An employer purchases a professional practice in an asset sale and inherits two employees from the old practice, with the promise that they would continue to benefit under the SARSEP established by the old practice (prior to 1997). After the asset sale is complete the employer forwards salary deferrals to the "inherited" employees' IRAs, AND continues to match the deferrals under the old practice's generous matching formula. However the employer never formally adopts or executes anything in relation to the SARSEP, nor do the asset sale documents address the SARSEP. Is it necessary to "unwind" all of the new employer's contributions (and the post-asset sale deferrals)?

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I am looking for sample 401k negative election language. Several other posts have made this request (but I don't see responses). So I'll try again - does anyone have sample notice language they'd be willing to share? An e mail of the WORD document to rvatalaro@earthlink.net would be greatly appreciated. Thanks!

If a plan has a pre-1987 carryforward for deductibility purposes, and that plan has been terminated, may the employer use that pre-1987 carryforward in a subsequent plan (for example, money purchase plan terminates, plain vanilla profit sharing plan starts - can the profit sharing use the pre-1987 carryforward from the money purchase)?

Loan was given to owner of an S corp, which of course would be a prohibited transaction.

but also, Plan does not allow loans.

so, which comes first? Is it an operational defect that can be corrected (perhaps under APRSC)

or a prohibited transaction, which is not correctable under any of the programs.

owner has been paying back loan with interest.

as a side note, plan does not allow in-service withdrawals, so it can't be treated as a distribution.

We have been researching the elements of the "GUST" legislation that may be applicable to "qualified" government pension plans and it appears that only "USERRA" apllies. Has anybody else researched this subject?

Can an employer who increases the maximum deferral under a health FSA during a plan year allow participants to increase their elections during that year?

How flexible is the IRS under VCR? A 401(k) plan with a matching contribution failed to credit controlled group employees transferring to the plan sponsor with their prior group service and required them to complete an additional year of service before being eligible to make elective deferrals. When actually eligible, less than 10% of the affected employees elected to defer.

The VCR correction per Appendix B is for the employer to make a QNC equal to the ADP (for elective deferrals) and ACP (for the match) for all of them, even the 90% who never deferred into the plan. Anyone have any experience with IRS flexibility on this. We would like to make corrective contributions only for those who later deferred, the presumption being those who never did, would not have had the plan been adiminstered correctly. Cost is a 10X increase the IRS way. Seems to convert a correction to a penalty to me. Anyone?

Is there any requirement that vesting be shown on a participant's annual benefit statement, or is it enough to show the total accrued benefit before vesting?

After Company B has merged into Company A (i.e., Company B no longer exists) and has "frozen" contributions to its 401(k) plan as of the corporate merger date, does former Company B's "frozen" 401(k) plan subsequently report under Company A's employer name, EIN, and next available Plan Number between the corporate merger and the ultimate plan merger (since Company B no longer exists)? Plan contributions continued seamlessly for the employees of Company B into the Company A 401(k) Plan.

The specific situation is that Company B's 401(k) Plan has some operational defects which must be corrected under EPCRS prior to a merger into Company A's 401(k) Plan, and so there will be a period of time when the 2 plan co-exist. Company A would like to shift the assets of Company B's "frozen" 401(k) Plan onto the same investment platform as its 401(k) Plan is on to allow the employees to have the same investment options. Unfortunately, this requires an amended Adoption Agreement (the Co. B Plan is currently on an insurance company Adoption Agreement, which must be changed if investments are shifted our of the ins. co.'s investments). On the amended Adoption Agreement, the "Employer," "EIN," and "Plan Number" must be identified. Do we use Company A's information, including assigning the next available Comapny A "Plan Number" to the "frozen" Company B 401(k) Plan?

Any suggestions or thoughts are appreciated.

Must employees on FMLA or Non-FMLA be given the same opportunity as active employees to make election changes during the normal annual enrollment period while on LOA? Normally, it is my understanding that employees on LOA must wait to make changes upon their return to work.

I recognize that the DOL has increased its audit activity and one of the issues it has been focusing on is whether employers are remitting contributions to the plan on a timely basis. If the DOL conducts an audit and uncovers such an issue, will this automatically trigger (or increase the chances of) an IRS audit. In particular, I am interested in whether such a DOL finding would trigger (or increase the chances of) an IRS audit of a not-for-profit located in the NYC area.

