My AGI made me ineligible to make a Roth IRA contribution for 1999, but for 2000 it will be much lower. So I made a traditional IRA contribution for 1999 in January, 2000, and a few days later converted it to a Roth (a year 2000 conversion). My IRA trustee has issued a Form 5498 for 1999 showing a $2000 contribution to a Roth for 1999. I have asked for a corrected 5498, and the initial response I got was that the Roth conversion before April 17, 2000 "recharacterized" the contribution from traditional to Roth, even though I did not request a recharacterization.

Am I correct in assuming that if I do not elect to recharacterize the contribution, that my intended scheme works - a 1999 contribution, followed by a 2000 Roth conversion?

My employer is not permitting employees to make contributions upon eligibility because they often are not timely in making the appropriate payroll deductions. Then they want people to just forget about it. This is a company-wide thing. Same thing is happening with the H&W plans. All are qualified plans.

Any ideas for how to correct failure to enroll an HCE in a 401(k) Plan when there were no other HCE's? Correction would be to give QNEC equal to ADP of employee's group. ADP of employee's group was 0 since no other HCE's. Employee was subsequently enrolled at next entry date (in different plan year) and deferred 4%.

Everyone is in agreement that the 3% of pay safe harbor non-elective contribution can pull triple duty: (1) be applied to Section 416 minimum required allocation for top heavy plans, (2) avoid ADP 401(k) non-discrimination test, and (3)be used for 401(a)(4) non-discrimination testing (popularly used in cross testing on a benefits basis).

Everyone also agrees that the non-elective CANNOT pull a 4th duty: Be used as the first 3% of pay base tier in the integrated PSP allocation formula because Notice 98-52 precludes its usage towards 401(l).

Question: If one is willing to do general testing to pass 401(a)(4) rather than rely on the 401(l) safe harbor, the "PSP" allocation (including the non-elective) is not discriminatory if it passes one of six (a)(4) methods: Two on a contributions basis (w/o permitted disparity and with) and four on a benefits basis (annual w & w/o PD or accrued to date w & w/o PD).

Could I use the 3% non-elective in my first base tier of the "traditional" integrated PSP formula if the plan passes 1.401(a)(4)-2©(2)(iv) [the annual contribution basis with permitted disparity method] for the year? Only the HCE would get the next tier of the integration formula (3% of excess pay). The HCE's are younger than the NHCE's, so cross testing on a benefits basis doesn't work.

It probably doesn't pass the smell test, but what does everyone think? Your comments would be very much appreciated!

Also, I would appreciate it if anyone could point me toward a quick primer in the area of government plans. Thank you.

We have 850 employees on a self-funded plan with a $50,000 specific and aggregate coverage. Our current plan design requires designation of a Primary Care Physician with a $15 co-pay and 80% for specialists. We are considering changing from a small TPA and several networks to a national company (UHC) with a plan design of $15 co-pay Primary Care Physician and Specialists. 90% in-network and 70% out-of-network for hospital and increasing prescription drug co-pay to 3 tier $7/$14/$25. How is it best to analyze projected costs? I have prepared a spreadsheet with expected fixed costs and attachment factor but all this seems based on enrollment remaining the same which of course it will fluctuate somewhat. I don't want to surprise the company with higher than projected costs due to an enhanced plan design. Questions: Any suggestions on how to best display projected costs, is there a trend in plan design for company's our size, does anyone have any experience with United HealthCare?

I am self employed with a SEP-IRA. From what I have read, it seems that I can convert the IRA to a Roth by December 31st; pay the taxes on the converted funds, yet also take an income deduction for the SEP-IRA contributions made throughout the year. Am I undertanding this correctly? Also, how often can I convert IRA funds to Roth funds? Can this be done every year?

Can a member of an LLC have a loan in a 401(k) plan?

Thanks

Pat Insall, CPC

If a DC plan (which otherwise meets the 1 year of service participation requirements of 410(a)) contains a supplemental employer contribution requiring 5 years of service, does the plan satisfy the participation requirements of 410(a)?

Does the answer to the above question change if the plan has received a satisfactory IRS determination letter?

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Can members of an LLC taxed as a partnership participate in a 125 plan?

If so, is there a certain interest % that can participate, like the 2% Sub-S rule?

Thanks

Pat Insall, CPC

Employer is reducing staff by about 13%. He wants to 100% vest those leaving. Can the employer be more generous than the 20% rule? Could the document define a partial termination as a 10% reduction?

