If a privately owned company decides to sell to an ESOP who runs the company if the owner sells:

1. 30% ?

2. 49% ?

3. Over 50% ?

4. Who appoints new president if original owner sells out? or how is this determined? Can employees vote in a new president or board if they own over 50% ?

Has anyone had experience in merging 2 or more VEBAs maintained within the same controlled group of corporations? Are there any tricky issues of which one needs to be aware?

I was recently told by a plan administrator that it is not possible to terminate a 403(B) plan! In this case, a church-sponsored plan has stopped using their 403(B) and adopted a 401(k) plan. The participants were only allowed to roll accounts to annuity contracts and not to rollover IRAs. The reason given was that it was not possible to terminate the 403(B) plan and none of the other qualifying events had taken place (separation from service, etc.) I don't work with 403(B) plans, but this seems pretty strange.....you can start a plan but never terminate it? Any comments and cites appreciated.

I'm confused as to whether 402(g) excess deferrals that have not been refunded by April 15 have to stay in the plan as provided by Reg. 1.402(g)-1(e)(8)(iii), or should or must be returned under APRSC as provided in Rev. Proc. 98-22, Appendix A, .04. Did Rev. Proc. 98-22 supercede Reg. 1.402(g)-1(e)(8)(iii) - which says that the excess deferral must stay in the plan until a distributable event named in 401(k)(2)(B) has occured? If the deferral has to stay in the plan, do earnings still have to be returned?

The language of each section reads:

1.402(g)-1(e)(8)(iii) (not yet amended for GATT)

(iii) Distributions of excess deferrals after correction period. If excess deferrals (and income) for a taxable year are not distributed within the period described in paragraphs (e)(2) and (e)(3) of this section, they may only be distributed when permitted under section 401(k)(2)(B). These amounts are includible in gross income when distributed, and are treated for purposes of the distribution rules otherwise applicable to the plan as elective deferrals (and income) that were excludable from the individual's gross income under section 402(g). Thus, any amount includible in gross income for any taxable year under this section that is not distributed by April 15 of the following taxable year is not treated as an investment in the contract for purposes of section 72 and is includible in the employee's gross income when distributed from the plan. Excess deferrals that are distributed under this paragraph (e)(8)(iii) are treated as employer contributions for purposes of section 415 when they are contributed to the plan.

Rev. Proc. 98-22

APPENDIX A - OPERATIONAL FAILURES AND CORRECTIONS UNDER SVP

.04 Failure to distribute elective deferrals in excess of the section 402(q) limit (in contravention of section 401(a)(30)).

The permitted correction method is to distribute the excess deferral to the employee and to report the amount as taxable in the year of deferral and the year distributed. In accordance with section 1.402(g)-1(e)(1)(ii), a distribution to a highly compensated employee is included in the ADP test; a distribution to a nonhighly compensated employee is not included in the ADP test.

Is there a GUST Model Plan Amendment, and if so, where can I get it?

If a participant exceeded the $10,000 402(g) limit for 1998 and the excess was not returned by April 15, is there another deadline for returning the excess or can the excess remain in the plan? (I realize double taxation will apply, the excess will be taxed in the year of deferral and in the year of distribution.)

I have an employee who is divorced, his children live with his former spouse, who claims them on her tax return. However, the employee pays more than 50% of their support.

Can his children be considered "Eligible Dependents" for the purpose of a Health Care FSA enrollment?

I know that the IRS allows a person to be considered a dependent for the purpose of medical expense deduction even if you cannot claim them on your return. Provided, of course, that you provided more than half of the individual's total support of the calendar year. Does this apply in FSA's as well?

At this point I am inclined to allow the enrollment, but I wanted some further clarification, as I am a "payroll" person and benefits are not really my area of specialty.

Thanks,

Carole

We are currently offering LTC Insurance as an employee benefit. We are converting to PeopleSoft in April of 2000. At this time there not a LTC module in PeopleSoft. Is there anyone processing LTC through Ben. Admin in PeopleSoft? If so can someone please help me with a solution. I would prefer to run it through Ben. Admin instead of a general payroll deduction.

