In cross-tested Plans, should the document include or exclude the method to correct the test? If the document does not specify the correction method, can different correction methods be used for different years?

I'm interested in knowing the five most commonly asked questions regarding retirement plans that attorneys, accountants, and benefits consultants receive from their clients.

Thank you.

We have a participant who is age 65, NRA in the plan document. He would like to take a loan for 50% of his vested balance and then, later, take an in-service withdrawal of the remainder of the account. The plan document allows for pre-retirement distributions after age 59 1/2 of up to 100% of a participant's vested balance. Are there any restrictions on his ability to do this since he is essentially withdrawing the collateral for the original loan?

Is it true that when performing 410(B) testing, one should not include employees only receiving a top-heavy contribution? Is it also true that if the 410(B) test fails without employees only receiving a top-heavy contribution, then those employees need to "benefit" at the same percent as everyone else (not just the 3% top-heavy)?

Is it true that any time you include otherwise excludable employees in order to pass the 410(B) test, you should do an amendment to the Plan stating which classification of employees were included (e.g. employees working more than 800 hours)?

Is this in the regs?

I have a DC plan with deferrals only and a year end of 5/31/99. Without going into the messy background, the facts are...

* Sponsor was part of stock sale effective 1/15/98

* Plan year = 6/1/98 - 5/31/99

* Plan termination date = 10/16/99

* Participants deferrals ceased going into this plan and starting going into parent company's plan 1/1/99.

I believe the wages upon which ADP should be tested would be for the period 6/1/98 - 12/31/98. Am I on target on this? Citations would be appreciated.

How does a franchise effect retirement plans?....do you consider it like a controlled group where you would set up one plan for all franchise's or what? Any insight?

Have a 401(k) Plan which does NOT provide for return of ee salary deferrals in the event of a "415 excess" - uses the "415 excess suspense account" approach.

Participant incurred a 415 excess for the 1998 plan year (employer made a large PS contribution). A "415 excess suspense account" was created for this participant, which presumably would be allocated as part of the 1999 PS contribution. However, a PS contribution was NOT made for 1999 plan year.

Is the "415 excess suspense account" allocated to this participant for the 1999 plan year (despite the fact that no PS contribution was made), or does it continue to be held in suspense until the employer makes a PS contribution?

Document (CORBEL volume submitter) does not address this specific situation.

Anyone with prior experience and/or any thoughts? Thanks!

Corporation sponsors a vanilla profit sharing plan which was adopted a number of years ago by an affiliated corporation ("Affiliate"). The Affiliate has more than 20% of the total participants in the plan. The Corporation and Affiliate want to go their separate ways, with the Corporation adding 401(k) terms to its plan and the Affiliate sponsoring its own profit sharing plan. If the accounts are transferred to Affiliate's new plan via a trustee-to-trustee transfer in a spinoff, would they have to be fully vested or would they following the vesting schedule (identical to Corporation's schedule) of the Affiliate's new plan? Will the withdrawal of Affiliate's participants cause a partial termination to Corporation's plan, requiring 100% vesting of the Affiliate's particpiants' accounts? FYI, the two companies used to form a controlled group, but Affiliate was recently sold to an unrelated party.

For the year ended 12/31/99, I have taken over a standardized prototype defined contribution plan with deferrals and fixed match.

During the 1999 administration of this plan I discovered that, for the plan year ended 12/31/98, the employer fixed matching contribution was used to satisfy the required top-heavy contribution (not good).

The sponsor would like to correct the error.

My question is two-fold: 1) Is there a penalty involved with making an employer contribution after the 12 month period following the end of the plan year (12/31/98)? 2) Should an estimate of the lost earnings be made as well? If so, what time period should it cover?

Any ideas? Citations?

My wife has made a year 2000 Roth contribution before we realized she's not going to have any earned income. She already maxed out her 1999 contribution.

What can we do? Can it be transferred to my Roth? What about a spousal IRA?

Thanks for your help!

I have seen a number of opinions that severance pay is not eligible to be deferred, but no citation of authority. The posting titled "Is employee in the ADP test?" on March 17 indicates that it is not, or that it is not if paid after termination of service.

Is it the mere fact that it is severance pay that causes the problem or is it the fact that it is paid after termination? In the latter instance I think it is clear that a non-employee cannot defer. Would it make a difference if the severance is paid in the last check received on the last day of work?

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I'm participating in my Companies Stock Purchase Program. It has a 3 month grant period. The stock is purchased at 85% of the stocks value on the first day or the last day of the grant period, which ever is lowest. We are allowed to sell about 5 days after the grant period is over.

My question:

Do I need to use the "wash sale" rules when filing my taxes? I have sold ESPP stock at a loss 30 days before or after purchasing more ESPP stock. I feel that the grant period could allow me to be exempt from the "wash sale" rules.

Thanks,

Scott

I recently began working as an Account Manager for an Employee Benefits Broker and I need a better understanding of things like RFPs, BORs, renewals, etc. Can anyone recommend a book or website that can help me?

Help!

I started a Roth IRA and contributed $2000 per year for 1998 and 1999. I am doing my 1999 tax return and I discover our married AGI falls in the 150-160k range. Turbotax tells me that I overpaid by $520. I have made a few trades and my holdings have appreciated, making it difficult to track where this $520 went. Assuming I can estimate its current value, can I withdraw it from my account without penalty in order to keep my Roth tax-free?

Thanks for any guidance.

Rob

I have a client who has purchased a majority interest in an entity organized as a L.L.C. - the new entity has no plan at present. His company is a C-Corp, using a non-standardized 401K Prototype. He wants the new entity to become an adopting employer of his existing plan. Can he do this? If so, what are the practical problems?

I'm well aware that the above is not allowed-and I did not learn the hard way. A 401(k) must be rolled over (or preferably direct transferred) to a traditional IRA. Funds in the traditional IRA can then be converted to a Roth if the plan owner wishes to do so.

As I said above, I didn't do this but I'm aware that a few others have. The 401(k) to Roth IRA transaction took place sometime in 1999. Now it is 2000 and the account holder belatedly discovers his error. I know the drill about getting the contributions, plus earnings, out of the Roth IRA by the due date, including extensions, for the 1999 tax return. The 60-day rollover period is blown so the funds can't be tax deferred by transferring them to a traditional IRA, or can they?

Is anybody aware of any special dispensations (like Catholics eating corn beef during lent when St. Patrick's day falls on a Friday) that a victim of this type of mistake could take advantage of?

I think that you are on the right track with the match, but there are still things to watch out for. If the match is made at the end of the year, it will be much less effective in increasing particpation because the employees will not recognize the benefit. Try and make sure that the match is allocated on a payroll period basis so that the employees really get to see the benefit immediately.

If it were a 401(k) plan, I would recommend the negative election approach (all of my clients are doing it), but I don't think that the IRS will let you do it for a 403(b)plan.

Actually, they are both on the calendar year. The difference is that the conversion counts for the year of conversion (2000) and the contribution counts for the year it is designated (1999 or 2000, whatever you want). It is not really a fiscal year, but just a rule that lets you designate a contribution made in 2000 as a contribution for 1999.

I own a very small company with only 4 part-time employees, all paid by the hour. Each employee has different needs. My business can not afford to increase their hourly rate, but I would like to find a way to compensate them individually. Are there any guidelines available for non-cash reimbursements/benefits, such as gasoline assistance for a long commuter or child-care financial assistance? Since I am talking of only one or two people, setting up cafeteria or other plans seems too cumbersome and far too expensive to be cost effective on my scale. Anyone know of where to go to further research options for such a small company as mine? Advice would be much appreciated.

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