A participant in a 401(k) plan that provides for self-direction is interested in purchasing covered calls. Is this permissible? I know of the UBTI issue for the plan as a whole, but thought that only applied if plan didn't provide for self-direction. Any thoughts? Thanks. Ed

We are just starting the process of merging two frozen 403(B) plans into an existing plan. We have drafted a resolution transferring annuity contracts and custodial provisions. Other than anti-cutback, are there any other concerns, issues or procedures we should be aware of related to merging 403(B) plans?

A plan fails the ADP test. HCE 1 deferred 10% and the amount to be returned is determined by reducing his deferrals to 8%. HCE 2 actually receives the distribution to correct the test. The employer match was dollar for dollar. Whose match gets forfeited to comply with 401(a)(4)? Was this addressed in any legislation?

Thanks in advance.

Does anyone know what the IRS position on the minimum normal retirement age in a defined benefit plan can be? All participants will be fully vested at all times and because the plan's assets will be invested so as to equal the interest credits (it will be a cash balance plan), the vesting and funding issues should not be relevant. We want to allow in-service distributions after normal retirement age and want to set normal retirement age as young as is permissable.

I have two Roth IRA's. One was a conversion from a traditional IRA. Can I combine these two IRA's into one?

A Profit Sharing Plan with a 401(k) salary deferral feature permits employees to defer salary immediately upon enrollment, but requires 12 months of employment to receive the discretionary employer profit sharing contribution. If the Plan is top-heavy, must the Plan provide the minimum top-heavy contribution for the employees who are eligible to defer salary, but not yet eligible to receive the discretionary employer profit sharing contribution?

Is there a way to disaggregate the portions of the Plan for purposes of determining which employees are to receive the top heavy minimim contribution?

A participant plan on retireing this year. She currently has an outstanding loan in her employer's 401(k) plan. The loan program states that loans are repaid through payroll deduction. There is no other option. This is a large plan with numerous loans and the employer does not wish to handle loan repayments outside their payroll system. The participant does not wish to request a distribution from the plan until after the end of the 2000 tax year. She would like to continue to make her loan payments to the trust. She does not wish to take the loan as a partial distribution nor does she wish to default on the loan. The loan program states that loans are considered to be in default after 60 days from the date a payment is missed. What are her options?

Where can I find reviews or ratings of TPA's for a defined contribution plan? We are unhappy with our current TPA and would like to get some input about potential new provders

Is there any downside to taking an earlier withdrawal from a roth IRA to pay for my kids education in 15 years. It seems that this would be a better vehicle than a mutual fund. It seems that you get taxed the same way, and If I do not need all the money for education, it keeps earning tax free until we retire.

Thanks

Joe

If a partner loans money to an ESOP, is the loan interest paid by the ESOP reported on a 1099-R or a 1099-INT?

Does anyone have any statistics concerning the percentages of employees who make the election to opt out of a plan when they are negatively enrolled?

here is an interesting issue I have encountered. If a participant has made extra loan payments, then the amortization schedule 'adjusts' his loan payments to correspond to the number of months remaining.

NOTE: this does not appear to change the regular payments, it is simply the amortization schedule that prints this way.

in other words, if I want to print a revised amortization schedule on an individual, I have to model it, set the loan payment amount to the original payment amount and then print the schedule.

In fact, as with all loans, the last payment is usually slightly different than all the other payments. As a result, the loan payment amount might end up differnt on your amortization schedule regardless if extra payments were made. I have encountered some varying a few pennies.

AGAIN, I would emphasize, this is only the amort schedule. the system does not appear to be using these adjusted amounts.

If you don't 'model' before printing, you might not even be aware the system is doing this.

I would like to hear what others will be doing. Do you think this just another bump in the road like the 1994 TAM was? It is certainly coming at an inopportune time, with restatements coming soon.

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

Andy Treece

Prop. Treas. Reg 1.125-1, Q/A-17

Prop. Treas. Reg 1.125-2, Q/A-7

Yes, they may use a different definition of compensation for the deferrals versus what they use for the match. They definitely won't fit a prototype plan document, but it doesn't sound like they do anyway. Obviously, you'd want to talk to payroll and the recordkeeper to make sure they can handle it.

Both the ADP and ACP tests should be run using 414(s) compensation. HCE compensation must be a total compensation definition. Hence, you probably want to include all commissions for running those tests.

If your client is already used to running their tests with deferrals limited to first $45000 of commissions, this change can be expected to make their ADP test results worse.

A law firm has a top-heavy profit sharing plan that excludes associate attorneys but passes coverage. Figuring its "their money" the firm begins a separate 401(k)plan for elective deferrals only, allows associates to particpate, but also allows key employees to participate. The plans, on an aggregate basis are top heavy.

1) I assume the firm now must make a 3% contribution for associates into the 401(k) plan because the Plan is no mandatorily aggregated with the profit sharing Plan. Does anyone disagree?

2) Is there a way around this prospectively?. It does not appear that the 401(k) can be terminated and a new plan started includng associates/non-keys only because of the successor plan rules.

3) If the 401(k) Plan was "frozen" so no future deferrals were allowed, would a top heavy contribution still be required because of the frozen plan's aggregation with the profit sharing plan and the fact that keys are getting 3% or more into the existing profit sharing plan? [1.416-1 Q&AT-5 read with 416©(2)(B)(ii)(I)].

4) If you prospectively eliminate participation of the keys in the 401(k) would you then have to wait 5 years before mandatory aggregation would not apply?

5) Any other ideas on a way "around" the top heavy contribution problem prospectively?

[This message has been edited by KJohnson (edited 03-01-2000).]

[This message has been edited by KJohnson (edited 05-10-2000).]

Has anyone had a leased employee participate in the recipient's 401(k) plan? If so, what procedures were used to handle the leased employee's elective deferral contributions? Were the contributions withheld from the amount the recipient paid the leasing organization?

Am I the last to know? In Quantech 4.3, unconfirmed MATCH transactions do NOT show in the ACP test (reportedly fixed in 5.0). When posting with 415 limits, NO UNCONFIRMED TRANSACTIONS are used (reported fixed in 5.0). Here's the best one - in doing the 410(B) Average Benefits Percentage Test, NO UNCONFIRMED TRANSACTIONS ARE USED. THis is NOT changed for 5.0 or 6.0.

Am I wrong in believing these are serious oversights? Who would check the totals on a test if each of the individual reports were correct??

I am considering starting a small TPA out of my house. Does anyone have any advice that may be useful? Do I need any sort of license? I am planning on going after small plans, how much revenue can I expect them to generate? How long before I can expect the business to be profitable? Should I try to ally myself with a broker? Any help would be greatly appreciated.

An employer/plan sponsor has an SEP that allows for immediate eligibility at which time employer is the only participant. Upon hiring two new employees, the employees are not included within the SEP, and the employer has never included the elgible employees within the SEP. I realize that correction cannot occur under EPCRS. I have been searching for authority but can find no guidance on how to correct this problem. Should employer pursue a closing agreement under IRC § 7121? Any advice on how to fix this error would be appreciated.