Prototype 401(k) plan provides for several annuity forms of distribution as well as lump sums. Sponsor wants to terminate plan. Code section 401(k)(10(B) says distributions upon plan termination must be lump sum. How does this work if a participant elects an annuity? Can the plan not be terminated? Can the plan satisfy this requirement by purchasing an annuity contract for the participant?

I think your administrator is being too cautious.

Reg. 1.401(a)(4)-4(B)(1) does say the benefit, right or feature must be currently available "during the plan year" to an employee group that passes the nondiscriminatory classification test. However, that stops a long way from saying that the only way to run the currently available test is to create annual plan year rates of effective match divided by compensation. As the IRS' waffling back and forth on the 401(k) safe harbor match rates show, there's more than one way to interpret general testing provisions.

I'd argue that a 3% match was currently available to all employees for the first 9 months and then no match was available the last 3 months of the plan year. If this is the approach you take, you could complete the demos for your determination letter accordingly and try to obtain IRS approval.

Note that even if the administrator is right, it only shows that you would have to perform benefit, right and features testing, not that the plan was discriminatory. There's no reason why your plan needs to be hamstrung in handling distributions in the meantime.

3 doctors are incorporated, and own XYZ Corporation that employes their staff and pays other shared expenses (rent, etc.) The doctors do not owns any other businesses or practices.

Each doctor's corporation receives income from patients. The doctors' corporations reimburse XYZ for expenses, and pay themselves W2 salary from their own corporation. The staff receives W2 from XYZ.

The doctors want to have a pension plan that covers the 3 doctors and the staff.

Would the plan be sponsored by XYZ, and base benefits on doctor's W2 salaries from their own corporations and the staff W2 salaries from XYZ.

Or, would the doctors have to become employees of XYZ and receive W2 salaries from XYZ. (In this case, would the patient revenue continue to be paid to the doctor's corporation and then paid to XYZ, which would then pay the doctor a salary? Or would the patient revenue have to be paid directly to XYZ, which would thgen pay the doctor a salary?)

Any ideas? What is typical?

I have been supplied with a 403(B)"specimen" plan document and Summary Plan Description by a large insurance carrier (to go along with its group annuity contract). The carrier has dubbed it a specimen document and SPD because it has made it extremely clear that it does NOT want to have anything to do with the final drafting of the document which should be done by the 403(B) plan sponsor's ERISA attorney.

Could someone please direct me to a plan document provider/service that will be able to 1) provide a reasonably priced document that the 501©(3) org will pay for; and

2)maintain the document each year updating it for any changes in the code.

Your advice would be very much appreciated.

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I am having trouble understanding the use of the family codes in the sttaus screen of the census secton. Example: Father and Son in a business. If a father owns 100% of the stock ,we enter the 100% ownership, and then use a family code of 0101, his wife is also 0101, and the son who owns no stock is coded as 0% ownership but with a family code of 0102. When running the ADP test, the son does not show up as a HCE but seems to be that he should based on on the Section 318. Since Dad has effective contrl, the age of the son is irrelevant. Second, if DAD owned only 25%, and son owned 0%, would the family code test the age of the son to see if he is a HCE by Section 318 ? Thanks for the help

If a 401(k) participant needs to borrow money from the plan, and may choose whether to borrow either deductible or nondeductible money, which would be the better choice?

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John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO

314-909-8818

Sight unseen, I agreed to take over administration of a 401(k) Plan. Prior "Administrator" provided zilch. Reconstructing records, I see a Top-Heavy Plan in 1998, no minimum contribution, and Key Employee deferrals and match of 2.7% (was in effect 3 months of 1998).

Testing for 1999, I'm calculating ADP for NHCs based on 3 months deferrals/3 months pay. Is this Kosher? 401k feature added to long-existing PS.

I want to self-correct Top-Heavy contribution for 1998. Comments?

Company asked if Match in 1998 could be used for Top-Heavy. I know, legally it can. But practically?

Match was 50% of first 6%, which isn't in the document. It's deferral ratio. Self correct?

If I use the Match for Top-Heavy and pass 401(a)4 (doubtful), then I have no LOW ACP % for 1999. I've thought of using HCs Match for TOP-Heavy, but this won't pass 401(a)4.

I know, a doozie.

I understand a Roth IRA can be established for minor child with qualifying income. For some reason, financial institutions that handle Roth IRAs aren't willing to open a Roth IRA for a minor. Can anyone furnish names of brokers/banks that are willing to open a Roth IRA for a minor. I'm aware that I can open a Roth IRA for myself and designate my minor child as beneficiary. I'm not asking about that. I want to open a Roth IRA in the name of the minor child.

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In May 98, I opened an Roth IRA and contributed $2000. In June 98, I transfered my entire traditional IRA account into my Roth IRA account thinking that I had converted or rollovered from traditional to Roth. The error that I made was I did not check the box IRA Direct Rollover on my Account Transfer Form application. My brokerage firm simply transfered the equity from my IRA to my Roth Account. On my 1998 5498 Form for the Roth account, there was no indication for the rollover dollar amount. When I filed my 1998 income tax, I did not file the 8606 form with my 1040 (my error #2).

Question 1. I want to be official Rollover to Roth IRA, not just transfering. What should I do?

