I have a client where the match portion of the 401K is taxable for the City. They have a vesting schedule, 20% per year, and the employee is funded on a quarterly basis. If an employee leaves during the quarter, they do not receive any of the company match during that period.

Since the employee is on this vesting schedule, I am not sure if they should be taxed on the full company match portion or only on their vested portion.

Any recommendations ?

How long do you have give a participant in a terminating profit sharing plan with a balance greater than $5000 to decide to rollover or take a lump-sum distriubtion? If the participant does not respond, can you force a lump-sum distribution greater than $5000?

We have a client that has plan assets invested in a short term investment fund (STIF) that also happens to be a common trust fund. Our dilemma is on how to report this in the Statement of Income and Expenses on Schedule H. The instructions seem to indicate that STIF funds should be reported on line (B)(1) - the Interest Bearing cash line. This, however, is a common trust fund, so should it be reported on line (B)(6) - the common/collective fund line? It appears that both lines would a reasonable place to report the earnings, but I'm leaning more towards the common/collective line. Your thoughts on this issue would be most appreciated. Thanks.

Interesting question: A company (for this example, Company A)has 3 employees, but offers no benefits such as a 401(k) plan. However, Company A, to accomodate the employees,has an arrangement where the employees wages are paid by a totally unrelated company (Company b). There is no controlled group issue between A and B.

The Company A employees perform no services at all for B; the only reason they are carried on Company B's books is to be able to contribute to the Company B 401(k) plan. They receive their W-2's from Company B. Company B is reimbursed by Company A for the wages, taxes, etc.

Is this a proper set-up? I have never encountered this, so I was curious as to whether anyone else had heard of this situation. Thanks for any answers.

Does a 1099R form need to be filed for a missing participant from a terminating plan who has had his account balance moved to an escrow account?

Can a terminated employee who was in a DB plan rollover his funds into his new employer's DC plan? Please provide the regulation or code section.

My daughter is the beneficiary of her father's pension plan. As the non-spousal beneficiary, they are telling her she must receive this as a "lump sum" distribution, and cannot roll it over. She will be entering dental school next year, and we want to use this money to fund her schooling. Is there any way to get this "lump sum" into a Roth IRA? if so, would she then be able to take distributions on the capital investment without penalties? She is 19, has no significant income, and we have $112,000 to protect. We need a secure vehicle, with minimal tax implications, and reasonable liquidity.

Have we heard anything about extension of the 9/30/01 sunset deadline on the Mental health Parity Act?

A Plan has a SS offset formula. Normal Ret is age 65.

The offset is up to 45% of PIA.

If a person has a SSRA of 66 and retires at age 65 should the Plan use the PIA at age 66 and then reduce it by 1/15 for commencement at age 65 when determining the offset portion? It doesn't seem right to use the PIA unreduced. It seems it s/ use the SS Ben at the ben commencement date of 65. Any thoughts? Plan says that it is just the unreduced PIA, but I tend to disagree.

Gary.

The recent article from the Cato Institute about Social Security has left me with a rather bad taste in my mouth. Below are some quoted excerpts (full article here: http://www.cato.org/dailys/11-17-00.html), and my responses.

"We may not yet know who the American people chose for their next president, but it is becoming increasingly easy to see their preference when it comes to Social Security."

Since when do we put bread and circuses ahead of sound fiscal policy? As much respect as I may have for individual Americans, history makes it clear that the majority rarely qualifies any decision as a good decision.

"Opponents of Social Security privatization mounted a major campaign to demonize Bush's proposal."

As with most major policy changes that are first introduced in a major campaign for elective office, there is always ample fodder for gainsayers to find fault. The basic idea of privatization has merit, but Bush's proposals contain as much blue sky as anything I've seen in the last 25 years. If this is demonizing, then we'd better all lay in a few gallons of holy water. The recent presidential campaign was, in my opinion, straight from Hell.

"Yet despite this unprecedented campaign of distortion and fear mongering, the American people came down firmly on the side of privatization. Exit polls showed that 57 percent of American voters supported individual accounts."

