If an employee elects out of the plan, can he still contribute to a traditional IRA.

There seems to be a lot of employers who mark the Pension Box on the W-2 and claim they are right. I thought Notice 87-16 covered this to prove they are wrong. Any comments??

Thanks Milton

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I had a pension calculation done in

August of 1996 for a lump sum rollover. The lump sum was $8,278. I decided to just leave it alone and not take the lump sum at that time.

Then in July of 1998 I had another pension calculation done for lump sum rollover. The lump sum was $9,232. I decided to just leave it alone and not take the lump sum at that time also.

I just had another pension calculation done for a lump sum rollover fully intending on rolling it over this time into my Schwab IRA. The lump sum for January 2000 came to $5,427.!!??

Why would it go down so over 40%!!? I asked the Benefits Administrator to explain to me why it would decrease so much and was told 'interest rates'. They would not say what interest rates affect pension calculations or give me any other specifics just that 'when interest rates go up, lump sum distributions go down, way down.'

Does this sound right? I need some guidance here. Should I have it recalculated, contact an actuary for assistance or what?

Thanks,

David

The Treas. Regs. basically state that if an excess contribution is returned within the first 2 1/2 months of the plan year following the plan year in which the excess occurred that it's taxable in the earlier year. The plan year end is 12/31/99. The ADP test fails and returns are distributed. The 1099R for the distribution won't be sent out until Jan 2001. How does the participant report the additional income on their 1999 tax forms?

Has anyone ever used a negative election form in a cafeteria plan whereby employees only sign the form if they DO NOT want pre-tax benefits? All other employees would automatically receive pre-taxation of health and dental premiums. I have heard of this being done but have never personally used this before.

Thank you!

I have several plan sponsors asking about the ramifications of the aforementioned topic. I would be interested in hearing thoughts about the pros and cons of this approach to 401K enrollment.

The DOL was asked if synthetic GICs, separate account GICs, and insurance company stable value funds could be reported at contract or book value on the applicable schedules. The DOL basically said no and inferred that these contracts could not be reported on a single line item. This implies that the reporting must be on a fair value basis and on more than one line item. The DOL finishes up by saying that reporting for these contracts must continue to be done in accordance with the existing reporting requirements. What are those existing requirements? I’ve never seen any prior DOL guidance on this issue.

Can you tell me what the law states for investing into our 401K plan for a

Canadian employee here on work visa?

He is concerned about accessibility.

Cannot find info on whether COBRA can be kept if you move out of state. Have heard conflicting advice- yes, you can- and no, it is cancelled if you leave the service area. If you cannot take it with you, it seems to be of very limited value- people are more mobile today then ever. Any advice/info? Please email me. Thanks. David

Under dual coverage for a newborn baby, the mother's employer has a fully insured health plan that automatically covers newborns for 31 days. The father, who works for a self-insured employer, enrolled the baby under his plan as of the date of birth. The mother's insurance paid the claim for the first month. The baby was a premature birth and the amount paid was about $267,000. 1 1/2 years later the mother's insurer is coming back claiming that their policy is going by the gender rule and the father's insurance must reimburse them for the paid claim. The father's insurance goes by the birthday rule and since the mother is born first, refuses to reimburse.

Any suggestions as to how this might go? Is there a time limitiation to the insurer questioning a claim they paid? How would the self insured's reinsurer react? We are in PA and the insurance department states that the birthday rule seems to be most often used but that there was no definite rule or regulation by the state.

A client maintains a DB plan that pays a fixed death benefit to a designated beneficiary upon the participant's death if the participant has already retired. I'm trying to figure out whether the payments are included in the recipient's income. I'm wrestling with the following ideas, many of which came up at least tangentially in a thread on this Board from last summer:

1. The $5000 death benefit exclusion of Section 101(B) was repealed, effective 8/20/96. Does this repeal mean that the death benefit distributions can be eligble rollover contributions, if they otherwise qualify, even if the specific $5000 exclusion has been taken away?

2. Is there any way to characterize these death benefits paid out of general assets as excludable life insurance contract benefits under Section 101(a)? One idea might be to stretch the reasoning of PLRs 199921036 and 200003020, in which death benefits paid under collectively-bargained welfare benefit plans were found to be excludable under Section 101(a). Does anyone have thoughts on whether this a viable option?

