Are pick up contributions counted as annual additions when the employer actually picks up the contributions (no salary reduction for employee)? Are pick up contribution counted as annual additions when the employer says there is a pick up arrangement but the contribution is actually made via the employee's salary reduction? I have seen elsewhere a statement that they are not counted as annual additions in either case but can't find any cite to support that.

Any suggestions on best method to correct this?

Here's the scenario: employee age 72 takes in-service withdrawal of entire plan balances during first quarter of 2000, then retires in second quarter 2000.

His required beginning date is April 1, 2001, and his first distribution calendar year is 2000.

Is it proper that part of his in-service withdrawal from earlier in the year be not eligible for rollover, with the amount not eligible determined by the account balance on December 31, 1999 (the last valuation date of the year prior to the first distribution year)?

Thanks.

I have the following situation. The owners of a company want to freeze or partially freeze their DB plan. The DB plan is over funded and the owners would like to place more money into the DC plan that they have. (New-Comparability 30K limit/ I know about IRS notice 2000-14.)The owners are basically getting frustrated with the T-bill rate that they are tied to in the DB plan.

The following are what I believe are some of the pertinent facts. Company established the DB plan for the plan year 1994 and subsequently amended to a cash balance plan for plan year of 1996. Plan document has specific language saying "an amendment to freeze all future benefit accruals but otherwise continue maintenance of the plan, is not a termination..." Current benefit accruals are as follows:

Owners = A $ amount equal to the present value of 10% of participants maximum annual benefit.

Employees= A $ amount equal to 5.7% of the participants compensation for the plan year.

Can the company amend the DB plan to reduce the future benefit accrual amounts for both the owners and the employees? What is the process for freezing a DB plan? Is the DB plan to young to terminate? Where can I find more information on the process of freezing a DB plan?

Everyone is in agreement that the 3% of pay safe harbor non-elective contribution can pull triple duty: (1) be applied to Section 416 minimum required allocation for top heavy plans, (2) avoid ADP 401(k) non-discrimination test, and (3)be used for 401(a)(4) non-discrimination testing (popularly used in cross testing on a benefits basis).

Everyone also agrees that the non-elective CANNOT pull a 4th duty: Be used as the first 3% of pay base tier in the integrated PSP allocation formula because Notice 98-52 precludes its usage towards 401(l).

Question: If one is willing to do general testing to pass 401(a)(4) rather than rely on the 401(l) safe harbor, the "PSP" allocation (including the non-elective) is not discriminatory if it passes one of six (a)(4) methods: Two on a contributions basis (w/o permitted disparity and with) and four on a benefits basis (annual w & w/o PD or accrued to date w & w/o PD).

Could I use the 3% non-elective in my first base tier of the "traditional" integrated PSP formula if the plan passes 1.401(a)(4)-2©(2)(iv) [the annual contribution basis with permitted disparity method] for the year? Only the HCE would get the next tier of the integration formula (3% of excess pay). The HCE's are younger than the NHCE's, so cross testing on a benefits basis doesn't work.

It probably doesn't pass the smell test, but what does everyone think? Your comments would be very much appreciated!

Two thoughts. Could an Employer with only HCE's(four Owners 25% each) establish a 401(k) Plan? If so how would you test? I sapose you could set it up as a safe harbor.

Second, what if a Plan lost all NHCE's due to termination or quit. If Plan was using current year method and ther were no eligible NHCE's how would you test.

If your ADP for NHCE is zero, if you test at lessor of 2+ or 2* the result would be zero.

Any thoughts?

We will be looking to hire new 401(k) plan counsel. We can come up with questions to ask on our own but were wondering if there was anything out there already. Basically, looking for around 10 "must ask" questions to prospectives. Thanks!!

[This message has been edited by Dave Baker (edited 05-26-2000).]

We have a client that currently maintains a defined benefit plan that it wants to terminate. Current distributions options are limited to annuities. The client wants to require active participants to transfer the lump sum value of their accrued beneft to the replacement plan, most likely a 401(k) plan. I did not think a plan sponsor could do this but another consultant has suggested the plan be amended to add a lump sum option and anyone who elects it must have their balance rolled to the replacement plan. My question is can this be done and if so, what is the citation that permits it? Also, could the plan be amended instead to offer the direct transfer to the replacement plan as a distribution option? I would think it could but if not please let me know why not. Any other suggestions would be welcomed as well. THANK YOU!!

