Employer adopted a profit sharing plan in 1986. The plan is a standard prototype. Employer failed to include one of its employees (that we know of) since the inception of the plan. We intend to file under SVP. 2 questions arise immediately:

1. Employer's CPA is convinced that since payroll records must only be kept for 7 years that the correction can be made just for 7 years. The employer actually does have records back to 1986. I find no basis for the CPA's position. Notice 2000-16 is clear that correction must be made for all taxable years. Am I missing something?

2. The employer omitted the employee because the employer felt that it could exclude all employees that did not average 32 hours/week. My concern is that there are others that were excluded and the employer is not telling us. I have never filed under SVP, VCR, etc. The submission requirements require that we explain how the faile arose, procedures in effect at the time etc. Is the IRS likely to see this as a red flag and audit the entire plan once the SVP is over?

May a foreign government, or an agency of that government, establish a 401(k) plan for its USC employees in the US as well as its resident alien employees in the US (resident aliens are subject to US taxation)?

I see nothing in the Code or regs to prohibit this.

I have a defined contribution plan. The plan document set vesting for both a top-heavy plan year and a non-top-heavy plan year at a 6-year graded schedule (2-20%). Prior to taking over this plan, the document was amended to change the non-top-heavy vesting schedule to 1 year of service = 50%, 2 years of service = 100%. The Plan was not amended to change the top-heavy vesting schedule. The plan has been top-heavy for the past few years. Since the participant's vesting percentage would decrease under the top-heavy schedule, can I rely on "protection rules" to apply the greater vesting percentages under the amended non-top-heavy vesting schedule? In other words, is it necessary to amend the plan to allow for a vesting schedule which is at least as fast as the non-top-heavy schedule?

A plan passes both the ADP and ACP test using the alternative, +2 x2, method. It then fails multiple use. If 1.0% was borrowed from the ADP of the HCEs and NHCEs and used in the ACP test the ADP test would still pass and the ACP test would pass using the basic, 1.25%, method. Multiple Use would not be necessary. What wording or code references must be in the Plan Document to allow borrowing?

It was just discovered that a 403(B) participant over contributed $500 for 1999 (deferred $10,500 vs. $10,000) and the plan is refunding the $500 in December of 2000 (under APRSC). My understanding is that the participant will be taxed twice on this over contribution--once in 1999 (year of deferral) and again in 2000 (year of distribution).

My questions are these: 1)Is this excess deferral subject to an excise tax? Would a Form 5330 need to be filed? If so, would it be filed by the participant or by the employer? 2)Are related earning also required to be refunded? If yes, only taxable in the year of distribution?

Any comments would be appreciated.

Thanks,

Diane

Would the following employee be eligible to join a cafeteria plan, assuming they meet basic eligibility? It is the same person employed by two different companies.

The employee is a plan trustee, former company officer - 3 years ago, and sibling to 80% shareholder of S-Corp.

The same employee is employed with this other separate company,is the spouse to the General Manager/Trustee, is a company officer/Trustee, and is the "child(of adult age)" of the 100% shareholder of the second S-Corp?

Thank you for any assistance.

How are "ownership interests" determined for members of a Limited Liability Company (LLC is taxed as a partnership]?

Can an existing calendar year 401(k) plan be treated as a safe harbor 401(k) plan right now (for 2001) if the required notices are distributed immediately, and the plan is amended to include the safe harbor provisions by the end of the remedial amendment period?

Want to start up Qualified Parking Reimbursement. I know how to apply the benefit as pre-tax, set the limit and all that stuff. What I'm looking for is a definitive answer to this question: For Qualified Parking Reimbursement (at a train station or at or near work premises) how often are receipts needed? One per month, once per quarter, twice a year, once a year? I know there has been some back and forth on this but I have never seen anything put out by the "big guys". PLEASE RESPOND IF YOU KNOW!!

A participant eligible to participate in his employer's SIMPLE plan has stated he wants to opt out of the plan. Reason is unknown. Everything I find says contribution must be made for all eligible employees without reference to any who may not WANT to benefit. Is this possible, and must the required contribution be given to the participant in the form of cash if he refuses to accept an IRA contribution?

Above assumes employer is making a 2% non-elective contribution in lieu of the 3% matching, as obviously this EE chooses not to make elective contributions.

