An employer failed to take loan repayments from paid disability leave, and thus the loans will not be repaid in five years. It was also discovered that some ex-employees separated from service in prior years with outstanding loans that were not treated as deemed distributions (not reported as taxable event, etc.).

The employer proposes to reamortize the loans for current employees and treat outstanding loans held by ex-exmployees as a deemed distribution in 2000. IRS guidance does not specifically describe how to correct loan defects. Setting aside the issue of whether we will correct under APRSC or VCR, are there any thoughts on our proposal? I am fairly certain that excise taxes will still apply and that some amended returns (1099-Rs and individual tax returns) may be necessary (to the extent an employee left prior to 1999).

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

Anyone know where I can get either an electronic copy (preferred), or even a hardcopy, of the the IRS model defined benefit plan docuemnt? I am also looking for the profit sharing, 401(k), and money purchase as well.

Do you have to have net profits in order to make a SEP cnt. If a farmer has and is showing a net loss can he make his SEP cnt? In a profit sharing plan can elect if you want to limit the cnt to net profits but thats not an option in a SEP.

I represent a service corporation (SC) that sold 100% of its assets to an LLP within the past year. LLP employs all the employees of SC, who now participate in LLP's plan. LLP does not maintain SC's plan in any way, and will not merge it into LLP's plan. SC now wishes to wind down the corporation and terminate its plan.

If both business entities were corporations, I believe we would clearly have a

410(k)(10)(A)exception to the "same desk" rule and distributions from SC's plan would be permitted. Am I correct in this assumption?

However, based on several letter rulings (See PLR 9102044 and PLR 9848008) both the selling and purchasing business entities must be corporations.

Is SC destined to maintain a wasting trust? Must it maintain its corporate charter until 150 participant have a "separation from service"? Is this good public policy. Does anyone have any ideas? I've considered terminating the plan and filing the 5310 with full disclosure and see what happens. HELP!

FACTS: ABC, Inc. has sponsored a 401(k)plan since 1987 which allows immediate payment to pre-retirement age terminees. They want to amend the plan to delay payment (other than rollouts) for two years after termination of employment.

Since 411d6 protects the timing of the benefits, they want to make the delay effective for the increase in benefits after 6/30/2000 from both contributions and investment gains. For example, Joe has an account balance of $10,000 on 6/30/2000 and terminates employment at age 40 in 2006 when his account balance is $50,000.

ISSUE: Can payment to Joe in 2006 be limited to $10,000? Or must it include the allocable investment gain from 6/30/2000 to 6/30/2006?

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

Can someone point me in the right direction . . .

A publicly-traded parent's subsidiary wants to offer employees options on the subsidiaries shares. The sub is owned 100% by the parent. The sub will have the right of first refusal and must consent to any sale to a third party.

Are there any decent sources that discuss the securities laws aspects of this type of arrangement?

Trying to decide whether or not to outsource our flex administration. Curious as to what the practical pro and cons might be to either approach. If we decide to outsource, there doesn't seem to be many flex administrators. Any recommendations? We are in Seattle.

Recently acquired subsidiary 401(k) plan merged into parent plan on 6/1. Sub plan in existence for 1/1-5/30. Is the sub plan required to perform ADP/ACP test for short plan year of 1/1-5/30?

Any thoughts on this issue will be appreciated.

Any suggestions, on a plan which the PA did not monitor the 4K contributions of participants who had taken hardship distributions?

Does anyone know what the maximum elective deferral amount that a Puerto Rico employee may contribute. I have some information as of 1993 that states the limit as the lesser of $7,000 or 10% of compensation. Has the limit since changed to $8,000 and 12% of compensation? I am looking at a plan summary that states the limit as the lesser of $8,000 or 12% of pay for Puerto Rico employees but don't have access to any materials to verify that is the case. (Are the requirements in the Puerto Rico Income Tax Act ("ITA") or is that still the operative Act?)

