I have two related questions regarding 401k's. My Brother-in-law(B-I-L) owns 60% of a company with an existing 401k. He and the other two shareholders are going to sell the Corp to another person so that the new majority shareholder will own 70%, my B-I-L 30% and the other two no ownership effective June 2001. The new majority owner already owns two S-Corp's and a sole proprietorship. He plans to start up 401k's for the employees of the S-Corps and a Keough for himself and his wife in the sole proprietorship. The new majority owner does not want the employees of the three Corps to know about the cross ownership so he does not want the SPD(s) to show one Corp as sponsor.

First, can he setup separate 401k's and/or a separate 401k and a keough?

Second, what happens to my B-I-L's existing 401k if the new owner already has implemented a separate 401k before he takes over?

I am trying to determine if terminating a Defined Benefit Plan and replacing it with a defined contribution plan makes sense for all employees involved.

I need to calculate what the defined benefits would be for employees aged 35 / 45 / 55 / 60 with 5 / 10 / 15 years of service in the D/B plan.

If I terminate the D/B plan and establish a 401k/money purchase plan will the employees be better off? How can I compare employees lumpsum plan values in theD/B plan against the value at age 65 of a Defined contribution plan earning 8% over the same time periods.

I have a question regarding how the rates for cobra coverage are determind. I terminated my position and was part of a group coverage policy, and I did a fair amount of research on cobra and estimated my payment to increase at 100% plus admin fees. I was completely shocked when my package arrived and the (cobra)insurance rates had tripled plus some! Is this legal and is there anyway for me to find out how these rates were determind? Thank you for your help.

Husband and wife own all of the stock of a closely-held business. In the event of their deaths, they would like to "give" the company to their 20 or so employees. The value of the company is such that federal estate tax is a

consideration. An outright gift may be possible, but does not seem practical. Has anyone ever seen anything like this or have any creative thoughts as to how this might be accomplished in a tax-efficient manner, using an ESOP or otherwise. One thought I had would be to create a private

foundation at death and bequeath the entire estate to the foundation (deductible for estate tax purposes). I believe the Foundation would be required to disgorge most of the stock as an excess business holding. Perhaps the directors could be directed, or at least encouraged, to sell the

stock to the employees in an ESOP-based transaction? Of course, that is not the same as a gift, and a bargain sale is probably not possible as it would likely violate state law. Nevertheless, this approach might be something

the client would consider. Any thoughts about this, or other ideas, would be welcome.

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.