Is it now safe to say the 2001 457 contribution limit is $8,500 - everywhere I look still has the pending legislation footnote.

Is a defined benefit plan considered a qualified retirement plan?

I have Roth IRAs (some converted from Traditional and some which were originally Roths) dating back to Year 1 of the Roth provisions. TODAY (who knows about tomorrow?) they all have losses. Someone told me that I can convert them to take tax advantage of the losses. Will someone please explain the mechanics of this conversion. How do I get the loss to show up on my tax return and when will it do so?

i am dealing with a plan that is terminating. we directed them to open a plan checking account in order to make distributions. instead they would like to make the distributions via an accountants trust account. can this be done? i do not think so.

If Salary Deferrals are returned due to 415 limits what should happen to the matching contributions associated with the deferrals?

Is there a discriminatory rate of match? (If yes on what basis?)

I am looking for a cite or information to research "bad boy" clauses. Specifically, a plan sponsor would like to forfeit the account of anyone leaving their firm and going to work for a local competitor. I seem to recall these clauses were severely restricted in their use but can't remember where I can find more specifics.

How can non-spouse beneficiaries retain the tax-deferral of a lump-sum distribution made from a DB Plan?

Who would be the beneficiary in the following scenario?

Taxpayer A converts his traditional IRA ("TIRA") to a Roth IRA ("RIRA") in 1998. For the TIRA the primary beneficiary was his spouse but for the RIRA the beneficary was a qualified trust [such that the beneficaries of the trust are the designated beneficiaries for 401(a)(9) purposes].

Taxpayer A dies in 1999.

In preparing Taxpayer A's estate the executor finds out that A's 1998 MAGI needs to be adjusted such that it will exceed the 100K limit. The executor recharaterizes the RIRA back to the TIRA by the 12/31/1999 deadline.

Who is the effective beneficary for this IRA?

i)On the one hand, Taxpayer A's last intention before he died with regard to the beneficiary was expressed on his RIRA. Which would leave it to the trust.

ii)On the other hand, 1.408A-5 Q&A-3 says the effect of the recharacterization, in this case, the RIRA "is treated as having been originally contributed to the Second IRA [herein the TIRA] on the same date ... that it was made to the the First IRA [herein the RIRA]". This implies to me that the beneficiary should then be the ben. of the TIRA, the spouse.

Seems to me result (i) makes the most sense. For example, the executor should not have the power to change the beneficiary designation of the decedent. Note in this case

1.408A-5 Q&A-6© gives the power to the executor to make a post-death recharacterization. It does not say it has to be a mandatory recharacterization. If result (ii) was correct the executor could change the intentions of the decedent. What if the executor was the beneficiary of the TIRA? You see where I'm going...

In addition, 1.408A-5 Q&A-1(a) says that if both the RIRA and the TIRA were within the same trustee instead of a transfer back to the original TIRA, the RIRA can be "redesignated" as a new TIRA; which in this case a redesignation would keep the RIRA's beneficary, the trust. One would think that the effective beneficary would not rest on the way the trustee chooses to processes the recharacterization.

Does anyone have a citation that would apply, other than the previously quoted 408A-5 regs in this scenario? I think that result (i) should be right; but I have no legal basis for it.

One could go on and complicate things by asking about a fractional recharacterization and about whose lifetime would be considered for MRD purposes in the recharacterized IRA but I think I'll stop here for now...

reg_h2b

Many years ago, a 501©(3) entity sponsored a 403(B) plan with employer contributions. There was a document and the plan complied with all of the applicable regs and rules. The plan was frozen and no contributions have been made to the plan for years. Employer has since adopted a 401(k) plan which is running nicely. Employer wants to allow employees to make deferrals to a 403(B) program. Primary reason is that some employees have asked to be able to. Second reason is that some employees get refunds of their deferrals to the 401(k) plan each year because of ADP testing. 403(B) would be open to all, employees can select vendors, etc., etc.....Is the "new" 403(B) program exempt from ERISA (assuming we meet all of the requirements) or is it somehow subject to ERISA because of the old plan or some other reason. Thanks

Fund choices changed in company plan, and no notification was sent to former employee. The funds rolled into a default account which was a bond. He had been in a growth fund. The former employee had a significant loss and is very upset. Any violations?