How many visitors to this forum have seen the 8/21/00 issue of Pensions & Investments, p.49 "Fewer Express Confidence"?

The articles highlights several recent surveys that say that participant confidence in their investing skills is declining, that the addition of more fund options has not done anything to improve participant asset allocation, and that, in general, many participants are still clueless about appropriate asset allocation.

This is after almost two decades of advancements in "educational" efforts like interactive software, video, Internet, colorful workbooks, etc. This is one of the first articles that I have seen that shows what I have suspected for a long time - "educational" efforts have maxxed-out. It not only doesn't get any better than this, but things seem to be going backwards (according to Vanguard)!

This could have profound liability implications for plan sponsors in a few years. Consider the cover story on the most recent edition of Plan Sponsor mangazine warning plan sponsors to prepare for a rising trend in participant litigation. (What would a good plaintiff's attorney say is the opportunity cost to a worker who's made dumb or inappropriate (uninformed) investment choices for 20 years? Probably some six-figure number.)

And this is all happening at a time when the latest must-have items on the 401(k) wish list are more tech funds and brokerage windows!

Let's get a lively discussion going on this. Comments anyone? Certainly everyone must have some views on this...

Is it permissible to amend a profit sharing plan right now to add a year end employment requirement for the current plan year that ends on 12/31/00? The regs under Section 411(d) seem to refer to cutting back benefits that have already accrued. I thought I heard or read somewhere that this couldn't be done for a plan subject to Section 412 but it could be done for a PS plan. Any thoughts, cites, opinions are welcomed.

PBGC Regs state that the Form 500 must be filed "on or before the 180th day after the proposed termination date". This clearly sets the outside limit. Is their anything preventing a plan from filing the Form 500 prior to the proposed termination date (ex. simultaneous with the Notice of Intent to Terminate)?

Has anyone ran into the following situation? Using the receivable function (on a share basis) to cary forward a contribution into the next year. Upon working on the next years allocation you notice the client submitted the payments over a period of months so there are multiple share prices. How can this be easily settled? Thanks! JimP

a participant dies and his 4 kids are the beneficiaries. three of them elect to leave their money in the plan. question is- are these 3 considered participants? if so, they should complete beneficiary forms. if so, must they name their spouses as beneficiaries?

Employer changes group health insurance carrier in California - new carrier does not offer coverage in Illinois, where former employees enjoy COBRA coverage with affiliate of prior carrier. My understanding is that, under Cobel v. Bonita House, 789 F.Supp. 320 (N.D.Ca. 1992), the employer must find "meaningful coverage" in Illinois, comparable to the California coverage, but that under the final COBRA regs there is no such obligation if the only coverage made available to active employees is not extendable to the relocated COBRA recipients. It is relevant if the COBRA recipient relocates before or after the change in coverage? Do any of you have experience w/a comparable situation?

A PS plan currently states that forfeitures do not occur until the terminated participant has 5 consecutive 1-year breaks in service. Therefore, the plan is carrying forfeited balances for terminated people back to 1995 or so.

The plan sponsor wants to amend this provision to forfeit balances upon the earlier of 5 years or when the vested balance is distributed.

Once this amendment is adopted, are we able to forfeit all those old balances immediately? Forfeitures are reallocated at year-end (12/31). It just seems a little odd to me that all the forfeitures from the last 5 years will be reallocated in one plan year. Does the amendment have to be effective prospectively? Are there any 411(d)(6) or 401(a)(4) issues to worry about?

I was hoping to use a roth conversion of my ira to help extract my husband and myself from an annoying liquidity situation, but based on what I've read, it doesn't appear that this is going to work. Let me lay out the scenario and see if anyone can come up with a way to make a roth work for us, and or offer any other useful advice:

My husband and I are both 32 yrs old. He is an executive with a base salary of $150k, and I no longer work but have been toying with the idea of returning to work (financial professional.) We have 2 young kids. All of our savings is in retirement accounts and our home (I'll get to that in a minute.)We have no debt whatsoever other than a $200k mortgage at 7 1/4%/15 yr/12 1/2 yrs remaining. My IRA rollover has about $100k in it depending on the day; my husband's 401k has around $200k in it.

Recently, my husband has been considering a career move, and has already been offered 2 positions. The last deal crashed over the unwillingness of the employer to do a home buyout so we could go ahead and move, and carry two mortgages for a finite period of time. The position was nearly 2000 miles from where we currently reside in Dallas, and after having split the family for 6 months to come down here, we were not willing to go through that again. After the deal crashed, I had some regrets about not blowing up my IRA (penalties and all) so we could go. We're young and capable of earning plenty of $ over our lifetime via salary pension and stock options, so that account to me is just play $ that I can look at and not touch for another 29 yrs. We do not have enough $ outside our home to make the downpayment on a second house, and renting is not an option with 2 kids and 5 big dogs. We need to go straight into a house. Credit and the ability to make 2 mortgage payments are not an issue. The sticking point is making the 20%downpayment necessary for carrying 2 mortgages. It's equally impossible to try to show our existing home with us and the dogs in it. Where all fixed up and clean it might sell in a week, it probably won't sell in 6 months or stay fresh with us here. So we're back to how to tap my IRA funds with the least penalty so that we can take a new position should the perfect one arise.

