An employer has two plans. One for union ees, and one for nonunion ees. Key employees only participate in the nonunion plan. Can these two plans be aggregated however for top heavy calculations?

Treas. Reg. 1.416-1, T-7

An employer may elect to treat a plan not required to be aggreagated as part of the aggregation group in order to remove the top heavy classification, but only if the aggreagated group continues to meet coverage and nondiscrimination.

Here since all union employees would be considered excludable employees for coverage and nondiscrimination, aggregating the two together will still pass coverage and nondiscrimination if the nonunion plan passes coverage and nondiscrimiantion on its own.

So, it appears to be permissible to aggreate for top heavy without any other plan issues. Comments?

We are preparing a proposal for a 401(k) plan in the

Virgin Islands. It is my understanding the regulations

fall under the U.S. Government regs and administration

of the plan would be no different than a plan in the

States. I am looking for confirmation on this as our

attorney isn't familiar with any regs on the matter.

A plan provides that a cash balance account ("cba") can be paid out as follows:

cba = 200,000

final salary = 100,000

lump sum is limited to 100,000 an the remaining 100,000 is converted to an equivalent annuity.

My problem is, what about 417(e). It seems either an equivalent pvab under 417(e) need be determined and if it is greater than 200,000, say 250,000, then 100,000 paid in cash and remaining 150,000 converted to an annuity.

Or at least the 200,000 should be converted to an annuity and the 100,000 cash payment should be offset from the gross annuity as an equivalent offset annuity using 417(e). So for eg if 100,000 as an annuity under 417(e) is 10,000 and the 200,000 is 25,000 then the remaining annuity s/b 15,000.

It seems something s/b done to incorporate 417(e). Any thoughts?

A wholly owned U.S. subsidiary of a foreign corporation is considering implementing a broad-based stock option program using the stock of its parent which is traded only on a foreign stock exhange. Can this be done? What unique legal and/or practical problems are presented by virtue of the stock only being traded on a foreign exchange?

Can an insurance company issuing a certificate of coverage for a group health plan retain the 2% administrative surcharge which a plan sponsor or plan administrative is authorized to charge under COBRA? I would like to know who is entitled to the 2% surcharge authorized by COBRA. Also, I have heard that insurance companies have been adding an additional 2% surcharge (in addition to the authorized 2% surcharge) for adverse selection. Can anybody confirm this practice?

I work for a minicipal fire department which offers a 457 TSA of which the city matches 4% of top step firefighter. Several members of the dept. are contributing the maximum amount of $8k afforded by the 457 plan so they are wanting to start a 401k so more of there earnings may be tax deferred. I understand the maximum contribution to a 401k is $10.5k annually. My question is can the employee contribute the maximum into both plans or is there an aggregate contribution cap for deferred comp. no matter how many plans you are subscribed to.

Ee terminates 2/2/93. Plan amends lump sum factors from PBGC rates to 120 % PBGC rates (for dist > 25,000) on 5/1/93 (adopted 5/11/93). Payout is 6/1/93.

Should ee be entitled to PBGC rates since her termed < 5/1/93?

Is this change a 411(d)(6) violation? The 417 (e) law prior to GATT said that if a plan adopts plan amendment related to 417(e) and PBGC rates, before end of 1989 plan year it is not a 411(d)(6) cutback. Of course this plan amendment took place in 1993. Appreciate any comments.

Gary

I understand the recent IRS revenue ruling (2000-36) that rules that a plan may use a direct rollover to an IRA as its default distribution where the participant's benefit is less than $5,000 and the participant has not elected to take cash or roll the benefit over into another qualified plan. Some comments I've read even indicate that the IRS prefers direct rollover to an IRA in the case of the accounts of missing participants in a defined contribution plan's termination.

As a practical matter, though, will a bank permit an IRA to be set up FBO a participant who hasn't personally signed up for the IRA her/himself? If the participant is "missing," why would a financial instituion want to take on an IRA with what has to be a small amount in it (less than $5,000) and cause itself the administrative burden?

I've been looking for an answer to this question and have been unsuccessful to date. We set up payroll deductions to deduct premiums for health and dental insurance on a pre-tax basis if an employee so desires. If an employee were to go on a leave and miss some deductions, can these pre-tax premiums be extended into the next calendar year? Or must all premiums for one calendar year be taken during THAT year? Any help with this question would be greatly appreciated.

Thank you in advance.

