We issued two 1099's with incorrect distribution amounts. After we issue corrected 1099's, I'm unsure about what to do about the 1096 that was filed with an incorrect total.

Do I file a corrected 1096 that has a new corrected total, that includes all distributions, not just those that were corrected? Or do I show on the corrected 1096 just the total of the two corrected 1099's? Also, the Form 1096 does not have a box to mark showing that it is a correction. Do I write "correction" on the Form 1096 or what?

The two incorrect 1099's had no withholding, so the 945 does not need to be corrected. Is there anything else other than issuing corrected 1099's and 1096 that I should do.

[This message has been edited by Richard Anderson (edited 03-21-2000).]

Can an employer (a partnership) establish a minimum age of 25 for participantion in a medical reimbursement plan? A 1,000 minimum hour requirement? Thanks.

Dr. is an employee of his own incorporated medical practice. He is also an empoyee of the local hospital and participantes in the hospital's TSA program. Does Dr.'s TSA contribution affect his 415 limit under his practice's PS Plan?

I know it used to (at least we ran the Plan as if it did!) - but with all of the recent changes, I'm just not certain anymore. Any and all input and cites welcome and appreciated!

This is a subject that has been discussed a few times before, and I’m wondering if anyone knows of anything new and what people have been doing in practice. If anyone is going to the 2000 EA meeting, could you follow up on this? The previous threads on the topic have pointed to:

The 99 EA Gray Book.

"QUESTION #30

Other DC Issues: Application of Maximum Compensation Limit

In a 401(k) plan, does IRC Section 401(a) (17) preclude the following?

A. Employee A earns $300,000 annually. He enrolls in 401(k) calendar year plan in August, after earning $175,000. He defers $10,000 for the balance of the year.

B. Employee A earns $300,000 annually. He participates in a calendar year 401(k) plan making monthly deferrals of a flat dollar amount of 1/12 of $10,000 in 1998, even though his pay exceeded $160,000 before he was done making elective deferrals.

C. Same as B, but deferrals are a percentage of pay (3.33333%).

RESPONSE

All of the above are acceptable, assuming the plan is not drafted in such a way as to prevent it.

In situation C, for example, a plan provision permitting deferrals expressed as a percentage of compensation but not permitting deferrals expressed as a dollar amount could not accommodate deferrals on pay in excess of $160,000. Where the plan permits deferrals expressed as a dollar amount specified in the employee's salary reduction agreement, the reference to a percentage in the individual agreement is irrelevant."

--------------------------------------

Assume a plan document permits deferrals of up to 15% of compensation and does not mention allowing deferrals of specific dollar amounts. Does the response above mean that, for this plan document, the Employee in Situation A may not make deferrals, and the Employee in Situations B and C is limited to $5,333.33 (3.33333% times $160,000)?

Does anyone have a plan document that has a provision allowing deferrals of a specific dollar amount per period? The response seems to indicate that a provision like that in the plan document makes Situations A, B and C o.k., even if the actual election form states a percentage of compensation. If the plan document has a provision like this, does this make it possible for the Employee in Situation A to receive a matching contribution? Would the answer be different depending on whether the match was based on deferrals (50% match, for example), or compensation (50% of the first 6% of pay deferred)?

I have not had to terminated a DB Plan for -awhile. DOes the Service still require a Required Statement in accordance with Notice 87-20, 87-46 and Section 1124 of TRA 86. If so does some one have a current one they would be willing to share?

jay.scholz@padgett-cpa.com

Thanks

Does anyone have a current IRS Required Statemnt used in connection with the termination of a defined benefit plan. I have an old one that incorporates Notice 87-20, 87-46 and Section 1124 of TRA 86 but nothing since than. I haven't terminated a DB Plan in awhile.

jay.scholz@padgett-cpa.com

If an IRA participant dies BEFORE required beginning date AND has multiple beneficiaries, can each individual beneficiary take payments over their OWN life expectancy? Or, must it be taken over the life expectancy of the eldest beneficiary?

I have also heard this term for time off referred to as bucket time.

------------------

It is now March 2, 2000. Company decides that it wants to adopt an ESOP effective as of January 1, 2000. Company wants to

terminate its "S" election (which it has until 3-15-2000 to do)effective as of 1-1-2000. Then, Company wants to have the sale effective as of 1-1-2000 and use section 1042. All employee allocations would be based on compensation from 1-1-2000 forward. Any thought about whether this is okay??? Is it okay as long as the stock valuation for 1-1-2000 is not significantly different from the closing date stock valuation?

A D.C. plan incorrectly allowed a participant to take a distribution when the participant was not eligible. The participant has repaid the distribution plus earnings as contemplated by APRSC.

