I have stock in a 401K that I plan to take out as certificates and pay the tax on the cost basis. Here is my question: can these certificates then be rolled into a Roth IRA? I was told that this was possible by a financial advisor, but cannot believe that it is true, and for that reason, I seek independent conformation that this is a valid strategy.

If a 401(k) only allows a lump sum distribution, are lump sums paid to married Participants in excess of $3,500/$5,000 subject to spousal consent? My understanding is that if there is no annuity option then a PSP is not subject to the spousal consent rules PERIOD.

Must a plan be formally amended in order to increase the $3,500 limit to $5,000?

I am having a "difference of opinion" with an associate about the following.

A client with a 10% MP Plan wants to terminate it and start a new 401(k). I am proposing that instead we amend and restate the existing MP Plan as a 401(k) as of a specific date prior to year end. I stated that the ER is obligated to make a 10% contribution based upon compensationup until the effective date of the amendment. I also stated that as we are changing from a pension plan to a profit sharing plan there has to be 100% vesting and any "protected beenfits" must be preserved. My associate says it is not necessary to have 100% vesting.

Also, if the MP funds are placed in "rollover" accounts in the new plan subject to the annuity rules and the new plan only allows a lump sum, does new money in other accounts escape the annuity rules?

Calendar year plan; new plan beginning 9/1/00.

What limits are affected by the short plan year and need to be adjusted?

402(g)? 401(a)(17)? 415? HCE comp limits?

Not that I have done this: If you complete the work on a client where you only have to do compliance testing and you realize you have the wrong plan year don't freakout. Simply run the reports to a file and edit the date on your word processing software. You can not tell the files have been changed and this will save you alot of time. Enjoy!

When the plan year is 7/1/99-6/30/00, would the 402(g) limit be based on 1999 or 2000? (I need to process a refund, but should it be for the amount over $10,500 or $10,000?)

Has anyone seen a cash balance plan that includes a "subsidy" for general early retirement at specified age and service (e.g., 55/15 years) and/or upon a specified contingent event (e.g., termination due to layoff or job elimination with at least 15 YOS)? I see no reason that you couldn't include some automatic pop-up adjustment to the cash balance account, either a percentage increase or a flat dollar add-on... it shouldn't create a backloading issue because it's not part of the normal accrual formula, and it also shouldn't create a nondiscrimination issue if the subsidy is either available to all or, in the contingent event case, meets the current/effective availability test. And yet I have never seen a CBP that included something like this, and of course one of the popular objections to the cash balance approach is the loss of the early retirement subsidies common in traditional DB plans. Is there an issue or prohibition I'm missing here? Is it just that plan sponsors are trying to stay within the cash balance safe harbor provisions of the 401(a)(4) regs (which generally don't permit subsidies)? Your thoughts would be most appreciated.

OK, you have a takeover plan that is, lo and behold, a prototype document with a new comparabiliby formula. The adoption agreement was drafted in 1997. It is my understanding that the IRS is steadfast in its insistance that prototypes cannot be new comparability. So what do you do? I can restate to individually designed, but what effective date should I use? Its only a profit sharing, so I'm not uncomfortable restating now, but I don't want to leave the client exposed to trouble. Is there any guidance on this? Has the service given any indication as to how they would treat situations like this? I know there are other prototypes out there that stuck in new comparability formula options, hoping they would be allowed.

A 401k plan only provides salary deferrals and match. The employer deposits matching contributions quarterly. And, the plan contains a 500 hours of service requirement to be eligible to receive the match. If at the end of the plan year, there are extra matching contributions forfeited due to the hours requirement (but the employer deducted these amounts on his tax return), does this result in a nondeductable contribution subject to the 10% excise tax?

Does anyone know where to find information regarding what the average retiremetn age is in pension plans? I also need to find the percentage of plans that provide early retirement benefits that are subsidized, and at what age/service.

Thanks.

