former employer cancelled all healthcare benefits the week after I left. I signed up for cobra, then found out the policy was cancelled for the entire office.

If the company enrolls with a new healtcare company am I entitled to cobra benefits?..Help Please!

I have contributed $2000 this year to my traditional IRA. I would like to convert this year's contributions to a Roth IRA but am unclear on the law. My income is greater than $100,000 meaning I am ineligible to convert previous years' contributions, but is less than $150,000 meaning I am eligible to contribute to a Roth IRA.

Is it possible to convert these 1999 contributions with my income status?

We've been retained by a plan sponsor to review an excluded participant issue. The person in question is a former owner/participant who terminated employment several years ago. His current compensation consists of $1,000 a month contracted "consulting" fees and $50,000 under a deferred comp agreement. The plan is a bank standardized master master plan.

The company has not been including this person in the allocation since his retirement. Under a nonstandardized plan, there would be ways to exclude him. Under the standardized version, must he be included? Is he an employee? Are his consulting fees income under the plan? I'm assuming that the deferred comp is not comp under the terms of the plan, but don't have a copy of the core document. Thanks.

A client filed its corporate return for the fiscal year ended 8/31/1999. The plan is a money purchase plan and the contribution for the plan year ended 8/31/1999 has already been deposited. The compensation for one of the employees was reported incorrectly and the participant is now due an additional contribution of $1,237.50. It is my understanding that for minimum funding requirements, the client would still be required to make the deposit but for deduction purposes, would the client be able to file an amended corporate return and get the additional deduction for 8/31/1999 or can the client deduct the additional contribution for the fiscal year ended 8/31/2000?

I have just completed this month a direct rollover of my 401-K plan with a previous employer to a Rollover IRA. I would now like to convert either all or a portion of the Rollover IRA to a ROTH IRA before the 1999 year-end. My AGI (not counting the amount that would be converted to a ROTH) is less than $100,000 in 1999, and I am single; but I have no taxable compensation in 1999. I know that I would have to pay taxes on the amount that I would convert to a ROTH IRA. I would like to know the following:

1. Am I allowed to make a rollover contribution from my recently-established Rollover IRA to a ROTH IRA in 1999 even though I have no taxable compensation in 1999?

2. If the answer to #1 is yes, what is the dollar limit of the amount I can convert to a ROTH IRA in 1999?

3. If the answer to #1 is yes, am I allowed to make a partial conversion from the Rollover IRA to a ROTH IRA and keep the rest in the Rollover IRA? (It seems that Publication 590 implies that I could, but I cannot find anything in Section 408A of Title 26 that would allow a partial conversion.)

4. If I were to convert all or a portion of the Rollover IRA to a ROTH IRA in 1999 and then later find out that such a conversion (rollover contribution) is not allowed, would I be allowed to recharacterize the ROTH IRA back to a traditional IRA in the year 2000 before the due date (including extensions) of my income tax return for 1999 and suffer no adverse repercussions (i.e. taxes, penalties, etc.)?

5. Section 408A©(7) and Section 219(f)(3) of Title 26 say that a contribution to a ROTH IRA for a particular year must be made no later than the due date (not including extensions) for filing the return for such year....but I have heard people say that a rollover contribution for 1999 must be made before the end of 1999. Which is correct?

A key point to consider in answering the above questions is whether a "rollover contribution" (i.e. "conversion") is considered to be a "contribution". The very term "rollover contribution" implies that it IS a "contribution".

Section 408A©(2) (including its reference to Section 219) of Title 26, the Internal Revenue Code, basically states that the Contribution Limit is the lesser of $2000 or one's taxable compensation for the year (assuming one does not contribute to non-ROTH IRAs). It does NOT distinguish between a regular yearly contribution and a rollover contribution. That would seem to imply that the above-mentioned limit does indeed apply to a rollover contribution. Separately, Section 408A©(3) deals with limits based on modified AGI. Section 408A©(3) DOES make a distinction between a regular yearly contribution and a rollover contribution...but again, Section 408A©(2) on Contribution Limits DOES NOT.

Employer X sponsored a DB plan prior to 1986 and terminated plan. The same employer now wants to put in a new DB plan in which he will have only 5 years of participation. Can he count the participation in the prior plan toward meeting the 10 year participation requirement to get a full DB benefit? I understand that we will need to offset the current benefit with the prior benefit. Do we offset 50% of the DB limit or the DB limit adjusted for the sum of the prior participation and the current participation.

Facts: Disabled former employee and spouse on 29 month COBRA. Emp. turns 65 in Jan. and will drop our plan for Medicare.

Question: Can spouse continue COBRA for remainder of 29 months?

There isn't an IRS regulation on this topic.

What you're probably looking for is in Sections 404-407 of ERISA. There's an exception to the 404(a) duty to diversify investments (and the prudence duty to the extent it requires diversification) for employer securities. Because shares of the former parent's stock are no longer employer securities, this exception will cease to apply. The effect is that a sizeable portion of the plan assets may no longer be invested in the former parent company's stock.

[This message has been edited by MWeddell (edited 12-22-1999).]

Sheila - thanks for posting your PTO policy. I have a few questions:

1. When employees leave your employment, do you pay them off for the PTO time

they have on the books?