1. Is an ESOP required to furnish information about the valuation of the employer stock in the ESOP to its participants?

2. One way to try to figure out the first question: Since Form 5500 must be made available to participants, is information on the stock valuation required on Form 5500 for ESOPs?

What issues/notice requirements for plan change that now excludes a group of employees (co-op ees) from a DB plan? What about this same excluded group that terminates and then is rehired shortly afterwards?

I was scanning this message board recently and ran across a discussion about registering Section 401(k) plans which offered employer stock as an investment alternative as a security under the 1933 Act. While I am aware of the registration of such plans, I was wondering if anyone can elaborate on how the SEC's position taken in SEC Release No. 33-6281 concerning Section 401(k) plans affect such registration reqruiements. I was under the impression that the SEC had taken the position that 401(k) plans were not contributory on the part of employees and thus, if such a plan permitted employer stock as an investment alternative, it would not be subjec to the 1933 Act.

Company A sold some assets, but the sale did not constitute a sale of "substantially all of the assets in a trade or business" so as to allow for a 401(k) distribution to the employees affected by the sale. As a result, the employees, who now work for the purchaser, still have accounts in Company A's 401(k) plan. Some of the employees had loans under Company A's plan and are paying the loans with checks.

Can these former employees of Company A take new loans from their accounts in Company A's plan? The plan does not appear to specifically prohibit such a practice. Would there be any reason Company A would not want to permit this if it is otherwise allowable?

[This message has been edited by Scott (edited 02-11-2000).]

A plan is thinking about having an investment option in which only "qualified investors" pursuant to SEC law may invest. A QE must meet certain net worth requirements which are fairly subst'l.

Investment options are a benefit right or feature (BRF) as determined by the discrimination rules. If this investment option was offered would it be discriminatory, even though it is actual SEC law that is creating the restriction? The regulations, -4, seem to indicate it probably is discriminatory as to a BRF.

A Roth IRA contribution today(2/11/2000) results in a 5 year waiting period start date of 1/1/1999. If I then make IRA conversions to this Roth IRA will all conversions have the same start date of 1/1/1999 and therefore the same 5 year waiting period end date of 12/31/2003?

Furthermore if I continue to convert from an IRA to this Roth IRA after 12/31/2003 will these conversions have a 5 year year end date of 12/31/2003 and therefore be immediately withdrawable without penalty?

Does anyone have an alternate link to Notice 2000-11? I'm having some difficulties with the .pdf file on www.irs.ustreas.gov/prod/tax_regs/txts/irs-regs.htm Notice 2000-11 contains a “Safe Harbor Explanation” that plan administrators may provide the recipients of eligible rollover distributions from qualified plans in order to satisfy section 402(f). Thanks.

I have a client that became gravely ill recently. His 401(k) plan is a spin-off of a larger plan that broke up 2 years ago as a result of the divestiture of a large dental practice into 4 smaller ones. My client never completed a new Beneficiary Designation under the new plan and now is hospitalized with what may be a terminal illness. He is unconscious and in no position to complete a form now.

His former office manager found a copy of his beneficiary designation under the original, pre-spinoff, 401(k) plan. Can anyone confirm that this designation would be valid under the current plan since it is essentially a continuation of the original plan?

I'm still confused as to whether an additional payment can be made after year end, and applied retroactively.

I have a calendar year 1999 ESOP, where all the scheduled payments have been made during 1999. I can calculate the release based upn the P & I method which is in place. Scheduled payments have been made in January and February 2000 which will be applied toward the 2000 release formula. The client wants to know if they can make the scheduled payment on 3/1/2000, and an additional payment on 3/1/2000. (The loan allows extra principal payments.) They want the extra 3/1/2000 payment to be applied against the 1999 release, and deducted on the 1999 tax return.

Is it possible?

I know the extra payment falls within the 404 time period, but I don't see how I'd release the extra shares.

It seems that the extra payment for 1999 shoould have been made prior to 2/1/00.

thanks

What are average fees TPA's charge for claims processing?