I am not sure where to post this. Does anyone know what "k1 processing" is? Thanks, JimJ

I have a closely held client that sponsors an ESOP. In the past, when a participant exercised his or her put option, the ESOP purchased the shares from the participant. The ESOP was "frozen" two years ago and the company began redeeming shares when the put option was exercised, with the repurchased shares pledged as collateral for the company's repurchase obligation. Prior counsel advised the company that shares pledged as collateral were considered outstanding under state law, and therefore should be considered outstanding for valuation purposes until the shares were no longer pledged. The state law in question simply states that shares pledged in a redemption are not considered redeemed, but are also given no voting or distribution rights, except in the case of the company's failure to pay the redemption amount. My interpretation of the state law is that it protects sellers from pledged shares being considered retired in the event of default. If shares were considered retired, the selling shareholder would not automatically receive shares upon default and board action would be required to "reissue" the shares. I conclude that shares pledged as collateral for the company's repurchase upon the put should not be considered outstanding for ESOP valuation purposes unless and until default. Any thoughts?

It is my understanding that a taxpayer can open an Education IRA for just about anyone that he/she would like to (for example a neighbor's kid). I am currently using a Roth as a education savings vehicle for my son. But assuming that I was planning on using the money to pay for the higher eduction of my non-relative neighbor's son, would his education expenses be eligible as a qualified education expense? Could I draw funds out of my Roth penalty free to pay for a neighbor kid's eductaion, or does it need to be for a dependant child in order for it to be a qualified education expense?

Second question - Can a taxpayer take advantage of a hope credit or a lifetime learning credit during the same year he/she takes a tax-free distribution from a Roth to pay for education expenses?

Our firm has been an independent TPA since 1976. We have been working with a major insurance company [will gladly disclose via direct email] as a third party administrator using their group separate account annuities as a 401(k) funding vehicle. With deteriorating public opinon of insurance products in general, the trend is towards more bells and whistles and is moving away from insurance based products. Many firms are developing trust based products investing directly in mutual funds and directed brokerage accounts as replacement products. The Directed Brokerage Account has created conflicts of interest with major brokerage firms who do not want their brokers selling the Directed Brokerage accounts. The insurance company recently asked its PPA's and Marketing people basically to lie to brokers of one of the major Broker dealers [will gladly disclose via direct email] or simply not mention that the Directed Brokerage Account is available. Other major brokerage firms [will gladly disclose via direct email] have declined to enter selling agreements with this insurance company to sell their Trust product because of perceived conflicts of interest arising from the Directed Brokerage Account. I am personally uncomfortable with such mandates.

Besides a high degree of discomfort and due to a difference of opinion relating to grandios production expectations, other newly imposed requirements, and the direct promotion and public endorsement by the Insurance Company of a competing TPA's in the same market we are in, topped by a conflict of interest in their replacement Trust product is an unacceptable replacement product.

Therefore, we are seeking to explore other alternatives for 401(k) plan fundng with other media than variable annuity products but short of running Trustmark type programs. According to the OTS, there have been something like 125 applications for Trust charters since 1997. I do not believe these institutions are spending huge amounts of money to establish Trust Companies, just to say they have a Trust Company.

Does anyone know of a broker/dealer, insurance company, or other financial institution that is using a trust type product to market 401(k) participant directed accounts that involve the use of an outside TPA?

If your firm is either selling or administering insurance based daily valued variable annuity products, and are having problems with the carrier of a contract nature or otherwise, I would be interested in hearing from you also to compare notes or problems and the possibility of resolution of conflicts. We may all be in the same boat sooner or later.

J. D. Wright

Benefit Investment Group, Inc.

An error was made. Is there any way to undo the error?

Participant dies at 73 on July 1, 2000 past the RBD. Sole beneficiary is son who withdraws entire balance from the IRA on September 5, 2000. After speaking with me, it is clear to him that an error has been made. Is there any way to get the money back into deceased mother's name and do a stretch?

I have a few difficult questions about contribution limits to a combination of 401(k) and 403(B) plans. My spouse works as a professor in a public university in NC. There are two retirement plan options: 1) the state defined benefit retirement plan 2) the defined contribution plan for only EPA (exempt from personnel act) employees (academic staff and administrators), a 403(B). The State of NC also has the “Supplemental Retirement Income Plan of North Carolina,” a 401(k) plan, which all state employees can contribute to. From what I understand this is a “grandfathered” 401(k) plan. There are only employee contributions to the 401(k) plan. The 403(B) plan, which s/he joined with TIAA/CREF, has 6% mandatory employee and 6.66% employer contributions of salary.

I have been told that s/he can also contribute up to 20% or $10,500 (the maximum elective deferral) to the 401k. I also was told that the amounts contributed to the 403(B) RA did not count toward the maximum elective deferral because 1) this was in lieu of the state defined benefit plan and did not count 2) the 401k plan was grandfathered. However, I was told if s/he contributed to what TIAA/CREF calls “Supplemental” SRA 403(B)s (GSRAs) then that would offset any contributions to the state 401(k) plan and fall under the $10,500 combined limit for 2000. Is what I have been told accurate, especially the 401k limits? (BTW we have maxed out the 401k under this advice for several years.)