I don't see any means of getting our AGI under the $100k threshold for a roth, but if somebody out there does, please enlighten me. We will probably take a loss on the house, but I know of no way to use this loss until we have a passive income capital gain. It might be possible that if we made this move in 2001 carrying 2 mortgages, the interest payments on both homes could get us under the $100k threshold if I put off going back to work until 2002, but what is the maximum allowable interest deduction?

I could use a brilliant revelation about now.

GG

A private school wants to start a 403(B) plan. As required, participation will be immediate for salary deferrals. Can the school require a YOS for the profit sharing contribution and 2 YOS for the match? Thanks.

A private school wants to set up a 403b) plan. As required, eligibility to defer will be immediate. Can there be a one year eligibility period for the profit sharing contribution and two years for the matching contributions?

ok, we're pretty sure about this one, but just want to be sure. a client hires an employee who is over age 70 1/2 and who wishes to roll his distribution into the new employer's plan. must the prior plan do a minimum distribution before rolling the balance to the new plan? what if the employee had waived the minimum with the prior plan? we think yes either way.

I'm drawing a complete blank on this issue. A participant in a DB plan meets the normal retirement requirement at age 59, terminates service, but does not apply for benefits until he's 62. Plan says he has to apply to get benefits. What happens to the accrued benefits in the years he's not getting benefits to which he's entitled? Is there an actuarial increase? A retroactive payment? Some kind of actuarial adjustment? By that I mean neither an increase or a decrease, just adjusting the benefit payments to accommodate a shorter period of time. How is this handled, and what's the authority for the answer?

On February 11th the DOL adopted an interim final rule requiring MEWAs to file a new form - the "M-1" - by May 1st. I saw nothing in any daily journals or other news reports about this new requirement, and just found out about it recently. Thankfully, the DOL doesn't intend to assess the $1,000/day penalty this year, but the form is still due. Was I asleep when this was announced, or is anyone else surprised by this? Has anyone had any experience with filing the forms?

Individual A was formerly a partner in a law firm. During 2000, Individual A contributed $10,000 to the law firm's 401(k) plan. The law firm dissolved and Individual A provides services to a new employer as an independent contractor. As all of Individual A's remuneration is treated as earned income, what is Individual A's annual addition limit under fis current employer's plan. Is his $30,000 limit reduced or not? Any thoughts? Thanks. Ed

I have a roth IRA with Scandia and want to roll this account into an on-line brokerage account as a roth IRA. I would research, buy stocks and keep the portfolio as a roth IRA. Has anyone ever heard of or has done this before? Can this be done? I look at it as cutting out the middle-man and the "fund" myself.

Participants are required to get an SAR, which gives them the option of requesting a copy of the full annual report. The SAR wording per the Labor Regs says, "The charge to cover copying costs will be $XXX for the full annual report, or $XXX per page for any part thereof." Other Labor Regs say that these charges should be reasonable, but not to exceed $0.25 per page. We have always been indicating a $3 charge for the total report. I don't know if we made this up, or if it was decreed by a power-that-be (or that-was), or if it just seemed reasonable for a 5500-C. However, now that annual reports can run into dozens of pages, especially with a Schedule B or a Schedule D, $3 no longer seems "reasonable."

What is anyone else showing for the charge for a full report? Does this vary on a case by case basis depending on the size of the report? Any thoughts are appreciated!

I work for a small (90 employees), but growing software development company. I am looking into improving our tuition assistance program. We currently offer $1,500 per employee per year and that is the extent of the policy. Specifically, I am trying to find out what other companies our size offer and what the legal/tax limitations may be on this program. Does anyone know of any references that may help me in my onformation gathering stage?

I have a question about filing Form 990-T for IRAs that

have unrelated business taxable income. UBTI is a difficult issue for trustees and custodians; therefore, many leave it up to the account holder to prepare and file the form.

>

My question is: Does the trustee/custodian who leaves the account holder "on his/her own" to file Form 990-T risking penalties if the account holder fails to file the return?

From my reading of the Section 408 regulations,

the Internal Revenue Manual, and other materials, I think the answer is "yes." I think that the IRS can assess the trustee/custodian the failure to file and failure to pay penalties. Also, it appears to me that trustees and

custodians are subject to equivalent rules (in other words, a custodian does not get easier treatment than a trustee).

> Do you have any thoughts on this issue?

I have a controlled group of three companies each with its own plan. They will file seperate 5500s and pass one 410(B) test. When completing Schedule T, do I disaggregate the plans?

What's your opinion on how to answer the defined contribution pension features and whether or not a plan is intending to comply with 404c (code 2F)?

I think a lot of plans try to comply, but I've always heard that 404c is impossible to comply with.

We have a lot of clients using insurance group annuity contracts with brokers telling them they are complying with 404c. I have some trouble not marking that they saying that they are not when clients think that they are. Someone said that the IRS is gathering this data so that they can start auditing plans for 404c compliance.