[This message has been edited by Richard Anderson (edited 06-02-2000).]

A division of a company was sold. The employees affected by the sale had prior to a certain date the opportunity to 1) take withdrawal from current plan; 2) rollover to new purchasing employer plan; or, 3)leave money in old plan. If #3 was chosen, money cannot be distributed from old plan until participant terminates from new acquiring employer. No loans are allowed from accounts left under old plan according to plan document since repayment is by payroll deduction and only to parties-in-interest.

Plan also allows for IRS safe harbor reasons.

Question: can a hardship distribution be taken to purchase home by former employee who left money in old plan?

Definition of participant is "eligible employee...whose participation has not been terminated." eligible empoyee is "..person employed by Company.." Company is defined as the old employer and any successor employer.

Follow-up question: Assuming that somehow the answer will be that a hardship withdrawal is allowed, how is the 12 month suspension of salary deferral applied since the withdrawal did not come out of the acquiring employer plan?

Does anyone understand all the DFE stuff for plans with Pooled Separate Accounts? Do you complete a line item for each investment? I keep reading the instructions but can't get a grip! Thanks for any help.

I haven't seen anything come though about what the Insurance Companies are doing for 1999. Have you?

1) If an individual was mistakenly paid too little in a hardship withdrawal in January of 2000, is there any problem with letting the individual withdraw the additional amount that should have been included previously?

2) If a deferral was withheld in 1999, the withdrawal was taken January 9, and the deferral was deposited January 15, should the deferral deposited January 15 be included in determining how much the hardship withdrawal can be?

I have a client (fast food franchise) who wants to start a 401k plan. They want to exclude the hourly ee's. I need to find a plan English explanation of the coverage requirements to further our discussion. Any help will be greatly appreciated.

An HCE has excess deferrals. How is the match associated to that excess treated? Is it treated as a forfeiture and reallocated or used as a credit based on the plan's handling of forfeitures? Is it refunded to the employer? Is it distributed to the HCE? The plan is silent on this situation.

Any comments? Personally, I thought the study materials were inadequate. Quite a bit was inaccurate and ambiguous.

A large part of the required reading was not covered by the exam.

I'd like to hear other opinions.

The answer to this is going to depend on the wording of the merger agreeement (does it say anywhere that the terms of the agreement are intended to amend/modify/change the terms of the plan) and the provisions in the plan document that describes how the plan may be amended. Look at both documents careflly.

Can anyone point to some authority on the following issue (note: I am already aware of DOL Adv. Ops. 82-55A and 82-65A):

Bank trust department wants to pay referral/finder's fees to employees of its affiliate banks who refer qualifed plan trust business to said trust department. Such fee would be an ongoing annual fee as long as the trust business remains with the Trust Dept. and would be based on a percentage of the trustee's fees(which trustee fees would be equal to any 12b-1 fees received from the mutual funds, assuming that such trustee's fees are reasonable in amount).

Ex: Employee A of Bank A tells Company X to call Trust Dept. (an affiliate of Bank A) regarding acting as trustee of Company X's 401(k) plan. Company X makes the call and Trust Dept. becomes trustee of Company X's 401(k) plan. Accordingly, Trust Dept. pays Employee A a referral/finder's fee for so long as Trust Dept. continues to act as trustee of Company X's plan. The referral fee would be based on a percentage of the trustee fees. The trustee fees are equal to any 12b-1 fees/sub-trasfer fees/finder's fees the Trust Dept. receives from mutual funds in connection with the investment of the 401(k)'s assets in said mutual funds.

Prohibited Transaction?

A TPA, an insurer, who has discretionary authority under the plan to decide benefit claims, effectively denied a 47-year old participant's Group LTD Claim for "disability benefits" based on its restrictive determination that the chronic pain disorder associated with a physical disease (i.e., Fibromyalgia, Reflex Sympathy Distrophy, and Myofascial Pain Disorder with "trigger points") suffered by the participant qualified as a "mental disability" only, and not "mental and physical disability". This restrictive finding allowed the TPA to trigger contractual entitlement to 24 months coverage, as opposed to LTD benefits payable until age 65. I need help in finding applicable case law and other documentation that my tend to refute the TPA's analysis and conclusions to lend weight to a court's application of de novo review. Thanks for prompt replies.

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