To make matters even more complicated: My spouse has a semester visiting appointment at another public university out of state which in addition to his/her normal appointment in NC is paying some top-up salary. They have offered to contribute to a 403(B) on his/her behalf for this extra salary. (Hence, my spouse has two employers.) Their retirement plan has immediate vesting in the ORP 403(B) (TIAA/Cref also) and the institution contributes roughly 10% of his/her salary but does not have employee matching. They do offer the option to make “voluntary” additions to 403(B) (I assume GSRAs?) but they state that “The aggregate of employer contributions and voluntary employee contributions cannot exceed the IRS Code 403(B)2, 415©, and 402(g) limits.” This situation raises further questions. 1) is my spouse eligible for two 403(B) plans at the same time? 2) If so, how does the second 403(B) plan effect the first 403(B) plan (if at all) at his/her primary institution in NC? 3) How does the second 403(B) plan affect the 401(k) contribution limits (if at all) at the primary institution? As one can imagine this situation is novel (and difficult) for most HR officers. Many thanks for any assistance.

I remember seeing a thread on my question a while back, so please forgive me for being repetitive. My question is whether Code Section 318(a)(4) requires shares subject to unvested (i.e., unexercisable) stock options to be included for purposes of determining whether an employee is a 1% or 5% owner under the top-heavy rules. It seems logical to exclude such shares until they are vested, but the only authority (not directly on point)that I have found supports the opposite conclusion (e.g., Rev. Rul. 89-64, unvested options taken into account under Code Section 302(B)(2)in determining whether a redemption qualifies as substantially disproportionate).

I work for a financial institution in CA that is seriously considering "partial" self-funding of our medical benefits.

We have 200 employees with 120 lives insured in the medical plan that we want to self-insure. The self-insuring option appears to provide us with the option of giving the employee the types of coverages they've enjoyed in the past EPO/PPO vs. HMO/POS. We also believe that because we have a younger, healthier group that we can pay less in actual costs vs. paying fully insured premiums.

My question to the gurus who've done this before:

What are the major pitfalls?

Any surprises?

Overall experience with self-funding?

General advice?

Thank you for your help.

Premium only plan has been operating on "negative election" basis even though plan document requires positive election. This fact has surfaced because of an IRS audit of the corporation. Now the IRS has requested a copy of the plan, and I am concerned that once they receive it, they will request copies of the nonexistent election forms.

Any suggestions for arguing this one? It seems like revocation of the plan's tax-exempt status would hurt the employees more than the employer.

I am a long time lurker who is finally posting a message here. The TPA and the Bank preparing our retirement plan 5500s both state that mutual funds should not be considered a "single issuance" of securities for purposes of completing Schedule H of our 5500 which asks about transactions in excess of 5% of plan assets. See Part IV line 4(j). A similar question arises for small plans for a 20% + concentration of plan assets in a single security. Our auditors disagree, stating that a single mutual fund is a "single issuance" of a security and state that the DOL agrees. The examples in the instructions refer to CDs and bond issuances. It seems to me that the 5500 is getting at diversification issues. Therefore, a concentration in a mutual fund should not trigger a "yes" response (arguably, you might have to "look through" the mutual fund investment to determine whether a combination of plan funds invest in a single stock or bond at a level that exceeds the 5%/20 threshold). In addition, mutual funds are RICs and are not "issued" in the same sense as a corporation's common stock is issued. I have caved on this issue for this year, but am wondering what others think on this point. Are you aware of any published authority on point?

I need help identifying major voluntary carriers offering product in NY, NJ, CT, MA, & RI. How can I get this information without going direct to the companies licenced in a particular state and asking if they offer voluntary product? Is there an easier way? Please help.

Thanks.

Does anyone file a From 5500 for a Non-qualified Deferred Compensation Plan (Restoration Plan) and if so what schedules should be attached? We have less than 100 participants.

We have a standard prototype 401(k) which will be terminating as the Company was purchased. Typically we do not file IRS 5310 for a standard prototype plan termination but do notify employees of the plan termination as well as explain distribution options, etc. The attorneys hired to handle sale of the Company now think they should file a 5310 for the 401(k)and, of course, want us to provide all the backup document information, etc. Do all of you apply for a determination when terminating a run of the mill plan? Thanks.

Client wants to rollover/transfer assets from a SEP into a 401(a) qualified plan. I'm getting the impression from research that this can't be done, but I can't get an exact cite that says "no" or "yes". Can it be done? If so or if not, please provide me with the cite.

Need some info on complete PTO plans. I'm in healthcare and have no idea where to start. We currently have personal time, sick bank, vacation, holiday and no short term disability. (We do have LTD after 90 days) 90 days is the cap for the sick bank. How would I handle the sick bank when implementing the pto plan??? Any suggestions, plans would be greatly appreciated.

Estate questions on IRA Distributions.

1) Can a spouse disclaim a portion of an IRA and/or a portion of a qualified plan distribution?

2) Do you have a suggestion for good reference materials on distributions from both an IRA and qualified plans for a 4 million dollar estate?

Individual is the sole employee/owner of a C Corp. He wants to establish a medical reimbursement account to "pick up" anything that his health insurance does not cover. He also wants this Plan to be "retroactive" for four months (back to when he incorporated). This will be funded entirely by "employer" contributions (no 125 Plan).

1) I assume the Plan cannot be retroactive because Prop. Reg. 1.125-1 Q&A 17 is applicable to all 105 Plans even those not funded through a 125 Plan. Do you agree?

2) If there is only 1 employee do I avoid any 105 discrimination issues?

3) Any other problems that you see here

I am looking for a benchmark study or report for various employee benefits outsourcers. Companies include Hewitt, Aon, Towers Perrin, etc. Does anyone know of any such report or at least a thorough comparison of the companies?

Thanks!

What constitutes a nonelective contribution in a 403(B) plan?

Does anyone have experience with self-directed brokerage accounts in non-qualified plans? Can they even have them?