Question 2. Do I rollover the origninal transfered amount? If not, how am I going to calculate what is the right amount to rollover? I had sold my transfered equities and bought/sold something elses and bought/sold something elses.

Question 3. Should I rollover in 1998 and do a tax amendment for 1998? or should I rollover now and file as 1999 tax?

Please Advise.

Thanks in advance!

The context is a non profit DB with participants above the comp limit. A non qualified has been discussed but the 457 taxation rules are a problem. Now someone is proposing a "QSERP". Any ideas on how that might help?

If I contribute 2000/year to my Roth IRA, Can I still contribute to a 403(B)? How do I find out the max I can contribute?

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sb

Can "members" of an LLC participate in a 125 Plan? I'm told (in the present case) that although the LLC in question has elected to be taxed as a partnership, the members receive W-2s. In my mind, if the members receive W-2s, then they're employees and should be able to participate. Can someone set me straight? Thanks.

I received an unsolicited Advertisement from this Firm. They used the BenefitsLink White Pages to do this mass mailing, so many of you also received it. Do you think this should be allowed on BenefitsLink?

[This message has been edited by LCARUSI (edited 03-10-2000).]

How is defaulted loan taxed. My understanding has been that upon default of loan, the full value of outstanding principal and unpaid interest on default date is deemed distribution and taxable in year of default. Is this correct? After deemed distribution, what happens to additional accrued interest?

I have seen several places that a suspension of benefits notice is required for a plan that allows participants to continue to accrue benefits after normal retirement age. In my case, the employer continues to credit for years of service but does not actuarially increase the benefit.

The only reference I can find to this type of notice is Labor Reg 2530.203-3(B)(4). However, the regulation concerns suspension of benefits upon re-employment. Does this also apply to the employee who remains employed but does not take a benefit?

If yes, is there a model notice or any further guidance out there from the DOL or the IRS?

Just taken over a defined benefit pension plan that has had benefits frozen by amendment at the end of 1995. Plan was top heavy through end of 1996, and is no longer top heavy. Company is active and is just running this plan for another few years to bring funding up to an acceptable level at which point plan will terminate.

My question is about participants who have entered in 1998 forward. They have no accrued benefit and will not have any further accrued benefit as sponsor has no intention of lifting accruals. I'm assuming I can amend the plan to eliminate future entrants in 2000; any way that I can eliminate the $0 benefit participants? Thought about changing definition of eligible employee to eliminate those with no accrued benefit under the plan. Would a now excluded employee with $0 accrued benefit be able to be dropped as participant (ala a deemed distribution to a terminated non-vested participant) for PBGC premium and IRS count purposes? (Count is getting close to 100 and would like to avoid additional complexity with over 100 count).

Thanks for any input on this issue.

My company provides a 402(f) notice nearly identical to the model in IRS Notice 2000-11 to each participant in advance of distribution. We also provide a brochure summarizing Federal tax consequences and identifying the timing for receipt of form 1099R. Most of this brochure duplicates

information in the 402(f) notice, except some additional detail on capital gains, ten-year averaging and description of specific timing of when our company provides From 1099R. My co-worker calls this a 6057 notice and says we must provide it. I checked Section 6057 and didn't see much resemblance to this brochure. Can anyone point me towards a reference describing the required contents of a 6057 notice? Is my co-worker crazy? Also, we provide an explanation of the QJSA waiver and spousal consent. Are any other notices required at the time of distribution? Thanks for your time.

My company provides a 402(f) notice nearly identical to the model in IRS Notice 2000-11 to each participant in advance of distribution. We also provide a brochure summarizing Federal tax consequences and identifying the timing for receipt of form 1099R. Most of this brochure duplicates

information in the 402(f) notice, except some additional detail on capital gains, ten-year averaging and description of specific timing of when our company provides From 1099R. My co-worker calls this a 6057 notice and says we must provide it. I checked Section 6057 and didn't see much resemblance to this brochure. Can anyone point me towards a reference describing the required contents of a 6057 notice? Is my co-worker crazy? Also, we provide an explanation of the QJSA waiver and spousal consent. Are any other notices required at the time of distribution? Thanks for your time.

hi.. I had a traditional IRA account. there was $5800 in it this amount consisted of a 1997 $2000 deposit and a 1998 $2000 deposit both of these deposits were nondeductible. $1800 is the interest. In 1999 i converted the $5800 to a roth IRA. What amount do I have to pay taxes on ?? the 1099-r states 0 as the taxable amount.

please help... thanks a lot.

What is the proper procedure for making corrective distributions due to ACP test failure when match contribution has not yet been deposited? An employer has decided to make a discretionary matching contribution, and the match formula is defined in the plan document. The employer is planning on depositing the matching contribution after March 15. The ACP test fails and will be corrected through corrective distributions of the excess aggregate contributions. The employer would like to refund the excess aggregate contributions (match) before March 15. A few questions: 1) Can we safely assume that no earnings will be involved since the match has not yet been deposited? 2) Is it possible to make the actual deposit of match net out the excess aggregate contribution amount, so that the excess aggregate contribution amount is never deposited? 3) Can the employer refund the excess aggregate contributions from current match account balances before March 15, even though the match involved in the calculation has not yet been deposited?