Employer has 21 active employees as of 1/1/98. 7 of these employees are HCE for 1998 and 14 are NHCEs. One of the 7 HCEs, who is age 40, has a compensation history of $150,000 in 1995, 1996 and 1997, and $74,000 in 1998 and 1999. The other 6 HCEs have comp. over $100,000 in 1998. The 14 NHCEs have comp. under $80,000 in 1998. The employer decides to use the top-paid group election for 1999. There are no new employees and no terminations of employment.

Is the following correct:

The HCE in 1998 with $74,000 comp. in 1998 has a deemed separation year in 1998 and so is an HCFE for 1999.

Number of ees considered for top-paid group = 20.

The number in the top-paid group will be 4 (20% of 20).

There are 5 HCEs for 1999: the 4 employees with the highest compensation in 1998, plus the 1998 HCE with $74,000 comp. in 1998 (due to being an HCFE).

Is the above correct?

Can someone please verify for me that a company which previously maintained an ESOP w/o public stock pursuant to IRC 409(l)(2) and is now going to have a new public class of stock, must exchange the securities in the ESOP b/c it will be a 409(l)(1) company. Does anyone know the mechanics of how this can be done or have experience with it? I don't think it seems like a rare situation, but we have very few clients with ESOPs (especially nonpublic ESOPs). Thanks.

Is anyone aware,or can provide, a DOL Advisory Opinion Letter that states something to the effect that a 403(B) plan funded exclusively with annuity contracts is exempt from filing?

Please advise.

Thnak you

Does a Section 125 have to give employees the option of having medical / dental plan contributions deducted after tax?

1. If a non-owner employee earns $81,000 in 1997, and $35,000 in 1998 and 1999, is it correct that the employee is an NHCE for 1998 and an NHCE for 1999?

No this employee would be a HCE for 98 because he/she earned more than 80,000 in 97. Yes, this employee would be a NHCE for 99 since he earned less than 80,000 in 98.

2. When and/or why would Highly Compensated Former Employees (HCFEs) be important in relation to ADP/ACP testing and/or determining HCEs and NHCEs that matter?

For the purposes you are questioning, a HCE former employee could have come into play when the family aggregation rules were in effect (pre-SBJPA). If the former employee was a 5% owner or one of the ten highest paid employees, the family members of the HCE would be aggregated with the HCE when testing. So in short, you could have dragged a NHCE family member into HCE status.

Desingnated beneficiary spouse was age 55 at time of husband's death only a couple of months after his required beginning date. Rather than rollover to her own and begin SEPP, she opted to receive "death" distributions based on her single life expectancy, recalculated. Now that she is age 60 she wants to make it her own. Is there an exception to the "end of the year following death" for making the decision to make it her own?

Edit posted 2/8/00:

It looks like it is not a matter of end of year following death, but the fact that the surviving spouse may have made an irrevocable election NOT to treat the IRA as her own when she took a death distribution. PLR 9608042 seems to support a strict interpretation of this positon. As Natale Choate says in her book "Life and Death Planning for Retirement Benefits", page 120, the only people hurt by this ruling are poor young widows. Any ideas out there for a way around this? Think a PLR request would be worthwhile?

[This message has been edited by Steve Palmer (edited 02-08-2000).]

April 1, 2000 is a Saturday. What is the RMD deadline, March 31 or April 3?

What are the rules regarding Indian Tribal Governments and their sponsorship of qualified retirement plans (DB or DC)?

Are the retirement plans treated like governmental plans for purposes of testing, annual reporting, etc.?

What are the rules regarding Indian Tribal Governments and their sponsorship of defined benefit plans?

Is the defined benefit plan treated as a governmental plan?

I am working with a company that is told that their current provider (bank 1) is a named fiduciary. They are looking at another provider who is a directed trustee (bank2). Bank 1 says that they provide a much greater service than Bank2. Is this so?

Is the plan sponsor relieved of fiduciary responsibility with Bank 1? If not, what is their responsibility?

Add. Info.: plan type 401k

Participant directed

Plan sponsor picks fund choices

Currently use bank 1 funds and a

few outside funds

Fund performance is a issue

[This message has been edited by Ephesian431 (edited 02-07-2000).]