For Tax Year 1998, I converted a traditional IRA to a Roth IRA and chose to claim the "income" over 4 years. Because of casualty losses in 1999 due to Hurricane Floyd, I think it may well be to my advantage to claim the balance as income in 1999, rather than spreading it over the 3 remaining years as originally planned. "Do"able or not?

Employer to set up cafeteria plan with FSA for Health Care Reimbursement as well as Dependent Care Assistance. Employer initially going to cap the Dep. Care at 1,200, but possibly will change it later. If said change is made effective for the next plan year then it's a no-brainer. BUT what if employer wants to change the limit mid-year 2000? Employer to make contributions to the caf Plan on a quarterly basis so would it be possible for employer to notify e/ee's that the limit will be increased by $x effective next quarter and have all eligible employees make an election prior to that quarter??

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Announcement 2000-1 sets forth the IRS position that no W-2 reporting is required for a plan which meets either the requirements of, or the exceptions to (e.g., the exception for bona fide severance plans), I.R.C. § 457(B). The implication is that plans which do not meet such requirements must do W-2 reporting for amounts includible in income under their plans. This, of course, flies in the face of TAM 199903032, which had stated that no income tax withholding or W-2 income tax reporting was required until amounts under a failed 457 plan were actually or constructively paid out, even if the employee was subject to income tax withholding on such amounts at an earlier date. I guess this is IRS's happy new year's message?

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Employee benefits legal resource site

[This message has been edited by CVCalhoun (edited 01-11-2000).]

A company with a 401(k) plan wants to sell substantially all of its assets to another company. The prospective seller would like to simply continue the 401(k) plan as if no sale had occurred. Does anyone see any problems with this? What further questions need to be asked? Thanks.

The situation involves a Money Purchase Pension plan sponsored by a non-profit entity. The non-profit entity is no longer operation. In the last years of its life, there was only one employee and one participant in the plan. (At most, there had been two participants in the plan.) The plan year end is 3/31. The last 5500 form that was submitted was for plan year ending 3/31/97. The intention is to terminate the plan at this time. Should the 5500 forms be filed, potentially causing late penalties? Or should the plan be terminated with no further filings with the IRS?

DB plan - originally effective 1970 - collectively bargained - plan contained a non-PBGC rate when GATT was effective (Dec. 8 1994). It appears to me that the options for such a plan at that time were are as follows: (1) Implement a PBGC rate on December 8, 1994 to avoid using GATT immediatley and implement GATT within the remedial amendment period; (2) keep the non-PBGC rate and give greater of GATT (or PBGC through the remedial amendment period) and non-PBGC rate from Dec. 8, 1994 forward. That is, if a plan contained a non-PBGC rate at the time GATT was implemented, it either had to immediately change to a PBGC rate or give the greater of GATT (or PBGC through the remedial amendment period) or the non-PBGC rate. Is this correct? If so, are there any exceptions for a collectively-bargained plan that would allow it to keep a non-PBGC rate through the remedial amendment period and then move to GATT? Any help would be appreciated.

Assume: Corp. A and Corp. B are in the same controlled group (no QSLOB). Plan A (401(k)) covers Corp. A employees and Plan B (401(k))covers Corp. B employees. Assume there are no excludable employees in either corp. Plan A has 10 HCEs and 8 are benefiting. Plan B has 5 HCEs and 3 are benefiting. In running a 410(B) test (ratio percentage test) on a controlled group basis for Plan A, how do you determine the percentage of HCEs benefiting under Plan A? (I have the same question with respect to NHCEs, but the answer will be the same for HCEs and NHCEs). Do you take all HCEs for both Corp. A and Corp B in determining the denominator and take all HCEs benefiting in both plans for the numerator (ie, 11/15), or do you take all HCEs for both Corp. A and Corp. B for the denominator and only the HCEs actually benefiting in Plan A since it is only the 410(B) test for Plan A (ie, 8/15)? My thoughts: if you are not aggregating the plans for 401(k), (m), and 401(a)(4) as well, then it should be 8/15 (ie, you do not take into account the HCEs benefiting under Plan b). If you are aggregating the plans for 401(k),(m) and 401(a)(4) as well, then it is 11/15 (ie, you take into account the employees benefiting under Plan b). It seems to me that controlled group testing (as opposed to aggregation of plans) simply requires the denominator to consider all employees within the controlled group, but that it does not affect the numerator. Aggregation (not controlled group) of plans affects the numerator. I may be totally off-base. Any quick help/thoughts would be greatly appreciated.