The participant is now eligible for a distribution. Does he receive "investment in contract" for his repayment of the previously taxed distribution? If so, the participant now only wants to take a partial distribution-- so how would that "invesment in contract" be allocated between the partial distribution amount and the amount that would remain in the Plan?

I thought this was discussed before, but I can't seem to find anything.

What opinions are out there about filing for a determination letter before plan termination a one person plan?

Assume that its been a clean plan (no compliance issues), there has always been one person and that its on a standardized document.

I've convinced myself that it wouldn't really be necessary, but would like other people's views/experience.

To what extent can an individual have a SEP-IRA and be a participant in a qualified plan, e.g., a profit sharing plan? In other words, does the 415© limit on annual additions apply per individual or per employer? Could an individual have two jobs with unrelated employers and be a participant in two profit sharing plans and receive contributions under the two plans that exceed the 415© limit?

------------------

Can participants who have self-directed accounts be offered individual life insurance policies withing their 401(K) plan? The type of insurance being considered by the trustee would be term, so it would be purely an expense item from each participant's account, not an "investment" as there would not be any cash value accumulating. Would there be any discrimination issues, e.g., assigned risks having to pay higher premiums for the same benefit that non-risks are getting? The agent says that males could pay less for insurance through the plan since unisex rates must be used to be nondiscriminatory(?). If that's the case, I wouldn't think any of the females would want to pay the higher premiums this would create for them. I'm also guessing that, in light of the 25% of contribution limit for premiums, a participant would lose their insurance coverage if they stopped deferring. I don't know that much about insurance, but it seems that its advantages are usually outweighed by the complications it causes in qualified plans.

Client adopted a Northwestern Prototype document with the assistance of a purported professional employee benefits firm in 1996. Client looking to terminate the plan now. Upon contacting Northwestern, I learn that Northwestern ceased sponsoring said prototype on July 14 of 1995. Northwetsern notified all prototype users on said date as well as provided them with an updated (as of 1995) plan doc. It appears that the actual plan document ( and adoption agreement)that the e/ee ben firm used was a doc from 1986. Thus, the doc did not contain the required rollover provisions, comp limits, and who knows what else. I know there is/are correction programs for late amenders, but would correction be possible where the doc was not qualified from the start?? I wouldn't think so, but just wanted to ask.. Thanks.

------------------

Does anyone have, or know where I can find, the address where a check for withholding would be mailed for California state tax withheld from a 401(k) plan distribution?

Company A, which maintains a 401(k) plan, is sold to Company B, which also maintains a 401(k) plan, on July 1, 1998. The 401(k) plans will be merged May 1, 2000. Both plans are calendar-year plans.

Can anyone give me a general overview of how testing is done in 1999 and 2000? How is the former ownership of Company A treated (important for key employee definition, not used for HCE determination?)? Does company A's plan have to be tested for 1/1/2000-4/30/2000, or is it combined with the plan it is merged into and tested for all of 2000?

If this is too open-ended a question to ask here, does anyone know of an article that has been written on this issue? Thanks for any suggestions you might have!

Does anyone know of a good website that has up to date rates ( e.g. the Feb. 2000 rate)

What does the plan document say? Some documents allow new hires to enroll after some sort of probationary period until the end of the plan year. Some documents restrict enrollment to plan anniversary.

What do you mean by "All of the participants will be fully diversified in Company A stock which they hold in the plan" ? Presumably, Company A will be liquidated following the sale of its assets and the Company A stock will be converted into cash.

If the assets of the Company A Plan are transferred to the Company B Plan, the IRS would likely say that Company A Plan is a "predecessor plan" to the Company B Plan and participation in the Company A Plan would count as participation under IRC Sec. 401(a)(28)(B) for purposes of Company B Plan's ESOP diversification election. The law is not totally clear on this point, however, and it may be possible to avoid this result (if that's what you want to do) by obtaining an IRS determination letter on plan provisions which deny such treatment.

Note that the diversification requirement of Sec. 401(a)(28)(B) is based on "participation," not "service."

[This message has been edited by RLL (edited 03-02-2000).]

This isn't really a cross-tested question, but it affects a new comp. plan that I am working on.

1999 calendar year plan. A person was rehired 11/1/99. According to the document, this person will participate "retroactively" to his rehire date once he completes a year of service. Regardless of what happens, he will not get a contribution for 1999, because the plan requires 1000 hours to get a contribution. But is he included in the 410(B) and 401(a)(4) tests as not-benefiting?

Do I have to wait until 11/1/2000 to see if he completes his year of service? I hope I do not have to include him for 1999, because it will hurt my (a)(4) testing.

------------------

Andy Treece