Can anyone tell me where I can review the rules for the Multiple Use Test, a test that applies an Aggregate Limit to the total of the HCE ADP and ACP and must be performed when only the Alternative Test can be used to pass the ACP/ADP nondiscrimination testing? Thank you.

I understand that the DOL is sending subpoenas to companies that market individual insurance policies such as cancer coverage, supplemental disability, etc. The subpoenas request information regarding employers who offer these products through their flex plans. These plans are then audited. Has anyone else had experience with or heard about this new initiative?

A calendar year plan, liquidates excess contributions from participants accounts and the Trust 3/13/00, the checks are cut 3/15/00 with a post date of 3/16/00 and mailed 3/16/00. Which year would the participants be taxed 1999 or 2000? How is the 2 and ½ months interpreted? Could the transfer of assets and the correction to the Plan prior to 3/15 meet the 2 and ½ deadline?

A client has 3 defined contribution plans.

An employee is a participant in all three plans. The employee retires. He wants to roll his money out of two of the plans into the third plan.

I stress he is no longer an employee nor is he a participant in the plan to which he wants to roll the money. The Plan accepts rollovers from participants and employees and we could amend to say it will accept roll-ins of eligible rollvoer distributions from former employees. I don't see any problem with this - any thoughts???

I am in the process of converting my IRA to a Roth IRA. I am also changing to an on-line broker for the Roth IRA. My current broker has made a mistake, and instead of transfering the funds, they sent me a distribution check. Can I deposit these funds directly into a Roth IRA account, or will I be subject to the 10% penalty because my broker didn't properly convert the funds?

I have a terminated employee who is demanding interest be paid on his distribution and I can't find anything to support his claim.

The plan has quarterly valuation and does not contain any language regarding payment of interest or earnings during the time between valuations. The employee was terminated in 12/99 and requested a distribution on 12/28 or 12/22. The plan says payment will be made as soon as practical but not more than 60 days after end of plan year.

Former employee received distribution on 2/24 based on 12/31 valuation that had just been completed. He now claims that the plan has to pay him interest of 5% on the distribution for January and February. His support is that the plan must be held for the exclusive benefit of participants and since he did not get the "earnings" (actually 2% or less) the trustees must have received his money and that violates their fiduciary duties.

In reality, the "earnings" for the entire fund for the quarter were allocated among current participants on 3/31.

Is there any caselaw (or something) that supports him?

I am looking for surveys on the web that detail current 401(k) participation rates by industry

Employer terminated its ESOP and made stock distributions. Most participants exercised their put option during the first put period. Only a handful of people still hold stock and they do not intend to exercise the put option. Can the company save itself some money by not having a valuation done unless one of the employees still holding stock requests it (i.e., send out notices explaining the put option and giving the employee the right to request a valuation be done).

A SEP-IRA of a self-employed individual requires by the terms of his 5305-SEP document a 1 year waiting period for eligibility. The SE individual had been told that he could require a 3 year wait and at the end of 1999, the 3 year waiting period was satisfied by his only employee. Since he made contributions for himself but not his employee for 1997 & 1998, those two years are vulnerable. No IRA was established for the employee in 97 or 98. I understand that some

practitioners have received a closing agreement under Walk-in CAP although Rev.Proc 2000-16 does not mention SEP-IRAs. Has anyone utilized this relief? Would it allow making make-up contributions (including earnings) for the employee for 97-98? What penalty was assessed?

Cecil Ray

Dallas, Texas

My client is designing a Supplemental Executive Retirement Plan which would provide a benefit based on 60% of Final Average Pay for top executives. The Board would like to know how this benefit level compares with what other companies are providing. Any input, comments or survey information available on this issue will be appreciated.

If an employee's premium is unaffected by the addition of a dependent, can he/she add the dependent past the 31 day deadline we have set up in the plan? For example, the employee has family coverage and has a baby. Can the baby be added past the 31 deadline since the premium is unaffected?

This issue comes up from time to time. I have a client that wants to allow participant directed investment elections for active employees but not for terminated employees. The entire population (Terms and Actives)is currently employer directed only. Does this cause a 401(a)(4) discrimination issue? Please let me know if you know of an article or regulation that has addressed this issue.

Some employees in a union 401(k) plan have compensation and deferrals in the plan during a plan (and same) tax year. During the year, they transfer to non-union status and have compensation and deferrals in the non-union 401(k) plan. Normally, full year compensation is used for determining the deductibility limit. Is full year still used for both union and non-union deductbility limits? How do the deferrals in each plan affect the deductibility limit for each plan?

For qualified plan purposes, when has an owner officially terminated employment? An owner would like to take a distribution from the plan, but would like to be sure they can be considered terminated. In-service withdrawals are possible, but not for the full amount of the account. The owner has not taken any compensation for more than a year, but the owner does still share in the profits.

1) Can an owner retain ownership but terminate employment?

2) Can an owner still be considered an active employee even though no compensation is taken?

3) Can an owner be considered terminated even though the owner shares in the profits?

4) What date would an owner be considered terminated?

Thanks for any thoughts on the issues.

I have a client who made a $2,000 Roth contribution for 1999 and invested the cash in stock. Realizes in March 2000 that he has no earned income to base the contribution on. Takes the Roth account (which has the shares in it)and converts it to a personal account. At the time of conversion, the stock has appreciated so that the value of the account is $2,300 (no dividends have been paid). Does the client pay tax on the $300 of appreciation? If so, in what year, 1999 or 2000? And where is it classified on the individual's Form 1040?

And, for the sake of arguement, what happens if the stock had depreciated to $1,700? Could the client claim the $300 loss on his personal return?

Any help would be appreciated. Thanks!

Can I use years of services as the criteria for determining allocation percentages. For example: Group #1 - employees w/ greater than 15 years of services, Group #2 - employees with 10 to but less than 15 years of services, Group #3 - employees with 2 to but less than 10 years of services and group #4 w/ less than 3 years of services. Obviously this would need to pass discrimination testing, but is it possible? Could I add groups at some future point, such as a new group for those with over 20 years of services (while maintaining the other 4 groups)? What other criteria can I use besides, age and service? (The HCEs would both fall into Group #1 at this point.) Thank you!

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A 10% owner (who is also an officer and director of) a closely held corporation directs the purchase of 2% of the outstanding shares from the company in his IRA. Given that he is not a 50% shareholder this appears not to be a prohibited transaction. Is my analysis correct? Something just looks wrong here.

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I had planned to put $2000 into a Roth nondeductible IRA. I've completed my tax forms and I'm assuming that I have to fill out Form 8606 but I don't see what part of the form I have to fill out-its not a traditional IRA or a conversion. Maybe I don't have to fill it out? Please help!!!

If a plan permits loans, can the loan be taken from the 401(k), match and profit sharing portions of the plan?

Can a person take a loan from a 403(B) plan if the plan only has salary deferral money? Cites would be helpful.