Can a nonprofit (501©(3)) organization set-up and maintain a SIMPLE IRA plan? Can they do a SIMPLE 401(k) Plan? I am pretty sure than can set-up a Standard 401(k) Plan and a Safe-Harbor 401(k), but I am not positive? I appreciate the help!

If no Schedule B is required for the defined benefit plan's 1999 final return, does it make sense to say that Schedule T is not required? Also for Schedule R, my understanding is that since the plan is not subject to IRC 412 w/r to the final return, then Schedule R would need to be filed only if benefit distributions were made in the final year.

Looking for comments.

Thanks

This is a follow up to my 7/21 question. I called the IRS and discussed Schedule T. The situation we discussed was a DB plan that terminated in 1998 and paid out benefits in 1999. The IRS response was that you can rely on an earlier test date (namely the 1998 information that was used for the 5310 filing) and note that on line 10 of Form 5500. In other words, in order for the plan to remain qualified,(up until the last benefit is distributed) the plan sponsor has to prove the plan met coverage.

[Edited by meggie on 07-25-2000 at 10:34 AM]

A client of ours was audited by the DOL. The result was the DOL cited them for not deposting employee contributions timely (most occurences were prior to the new 15 day reg). The DOL position was based on the fact that the employer does payroll weekly and that segregation of the assets could have been done in seven days. frankly, we are confused with this interpretation. does anyone have any insight?

Most 401(k) plans contain either percentage limitations or per hour, dollar limitations on employee elective deferrals. For example, hourly wage deferrals (in a multiemployer plan setting) may be limited to $1, $2, or $3 per hour. These are set for purposes of administraive convenience but may have the effect of limiting a specific employee's deferrals to less than the 402(g) limit ($10,500). Does anyone know of any authority to set these contribution limits, even if they have this effect?

I am 24, I am getting married in a month, she is 23. We want to start a Roth IRA to retire at 60 or 65. We collectively make about 55,000 to 60,000 a year. We are waiting until we get married to talk to a bank about starting a Roth. But can anyone give me any 'newboe' tips? How much I can expect to contribute, what is the minimum you can start a Roth with, etc.

thanks all

jamison

How should the insurance premiums be reported on schedule A? My service provider is reporting them as allocated. I think they should be unallocated. Is it different for DB vs DC plans? Thanks for the help. Any citations would also help.

(Jonathan P. Weiner, in the Baltimore Sun, 7/21/2000)

Excerpt: "And yet, in our attempt to regulate and litigate HMOs and other health insurance plans into submission, we have once again side-stepped the two real U.S. health-care issues: the more than 40 million Americans who have little or no access to services and--election promises and contingency fees aside--that health-care resources are finite. Neither of these two issues are the HMOs' fault. In fact, quite the opposite is true."

http://www.sunspot.net/content/archive/sto...d=1150370207105

Please take a look at this piece and post your comments here!

Does anyone have authority for the proposition that the February 1999 COBRA regulations apply to state and local governments subject to the PHSA? I know this question was asked last year and answered in the affirmative, but with no authority cited. Are the tax regs a binding interpretation of the PHSA or just persuasive? Thanks for any help.

Anyone know where I can get a copy of the 2000 Covered Compensation table and the plan limits for 2000 (eg. db limit, compensation limit, soc sec wage base, etc.)?

Where do the regulations allow an employee to join a health FSA during the middle of a year? Does that new participant get to defer the full amount allowed under the plan or is it prorated? Does new participant get reimbursements for the full plan year or only after participation?

Is this something allowed under the law or are people just doing it?

I have a merger situation, so the plans involved don't address this but appear to allow an employee into the plan during the year (silent re: proration of contributions)

If benefit at NRA is a flat % of compensation(i.e. 100%) are we oblige to reduce it by at least 1/25 for each year of service less than 25?

Thanks

I have a client who wants to terminate his SIMPLE plan and start a defined benefit plan. He has contributed some money to his SIMPLE FY 2000. My understanding is that once a contribution is made to the SIMPLE IRA, there is no workout so another plan such as a defined benefit plan can be started in the same year. The client must wait until Y2001. Is there a workaround for this issue or is the client stuck for 2000?

A CPA friend of mine (usually pretty reliable) recently told me that he heard about a court case where a designated beneficiary (not the spouse) was allowed to roll and IRA over into the designated benificiaries name. I have not seen anything on this, has anyone else?

Plan member is the insured, with full coverage, under both these policies at the same time:

Self-Funded Policy

hired 11-07-98, with full coverage effective immediately.