Client will reach 59.5 after taking funds from account but before the 60 day period for the rollover is up. Is any amount not rolled over to new IRA subject to 10% penalty or just income tax?

A 401(k) plan participant that is 100% vested reduces hours of service to 200 hours per year. The plan does not have any hours requirement for the match. If I am correct that termination of employment is not part of the definition of a break-in-service, then the participant does have a break-in-service. Can the participant continue to defer and receive the match indefinitely, despite having a break-in-service each year? Does the reduction to 200 hours affect the plan participant in any way?

With respect to a MEWA, what are considered plan assets? Are the individual employer participation agreements considered plan assets?

I am in need of a legal opinion as to whether or not spousal consent is required in California when an employee designates someone other than their spouse as primary beneficiary for their life insurance benefit. Since California is a community property state it seems as though it is implied but I can't find anything specific. I know it is required on retirement plans. I have gotten varying opinions on this issue and any help or references would be appreciated.

401(k) plan has ees who transfer to another company that has no plan. It's determined that the same desk rule applies and no distributions are permitted. If ees are not fully vested upon transfer, but they are not terminated from plan, will they continue to accrue vesting service? Does it depend on how plan it written?

Is it legal for a city government to require its non-union employees to submit their prescription slips for brand name drugs to a city employee for approval if the employee wants to have it covered for payment under the employer's prescription plan?

It sounds like a violation of confidentiality of employee medical records, but I'd like to be sure and need an answer by 12/4/99. Please let me know which laws it violates (i.e. HIPAA, ERISA, etc.). Thanks!

An IRA nonspouse beneficiary can cause a trustee-to-trustee from one IRA to another. A nonspouse beneficiary of a qualified plan cannot rollover to an IRA.

Both spouses maintain IRA accounts and both are beyond age 70 1/2 and receiving minimum distributions based on joint life expectancy (not recalculated). One spouse dies and the other wants to rollover into their account. Can the minimum distribution on the total account continue to be calculated under the joint life expectancy?

A 401(k) plan has grown and is required to file a regular 5500 for the first time this year. The sponsor is changing the year-end date and will have a 3-month plan year ending 12/31/99. I will not be filing audited financial statements for the first of the two years, as allowed by the DOL exception. I understand that I must still submit unaudited financial statements with the first 5500. Questions: 1. Must the unaudited financial statements (which I am sending with the first 5500) be comparative? and 2. When I file the second 5500 with comparative statements, how many years should be shown, two or three?

Employer XYZ has two owners; nobody else works for this company.

The two owners are paid through a "leasing organization" ABC; their W2's show the EIN of ABC. They show no W2 income from their own EIN. (I think this is how this is structured.)

Can XYZ sponsor a pension plan using this income?

What other questions are important in this situation?

Coverage for an active employee terminates 12/15/99. The employee is enrolled in flex(medical account) for 99, but has already withdrawn the entire annual election. Annual enrollment is 12/1 - 12/31 and effective 1/1/00. Can the employee elect COBRA for medical only (not flex) for the last 2 weeks of 1999, add flex through annual enrollment for 2000, withdrawl the entire annual amount, and then drop flex (but continue with medical coverage) after the January's contribution?

I apologize if this question has already been asked and answered, but I did not find it on this Message Board's history.

The Colorado Public Employees Retirement Association maintains a grandfathered 401(k) plan. Participation in the Association by cities is elective. May a city (which has not previously maintained a 401(k) plan) now join the association and allow its employees to participate in the 401(k) plan?

The following is an excerpt from the Association's description of the plan.

PERA's 401(k) Plan was established on July 1, 1985, to enhance the retirement savings opportunities of PERA members. The 401(k) Plan provides all Colorado PERA members with a vehicle they can use to voluntarily invest some of their income tax-deferred.

Any active and contributing member of PERA is eligible to contribute to the Plan from his or her PERA-covered earned income. Your 401(k) contributions are in addition to your mandatory PERA defined benefit contributions of 8% of salary State Troopers and employees of CBI contribute 10% of salary). You can choose to contribute from as little as 1 percent to as much as 23 percent of salary plus Section 125 plan deductions, or you may designate a dollar amount (a minimum of 1 percent of salary is required).

All comments will be appreciated.

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