I suppose we have until 12/15 to sort this out for calendar year plans, but how is everyone handling the summary annual report format that corresponds with the "new" 1999 Form 5500 structure? Has anyone seen IRS/DOL guidance or just continuing to use the "old" SAR format (eliminating the "Disclosure" version that corresponded with the 5500-R's)?

Thanks in advance for any comments!

Hi mspencer! Welcome to the ESOP message board.

Under IRC Section 415©(2), "annual additions" is defined to include employer contributions, forfeitures and employee contributions.....although Section 415©(6) excludes certain contributions and forfeitures in the case of a leveraged ESOP. Dividends on employer stock owned by an ESOP constitute earnings on trust assets, and such earnings are not "annual additions" under the IRC.

However, the IRS regulations under Section 415©, at Reg. Sec. 1.415-6(B), provide that certain transactions between an employer and a plan may give rise to annual additions. This would apply to dividends only in an extraordinary circumstance when the IRS could "recharacterize" certain dividends as employer contributions. For example, if the ESOP were the only holder of a certain class of employer stock and an extraordinary amount of dividends were paid on that class, this may be an appropriate circumstance for such a recharacterization. The IRS would have to establish that the dividends were designed as a means to avoid the Section 415© limitation.

If the dividends are "reasonable" in amount and/or if the ESOP is not the only shareholder receiving such dividends, the dividends cannot be recharacterized as "annual additions" under Section 415©(2).

The conversion deadline for any given year is Dec 31st, therefore you can not convert now for 1999. If you are getting contrary information from your accountant, you need to find a new accountant. This Roth reg is almost as basic as knowing April 17 is this years tax deadline.

The conversion deadline is mentioned in IRS documents, on the WWW.rothira.com web site, and in virtually every article ever written on the subject. Every accountant should know this info, it is not an obscure reg but a very basic Roth rule.

Scenario: Employer has a Cafeteria plan with group health, dental and the Health care FSA and Dependent Care FSA, all are components of the Cafeteria plan.

Question 1: Under what circumstances, if any, is it necessary to extrapolate out the Healthcare and Dependent Care pre-tax amounts that go on line 6 ("Enter total cost of the fringe benefit plan for the plan year"). In other words, are there any requiremnts that these amounts MUST be reported separately on 2 other 5500, Schedule F's. I say NO.

Question 2: Now assume that the FSA are NOT components of the Cafeteria plan (becuase of poor drafting or some other reason) and the FSA documents have enough language that they each constitute a Cafeteria plan. I say YES, but why would you ever want to do a total of 3 filings when you only need one. Fix the Cafeteria plan document to include both FSA as components.

Please confirm: You need a Schedule A for a Healthcare FSA with more than 100 participants. The cost entered on Schedule A also goes on the Schedule F. I say YES.

THANKS!!!

If a money purchase plan permitted some post-tax employee contributions to be made, what should/does happen to those funds when the plan terminates?

my claim for 150.00 has been approved by the FLEX One account manager for my 1999 account.

the employee has been contacted twice by FLEX One and the employer refuses to issue my check.

What is my next step in order to get my account reimbursement from the employer?

Looking at adopting a safe harbor method (3% nondiscretionary) in an existing 401(k) Plan. I can't interpret Notice 2000-3 to my own satisfaction. Section III A-1 seems to be saying that if you amend in the current year, you still have to pass the ADP for the year. So what good is vesting a 3% contribution when it's useless in the current year.

It looks like A-9 lets you off the ADP testing hook if you get notices out before May 1, 2000.

Thanks for comments.

Employer wants to offer a choices for nonelective vacation balance (1) cash out (up to 3 weeks); (2)rollover to next year; (3)or using the vacation. Election will be made in August for following calendar year. What constructive receipt issues, if any. Cites?

Absent plan language addressing the issue, does anyone know of state laws (Maryland) that would prohibit distributions to a minor from a DB plan?

This is really addressed to the board sponsors and moderators. I would like to know what the point of this board is? Questions RARELY get answered--only 6 out of the last 24 posts had replys. I was so pleased to have found this board in hopes to have others offer input into my concerns, but quite frankly it is a joke and a big waste of time due to lack of answers.

[This message was also posted on the Small Businesses Message Board]

On April 8, a notice was posted on the Reish & Luftman Internet site, http://www.reish.com/practice_areas/empben_frameset.html, providing a Q&A from the 1997 Enrolled Actuaries meeting concerning plans for inside directors. In the response the IRS said that the 414(o) regs. were not applicable, but that the affiliated service group (ASG) rules probably would restrict an inside director from establishing a plan for his/her director fee earned income. I have looked at the ASG rules and do not see how the A and B org rules would apply. If the Service could make the argument that the management service rules of 414(m)(5) would apply, why would the application be limited to inside directors? Has any one had the fun of dealing with this issue? Any guidance would be appreciated.

My client wants to know if partial ESOP distributions are a common Plan option. Additionally, what are the administrative issues that should be considered prior to adding this option. Currently my client only permits lump sum distributions of the entire account balance.

Identity theft seems to be a growing problem, made even easier by the resources available on the Web. Given the fact that our pension consulting businesses contain loads of confidential payroll data, including participant names, Social Security numbers, salaries, birth dates, etc., do we have exposure if some nefarious individual(s) get ahold of this data, either through "dumpster diving" or electronic means? What steps do you all take to dispose of confidential information. You see so much data in this business that you tend to forget that much is very confidential and could be put to very devious purposes. What steps (if any) are people taking out there to protect their data? Shredding papers, network protection, firewalls, etc., are all ideas that come to mind. Given that we're "discussing" this on the Web itself, I'm assuming that most of us are sensitive to these issues. How about a discussion about "best practices" with data?

I have read that in determining PIA, you compute AIME by using earnings history prior to year you attain age 62. Is this true, or does anyone know of using earnings after age 62 when determining AIME?

Can anyone point me in the right direction? There is a debate in the office as to whether we can use Form 5307. If we cannot use Form 5307, then what form should we use? Thanks.

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?