Fully Insured Policy

hired 10-25-98, with a 60 day waiting period for full coverage to become effective

I always heard in such a case, the policy in effect longer is prime, but this case raises the question of when to start counting: hire date or effective date of coverage? Also, does the fact that one Plan is fully insured vs. the other being self-funded make a difference?

To add a possible further twist, I believe the fully- insured plan is for a non-federal government entity, and the self-funded plan we administer is also a non-federal government entity, although as far as I know they do not opt out of any requirements on that basis.

Any opinions out there?

I am looking for a copy of AICPA Statement of Position (SOP) 92-6, Accounting and Reporting by Health and Welfare Benefit Plans. Can anyone steer me in the right direction? Paper is OK, but online is better.

Thanks.

IF A PARTICIAPNT SIGNS UP TO CONTRIBUTE AN AMOUNT PER PAY PERIOD TO THE MEDICAL REIMBURSEMENT ACCOUNT BUT THE PAYROLL DEPARTMENT AT THIS TIME HAS NOT TAKEN ANY PRE-TAX CONTRIBUTIONS OUT FOR THIS PARTICIANT, CAN THE PARTICIANT CHANGE HIS ELECTION AMOUNT?, JUST CONTRIBUTE FROM HERE ON OUT?, IS THE EMPLOYER LIABLE FOR ANY OF THOSE PREMIUMS THAT NEVER CAME OUT?,.....THANKS

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission (copyright 2000 TRI Pension Services, all rights reserved).

<blockquote>Please feel free to add a reply to this thread (see link towards bottom of this page) if you would like to discuss comments or questions about this article with others!</blockquote>

Automatic enrollment feature is permissible in 403(B) plan/caution on Title I issue (added July 18, 2000).

Rev. Rul. 2000-35 confirms that an automatic enrollment feature is acceptable under a section 403(B) plan. This is true regardless of whether the plan is funded with annuity contracts or custodial accounts. The requirements parallel those prescribed for 401(k) plans under Rev. Rul. 2000-8. If the automatic enrollment feature is properly applied, the contirubtions deducted from an employee's compensation, for transmittal to the 403(B) plan, are treated as salary reduciton contributions that are excludable from income (subject to the §402(g) limit, the maximum exclusion allowance under IRC §403(B), and the section 415 limits).

Caution - Title I issue. If a 403(B) plan is set up solely to receive salary reduction contributions, and no employer contributions will be made to the plan (i.e., no matching contributions and no nonelective contributions), the plan is generally exempt from Title I of ERISA. See DOL Reg. §2510.3-2(f). However, one of the conditions for the Title I exemption is that the employer have limited involvement in the plan. Included in the activities the employer may engage in without creating a Title I plan is the collection of contributions through the salary reduction agreements and transmital of those contributions to the annuity provider or custodian of the custodial account. Is an automatic enrollment program crossing the line, resulting in Title I coverage? This issue is not addressed in Rev. Rul. 2000-35, because the employer makes matching contributions under the plan, resulting in Title I coverage anyway. Perhaps the IRS or DOL will clarify this issue at a later date.

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission (copyright 2000 TRI Pension Services, all rights reserved).

Rollover of non-employer-stock investments to money purchase plan established solely to accept rollovers does not preclude exclusion of NUA on employer stock distributed from KSOP (added July 18, 2000).

In PLR 200027058, Plan X includes a 401(k) arrangement and an ESOP (referred to as a "KSOP" in this discussion). Employer contributions are invested in employer stock. Employes have several investment choices for their 401(k) contributions. Plan Y, a money purchase plan, was established solely for the purpose of accepting rollovers. The employer contribution formula is 0%. The only eligible employees for Plan Y are: 1) employees who have attained age 59-1/2 and have received a lump sum distribution from Plan X, and 2) former employees who receive a lump sum distribution from Plan X. The purpose of Plan Y is to provide a means for these employees and former employees to accomplish two goals: 1) retain the portion of their lump sum distribution that consists of employer securities, in order to take advantage of the gross income exclusion for net unrealized appreciation (NUA), and 2) continue the remaining investment of their account in the same investment options they had under Plan X.

