Please forgive me if this topic has already been addressed at length. My question relates to how deferrals in a 403(B) and 457 - both sponsored by a governmental agency - are supposed to be handled.

Now, I am not a governmental plan expert, so bear with me. Several years ago there was a permanent moratorium on discrimination testing on all governmental plans. I have recently run into a governmental agency that was allowing their employees to max-out in both plans, ingoring the coordination requirement. Had I not seen something like this before, my knee jerk reaction would have been that this was clearly an error.

However, I have researched this, and I am looking for some feedback on whether what I have found is accurate.

First, there is no question that deferral and contribution limits of 403(B) and a 457 sponsored by a non-governmental agencies must be coordinated. But what if the plans are sponsored by the same governmental agency? For example, under Treas Reg 1.457-2©/(e)(2), it appears that a governmental 457 must coordinate benefits with a 403(B) ONLY if the 403(B) plan is sponsored by a 501©(3) organization. So it appears to me that if a 403(B) is sponsored by a governmental agency, then the employees of said agency could contribute $10,500 to the 403(B) and $8,000 to the 457 - if all other limitations are satisfied. I want to know if any of you have looked into this, and whether this is possible.

Your thoughts and feedback would be greatly helpful and appreciated.

Matt

If excess annual additions are cured by distributing elective deferrals, are those distributed deferrals included in the ADP test? I'm inclined to think that the same treatment as excess deferrals would apply. Therefore, if the participant is a HCE the distribution would be included in the ADP test; if the participant is a NHCE, the distribution would not be included. Is that correct?

Also, is the distribution for excess annual additions included in the top heavy test?

I have a potential client that in interested in a quasi-Section 125 Reimbursement Account. He likes everything about one except the risk for himself and his employees. Big surprise! He wants to put in a certain amount of money into each employee's account and whatever they don't use give back to them at the end of the year.

I know you can't do this in a Medical Reimbursement FSA account or even a Medical Savings Account plan, but is there a Section number something plan out there where this can be done by the "rules"? I've got the software to do it, I just need the rules associated with it if there are any.

Are alternate payees and beneficiaries eligible for diversification or is diversification limited to employee participants?

There is a terminated employee who cashed out of their 401k plan, but never cashed his check. Three years have now gone by. If the plan administrator is able to successfully get the funds back (and not have them escheat to the State), how would the plan administrator treat the funds? Would it be a forfeiture or could the plan use the money for future contributions?

not being very up to snuff on tax info i was wondering if anyone could help me with the following:

Currently my employer is offering everyone in the office the option of contributing their money to a 401k plan. The plan does not offer any type of matching $'s just your money, although they do contribute a lump sum irregardless of your contributions. It was my contention that everyone would be better off putting any contributions into a Roth which they would then have complete control over as well as probably better tax consequences. Was i right in assuming this?

May an individual use a w/drawal from a 457 plan to meet the combined required min dist from a 457 and an IRA? And vice versa?

A Plan sponsor (company) sells 88% of its stock to 6 or 7 entities. They will continue to use the remaining stock to make aquisitions. The hiring and firing of all the employees will remain under the control of the original plan sponsor entity. however, all payroll and benefits will be handled by a leasing company going forward.

should these people get paid out or is it a same desk rule scenerio?

Form 5500, Schedule H, Part IV, Question 4i, asks if a plan holds assets for investment? The instructions give a format to use and a whole list of assets that are excluded for this purpose. Mutual funds are one of the assets that appears to be excluded. So, if a daily 401(k) plan is only investing in mutual funds, do you answer question 4i "No" and thus are not required to complete or attach a "Schedule of Assets Held for Investment Purposes at End of Year?

Does anyone have any information or articles regarding the possibility of reinbursement for unpaid/noncovered medical expenses for an executive?

My memory is getting rusty. I cannot remember when the new Dollar Limits for EB Plans are usually released.

Didn't GATT set the requirements for WHEN the limits had to be adjusted for Cost of Living? Was that in October? (I tried searching on the internet (TAG) but couldn't find anything specific, even looking under GATT, Uruaguay Round Agreements or Dollar limits, etc.)

If your plan has a last day requirement for a match contribution, are the participants who are excluded from the match contribution on this basis also excluded from the ACP test?

I have a question I was hoping someone might be able to help me with.

If I elect a Code section 1042 deferral of gain on a sale of employer securities to an ESOP does such an election also operate as a deferral of gain on the sale under California tax law, such that I will not be responsible for California state taxes until I sell such replacement securities?

Thanks!

Must a 457 plan contain language about 401(a)(9) minimum distributions?

May a 457 plan make all required minimum distributions based on the life expectancy of the participant only (without giving the participant a choice to use joint life expectancy with a designated beneficiary)?

I have a prospect whose plan has a CDSC of 2% if they move the plan within the next four years. I have discussed it with my company (we are a bank if it matters) and we are willing to "pay" or "cover" the CDSC to get the plan. I know insurance providers will cover the CDSC but I do not know how it is done.

I have been told that the existing provide will take the CDSC out of the assets before they transfer the plan. How do we properly "replace" the assets to the plan? Can my prospect "require" the existing investment provider to bill the company for the CDSC instead of charging it to plan

assets? Thank you for the assistance?

Plan specifies that gap income is to be attributed to corrective amounts using safe harbor 10% method. The plan year being tested is a short one of three months (10/1/99-12/31/99), so the dollar amounts of both the excess contributions and the attributable income for the plan year are low. Taking 10% of that amount per gap month seems to produce an artifically low gap income amount, and does not jive with what I have always thought was the concept of the safe harbor formula. However I do not find anything requiring any adjustment for a short plan year. Any thoughts?

What happens when a C-Corp. greater than 5% shareholder

borrows from the Profit Sharing Plan and then proceeds

to convert to an S-Corp prior to the loan being paid off?

Is there relief in that the loan was proper at the time

it was made, or is it deemed improper at the point when

he becomes a more than 5% owner of the S-Corp? Anyone have

any ideas or is there guidance?

A small employer sponsors a profit sharing plan. The owner is trustee. The owner is also the world's best investor. On a hot tip he used about 90% of the plan assets to purchase options. Lost about 60% of the plan assets. He wants to make up the losses to all of the participant's accounts, except for his own account.

Can he make restorative payments to the plan based on his own determination that a fiduciary breach has occurred?

If so, can the restorative payments be made to only non-key accounts?

Are the restorative payments deductible for the plan sponsor?

The DOL voluntary fiduciary correction program doesn't cover this; is there a program that would cover this, or does the fiduciary just wait for a DOL audit?

Self insured health plan wants to permit employees to waive health insurance co-pays for the specific purpose of one-day prostate cancer screening. Any ERISA, tax or other issues?

I was talking with an employee benefits attorney the other day about whether a governmental plan should obtain a favorable determination letter from the IRS that the plan satisfies those portions of the qualified plan rules applicable to governmental plans.

The attorney mentioned that if the governmental plan applies for a determination letter, the plan is now, somehow, subject to some or all of the qualified plan rules from which the plan would otherwise be exempt.

Is this true?

While I have only very limited experience with governmental plans, this seems like an odd rule to me. Nothing in the Form 5300 instructions suggests such a rule.

If, in fact, there is such a rule, does anyone have a citation? The attorney who mentioned it did not?

Thank you very much!