2. Playing "devils advocate" - I would think combining "vacation" and "sick/personal"

time under PTO actually gives the employees more paid time off than keeping the two

programs separate. Your thoughts...

3. I love the part of your policy indicating that during someone's final two-week

notice of separation, PTO will not be granted. In reality, how successful have you

been in upholding this? What keeps your employees from using PTO the week prior

to a notice and then possibly even only giving you a 1 week notice.

4. What do you do when someone does not have enough PTO to fill in for their

absence/s (i.e., they haven't earned enough time or they are the typical earn it/use it

employee and all of the sudden find themselves needing time they should have

banked!)? Are they allowed so many hours of unpaid time and then you move into

disciplinary procedures, etc., etc. - or what???

Thanks - look forward to your feedback. Feedback from others would also be great.

Candy Vande Ven

HR Director, International Arabian Horse Assoc.

Denver, CO candy.vandeven@iaha.com or

303-696-4563

[This message has been edited by Sheila k (edited 12-22-1999).]

What policies have companies implemented that attempt to keep employees from using up their "personal time off" once they have submitted a resignation notice (typically our employees will provide a 1-2 week notice and then call in "sick" during that time - applying personal time off that they have on the books which is not paid off at time of separation).

Annually each November, we provide eligible employees with an estimate of their MEA for the next year (based on assumptions using prior year data). Then, we run the MEA calcs again at the end of the year using actual year data. From what I understand, the actual test needs to be completed before the end of the year to correctly process W-2's, yet, this means estimating at least a month or two of data which we then need to manually re-verify. We always seem to be scrambling around at the 11th hour doing data analysis so that correct final refund information makes it to the payroll by year end. Does anyone have a more simple approach to this madness? (It would seem logical to run the year end tests shortly following the end of the year when you'd know what the data is exactly, but we have been advised against it.)

I've heard that one can't but would like this confirmed. The IRS Publication that addresses this issue is not available on their website; the Chicago phone number I was referred to that addresses it does not work correctly - it automatically hangs up (perhaps it is working correctly??). Thanks for anticipated assistance.

I’ve heard recently about a technique whereby a leveraged ESOP would be used to acquire preferred stock in a company, where the value of the preferred stock was tied to a fund of assets set aside by such company. The ESOP debt would also be assigned to that fund. The net result would be that the preferred stock would have a lower value post transaction than it did pretransaction, similar to a traditional leveraged buyout situation. Has anybody seen this preferred stock technique used? If so, by any public company?

This would seem to raise a whole host of issues, for example, could a “security” (preferred stock convertible into common stock of the company, but where the conversion is based on the value of the fund) be structured so as to be a qualifying employer security for the purposes of the Code and ERISA? Could such a conversion scheme be “reasonable” within the meaning of Section 409(l) of the Code?

How can a DB plan address the effect of inflation for an employee if there is a significant period between the time of termination and benefit effectice date? Example: Employee completed 20 years of service at age 45, but can not collect benefits until 55.

Is there any exception to the 401(a)(26) requirement that at least 2 EEs must participate, in a situation where there are only 2 EEs who are both owners of the business, but only 1 wants to participate? The 2 EEs are father and daughter and the father would like to waive participation.

The latest news I have heard is that the new 5500 forms that are to be used for the 1999 plan year filings will not be available until the end of January or in February. That certainly does not give practitioners much time to react in order to get systems updated. Does anyone know if the IRS is considering delaying the effective date of the forms, or at least waiving extensions for the 1999 plan year filings? We are a high volume producer, and we certainly do not want to be faced with filing extensions for thousands of plans (nor do we want our clients to be upset with having to have extensions filed). I spoke with ASPA and they are considering lobbying for a waiving of the requirement to file extensions (i.e. moving the due date back 2 1/2 or 3 months). What do others intend to do?

Does anyone have employers provide statements to participants that their plan complies with Section 404©and if so what does the statement contain? Does the employer gain additional fiduciary relief in doing this?

If a block of people in a 401k plan are going to work for an unrelated employer because of a company sale (assume same desk rule is an issue), and the unrelated employer sponsors a 401k plan, and the intention is that the 401k balances of the people moving to the new employer will be transferred to the plan of the new employer, do the transferred employees have the option to leave their 401k balances in the plan of the company they are leaving (some don't want to move their assets - but understand that if they begin deferring it would be into the plan of the new employer).

Thanks in advance for any help.

Company A, B and C are participating employers in the XYZ plan the companies are a controlled group. Company C was sold to an unrelated buyer and is no longer part of the controlled group. Employees will continue at effectively the same job as they had before with this unrelated buyer (hence I think same desk rules apply?).

The gameplan is for former employees of C to have their 401k balances rolled to an existing plan of the unrelated buyer. I know I need to look at vesting issues.

If an employee does not want his balance moved to the new new company's plan, can he leave it with XYZ? Hence effectively giving the participants of C two choices for investment - either stay w/ the old or roll to the new. I'm just not sure in a spin off situation if the employees have the option. Thanks in advance for any help.

A DB plan terminated and some of the particpants rolled their balance into the company's 401(k) plan which was not subject to the QJSA rules. Is the 401(k) plan now subject to these rules? If so, does the plan need to be amended?