IRC §402(e)(4) provides that, in the case of a lump sum distribution which includes employer securities, NUA on those securities is excluded from the distributee's gross income unless otherwise elected. In several previous private letter rulings, the IRS has ruled that, although a partial rollover precludes income averaging treatment on a lump sum distribution, it does not affect the right to the NUA exclusion for the emploiyer securities that are not rolled over. Thus, when an employee or former employee who is eligible for Plan Y rolls over the non-employer-securities to Plan Y, the remaining distribution from Plan X is eligible for the NUA exclusion. In other words, the combination of the distribution of the employer securities from Plan X and the direct rollover of the remaining investments to Plan Y, constitute a lump sum distribution for §402(e)(4) purposes, allowing the NUA exclusion on the distributed employer securities. By establishing Plan Y, the employer has provided a means for these participants to preserve the current non-stock investments in their accounts, through the rollover to Plan Y, while electing a distribution of the employer securities and taking advantage of the NUA exclusion.

An interesting sidenote with this case is the establishment of Plan Y with no employer contribution formula. Is it significant that Plan Y is a money purchase plan and not a profit sharing plan? It seems so. Questions have been raised at various employee benefit conferences whetehr a profit sharing plan can be established solely for the purpose of accepting rollovers. Treas. Reg. §1.401-1(B)(2) requires an employer to make "substantial" and "recurring" contributions to a profit sharing plan. No parallel requirement exists for money purchase plans. Thus, by establishing Plan Y as a money purchase plan, the fact that the plan is funded solely with rollovers from Plan X does not present a problem.

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission (copyright 2000 TRI Pension Services, all rights reserved).

Interest rate not exceeding 120% of federal mid-term rate is deemed reasonable for calculating "substantially equal" payments under IRC §72(t)(2) exception (added July 18, 2000).

In PLR 200027062, the taxpayer, who is age 53, elected substantially equal payments to be made from his IRA. The payments are intended to be exempt from the premature distribution penalty, pursuant to IRC §72(t)(2)(A)(iv). The monthly payments were calculated on the basis of the taxpayer's IRA account balance as of November 30, 1999, uding A's life expectancy (30.4 years) under Table V in Treas. Reg. §1.72-9, and an interest rate assumption of 6%. This is the amortization method prescibed by Notice 89-25. In past rulings, IRS has said that the interest rate used to calculate substantially equal payments must be reasonabe, but has not established any safe harbor standard. In this ruling, the IRS takes the position that any interest rate which does not exceed 120% of the federal mid-term rate is treated as reasonable.

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission (copyright 2000 TRI Pension Services, all rights reserved).

In applying the same desk rule, it is not relevant whether a transferred employee performs different services and job functions than he performed for former employer if such change occurs after the date the employee is transferred to the new employer (added July 18, 2000).

In PLR 200027059, the IRS specifically address the affect of a later change in a transferred employee's job functions on the determination of whether there has been a separation from service with the prior employer. This case is another one where there is no sale of assets, stock, merger or other business transaction between the former employer and the new employer. However, the transferred employees, at least initially, continue to perform the same job functions that they performed for the former employer. The 342 employees at issue here were performing information services for Corporation A. A determinated that it needed to concentrate on other business operations, so it decided to outsource the information services component of its operations. The outsourcing occurred under a contract with Corporation C, an unrelated company. The contract was effective March 1, 1999. As of that date, the 342 employees were terminated from A's employees and were hired by C. Corporation C determined that the required level of staffing under its contract with A required no more than 300 of these 342 employees. C initially had all 342 employed to carry out the functions of the contract with C, but by October 1, 1999, there had been substantial changes. Only about 100 of the 342 employees will continue to perform services for A on-site. The rest work in other facilities, some performing services for A only part of the time and others no longer providing services for A. A maintains a 401(k) plan. Rulings were requested on whether any of the following employees could be treated as having a separation from service with A, thereby triggering a distribution event from the 401(k) plan: 1) those whose supervisors, benefits, or policies had changed, but who continued to perform services for A under Corporation C's contract with A, 2) employees who, on some date after their initial hire by C, work exclusively on non-A work, 3) employees who, on some date after their initial hire by C, work at least part of the time on non-A work.

The IRS ruled that none of these employees has a separation from service. When there is no business transaction (e.g., sale of assets or stock) that involves the transfer of employees, IRS looks at the job functions of the transferred employes to determine whether the same desk rule applies with respect to the former employer. If, at the time of transfer, the employees continue to perform services for the former employer in substantially the same job capacities, the same desk rule is triggered and there is no separation from service with the former employer. Any later changes to the job functions of the transferred employees are irrelevant in finding a separation from service, so long as the employees continue to work with the company who initially hired them from the former employees. Thus, all three categories of employees described in the prior paragraph do not have a separation from service with A, even if they no longer perform any services under C's contract with A or work only part of the time under such contract. So long as these employees continue to work for C, the A 401(k) plan may not treat them as having a separation from service.