It appears that a while a custodial account arrangement of a 403(B) plan that is subject to ERISA may be exempt from the trust requirments of ERISA by qualifying under section 403(B)(7) of the tax code, the brokerage company that is the custodian must still be bonded under under section 412 of ERISA if company is not a regulated trust company or insurance company. Any arguments to the contrary?

My wife was married before. In her divorce decree, her ex-spouse is responsible for carrying the children (2) under his medical insurance plan. However, my wife will have to pay $25 per pay period (i.e. $650 per year) to her ex-husband to compensate his medical premium expenses. My wife pays from her after-tax dollars. Can this amount be considered as FSA reimbursable medical expense?

Thanks

Can anyone comment on the increased administrative burden (ie. paperwork, calculations, questions from plan participants) on 401(k) plans that offer multiple loans as opposed to those that just offer one outstanding loan? Advantages and Disadvantages??

Client wants to set up a 401k at dec 1, 2000, effective January 1, 2000 for 415 purposes, allow all employees to defer up to 100% of dec salary and depend on the 3% non hce rule in the first year to allow the HCE to defer up to $8,500 (170,000 x.05) I don't see why it is not ok, but would like some feed back

In 1998 I converted a $16,000 traditional IRA to a Roth IRA, and elected to spread the income over 4 years ($4,000 each year).

Can I, now in 2000, recharacterize the entire conversion back to a traditional IRA? Can I also reclaim the tax I paid on the conversion amount for both 1998/1999? If so how?

I am 31 years old, earn approx $60,0000 a year (gross) and contribute the full $2,000 each year to the Roth with no other investing. Is it worth me going back to a traditional IRA (I did not have losses in my Roth this year) to gain the present tax advantage or should I stick with the Roth?

Which safe harbor definitions of compensation include severance pay and which do not? The sources I have available seem to disagree.

All seem to agree that severance pay is included in W-2 wages (the Wages, Tips and other compensation box on W-2).

However, some say included and some say excluded for 3401(a) withholding wages, 415©3) "long list", 415©(3)"short list", and 414(s).

Can anyone clarify whether severance pay is included or excluded under these definitions? Any cites that specifically mention severance would be appreciated.

I'm a first time participant...my apologies if my question is a repeat. My wife and I have a combined AGI very close to $150,000 and I expect it to surpass that level, and the $160,000 maximum, within the next year or two. My question is this: on what income level are taxability of future withdrawals determined - AGI at time of investment, or at time of withdrawal? And what if I invest in a Roth while my AGI is below $160,000, and continue to add to the fund each year even after I surpass the $160,000 threshhold? Will I have to keep track of which investments were made pre-$160,000 and which were post-$160,000 and treat only part of the total withdrawals as tax-free?

For a small company that is terminating a PBGC-covered DB plan that is underfunded on a termination basis:

If I understand the rules correctly, a standard termination (as opposed to a distress termination) can be used if either (1) the plan sponsor (a corporation) agrees to contribute the amount necessary to make the plan sufficient, or (2) the majority owner agrees to take a benefit cutback. Is this correct?

I also feel that item 2 is superior to item 1, since the plan sponsor probably cannot use the tax deduction. Does this make sense.

Finally, if there are two 50% owners (exactly 50%), does that mean that both must agree to a cutback, either can, or neither can (since neither is a majority owner). [in this case, one of the two owners died about a year ago, which contributed to the demise of the business, etc.]

Thanks

Recharacterization question: example: I converted my IRA to ROTH earlier this year. Value of conversion was $20,000. Now I am going to re-characterize back to IRA since value has gone down to $12,000. Next year I will possibly convert back to ROTH. My question is will I owe any tax on the difference $8,000? I am almost sure I won't, but I want to make sure the IRS doesn't think I left the $8,000 in the ROTH. I didn't, I just lost it in the market..

Thanks

Jay

Is it legal for a company to disallow particiation of spouse in PPO plans if they are eligible for a plan with the company they work for?

