We wonder whether we need to include employees who are residents of Puerto Rico in the 410(B) coverage tests for our 401(k) and other plans. Any insight?

I borrowed $90,000 form my partnership's profit sharing plan in 1981. I am a 50% partner. According to the promissory note, I was supposed to pay monthly installments over a 20 year period .... but I made one annual payment at the end of each year (rather than 12 separate monthy payments). I finally paid the entire 35,000 balance off last year. Now I'm trying to determine if the $90,000 was a distribution to me in 1981 (because I may not have followed all the rules). Just one problem ... I can't figure out what the rules are. I've been searching the tax code, ERISA and old tax reform acts for the past four days and I'm as confused as h*ll. It's easy to find the rules presently in effect, but what about the rules that existed in 1981 (that's the hard part).

Here's my questions:

1) It's my understanding that ALL partnership plans are prohibited from making loans to it's partners. (What about my situation ?)

2) It's my understanding that loans are currently supposed to be limited to $50,000. (What about in 1981 ?)

3) It's my understanding that effective 01/01/87, the Tax Reform Act of 1986 amended IRC Sec 72(p)(2) by requiring that all note payments be at least quarterly. (What about my 1981 loan...was I supposed to start making quarterly payments beginning 01/01/87 ?)

4) What is so special about the date "August 13,1982" ? Is that like the date that IRC 72(p) was born into existence. (If so, then was I even required to follow IRC 72(p) on my note since it originated prior to August 13, 1982?)

5) Did any tax code require that I pay this 1981 loan back within 5 years (or is the 5 year requirement simply a new rule that didn't exist back in 1981?)

6) Does anyone know of a web.site that simply & clearly lays out in chronological order all the amended, superseded and current tax rules of defaulted plan loans ?

Hey ...thanks for reading my questions. I don't know if anyone out there can answer them, but I sure hope so.

May earnings attributable to elective deferrals be included in the distributable amount for a hardship distribution? I have an institutional trustee telling me that he will not distribute the earnings because there is a "federal statute." I assume he is referring to 401(k) regs, but I believe that he is misreading them. Can someone confirm for me?

Is an employer legally required to withhold 401(k) deferrals from an employee if the payroll department forgot to withhold from 2 checks. The employee does not want the employer to double up on the withholding from the next paycheck. Does the employer have to withhold this money or can they ignore the first two deferrals that were not made?

A U.S. company has employees who are U.S. citizens in a foreign country. The employees are leased employees, and the leasing organization and the U.S. company have no common ownership. However, all leased employees of the leasing organization are employed by the U.S. company. Also, the earnings of the U.S. citizens are not taxable as U.S. income. The employees do not receive a W-2 or any type of 1099.

The foreign government has mandated that all employees of the leasing organization be covered under qualified plan. In this case, the plan is a salary deferral plan with a matching contribution. The U.S. company also provides a 401(k) plan for its rank and file employees. The leased employees are not listed as an excluded group. In considering ADP testing, are the U.S. citizen employees considered "common law" employees of the U.S. corporation? If so, are their deferral and matching contributions treated as a benefit under the U.S. company's 401(k) plan, or are they disregarded for this plan? If the contributions are disregarded and the employees are not listed in the plan document as an excluded group, are they treated as benefiting under the U.S. company's 401(k) plan with a 0% deferral, or are they excluded since they do not earn U.S. income?

The particular situation is one in which two highly compensated and approximately 15 non-highly compensated employees are in the deferral plan of the leasing organization. For the U.S. company's 401(k) plan, I have treated all employees of the leasing organization as non-excludable, non-benefiting, and the resulting 410(B) coverage percentage is 98%. The most beneficial scenario for the U.S. corporation would be to include these employees as non-excluded, benefiting at 0% deferral. The impact of the non-hce's would be minimal, and the impact of the hce's deferring 0% would help the hce group of the U.S. company. However, if I need to take into account the contributions to the leasing organization's plan, there would be no benefit and a possible detriment. In that case, I would recommend excluding the employee group in the plan document as long as coverage is not an issue.

Any help anyone can provide is extremely welcome!!! Thanks!!!

I am an administrator of a school affiliated with the US Consulate in Karachi, Pakistan and need help with a number of Roth questions:

1) My wife and I converted our IRAs to Roths in '98, and at the time we met the AGI and joint filing requirements. Since then our income has increased making it no longer possible to file jointly because we each need to take advantage of the $74,000 Foreign Earned Income exclusion (Form 2555) in order to protect that part of our income. What are my options at this point? Must I recharacterize back to a traditional IRA? Or can I keep the Roth, but no longer contribute to it until I return to joint filing status, which I anticipate in 3? If so, can I establish a traditional IRA in the interim and make contributions therein?

2) To further complicate matters, I misunderstood the Roth IRA tax implications in '98 and need to submit an amended tax return for '98 and '99. I am in the need of a tax advisor available for consulatation over the internet, as I will not be returning to the US until February.

Any recommendations would be greatly appreciated.

Glenn

I am an administrator of a school affiliated with the US Consulate in Karachi, Pakistan and need help with a number of Roth questions:

1) My wife and I converted our IRAs to Roths in '98, and at the time we met the AGI and joint filing requirements. Since then our income has increased making it no longer possible to file jointly because we each need to take advantage of the $74,000 Foreign Earned Income exclusion (Form 2555) in order to protect that part of our income. What are my options at this point? Must I recharacterize back to a traditional IRA? Or can I keep the Roth, but no longer contribute to it until I return to joint filing status, which I anticipate in 3? If so, can I establish a traditional IRA in the interim and make contributions therein?

2) To further complicate matters, I misunderstood the Roth IRA tax implications in '98 and need to submit an amended tax return for '98 and '99. I am in the need of a tax advisor available for consultation over the internet, as I will not be returning to the US until February.

Any recommendations would be greatly appreciated.

Glenn

Can a church affiliated health care organization convert an acquired (through a corporate acquisition) ERISA db retirement plan to church plan status?

I noticed in the Special Tax Notice that the 10% penalty is not required for medical expensed in excess of 7 1/2%. Are there any other times when the 10% doesn't apply?

Where is the best place to learn about new comparability plans on a self study basis?

My client has a 403(B) plan that has a matching contribution and is therefore subject to ERISA. I am preparing the 5500 for the plan and per the 1999 5500 instructions need only complete Parts I and II (lines 1-5 and 8). What do I do about the SAR? The SAR is a summary of the 5500. The 5500 has very little info. on it. Per the DOL regs, "any portion of the SAR which would require info which is not required to be reported on the 5500 may be omitted on the SAR." Do plan sponsors even do SAR's for 403b's or is there an abbreviated version that is suggested?

Individual is a sole proprietor w/ a sep plan, this yr he became a 1/3 partner in an LLC. If the LLC establishes a plan my opinion is he is able to participate in that plan without any consideration given to the sep. He will continue to have income from both and wants to continue to fund his sep.

no affiliated service group exists.

Am I missing anything?

When doing top heavy testing, is the forfeited portion of a distribution included?

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?