Can a 401(k) plan accept a rollover from the government Thrift Savings Plan?

I have a client calling me regarding 404©. They want to know if section 404© is worth the additional work that they must complete. Since the plan trustee is ultimately responsible for the plan with or without 404© I'm not sure what to recommend. The issue that really concerns me is "What should I indicate on the 5500?" Either way the question is answered, it seems to me, it could come back to implicate the client. Any advise?

Current plan document for profit sharing. Added 401k feature. Trustees have not signed document. Even though enrollment meetings have been completed and they have submitted deferrals for investment. Must deferrals be returned. Or since the effective date is prior to receipt of deferrals, can they sign document now?

401(k) Plan has 140 participants as of 1/1/2000 and as of 9/30/2000. Client wishes to split plan into two plans (one plan for each of company's two divisions) as of 12/1/2000. Each plan would then have 70 participants.

Clearly a CPA audit of Form 5500 is still required for 2000 Plan Year. I believe that a CPA audit would not be required for the two new plans years beginning 1/1/2001, since each of the new plans would have less than 100 participants as of the first day of the plan years.

Plan participants have daily valued investments with a national insurance company's group annuity product. To obtain better expenses/prices the client would like to maintain the plans in one contract with the insurance company's records.

TPA receives electronic download from insurance company and can produce separate plan level and participant statements on a divisional basis. This is easy since the investments are valued daily.

New plans will be identical in provisions. Only difference will be plan name.

Question: Are there problems with having the two plans investments in one contract? Does this create a common collective trust and additional reporting requirements?

401(k) Plan has 140 participants as of 1/1/2000 and as of 9/30/2000. Client wishes to split plan into two plans (one plan for each of company's two divisions) as of 12/1/2000. Each plan would then have 70 participants.

Clearly a CPA audit of Form 5500 is still required for 2000 Plan Year. I believe that a CPA audit would not be required for the two new plans years beginning 1/1/2001, since each of the new plans would have less than 100 participants as of the first day of the plan years.

Plan participants have daily valued investments with a national insurance company's group annuity product. To obtain better expenses/prices the client would like to maintain the plans in one contract with the insurance company's records.

TPA receives electronic download from insurance company and can produce separate plan level and participant statements on a divisional basis. This is easy since the investments are valued daily.

New plans will be identical in provisions. Only difference will be plan name.

Question: Are there problems with having the two plans investments in one contract? Does this create a common collective trust and additional reporting requirements?

Is the following correct:

If a plan borrows an amount equal to the cash value of a participant's life insurance policy minus the accumulated P.S. 58 costs, and then distributes (transfers the ownership of) the policy to the participant, the amount of the P.S. 58 costs is treated as a non-taxable (or after-tax) distribution, while the distribution of the borrowed cash to the participant is treated as a taxable distribution (or as an eligible rollover distribution).

However, if a plan surrenders the policy for the cash surrender value, and then distributes this cash to the participant, the entire amount is taxable (and an eligible rollover distribution) - there is no basis for the P.S. 58 costs.

I'm looking at Private Letter Ruling 8539066, and trying to figure out what it means to "convert the whole life insurance policies to their cash surrender value," and what event triggers the loss of tax basis in P.S. 58 costs. Is the P.S. 58 tax basis lost anytime the ownership of the policy is not transferred to the participant?

A sole proprietor adopts a Profit Sharing and a Money Purchase Pension Plan. The sole proprietor has no employees so she did not apply for an EIN. Does she need to file Form SS-4 to obtain an EIN or can the plans use her social security number as the EIN?

I'm sure everyone has been following closely all of the proposed pension changes in the House and Senate this summer. One proposal in particular is to change the 415 limit for DC plans to the lesser of $30,000 and 100% of Compensation. On the surface this is great; however, we have a number of age-based plans where there are a few older NHCEs in the population who presently are capped at 25% of pay in their allocation. If this proposal goes through the attractiveness of the age-based allocation could fall dramatically (although a great windfall for these select individuals).

Anyone have any thoughts on this issue?

i'm looking for some help. I searched around and didn't find exactly what i was looking for. Here's my problem(not really a problem but you'll get the picture): i'm a 21 year old college student that nows diddley about IRA's, yet a Pharmacist i work with got hooked on the idea. I've defintly decided to get a Roth IRA. What is the difference and or value between a savings or a certificate of deposit IRA? Here's the deal i don't make a great deal of money and i'm going to pharmacy school next fall '01. so only in the summer's will i be able to make limited contributions. but i think anything to get on jump on my retirement will help, correct. what is better for just sitting around???? and i don't/won't 'play the market' cause i have a weak stomach for that. I need something i can dump some money into that will eventually grow. Any help would be great.

thanks

A client requested disability coverage in the UK for their 7 person office.