I thought This topic had been discussed before, but I can't find it anywhere. Until discovered last week by our independent auditors, we were unaware that one weeks worth of employee payroll deductions to the 401(k) plan had not been forwarded to the plan trustee in a timely manner. We have since forwarded the initial deducted amounts to the trustee. We know that we must now remit lost earnings on these funds and are in the process of doing so.

We have been told that the earnings can be based on the most favorable fund performance of the Plan fund options during the delenquent period. Does this mean that we simply calculate the year-to-date earnings from the date the funds would have normally been deposited to the date we remit the additional earnings? Is there any guidance out there that would tell us what dates should be used to do the calculations? The additional amount is small and not an issue for the company we just want to do the right thing to remedy the error.

Are we automatically going to be required to file a form 5330 and pay excise taxes because of this administrative error?

Sections 12(g)(1)(A) and (B) of the '34 Act generally provide that a private company is subject to the reporting requirements of the Secion 12(B) of the Act if it "has total assets exceeding $1,000,000 and a class of equity security held of record by [500 or more persons]." Thus, a private company will essentially be subject to the same reporting requirements as a public company upon exceeding the 12(g) limitations. Does anyone know of any articles or publications that provide a thorough discussion and analysis of these limitations?

Is there any reason a plan sponsor could not terminate a profit-sharing plan, and immediately start a 401(k) plan?

I have a company who would like to start a 401K Plan. In addtion to salaried employees they have two people who are 1099'ed. These individuals work on location. Do they have to be included for the company 401K.?

Thanks in advance.

This looks good --

Your Pension and Your Spouse--The Joint and Survivor Dilemma, 5th edition

http://www.ifebp.org/pbpensps.html

Anybody used it?

Final regs have adopted the IRS' 1998 proposal to eliminate the "lookback rule" (generally effective October 17, 2000) which has prevented involuntary cashouts in some circumstances (e.g., where account value once was over the $5,000 threshhold but has dropped to less than $5,000 due to investment losses)

http://www.benefitslink.com/taxregs/cashou...out-final.shtml

Are there companies out there who recently have set up the following arrangement: Set up DB plan which calculates a monthly pension benefit, which is converted to a lump sum ("LS") for each participant. The LS represents a minimum account balance. In addition to the DB plan, a profit sharing plan is implemented and participants are allowed to self-direct their profit sharing accounts. When a participant becomes entitled to a distribution, he will receive his profit sharing account balance if such balance is greater than his LS in the DB plan. If the profit sharing account balance is less than the LS in the DB plan, then the DB plan will pay for the shortfall.

Although this idea is not new, it is recently being marketed again due to various tax law changes. I am interested in knowing whether any companies have recently set up such an arrangement (within the last year or so).

I have a client who has a calander year 401(k) plan and an off calander year (4/30)ESOP. How do I calculate the maximum annual additions limit and contribution under 415©(1)if the limitation years are different?

Out of 23 total years of service, 8 of them are being disallowed because of a break in service. The break was 9 years. The plan won't bridge if the break exceeds the service. The most recent 15 years includes 1987 when 5 year vesting was mandated -- does that make a difference? Is there anything in ERISA that would apply to current employees as opposed to current tenure segments? What sections of ERISA deal with breaks in service? and 5 year vesting?

Thank you.

[Edited by Dave Baker on 07-19-2000 at 12:07 PM]

Sole Proprietor Personal tax return is due on extention at 8/15 Simple IRA has not been fully funded. Goal $6000 plus 3% of Schedule C income.

CPA, pointing primiarly to page 9 of Pub 550, agrees the 3% can be contributed up until 8/15 but questions that the $6,000 can be contributed after 01/31/00 (more than 30 days after the end of the year.)

I thought all contributions by a sole proprietor, with no employees, could be to made to a Simple IRA up to the due date of the tax return.

I think example 2 ("When to Deduct Contributions") on page 9 of pub 560 supports this.

Who is right? Thanks

We have a client who will need to have an audit done. The client (employer) would like to engage the CPA firm that handles the corporate books. Is that permissible? Also, does it matter if we prepare the 5500 and schedules or the can the auditor? I called a couple of firms in our area known for doing plan audits and one quoted a bid that included the completion of the forms and attachments and the other firm said it was our job to do the 5500 and they simply do the attachment. Does it really matter? As you can tell, we normally only handle plans with less than 50 participants so this is all new to me. Thanks for any info.