistakenly distributed participant benefits out of a company account rather then the plan's trust account. Is there a corrective procedure for this type of error? What alternatives corrective measures are available?

I am designing a flextime/compressed workweek policy. I am wondering how other companies deal with the issue of vacation days and sick days for employees who are working a reduced number of days for more hours each day per week. If they have the same number of days off as employees working a five-day week, they are in essence getting more time off than their peers because their "days" are more hours. Has anyone else addressed this issue in a policy?

I'd also love to see a written policy on flextime even if it doesn't address this issue, if any of you are willing to share your company's policy.

Thanks,

Liss

Is it a prohibited transaction for a plan to purchase property from a trust for cash where the grantor of the trust is the spouse of the plans trustee?

I know it is a prohibited transaction for the plan to purchanse real estate from a party in interest/disqualified person (spouse). However, I am thinking that if the spouse is merely a grantor of the trust, whether or not there was a PT might depend on whether the beneficiaries of the trust are actually disqualified persons.

Does the following sound like a legit plan design?

For its annual profit sharing contribution, employer wants to contributes company stock for participants until they hit both age 25 and have 3 years of service. At that point, the contribution gradually involves less company stock and more company dollars. Eventually, at say age 35 and 10 years of service, the participant no longer receives any company stock for the profit sharing contribution, just all dollars.

Is this acceptable and if so, how would it be tested for non-discrimination?

Thanks

If a 401(k) plan allows its participants to take a distribution from employer sources (i.e. profit sharing and/or regular match) "on account of hardship", is there a minimum amount of time that the employer money must be in the plan before it may be withdrawn? If so, does it apply to all pre-retirement/pre-separation withdrawals from employer sources (i.e. inservice and on account of hardship)? Where is this referenced in the Code/regs?

I thought this had been discussed before, but I cannot seem to find the appropriate thread.

Can a 1999 5500 Form to be used to file for a short plan year beginning and ending in 2000 (and due by March 31, 2001)?

Do you cross out the 1999 and write in 2000?

Company A is comprised of 3 divisions, X, Y, and Z.

Company A wants 1 401(k) plan to cover eligible employees in all 3 divisions. However, company A would like certain provisions to be different for participants in the 3 divisions. Little things, like PS contribution allocation.

I know that for the above to fly, plan will have to pass 410(B) and 401(a)(4), which will ensure (if passing) non-discrimination.

However, they also want different vesting schedules to apply to the divisions. This is a BRF issue and will also need to be non-discriminatory, but how is this actually tested?

Any help is appreciated.

Do Section 457 plans have a required due date for employers to deposit employees payroll deductions? Is there a legal timeline as there is with 401(k) contributions? Thanks for any info - I know nothing about 457 plans.

The use of the early distribution events of sections 403(B)(7)(A)(ii) and 403(b)11 to also govern eligibility for rollover treatment renders the triggering events under section 403(B)8, the rollover provision of section 403(B), which were repealed under the Unemployment Compensation Amendments of 1992, meaningless.

Moreover, insofar as 403(b)11 went into effect on January 1, 1989 the application of section 403(b)11 to rollovers has the result of bifurcating the employee's account balance between pre-1989 and post 1988 amounts with reference to their eligibility for rollover treatment.

Example:

Assume a 12/31/00 balance of $500,000.00 with a balance of $200,000.00 on 12/31/88. The employee is free to rollover only $200,000 at will because the triggering events under section 403(B)8, the rollover provision, were eliminated. The employee may only rollover the post 1988 balance of $300,000.00 upon satisfying one of the early distribution events under section 403(b)11 because section 403(b)11 went into effect on 1/1/89.

Congress never intended that a bifurcation would be the result of its repeal of the distribution events under section 403(B)8, the rollover provision of section 403(B). Is there anyone out there that believes that Congress wanted to repeal rollover distribution events for just pre 1989 amounts? Apparently the United States Court of Appeals for the 2nd Circuit does. See FRANK V. ARRONSON at: http://laws.findlaw.com/2nd/969456.html.

I call on all the pros in the 403(B) community to request a Congressional clarification on this issue.

Joel L. Frank

Can the assets of a terminated Money Purchase Pension Plan be transferred to a defined benefit plan sponsored by the same employer?

My father passed away in 2001 and left three IRA's with 3 children as beneficiaries. As executor (and a child). I would like to do the following:

1) Create 3 sub-accounts for each of the IRA's with equal amounts. Each one titled "DEC John Doe, FBO Jane Doe". (or Jack Doe, or Jim Doe) assuming John Doe as the father and Jane Doe as one of the beneficiaries.

2) Each beneficiary then does a Trustee-to-Trustee Transfer to a new account with the same title.

3) Each beneficiary continues with the minimum withdrawal's using whatever rule is in place that day.

It appears to a Grey area reading all the posts, but right now, that's my plan.

What was allowable deductible contribution into an IRA in 1982?

Client maintains a unfunded welfare plan for payment of small medical and dental claim. Do the COBRA continuation requirements cause this plan to file a form 5500 if someone elects it? There are fewer than 100 employees in this situation.

If someone elects to take COBRA coverage, then the plan has now accepted contributons and thus becoming a "funded" plan, which requires a 5500 form. At least that's the way I read the 5500 instructions.

Anybody know a way out of this?

David:

I had a "bad" year, though I do have the "luxury" of some tax-free disability monies we live off of.

I made a $4000 traditional IRA contribution in Jan 2000 for year 2000.

My taxable AGI is just $7600, and with $23000+ itemized deduction (medical bills!), I owe no tax.

My wife and I have $16,000 each in traditional IRAs (including the $2K added last year).

My question: does it nake sense to take advantage of this year and:

1. recharacterize the year 2000 trad IRAs ($4000) to Roths?

2. convert the trad IRAs ($28000) to Roths and "pay the tax?"

I estimate this might make my tax refund of $600 become a tax bill of $1600; but $1000 out-of-pocket to shield $32,000 from taxes forever sound pretty good, do you think?

I just need some back-up...my wife says it sounds TOO good...

Rick

If an employer makes deposits of "more" than a what participant actually deferred, how do you correct that? Transfer to forfeiture account? Is this a correction under EPCRS?

Must employees of a company purchased by the plan sponsor during the current plan year be included in the determination of the Top Paid Group for the look-back year?

Is there any disadvantage to a plan sponsor to making the top-paid group election to determine HCEs? The only one I have been able to think of is that it introduces some additional complexity to the HCE determination, conceivably raising the chance of errors. Are there any other disdavantages?

I guess I wasn't thinking. Of course, at least in a 401(k) plan, whether or not the top-paid group election is helpful or harms the plan depends on the amounts the participants who would be changed from HCE to NHCE by the election are deferring. Anything else I should have thought of?

Do Viator Policies in a profit sharing plan meet the definition of "qualifying plan assets"? Are they an acceptable investment for a qualified (401 a) plan?