Does anyone have any experience with the IRS as to what is acceptable under the "significantly discriminatory" statement under 1.401(a)(4)-5. I have a client that fits Example 1 exactly. I realize that in order to increase benefits, I need to give something to the previous participants, but the question is how much. I would suspect that as long as the NHCEs get 70% of what I give the HCE, I would be fine, but since it says "significantly discriminate" and since 70% passes the standard discrimination test, could I use 50%? Any thoughts?

Do I recommend what I think is reasonble then defend it if the IRS asks, or should I ask for an opinion letter ahead of time?

Has anyone else dealt with this?

Assuming a "reasonable error", is there a deadline (similar to March 15 for excess contributions and April 15 for excess deferrals) for distributing deferrals to correct excess annual additions? If there is a deadline, what are the consequences of distributing after the deadline?

We just received census information on a 1999 calendar year plan in which one participant deferred 31%.

An internet venture (in the form of an L.L.C.) is interested in establishing a plan that would provide employees with an equity ownership interest in the entity. I am guessing that this plan would resemble a non-qualified stock option plan and might provide employees with "profits interest". Does anyone have a document that I might be able to review. Thanks. Ed

I recently gave a car dealer my 2 wek notice, but left 4 days early. They are now holding 2 paychecks from the previous month pay, one a commission check. The manager says he has to wait until all paperwork is cleared. I will owe them nothing because I have no outstanding debts with them. He said if he can't coolect customers bills, I will have to pay those bills, because it is my responsibilty as a service consultant to make sure bills are paid. I am still due a paycheck of commission for 9 days of work from them. Is this legal? Can he withhold a paycheck? He has had it about 8 days now. I am not sure what my rights are. All help is much appreciated. I don't even know where to look this information up at.

What options exist for an employee's 401k account if they are terminating employment before retirement age. It seems may people role their 401k into an IRA. However, I understand but am unclear on the specifics, that the tax rate for 401k assets held over 5 years may be as low as 10%. Is this true. If it makes more sense, is there any way of maintaining a 401k account if your employer throws you out on termination.

A company will offer an early retirement window as part of its qualified DB plan. Participants electing to retire will receive an unreduced pension. The company also wants to give the participants a lump sum severance payment equal to 6 months compensation and would like this benefit to be funded by the DB plan as well. The DB plan will be amended to provide for both of these benefits.

Can the severance payment under the DB plan be set forth as a lump sum amount (i.e., "Upon early retirement, a participant shall receive his accrued benefit plus a lump sum equal to 6 months compensation"), or, since benefits under DB plans are usually phrased in terms of monthly payments for life, must it be set forth as a monthly amount for life in an amount that would have a lump sum present value equal to 6 months compensation? In other words, since the normal form of benefit under a DB plan is a life annuity (or QJSA if married), must the employer determine actuarially a monthly payment for life with a present value equal to the lump sum severance amount and allow early retirees to elect to have the severance amount paid as an annuity?

A client terminated an existing profit-sharing plan and opened a new plan as a non-standardized plan, but with no exclusions. What are the rules about amending the plan, at some point in the future, to a standardized plan? Cites to IRS authority would also be helpful.

Is the Employee Stock Purchase Plan a protected benefit plan under FMLA. I was trying to locate certain language related to stock purchase plans under regulation: CFR825.209, but it is not addressed. I'm trying to determine if employees are still eligible to participate in the plan while on leave (FMLA) or can they enroll when the Initial Offering period occurs. Or, if an employee stops contributing while on leave (FMLA), will they receive the same stock price upon returning to work and starting contributions again? Lastly, is it a SEC requirement for employers to address Leave of Absence provisions in their Employee Stock Purchase Plan Questions and Answers Summary Booklet?

Do you think it is a problem if a financial institution charges individual participants a fee for transferring assets in kind that are held in a directed brokerage account (option) contained within a 401(k)? The reaon for the charge is that it takes alot more time to transfer these assets in kind as opposed to liquidation and then rollover. Is this more appropriately a plan expense?

Any word on whether or not there will be an extension beyond 10/15/2000?

I have a client that has asked about changing the name of his salary reduction agreement..He wants to take out "Salary Reduction Agreement" on the form and replace it with "Benefit Election Form". The employer says that many employees actually think they are signing a form that allows him to reduce their pay or take away pay. Any suggestions?

A company has a Money Purchase Plan and a 401(k) plan. The Company wants to terminate or merge the MPP into the 401(k) plan for ease of administration. Can the two plans be merged so the assets are simply transferred between plans with no acceleration of the vesting schedule (i.e. 100% vested upon termination of a plan)?

Are viaticals considered by the IRS as a prohibited investment for a self-directed IRA?

When using Hyperprep to complete Schedule I, the plan assets at the end of the year auto-calculates zero. When I turn off Autocalc and try to put in the assets, it gives me an error when I validate. Shouldn't the total plan assets at the end of the year be listed in #1 column b?

Assuming a "reasonable error", when must elective deferrals be distributed to correct excess annual additions? Is there a deadline similar to excess deferrals (April 15) or excess contributions (March 15)? If there is a deadline, what are the consequences of a late distribution of the excess? We have just now received census data for a 12/31/99 year end plan, and one participant deferred 31%.

Organization that sponsors 403(B) arrangement with no employer involvement establishes separate 401(a) plan for purposes of making "matching" contributions based on deferrals under non-ERISA 403(B) plan.

Does establishment of parallel 401(a) plan constitute "employer involvement" such that the underlying 403(B) arrangement becomes subject to ERISA?

Earlier this year the IRS or DOL issued some sort of statement implying that if a pension plan gave an ad hoc benefit increase to retired participants, that a new benefit election (ie: spousal consent) must be obtained. This was debated at the EA meeting and most people felt it was a ludicrous position for the gov. to take.

Has anyone heard anything recently?

Under Section 1372 of the Internal Revenue Code, 2% shareholders of S corps. are treated as partners in a partnership for fringe benefit purposes. What if the individual is a 2% shareholder solely because of stock owned in an ESOP plan? Are they considered a 2% owner for Section 1372 purposes?

I am currently working with a highly compensated school superintendent. In november he will be receiving a large severence pay of $58,000. My question is how do I maximize contributions (or shelter additional dollars) to his 403 (B) plan in lieu of $365 per pay current salary reduction? He does not have 15 years with this employer. I believe this severence pay is derived from contract with the employer and not connected with sick pay, accrued benifit, or termination pay.

The next part of my question is how do I determine how much this individual could shelter from income? This calculation does not seem to appear on the current MEA worksheet that I am using.

Thank you,

Brian

Can a county government not allow a disibility as a distributable event? In drafting their 401(a) plan they have removed disability from their plan document It has been marked N/A in the definition section of their adoption agreement.

A cover letter sent with the draft asked them to define disability in the distribution section of their document. They did not respond and even deleted disability from the definition section of the adoption agreement.