we just took over a plan that has a clause which provides that employees who are terminated due to a "reduction in force" will be vested 100%. I have consulted with another attorney on this and he thinks it is not a great thing to have unless it is defined properly. also, use of such a clause will take the document out of prototype status. anyone have any opinions on this.

Your counsel is correct that the ESOP must receive not less than "fair market value" as of the transaction date if it sells shares to the company.

An alternative would be for the ESOP to distribute the shares to the terminated participant and for the company to give a "put option" (offering to repurchase the shares from the terminated participant) at the 12/31 appraised fair market value. This is permitted under Section 409(h) of the Internal Revenue Code and would avoid having to get an updated valuation.

[This message has been edited by RLL (edited 05-12-2000).]

Feel like I should be able to find an answer to this but have spent sometime looking

Facts: The taxpayer dies in 1999 and has not taken the required minimum IRA distribution payable in 1999 before the DOD.

There are a number of IRAs. Four out of five IRAs - a daughter is the beneficiary. The fifth IRA - the spouse is the beneficiary. (reason - second marriage)

The spouse does not rollover the IRA into an account in her own name until calendar 2000. The required beginning date for the spouse's rollover IRA (assume the spouse is age 75) is December 31, 2001 (the year following the year the account was rolled over).

My question - is a beneficiary required to take the minimum distribution not taken by the IRA owner before Dec 31 in the year of death?

If so, is the distribution treated as taken by the IRA owner or by the beneficiary?

Under the above fact pattern, could distributions be taken from any one of the IRAs to fulfill the minimum distribution? Or would the IRA which designates the daughter as beneficiary be treated separately from the IRA which designates the spouse as beneficiary?

Thanks for any insight you can provide.

Question is:

A participant has elected a fixed amount per pay period for elective deferrals, in addition to a fixed Section 125 cafeteria plan deferral. For the current pay period, because of various circumstances, there is not enough gross compensation to cover both deferrals. Can no 401(k) deferral be taken from this pay period, assuming the participant agrees and wishes to have his/her Section 125 deferral taken instead? Next pay period compensation will go back to its normal level.

Any comments would be helpful. Thanks.

I am chairman of an Ad Hoc committee of our churh seeking information on how to write a leaves policy for our minister. Currently we have no leave of absence policy. Our minister recently had a medical emergency and was unable to perform his pastoral duties between March 15 and May 7, 2000. Our Board of Trustees has appointed me to investigate how to write a leave of absence policy. I'd appreciate help from any church denomination on this topic. Thank you!

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A company installs a new safe harbor plan in July with proper notice to employees in May. The 3% nonelective safe harbor is used. Effective date is 1/01/00. Deferrals begin 7/01/00. The 3% safe harbor contribution is made for full year comp. Anyone have a problem with this?

If the effective date of the plan is 7/01/00, would full year comp have to be used anyway for the safe harbor contribution? Thanks.

Client is adding a k feature to profit sharing plan effective 6/1/2000.

Only non-HCE terminates 5/8.

Does non-HCE have to be included in k test for 2000?

Thanks

Pat Insall, CPC

Can an employer allow a hardship withdrawal for a reason other than the standard 4? (medical, education, residence, eviction).

We have always administered our plan according to these 4 reasons only, but our plan administrator is telling us that, as the employer, we can authorize a hardship withdraw for other reasons.

I don't know what your employer's benefit programs are like, but the idea that comes to my mind is to use the VEBA amounts to pay group medical or dental premiums.

Someone help me settle a bet.

Jim owns 100% of company A

Jim owns 51% of several other companies

Jim wants to set up a SIMPLE plan for Company A. Is there a control group situation with the other companies? The companies have nothing to do with each other and there is no other common ownership.

Our summary annual report tells a participant that they are entitled to receive a copy of the "full annual report". I am saying that this refers to a copy of the complete Form 5500 and related schedules, excluding the SSA. I'd like to know what others are providing to participants in response to this question.

An employee of our Company was sent a notice from her legal husband's employer that she waz no longer covered under her husband's medical plan effective end of the month due to the fact that she is not living with her husband. She moved out recentl with her minor child.

Is this allowable?

The employee is eligible for coverage under our medical plan but will have to pay a premium.

Thnaks

Can anyone help with the audit requirements of a multiple employer plan? What is the federal regulation for these plans?

My client has an overfunded DB plan and would like to refund employee contributions back to the employees who made them some 20-30 years ago. 9 out of the 10 employees that have ee contns. in the plan are union. I find no guidance that would permit such a withdrawal. Any thoughts of other, especially experts in this area, would be greatly appreciated.

If a 401(k) plan in which the 3% non-elective safe-harbor contribution is utilized requires end of year employment in order to share in the employer discretionary non-elective contribution, would a terminated participant who receives only the 3% safe-harbor contribution be considered benefiting for purposes of 410(B) coverage testing on the employer non-elective portion of the plan?

If not, then what if the above plan is top-heavy and also requires 1,000 hours to share in the employer discretionary non-elective contribution. A person employed at the end of the year with less than 1,000 hours who receives only a 3% top-heavy minimum employer contribution normally would be considered benefiting for 410(B) coverage testing, but what if the 3% top-heavy minimum was satisfied with the 3% safe-harbor contribution?

How does the consistency rule apply to the change in residence as a status change? What if someone moves to an adjacent apartment? Please provide examples.

Participant A is married to Participant B, both Participants have a 403(B) plan at the same vendor. Participant A dies and Participant B is the Beneficiary, can Participant B take over Participant's A 403(B) account by simply changing the name of the policy or does the 1 and 5 year rule apply?

I have a client that is interested in choosing a provider that offers personal brokerage accounts in their 401(k) plan. Can anyone share any experiences with this type of 401(k) specifically with regard to the fiduciary liability.

If an S corp shareholder takes a participant loan, what is the correction?

At the time the loan was taken it was not a loan due to not meeting the participant loan exemption rules, so it was a distribution at that time.

This is also a prohibited transaction. The fact that the transaction was taxable does not fix the prohibited transaction. The "loan" should also be repaid to the plan, creating basis for the taxpayer. Each year the "loan" is outstanding the 15% exise tax applies to the interest.

Comments on my short anaysis? Anyone dealt with fixing this type of transaction?

Does anyone have any guiadance on weather a Plan with a liberal eligibility provision ( say three months) can disregard these participants in trying to determine if a partial plan termination has occured.