We have prototype plan documents that allocate forfeitures to all eligible participants. I have an issue where the forfeiture is extremely small. Some participants receive under 25 cents. Beyond amending the plan, are there any regulations that address de-minimus amounts for forfeitures?

We are trying to research the new regulations regarding statutory exclusions for ADP/ACP testing for plan years beginning after 12/31/98;

1. Am I correct in understanding that the new rule is an alternative, but does not replace the previous method of testing (performing two tests; one on the group of employees who meet statutory eligibility, and another test for the group of 'otherwise excludable employees')? May an employer elect to use either rule for testing, even after the remedial amendment period?

2. Allocation of QNECs for a plan using the new statutory exclusion rule. If a plan uses the new statutory exclusion rule for their 1999 plan year test and chooses to make a QNEC to correct a failed test, would the QNEC only be allocated to those NHCs who meet the statutory eligibility requirements?

I have a client who established a 401k in 1998 and let anyone hired on 5/1/98 defer ASAP but had to wait to share in match after 1 year eligiblity and dual entry date. I now have 3 people with a 7/1/99 entry date for match but have been deferring since 1/1/99.

My question is, for ADP/ACP purposes, do I use full year's compensation for both tests or full year for ADP and half year for ACP?

My software won't do this so before I go to the trouble of creating a spreadsheet in Excel, I would like to know if anyone has ever had this come up and what did they do.

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EAC

An employer would like to change the loan provisions in their plan document to force terminated participants to pay back any outstanding loans within 30 days of termination of employment. Right now, the plan document provides that participants who have terminated employment with outstanding loans may continue to make loan payments. It seems clear that this change can be made on a prospective basis. Can the change apply to 1) current terminated participants who are making payments on their loans, 2) current active participants who have outstanding loans? So if a current active participant with an outstanding loan terminated employment next year, could that participant be forced to repay the loan under the change in the plan document loan provisions?

Plan A merges into Plan B eff. 4/1/2000 (both are calendar years). Do I do an ADP test for Plan A from 1/1 - 4/1?

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Andy Treece

An employee has been off work (over 6 months) for W/C and has NOT paid any of the monthly medical insurance premiums. Can we terminate her employment and offer COBRA?

Governmental employer wants to participate in state DB plan that generally requires employers to contribute between 7.5% and 9.5% of each eligible employee's compensation. However employer wants to effectively cap its potential contribution at 7.5% by requiring employees to pay back, via payroll deductions, the amount of any employer contributions made on their behalf above the 7.5% threshhold. Can they do this?

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a client walked into my office with a standardized plan that has not been amended since it was adopted back in 1888. it has been administered properly and all 5500's files. if we restate the plan for 2000, does the statute of limitations begin to run and if he decides not to go to CAP, does he escape potential sanction at some point?

How much notice does an employer need to give to participants before directing the 401(k) administrator to issue a cash payout?

If a partner withdraws from a partnership, is that a "separation from service" that would allow the partnership's 401(k) plan to pay the former partner's elective contributions to him/her?

The 5310-A instructions say not to file a Form 5310-A if 2 or more DC plans are merged and a. the sum of the balances in each plan prior to the merger equals the fair market value of teh entire plan assets, b. the assets of each plan are combined to form the assets of the plan as merged, and c. immediately after the merger, each participant in the plan has an account balance equal to the sum of the account balances the participant had in the plans immediately prior to the merger. Is this exception met if Company A sells a division to Company B and all of the above would be true if Company A's plan only covered the division being sold?

Can a profit sharing trust enter into the following real estate transaction? The Plan signs a 50 year ground lease on a piece of property which will lease for $2500 a month. The Plan then finds a tenant and builds to suit and then receives income from that lease.

Existing unfunded NQ deferred com plan provides that at age 65 the executive is fully vested and that within 30 days after age 65 payments will begin either in lump sum or by purchasing an annuity contract with the plan reserve book amount.

Executive turns age 65 in two weeks. He has decided to continue working and not retire yet. The client wants to:

1) extend the NQ deferred comp plan to continue to credit to the book reserve the same percent of profits as in the past while executive continues to work past age 65

2) what options are available with the payout of the current vested balance?

Would this executive have had to make an election to defer payment past age 65 at least 12 months before turning age 65? Since he is within 2 weeks of being eligible for payment is he out of luck in deferring any further?

What about if an annuity contract is purchased? I assume that because he could have chosen the lump sum he would be taxed as a lump sum at the time the annuity is purchased.

Could an installment payment option directly from the employer be added so that executive would only be taxed as amounts are received.

As he will continue working, he has no need for the income at this point.

Thank you for any comments.

A third party plan trustee gives erroneous information to a plan participant about the timing of a transaction. The error resulted in a loss of thousands of dollars because the stock market took a nose dive. The trust agreement only addresses the trustee to act with care, skill, prudence and diligence of a prudent person in a like capacity. The SPD states the correct timing of the transaction -- contrary to the information the trustee gave. What authority to address this issue? Who is liable to the Participant, if anybody.

A third party plan trustee gives erroneous information to a plan participant about the timing of a transaction. The error resulted in a loss of thousands of dollars because the stock market took a nose dive. The trust agreement only addresses the trustee to act with care, skill, prudence and diligence of a prudent person in a like capacity. The SPD states the correct timing of the transaction -- contrary to the information the trustee gave. What authority to address this issue? Who is liable to the Participant, if anybody.

Sorry if this is a simplistic question, but the best I have been able to find are general references. My husband and I are both planning on opening a roth in addition to our 401k. Can we open one account and both contribute, or do we need to open separate accounts?

I agree. 1.411(d)(4) Q&A 2-(B)(2)(x)

My husband and I are both planning on opening a ROTH this year with the money we receive from our tax returns. We file jointly, and I understand that we can open individual ROTH accounts, with our maximum investmets per year being $2000/ account. My question is this: is there a MINIMUM amount that we must invest in order to establish a ROTH? I have been told that the minimum amount needed is $250. Is this true? I have searched high and low for this info. Can someone help?

Recently my union sponsered defined benefit pension program amended its rules as follows:

A participant with 30 pension credits can retire at 55 years of age and draw full benefits. A vested participant with less than 30 pension credits at 55 years of age will be subject to a decreased benefit amount up to 9% of the credit value he has actually accumulated. Since the participant only receives payment on his actual number of credits, this rule benefits only an elite few. This seems illegal. Is there a violation of any ERISA ruling here?

Taxpayer had a large traditional IRA, which she intended to convert to a Roth IRA over a number of years, beginning 1999 and ending the year before reaching age 70 1/2, so as not to be in the highest income tax bracket in any year.

She converted some in 1999, and some in 2000, and now finds that her income went over $100,000 in 1999. So she has to recharacterize the 1999 conversion, along with the "income" thereon.

The calculation would be simple if she had not yet done the conversion for 2000 (into the same account). But it's made more complicated by the fact that she already did the conversion for 2000.

The regulations appear to say that she simply has to write to the IRA custodian (in this case, a large brokerage firm) to have them recharacterize the 1999 contribution plus the "income" thereon. This would leave it up to the IRA custodian to do the calculation.

What is the best way to handle this?

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Bruce Steiner, attorney

(212) 986-6000 (NY office)

(201) 862-1080 (NJ office)

also admitted in FL