I was able to get a LTD quote for the group but not STD as I "was told" that their is a federal program called Statutory Sick Pay (SSP) that covers up to 28 weeks.

Does anyone have experience obtaining STD coverage in the UK? where did you go for it?

Thanks for your help!

Apparent "catch-22" in money purchase pension plan funding. If required contribution to a 25% money purchase plan isn't made by the tax filing date including extensions, no deduction for the year is available under Code section 404(a), but the obligation to contribute under Code section 412 remains. This appears to create a catch-22: if the contribution isn't made, the funding deficiency gives rise to an excise tax under Code section 4971. If it is made, there is an excise tax under Code section 4972. Moreover, since the plan uses up its entire 404(a) deduction every year for current funding, it appears that whichever excise tax is chosen will recur every year until accruals are reduced or stopped.

Is there something I'm missing here?

A friend converted two conventional IRA accounts into Roth IRAs in 1998, dividing the taxable 'income' (about $87k) into four parts, about $22k annually, ending in 2001. In '98, this $22k Roth conversion 'income' boosted her reported 'income' from about $12k to about $34k. In '99, from about $17k to $39k reported income. For 2000, a projected $27k

actual income to $49k reported.

This is a annual tripling or doubling of actual income vs. reported income. The Roths are considered long-term investments, and some Roth conversion software (T.Rowe Price's) projected a $35k overall savings.

But few institutions seem to differentiate between reported 1040 income and actual income. For example, her '98 actual income entitled her to certain free medical benefits, while the 1040 reported income then and in subsequent years might change that (untested). As another example, parents might fill out an application for college scholarship/financial aid and find themselves reporting 1040 income that's double their actual income. Bureaucratic forms for reporting income may not make distinctions between phantom Roth-conversion income and actual income. This 1998-2001 four-year Roth 'income' split must apply to many people and many situations.

Has anything been written into tax law or the Roth

legislation to minimize such problems? Thanks. -- John

I have a question about the "L" distribution code. If a terminated participant defaults on their loan, should the distribution code be 1 or L1?

I know that self-insured health plans must comply with the nondiscrimination rules of IRC section 105(h). However, this section allows you to "exclude" a lot of people for purposes of passing the "eligibility" test. Our plan would like to cover all employees that work more than 25 hours per week AND cover only highly paid employees who work less. While this certainly seems discriminatory in theory, it appears to pass the eligbility test. Any thoughts or comments? Thanks.

When running ADP Test, are deferrals that participants made in excess of 402(g) limit ($10,000 in 1999) counted, or do you only count the deferrals up to the 402(g) limit? Our client had several participants who exceeded $10,000 last year. Corrective distributions were made earlier this year, however, we need to confirm treatment in ADP test.

When doing a distribution of Excess Aggreate Contributions to correct an ACP test what happens if the Highly-Compensated Employee is not 100% vested?

I understand that you will forfeit the non-vested portion, but which vested percent do you use - the percent vested at the end of the plan year or the percent vested at the time of distribution?

Eg:

I need to remove $1000.00 from a HCE.

He/she was 40% vested at 12/31/1999.

He/she is 60% vested at the time of distribution-9/27/2000.

Do I forfeit $600.00 or $400.00?

Thanks.

I have a client who is past his plan NRD and his benefit is max'd out at the 415(B)(2)(B) 100% of comp limit. Since the comp limit is supposedly absolute, his lump sum is decreasing each year. Is this correct? If so,is there any remedy?

Assume that a participant stops making payments on a loan in November of 1999. The plan allows for a grace period for that extends to the last day of the calendar quarter following the date of the missed payment, or March 31, 2000. The participant does not make any payments by the end of the grace period, making the loan taxable as a deemed distribution.

Is the loan considered taxable in 1999 (the due date of the original payment) or is it taxable in 2000 (taking into account the grace period)?

Thanks.

Does anyone have experience with paying legal fees (preparation for litigation and then actual litigation) from defined benefit plan assets, where the plan is party to a lawsuit? Participants' benefits would not be affected (besides being a DB plan, it also happens to be substantially overfunded). I know that there has been recent DOL audit activity in the midwest challenging payment of fees from plan assets, including defined benefit plans.[Edited by mo again on 09-28-2000 at 03:24 PM]

For folks with Employee Stock Purchase Plans with monthly, quarterly, etc. exercise dates following the date of option grant: Are you amending Section 423/Employee Stock Purchase Plans now to add a six month holding/vesting period before exercise in order to avoid overtime calculation issues under the Worker Economic Opportunity Act or waiting to see if the DOL issues exempting regulations?