http://www.benefitslink.com/articles/reform000907.shtml (click)

Provocative. Comments, anybody?

Client declared a profit sharing contribution in December of 1999 for the 1999 plan year. It is now time to make that contribution and they don't have the money. What are their options? It looks to me like if they don't fund, they lose the deduction and are subject to the excise tax. Am I missing anything? Is there anything they can do to put off the contribution?

Thanks,

Jeff

Schedule H, Part I states that you do not enter the value of the portion of an insurance contratc that guarantees during this plan year to pay a specific dollar benefit at a future date. We have always taken the postion that this means we should not include the cash value of life insurance policies held by the plan. I have a one person plan that has always had less than $100,000 in assets and has never had to file. If I include the cash value of insurance assets exceed $100,000 at 12/31/99; if I exclude insurance assets are less than $100,000. Do I include the insurance as an asset file or not?

DOL Regulations provide that the fidelity bond need not exceed $500,000 unless such greater amount is "prescribed by the Secretary". Does anyone know under what circumstances a bond should exceed this limit and actually reflect 10% of plan assets?

Notices to Interested Parties must be posted (one option) before submitting a Form 5300 for favorable determination.

May this posting be via internet?

We have been retained by a client to obtain an approval letter on a pre-GUST nonstandardized 401(k) profit sharing plan. The document was executed 4/96 through another TPA and never filed. The company is being sold and the purchaser wants a letter and cannot wait for our restated Cobel prototype. Will the IRS issue a pre-GUST letter? Can we attach GUST "clip on" amendments that we have been using for terminating plans? Any ideas?

All employees of a "start up" company are on COBRA from their previous employers. All employees are highly compensated. There are no non highly compensated employees. Can a 125 plan be established to cover the COBRA premiums? If so would the plan go into effect on the date adopted or could it be made retroactive? Is there special wording for the plan document?

Does anyone know where I might find a list of all Rev. Procs (or legislation, rulings, etc.) that have affected 401(k) (or at least employee benefit) plans in 1999 and 2000?

Does anyone know where I can find a "Special Tax Notice..." that has been updtaed for recent law changes?

Hi Everyone,

I need some help in properly interpreting the use of the MDIB Tables involving a RMD calculation.

Assume the following: An IRA owner age 70 1/2 (attained age of 70)and a non-spose beneficiary with an attained age of 42.

IRA owner elects the "joint life expectncy" option and the "Term Certain" method on BOTH individuals before the first RMD.

According to MDIB rules, the non-spouse beneficiary is "age adjusted" to appear to be age 60 for RMD calculation purposes. The life expectancy factor used for the first Distribution Calendar Year's RMD is 26.2 as taken from the MDIB Table (after compasrison with the standard J/L/E tables on an unadjusted age basis).

Here's the question. For subsequent RMD's in future years, is the original divisor of 26.2:

1. Reduced by one for each elapsed year (to reflect the "Term Certain" election on both lives made by the owner) resutling in a divisor of 25.2 for the second year, 24.2 for the following year and so on...

OR

2. Newly determined directly from the MDIB Table for each subsequent year resulting in the divisor of 25.3 for the second year, 24.4 for the following year, etc.

Concensus of opinion is that option #2 applies (even though using this method acutally introduces an element of "life expectancy recalculation" on the non-spouse beneficiary which is prohibited by the RMD Regs).

As one person told me, "The MDIB is a "table" and not a "method" so use it and don't think too much about it. Its how the IRS chose to implement MDIB rules."

The differences are subtle but important to understand especially as balances for RMD's skyrocket and people become more sophisticated about their options.

So if any of you have some factual information on this aspect of RMD's and MDIB's, I'd welcome hearing from you by e-mail on posted on the list.

Confused? I am.

Thanks

David H.

Our company is thinking about adding company stock as an investment option in our 401(k) plan. I need help! Does anyone know where I can get some good information on how distributions from that plan that include company stock are handled? Are capital gains/losses something we have to worry about?

My question concerns a disabled worker, presently receiving disability benefits, who has elected to take advantage of the offer of family medical and dental insurance coverage if the worker pays for this benefit. During the period of the disability, is the employer obliged to pay for the family medical and dental insurance coverage, offer the disabled worker the opportunity to pay to continue this coverage for the family, or is the employer obliged to discontinue this service during the period of the disability? Is this a matter determined by state or federal law?

I am tasked with benchmarking and making recommendations to a board of directors with respect to the company's executive pay and benefit programs. I have found plenty of survey data with competitive practices for executive pay, but am having trouble finding good data on benefits practices.

Thus, I am looking for survey data that includes competitive data with respect to the whole array of benefits (i.e., health and welfare, retirement, supplemental benefits, perq's, etc.) for executive level employees. Ideally, I need both prevalence data for specific benefits as well as information about competitive practices.

For supplemental benefits and perquisites I have a survey from Watson Wyatt, but for "basic" benefits I haven't found anything to my liking. Does anyone have any suggestions for other data sources?

Apparently the term "spouse", regarding the QJSA and QPSA rules, would include a common law spouse, if the state of the plan sponsor recognizes such. Or is there a definition of the term "spouse" applicable here, to be found in the IRC or ERISA? If the definition does depend on state law, is there common law marriage in California. Also, does California recognize (common law) marriages from other states?

May earnings on elective deferrals be included in the distributable amount for a hardship distribution? I have an institutional trustee who refuses to distribute the earnings (even though the plan document says it's okay) because he says "federal statute" won't allow it. I assume he is referring to the 401(k) regs (1.401(k)-1(d)(2)(ii), but I think he is misreading. Can anyone confirm?

Our company lumps vacation & sick time together, for PTO. Currently, we do not allow employees to cash out unused PTO time. If your company allows a "cash out" of PTO time, I'd be very interested in knowing the policy...is it allowed annually? just for some percentage of the total time? other?

If applicable, please also share any background on the business reasons for enabling a cash out policy, especially if it relates to a high-tech manufacturing environment.

Note: I am NOT talking about cashing out FTO time for terminated employees.

Thanks in advance for any responses.

Corporation A, a closely held corporation that sponsors a 401(k) plan, is being sold in a stock sale transaction (the corporation will be liquidated into a subsidiary of the acquiring company). The acquiring company does not want to assume any responsibility for terminating the 401(k) plan. Therefore, Corporation A is considering creating a new entity to assume sponsorship of the 401(k) plan prior to the sale. The new entity would be owned by the shareholders of Corporation A and its sole purpose for being would be to act as sponsor of the plan while it is being terminated. Is this permissible? For what liabilities of the 401(k) plan would the acquiring company potentially be liable? If it is permissible, what requirements would apply to the new entity in connection with acting as the new sponsor of the 401(k) plan? It is contemplated that the plan would be frozen and terminated prior to or on the closing date of the sale.

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?