We have a partnership that incorporated mid year 1999. Under the old rules when IRS was handling the 5500s, we would have had to file a 5500C/R for BOTH entities, one closing out the filing for the partnership if the assets were taken over by the successor plan, and one for the new entity showing assets accepted by new corp.

This has always seemed like a tremendous exercise in wasting time, effort and paper, especially in lieu of question 3, "has the sponsorship changed".

In lieu of the fact that DOL not IRS is handling the forms now, don't you think we can just file one form under the name of the new entity showing the name and EIN of the old entity and call it an initial return and cut out all the extra (and now it really is EXTRA) paperwork and BS?

If the plan document accepts rollovers from other plans, is it permissable for a participant to roll from a previous 401(k) plan to a Money Purchase Plan?

if a document covering more than one employer in a group of employers is amended to include dental ins premiums, does that mean all the employers have to offer dental ins to their employees?...one of the employers that was added to th group has always offered dental ins as part of their benefits, the other employers that have been around longer have not offered it and they are afraid amending the document will cause them to have to....help!

Although this may seem like a simple question, some of at our office have been debating it for awhile:

When an auditor selects participants for purposes of testing participant data and employee contributions, from what population should the sample be drawn --

a. all employees

b. only eligible participants

c. only active participants who are contributing

If the answer is a or b, the risk is that you select too many ineligible employees or participants who are not participating -- and thus may not have sufficient coverage when testing employee contributions. If the answer is c, the risk is that you will not identify potentially eligible participants who are being excluded from the plan.

For you auditors out there, how do you determine your sample?

Some employees of Company A were participants in Plan B which offered a lower rate of return, lower deferral limit & lower employee base to the participants than Plan A.

These Employees are now being transferred to Plan A.

We need to find how these employees could have incurred the losses, the nature of these losses & to calculate and make whole the economic losses suffered by the Employees and the Plan.

We also have to analyze how the IRS or DOL would recommend these losses to be compensated.

Could Anyone please help in correcting the above operational defects ?

Employer has been approached about a program where employees can personally invest after tax dollars in mutual funds through payroll deductions. These are the same family of mutual funds offered in the employer's 401(k) Plan. It has been represented that employees who use this payroll deduction program can be "linked" with the assets in the employer's retirement plan for determining "break points" on reductions of sales charges etc.

I know something like this was allowed for IRA's and non-Title I Plans in PTE 97-11, but has anyone seen something like this "linking" to a Title I Plan? Any comments on prohibited transaction issues? [Edited by KJohnson on 09-08-2000 at 02:20 PM]

In a single employer plan whose investments are in a common collective trust with full participant direction, should Schedule H, line 4j be checked yes or no if greater than 5% transactions exist but result from participant direction. Trying to interpret special rule for participant directed transactions and whether schedule of transactions should be attached.

Is there a way to learn qualified plan testing on my own? Is there a book, or manual?

I am looking to move to another employer, I am offered a great opportunity, but I need to learn testing.

Are ADP and ACP testing the only tests required for a plan, or are there more?

Thanks for any direction.

My company just started a 401-k program and will match 1% of my salary (approx. $1,200). Am I better off contributing new money to this 401-K, or continue to fund my wife's and my Roth IRA. Thanks

A local municipality sponsors a defined benefit plan. The municipality has been advised by a partner of an international accounting firm that a third-party, i.e., an entity other than the municipality or any of its employees, may donate $1.5 million of nonvoting, S-corporation stock to the defined contribution plan. The donor is a minority shareholder in the corporation. It is expected that the shares of S-corporation stock will be redeemed within 3 years of the donation. I have two questions:

(1) Is it possible for an entity/individual other than the employer or employee to donate/contribute funds to the defined benefit plan?

(2) If such an entity/individual can make such a contribution, are there any other related issues that I need to consider.

Thank you.[Edited by SCUDDESLER on 08-31-2000 at 11:55 AM]