Ex-spouse signed away her surviving spousal rights to her ex-spouse's retirement plan after taking 50% lump-sum. It was an erisa plan. She had a QDRO. Now she is claiming there was fraud, stating her ex-spouse lied a out assests and she is entitled to some or all of his retirement. I have been named as the surviving spouse by the plan. We were married at the time of his death (last yr. 5/27/99) She has been denied twice by the plan. Now I understand her attorney is asking the plan to interplead the funds into federal court and let them decide. What can she do? How far can she go? She has no proof of fraud, there divorce was 12 yrs ago

We have a self-funded welfare plan. The TPA sends a check register for claims processed and we in turn cut a check for the claims from general assets. A reserve is set up but actual reserve monies are not deposited. Is an audit required by a CPA firm to be attached to the 5500 or can we prepare the 5500 ourselves without an audit.

A question employees considering participation in our 401k plan frequently ask is can we show them how their net pay will be affected by participating. Does anyone know of a tool for showing this to employees. Employees may contribute from 1% to 15% of gross income and the employer match is 50 cents on the $1 up to the first 4% the employee contributes.

A group of companies are all part of a parent -sub control group, but maintain 2 different 401(k) plans. Readings say that all employees of a control group are treated as if they are employed by a single employer for certain testing purposes.

Question:

1) Are both plans combined for ADP/ACP testing purposes ? or, are they treated as separate plans for ADP ?

Thanks

Company has a 125 self-insured medical/dental plan. Employee premiums are pre-tax. I am confused (yes I'm rather new to the benefits arena) concerning the benefit--if any--that goes to those employees that opt out of the medical/dental.

I am having trouble finding any guidance on what constitutes "costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments)" under the safe harbor standard for hardship withdrawals.

Can anyone help me? What would those costs include? Down payment? Closing costs? Costs to construct a house?

My employer terminated an existing 401(k) plan at 12/31/99 and transfered our assets to a new plan on 3/9/00. How long by law, does an employer have to transfer the assets into the new plan?

We are consulting a company 401(k) plan whose last audit was performed by another CPA firm in 1995. The plan has been filing Form 5500s since, but has attached the audited statements of the 1995 year to each filing, and has not engaged an auditor for the years 1996 - 1998.

We have been engaged to audit the 1999 plan year, for which we will also audit 1998 in order to issue comparative statements, but 1996 and 1997 are still in question. We want to advise them on the potential penalties that may be imposed as well as provide them with any options they have under amnesty provisions to correct this. We are aware that there is a $1,100 a day penalty for failure to file Form 5500 with the DOL (including filings that exclude material information), but have not been able to locate any "come-clean" provisions.

Any information and/or suggestions regarding the best manner in which to advise this client are appreciated.

Scott E. Hall, MS/MBA, CPA

Vitale, Caturano and Company, P.C.

As the end of a plan year approaches, we are trying to decide whether or not to leave our current medical provider. Our employees seem to have their claims paid quickly and the variety of docs is sufficient to serve their needs. Our claim experience is quite high, we're self-funded and based on our (potentially) new broker, no one else wants us at the price we've been paying.

So, the problem is that our plan has been an administrative nightmare. Billings have been wrong every month. Employees are dropped and added without our approval. People who have never been employed here have appeared on our billings. In the past 4 months, we have received premium refunds which neither we nor the ins. company can substantiate! The company also has exhibited very poor customer service to our benefits administrator, sending incorrect information, etc.

The head of the HR department has said that if the employees are happy, we should just stick with the ins. co. and try to figure out a way to deal with the administrative nightmares...

The benefit administrator wants to wash her hands of this company and do whatever it takes to get our business moved elsewhere...

*How do you all weigh these kinds of concerns?

*Any advise for dealing with a really messed up ins. co. staff?

*Any recommendations for ins companies that are willing to look at a 200+ group with high claim experience?

Thanks so much!

Sheila K

If an employee is receiving SS benefits at retirement and spuose is receiving pension through government (CSRS), is the employee's SS benefit reduced due to her spouse's benefit. (The spouse is not receiving SS benefit). Help!

What is the tax treatment of a current year withdrawal of "after tax" employee contributions that were made to a qualified plan before 1987?

The participant wants to leave the earnings in the plan, but take out only that portion of his account balance on which he has already paid income tax (the "after tax" employee contributions made before 1987).

Thanks.

A company which is a C corporation is considering adopting a Cafeteria plan to accomodate basic benefits, i.e., insurance premiums, health expenses not covered, and dependent care coverage. They also have common ownership on a IRC Section 501©(3) foundation, which to date does not have any employees, but may end up with employees from the C-corp in the future. Can/should/may the foundation adopt the cafeteria plan, so that these employees can continue their pre-tax deductions upon transfer to the foundation? Any comments would be appreciated. Thanks.