I have a client (a small independent nation loosly affiliated with the US) who is establishing a new defined benefit plan (for its government employees). The client wants to allow up to two years of service with any branch of the US military to count toward vesting service but not benefit service.

The client is concerned that somehow this might jepordize or at least reduce any US military pension a member might be entitled to.

I have told them this is not a concern regarding vesting service.

Is there any circumstance where crediting service with the US military in a non-military defined benefit plan could cause problems with a military pension?

Thanks,

Mike

The following question was addressed to the Plan Design Q&A column. I referred the questioner to the materials from the recent ASPA conference for details about the mechanics of this issue, but I think that discussion by practitioners who have used this method, or who have chosen not to, would be valuable to both the questioner and many others. Any comments?

Recently, I read about the so-called "flip-flop" method of taking deductions for corporations sponsoring both a DB plan and a DC plan (see the details in the DATAIR Winter 2000 news letter). Under this method, a business owner may contribute 30K to a MP plan each year and the full amount to a DB plan each year, and deduct both contributions and still comply with 404(a)(7). The deductions are taken not

in the same year for both plans, but 2 years of 30K DC contributions are deducted in one year, and 2 years of DB contributions are deducted in the following year, and so on. The timing of the contributions must be carefully laid out and followed. I have never heard of this method before,

and would like some comment from other practitioners. It would obviously be very valuable to some high-income small business owners.

We have a cafeteria plan that offers several HMOs, a POS, a PPO and a Catastrophic (Cat) plan. Employees choose the Cat plan if they have other coverage. If an employee with a Cat plan has a life status change, we permit the employee to change from single to family or family to single. We do not permit a change to one of the other plans until Annual Enrollment (per our understanding of the Cafeteria rules pertaining to life status changes). Does HIPAA supercede this and permit a change in plans? We would like to permit this if we can support this with a cite.

Our firm has been involved with a PBGC audit of a terminated plan for over a year.

We have to pay out some additional funds due to changes in interest rates.

Plan has been terminated, all accounts closed, some of the participants are not employees.

How do the people get paid if there are no more plan accounts? From the corporation as non employee compensation, and then given a 1099 MISC??

It seems ludicrous to open up plan accounts when the plan has been closed for almost 2 years.

I asked the auditor who told me "it is a legal question, and I do not have the answer."

How are corrective distributions treated for top-heavy determination purposes? Are they treated like any other distribution? Does it make any difference if the corrective distribution is for excess contributions, excess aggregate contributions, excess deferrals, or 415 excesses?

A Company starts a 401(k)Plan 8/1/00. However, (either intentionally or unintentionally), their is no provision for an initial short plan year. Plan year is defined in the document as 1/1 - 12/31. References to compensation include periods prior to 8/1/00.

Does this mean that all eligible employees became participants on 8/1/00 or 1/1/00? Should the 2000 5500 indicate a 1/1/00 Plan effective date?

Thanks for any comments.

Can a company adopt a 401(k) plan in December to be effective retroactively to the beginning of the calendar year and take advantage of the first plan year adp non-highly compensated 3% deferral rate for testing?

In a situation where there is a short initial plan-year running from 7/1/2000 - 12/31/2000, is the deductibilty limit under Section 404 based on the full-year compensation or only the compensation for half of the year? Thanks.

I have a client that is having trouble access the web module using Netscape. Has anyone else had this problem?

I need a clarification on an MRD issue I have recently encountered:

Husband and wife are both over 70 1/2. Distributions have been taken using Joint Life Expectancy with recalculation. The husband dies, and the wife elects to treat the IRA as her own.

Question: Can she elect new beneficiaries and set up a new payment scheme? Everything I have read (both in books and here on the message boards) seem to indicate that this is allowable. However, one of the largest banks in the US indicated that the distributions must continue "as least as rapidly" as they were before, thus having the wife continue the distributions on a Single life expenctancy, as the husbands expectancy dropped to zero in the year after death.

Who is right? Any cites on the boards or from the regs would be appreciated.

In computing EBAR's for a safe-harbor 401(k) plan with a tiered PS allocation is this the correct methodology?

A. Before imputing disparity:

1. Calculate EBARs for avg. ben. % test using contributions from all sources-deferrals,3% safe harbor,employer allocations.

2. Calc EBARs for 401(a)(4) general test including safe harbor but excluding deferrals.

B. To impute disparity,repeat these steps, but using employer allocations only.

Has anyone done an SAR for a 412(i)plan? I'm not sure what information I need to include, since the plan is exempt from filing a Schedule I for the 1999 year. Specifically, do I just mention that the plan is funded solely by allocated insurance contracts and forget about asset values, gains/losses, etc. What about payouts and plan expenses? The plan is a take-over and used the 5500-R in lieu of the SAR in prior years, which is no longer an option.

Thanks

David

If an employee becomes disabled and the company changes life insurance carriers during the period of disablity: is the employer obligated to cover the person with the new carrier? inform the disabled that there is a change of carriers? if he's not obligated to cover the person, must he give the disabled the option to take out coverage on his own? is life insurance coverage covered by COBRA? can the employer who failed to cover such person, now say that the person was terminated on the first day of disability? In essence, I'd like to know basics before approaching legal counsel. Cites would be helpful. Thanks. PS The employer has about 75 employees and is centrally located.

We are thinking of investing in a Roth IRA for retirement and our daughters college education. She is 6. I'm wondering if this is a good investment and/or if there are any other types of savings tools out there that might benefit us more. I'm in my 30's and my husband is in his middle 20's. We don't currently invest in any type of 401K's at work or any other type of investment tools.

Can someone give me advice on this? Thanks!

Are the review of investment options by an outside consultant and the search for a new recordkeeper expenses that may be charged to a plan? Does the answer depend on the plan's provisions?

If a participant requests a copy of the full annual report - should we just provide the form and ALL the attached schedules?

Thank you for any help.

A sole proprietor (who has employees) is setting up a 401k plan. How should he declare his income so it can be used in the plan? OR maybe I should be asking what types of compensation should we include in the plan doc so his compensation is covered? From what I understand, he should not declare w-2 income? Any CPA's out there?

A fiscal year plan has been amended to a calandar year with a short plan year. when determining HCE's, what period do you use for the look back year. Do you pro rate (using the short plan year as the lookback year) or do you count compensation for the last full calendar year? a citation would be appreciated.

We are a TPA firm and presently prepare annual particpant statements for the participants in all of the 401(k) plans we administer along with SPDs and SARs. In addition, these same particpants are sent quarterly cash investment statements that reflect current market values.

The annual statements are run on a plan year basis, and reflect vesting etc. I was recently at a seminar and found that most of the TPAs have stopped the annual statement and only send the quarterlys. Our "document" is rather vague as to what the reporting requirements are.

What is really required. What do most TPAs send out?

Your thoughts would be appreciated.

Any opinions on 6.0? We're wondering if we should convert soon or wait until the end of busy season next year.

Any feedback positive or negative would be helpful.

Anyone have problems with the conversion?

Anyone have problems with custom reports other than those experienced from the 4.1 to 5.0 conversion?