This statement and others in the article go far beyond the run-of-the-mill creative statistics. (sarcasm) I would love for someone to show me the law that states that exit polls reflect the will of the American voters. Why count the votes? Exit polls are all you need. (/sarcasm)

"Results from further down the ticket also favored pro-privatization candidates. High-profile privatizers, such as Sen. Rick Santorum of Pennsylvania, were re-elected..."

While the first statement is arguable, invoking Sen. Santorum is a big mistake. He was elected because the Democrats in Pennsylvania could not find a candidate to challenge him. Social Security, or most other issues, had nothing to do with it. I know: I live and vote in Pennsylvania.

A corporation acquires another corporation in a stock deal. How are highly-compensated employees determined during the look-back year? Are the previously unrelated employers treated as one employer for purposes of determining who is an HCE? Where in the regulations/IRS pronouncements does it say this?

I have a claim in our office for abortion on a brand-new self-funded plan member who has no creditable coverage. I am inclined to say this is subject to the pre-existing exclusion, but the relation between abortion and maternity gives me pause. I don't want to run afoul of the pre-x rules regarding pregnancy.

Has anyone handled this situation before? I am wondering if the determination might hinge on the reason for the abortion.

Any help would be appreciated!

My company is a 100% S-Corp ESOP. The ESOP is our only retirement plan. I have attended many ESOP seminars and conferences, and cannot find any other company that uses the ESOP as the sole retirement plan.

I have been asking for years to install another, more viable retirement plan(401k) but it's falling on deaf ears. There seem to be many many ESOP advocates out there but when I ask the question of what happens when the company goes belly-up,burns down, etc, I get the old hairy eyeball !

I have a significant amount of $$$ (over 100K) in my ESOP account, and I am nervous it won't be there when I retire ( in 20 years).

What can I do to convince the company president that we employee owners need to diversify our retirement funds in the future? Am I wrong in assuming we're up the creek if the place goes belly up? Will the creditors understand I need that stock valued at what it was before the 2nd Great Depression?

Is there any way to test dividend allocations that Quantech calculates?

A plan is amended creating a short plan year by switching from a plan year ending 12/31 to a plan year ending 6/30. What are the ADP/ACP testing requirements? Should tests be done for 1/1 - 6/30 for the year the plan was amended, and then 7/1 - 6/30 thereafter, or should it be 1/1 - 12/31 for the year the plan was amended and an overlapping 7/1 - 6/30 test for the first full plan year?

Does anyone know if the 411 post normal ret age accruals apply to State Plans? i.e. for a teachers plan? I thought there may be something in ADEA that might require a gov plan to apply 411 post NRA accruals.

This has to do w/ receiving the greater of AB or age 65 act increased AB.

Gary

A Plan has a formula equal to:

1.5% * svc (limited to 40 years) * avg pay

less

66 2/3% of Soc Sec Ben.

The offset in its current version does not seem to be a fixed formula or a unit credit formula. It would appear that the 66 2/3% would either have to be prorated for service under 40 or would have to accrue at say 1 2/3% per year for a max of 40 years/ What do you think? Is there an omission in the formula? Is it illegal since it doesn't explicitly include one of the above?

Has anyone got current insight into the issue of whether Affiliated Service Group rules apply to a corporate director who owns less than 50% of the underlying corporation. The issue is whether that Director can establish a SIMPLE retirement plan using his Directors Fees (in addition to his coverage under the primary corporation's conventional qualified plan). I am still not sure whether a Directorship would be considered a 'Service Organization' under 414(m)(5).

Can an employee continue to defer while on short term disability?

We received a response to an IRS General Information Letter Request confirming that the rule of parity applies to employees and not just participants. This has confused me for a long time and we reached a point where we had to know.

General information letters are free and may be requested at the following address:

Employee Plans Technical Branches, IRS, 1111 Constitution Avenue, N.W., Attn: T;EP; Room 6052, Washington, DC 20224. Turnaround time is 30-60 days.

We sent in a detailed request with examples, but if all you want to know is whether or not the rule of parity applies to employees or participants, just send in that simple question. The information letter does not apply to a specific set of facts but expands on information already out there that may be confusing.

Hope this is helpful to some of my fellow strugglers.