We have a 3-employee group where the father is the sole proprietor. The other employees are his HCE son and a secretary who works less than 1000 hours a year. The father wants to start a 401k this week, effective 1/1/99 so he can defer $10,000 for 1999. There is only one pay date left for the son during 1999. Can this be done this late in the year, or is it discriminatory to the son?

A company which has an ESOP that owns over 50% of the stock of that company wants to go private. Management's plan is to purchase all the stock in the ESOP, then merge the Company into a privately-held company. What happens to the ESOP? What do the Employees get? Can anyone point me to a helpful article/source on ESOPs? Thanks.

Fairly small 70% ESOP owned "S" Corp made dividend of over $500,000, some of which was used to reduce their repurchase liability within the ESOP. However, the dividend was well within the amount of retained earnings since becoming an S Corp.

Has anyone else heard that S Corp dividends must be less than retained earnings since becoming S Corp or am I the only one?

First of all, it is not enough that the taxpayer be married, the spouse must be the designated beneficiary as of the required beginning date.

Even assuming that the spouse is, this is a gray area. The IRS has never dealt with this question directly, but in PLRs have hinted at an answer, in a case where a taxpayer has elected single life payout even though a joint life payout was available.

Unfortunately, in cases where the answer has been hinted, it hasn't been consistent. One PLR made it sound like the taxpayer himself was stuck with single life, another made it sound like he wasn't. These are my interpretations, so take it for what (not much) it's worth.

The suggestion from here is that you take the RMD from the second IRA as if it stood on its own. Your other alternative is to get your own ruling. While that could run into money, at least then I'LL have an answer for next time!

I work for a Software company in Seattle and am doing some research on what other high tech companies are using to budget for employee benefits. We use a per head amount and am wondering what other companies are using and what that amount includes. Can you help?

Our plan allows cancellation of coverage due to non-payment of the premium (eei portion) in the event of non-paid leave. We currently cancel after 90 days of non-payment (they can be on certain type of leaves for up to one year) but are considering reducing the period to 30 days. Does anyone know of any rule/ regulation limiting how long a plan has to allow for payment of back due premiums?

When are employer paid COBRA benefits on behalf of an active employee considered taxable income to the employee in whole or in part?

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E3 Ventures, Inc.

Cary NC 27511

losborn@e3ventures.com

In 1998, I had a miserable year. I had NEGATIVE income. But early in 1998, before I knew how lousy my year would be, I opened a Roth IRA at my bank and contributed $2000. (I'm single.) However, through ignorance, I didn't have my bank alter the paperwork so that the contribution could be credited for tax-year 1999 instead of 1998. Don't ask me why, I just didn't. Anyway, the IRS tells me that I had until the end of my extension period for tax-year 1998 to transfer the contribution to 1999 but they say now I'm screwed and I have to file form 5329 and pay a 6% excess contribution penalty. They say now I can get the bank to fix it but of course pay the penalty. And, if I don't do it by Dec. 31, I'll end up owing another 6% penalty.

Can I try to close this Roth IRA, reopen a new one, pretend it never happened, and hope the IRS never comes calling? Is there some way I can get around paying this penalty?

Thanks,

Eric Witte

ewittemd@aol.com

717-652-5239

Even if you post an answer, PLEASE EMAIL ME DIRECTLY AS WELL at ewittemd@aol.com. Otherwise I probably will never see your answer.

Thanks....Eric

Is there anything that says a participant must forfeit there distributable benefit because they were involved in a criminal act against the employer??

Has anyone worked with 100% ESOP owned S-corporations? I would like to get thoughts on uses and misuses.

The beneficiary receives regular and Roth IRA's from the decedent who died b/4 age 70. May a beneficiary who elects to receive substantially equal payments change this method after age 59? (Or am I confusing this with the rules for the IRA account holder who wishes to receive substantially equal distributions?)

Does anyone have any statistics as to what percentage of plan sponsors are offering investment advice to participants? (My definition of investment advice is giving participants specific instructions as to how to allocate their accounts among available options in the plan.)

The Regs for 404© say that a current prospectus must be furnished to a participant after he makes an ivestment in a fund. is it sufficient to give them to the Plan Administrator and have the participants get one from the Plan Administrator whent they make the investment?