I began working for a company in March of 2000 and we got coverage under the PPO plan. My husband became employed in July and since my insurance was better we decided to stay with my coverage. He has to sign a waiver of coverage for his plan. Now the company I work for is saying that they will not cover spouses under the PPO plan however if we want to switch to the HMO they will cover them. I would like to know what our rights are.

A company announces change in match from 25% to 35% in November to increase participation effective at year end bonus. Those who maxed out during the year are not able to benefit by increased match. OK?????

Does a QNEC contribution allocation need to be definitely determinable? Or, if the QNEC goes only to NHCEs, can the document not state the allocation formula, and state only that the QNEC goes only to NHCEs? The allocation if made to only NHCEs, cannot be discriminatory.

After receiving retirement benefits for 8 years the annuitant is advised that there was an error in the original calculation. In order to correct this overpayment the pensioner was advised that commencing on 10-31-00 there will be a reduction of $743.13 per month for 26 months. This represents a reduction of 22% of the full amount of $3362.64 per month. Restoration to $3362.64 will resume on 12-31-02.

Recognizing the length of time that has elapsed, can the Plan be enjoined from making the correction?

Best wishes,

Joel L. Frank

I am starting to see a lot of Heart & Stroke and Critical Illness policies being offered, both in and out of Sec 125 Cafeteria Plans. Has anyone heard of the reasons why the benefits are not taxable income? In particular the benefits that are not related to any expenses, such as the Dianosis Benefit and Home recovery Benefit etc.

This was a new design on me--trying to figure out if it can work. Forgive me if the answer's obvious.

Employer sponsors one big DC plan, with two components. First component is a profit sharing/safe harbor 401(k) plan, using the 3 percent nonelective contribution. All employees eligible. Second component is a money purchase plan with a 4 percent contribution--only the owner/sole HCE is eligible. Assume this is being treated as one plan, even though two components.

Is it permissible to test the money purchase component and the profit sharing component as a single plan under 410(B)? If not, how does the money purchase component pass coverage?

In a 401(k) plan with a loan provision and policy that is being utilized by participants, can an employer revoke that loan policy? In order to cut down on administration and expenses, the employer would like to disallow future loans while allowing existing loans to be repaid according to the amort schedules.

An employer owned by group of professionals is setting up a new defined benefit plan. (It already maintains a defined contribution plan.) Prior to drafting the plan document the board of directors polled the professionals to determine who wanted to participate in the new plan. No formal election regarding participation was ever offered to the professionals. However, those who expressed the desire not to participate were specifically excluded from the plan by name. The board of directors, which includes all of the shareholder/employees, determines the compensation of each employee each year. However, in practice, those who were excluded from the plan will receive more cash compensation from the employer than those who participate even though no formal agreement to this effect exists. Is this a cash or deferred election under Regulation Section 1.401(k)-1(a)(3)?

In a 401(k) retirement plan that allows post-tax (voluntary) contributions, do all ppost-tax contributions have to be a payroll deduction?

In other words, can John Doe cut a check from his personal checking account, mail it off to his HR Administrator, and ask that it be contributed to his individual 401(k) account.

If I have a University employee who participates in an ERISA 403(B) plan and also has self-employment income, must I consider his 403(B) contributions when calculating his maximum deduction for his own DB plan? I think no, as long as the 403(B) is an ERISA plan.

We have a client who did not pay the Company profit sharing contribution to the plan before the extended due date of the tax return due to an inadvertent ocersight. The contribution was deducted on the Company's Form 1120. According to the rules, in order to deduct the contribution on the current year income tax return, it must be deposited by the due date of the return, including extensions. Is there any lenience with this rule? The IRS has chosen this particular year for audit and we are concerned they may disallow the deduction.

Also, does anything happen to the participants' accounts due to this administrative error? Does the money stay in the plan or does it all have to be refunded?