Assume a non-contributory DB plan. Plan provides for a pre-retirement lump-sum death benefit equal to 3 times annual salary. Is this benefit life insurance proceeds and, therefore, not eligible for rollover treatment or is it a taxable distribution and, therefore, eligible for rollover treatment?

After a total distribution from an ESOT to a participant of employer stock, followed by a put back to the company by the participant, and payment from the company for the stock over 5 years, is withholding due on the payment by the company? Is the payment after the put considered a distribution from the plan?

I have someone who has proposed to offer a benefit whereby employees will receive 1 month of paid "end of year" leave upon retirement (or separation from service) for every year of service they accrue. This arrangement will cover employees of a tax-exempt organization and is intended to fall outside of the strictures of 457 (and 457(f)) by being deemed a severance or vacation plan. In light of PLR 199903032, I do not believe this arrangement would be considered a severance plan because payments are made "when" an employee terminates versus "because" an employee terminates. However, could this be considered a bona fide vacation plan (that is, perhaps under an argument that a year of service gets you a month of "sabbatical leave" or reward vacation time once you terminate)? There does not appear to be much authority out there vis-a-vis bona fide vacation plans. Thanks for your help!!!!

Doctor has a frozen defined benefit plan in his corporation. Subsequent to the freezing of the plan, his wife starts a business. The two businesses are in a control group. Are the employees of wife's new busines taken into account in examining the frozen plan's "prior benefit structure" under the 401(a)(26) regs?

Thanks.

Can someone please explain the answer?

Based on the following information, what is the participant's annual top-heavy minimum accrued

benefit as of June 30, 1997?

The participant works over 1000 hours per year and only participates in this plan.

The plan has always been super top-heavy.

The top-heavy min benefit is based upon years of service.

The plan year is July 1 to June 30.

DOH = 7/1/90

Plan Effective = 7/1/86

Annual comp:

6/30/91 = $20K

6/30/92 = 25K

6/30/93 = 25K

6/30/94 = 15K

6/30/95 = 22K

6/30/96 = 23K

6/30/97 = 10K

ANSWER = $3080???

It is my understanding that the IRS has issued a workplan for 2001 that includes guidance on 403(B) isssues. Where can I obtain more information on this?

After Company B has merged into Company A (i.e., Company B no longer exists) and has "frozen" contributions to its 401(k) plan as of the corporate merger date, does former Company B's "frozen" 401(k) plan subsequently report under Company A's employer name, EIN, and next available Plan Number between the corporate merger and the ultimate plan merger (since Company B no longer exists)? Plan contributions continued seamlessly for the employees of Company B into the Company A 401(k) Plan.

The specific situation is that Company B's 401(k) Plan has some operational defects which must be corrected under EPCRS prior to a merger into Company A's 401(k) Plan, and so there will be a period of time when the 2 plan co-exist. Company A would like to shift the assets of Company B's "frozen" 401(k) Plan onto the same investment platform as its 401(k) Plan is on to allow the employees to have the same investment options. Unfortunately, this requires an amended Adoption Agreement (the Co. B Plan is currently on an insurance company Adoption Agreement, which must be changed if investments are shifted our of the ins. co.'s investments). On the amended Adoption Agreement, the "Employer," "EIN," and "Plan Number" must be identified. Do we use Company A's information, including assigning the next available Comapny A "Plan Number" to the "frozen" Company B 401(k) Plan?

Any suggestions or thoughts are appreciated.

I was not aware of the 2-year holding period on SIMPLEs and rolled my SIMPLE from my previous employer when I left. I thought it was like a 401k and I could roll as soon as I left my employer.

Merrill Lynch, holder of the SIMPLE, did not tell me about the 2-year hold - indeed, the broker was not aware of it even today when I called.

Neither did they withhold the 25% penalty when they released the funds. Should they have done so?

Do I have any recourse now?

Am I on the hook only for the 25% penalty or for income tax plus penalty? The money was rolled into an IRA at Vanguard.

Thank you.