I converted my regular IRA to a Roth IRA earlier in 1999. My wife and I are both employed, both contributing to retirement plans, filing jointly. I thought our AGI would be under $100,000. Now it appears we may exceed this by approx. $ 5,000. I have a very small stake in an S-Corp. and will not know my income from that until late Feb. (I have included my estimate in the above AGI). It is now Y2K. Is it too late to convert back. If I pay a 10% penalty, do I have to remove the funds from my Roth? Can I still convert back? I do not think the S-Corp can defer my income. Any comments?

Is it possible to contribute to both a traditional and roth ira in the same tax year? If so is the traditional ira still deductible?

Thanks

David

In a multiemployer 401(k) plan of around 40 employers, some of the smaller employers include children of the owners in the CBU. These children participate in the plan. The businesses affected are among the smallest in the plan (say 5 or fewer employees). Is there any argument to be made that the children should not be considered owners and thus highly compensated for ADP testing purposes? I am thinking of the rule that states for general purposes of determining whether an employee in CBA 401(k) plan is an HCE you look at the total plan. Could I argue that mom and pop own less than 5% of the equity of the group taken as a whole (which they certainly do)? Is there another avenue I am missing?

[This message has been edited by Stephen Magowan (edited 12-31-1999).]

How does one handle the 3% (or 2%) matching employer contribution in the case of a sole proprietor? Is it a circular logic, Catch 22 situation?

Assume a professor made $10,000 in his sole proprietor summer consulting business, properly established a SIMPLE, contributed a $6,000 salary deferral and now is reminded of the 3% employer match.

Does he use 3% of $10,000 and then go back and enter $300 on line 19 of schedule C as an employer/company retirement plan expense which then makes his profit only $9,700 so he goes back and recalulates 3% of $9,700, etc. etc.... ad infinitum?

If so, it resembles the same circular logic for the 15% SEP limit for sole proprietors which gives rise to an infinite series of calculations with the ultimate converging series result of 13.04% or some such number which I once computed years ago for verification.

Has the IRS published a similar number to use in this example (something like 2.91%) or is my logic totally off base?

P.s. Sole propietors often focus on the $6,000 contribution and sometimes forget to make the 3% or 2% match for themselves. Strikes me this is something a computer program might flag for audit.

Thanks

A plan is requiring actively employed individuals who are not 5% owners to take distributions at age 70 1/2.

Participant begins taking these distributions in 1997 based on single life expectancy. Can the participant now roll the remaining account balance into an IRA with new beneficiaries and use "joint life" expectancies from the IRA since prior distributions were not "minimum required distributions" under 401(a)(9)?

Employee states that her day care provider will not disclose her social security number for submission of daycare expenses for 1999.

Employee has made every attempt to get the social security number from her provider. Evidently, employee has run out of resources. A letter was written and several phone calls (with no return calls) have been made. What option does my employee have. Please reply.

I am calculating the maximum deduction for a client that has a standalone 401(k)( no match) with an employer profit sharing component. And they have a 125 POP Plan.

Three HCEs, who are more than 2% owners are contributing to the premium only plan. Since they are 2% owners, their contributions are NOT deductible.

When calculating the max 15%, do I take gross W-2 less all 401(k) contributions less only the non-owners contributions to the 125 plan, or must I also subtract the owners non-deductible 125 plan contributions then apply the 15%, then subtract the K contributions less the 125 contributions, and the diference is the amount they can contribute to the profit sharing component?????

I'm confused by the following in the 1999 1099-R instructions pertaining to investment losses:

First, there is a section of the 1099-R instructions that covers losses for a corrective distribution of excess deferral made in a year after the year of deferral. However, I am not sure how to interpret the instructions. What does seem clear is that the participant must report the amount of the excess deferral, unadjusted for loss, in the year of deferral and may report the loss in the year the distribution is made. What is not clear to me is: 1) Should the actual distribution be reduced by the loss, or should it be the amount of the excess unadjusted by the loss? 2)Should the amount reported on the 1099-R in Boxes 1 and 2a be reduced by the loss, or should it be the amount of the excess unadjusted by the loss? (the answer seems to depend on the answer to 1) since the instructions seem to indicate that the actual amount of the distribution should be reported) 3)How is the participant notified of the amount of the loss for tax purposes for the year the corrective distribution is made?

Second, I am not finding instructions related to losses allocated to excess contributions, excess aggregate contributions, and excess annual additions. Are these losses treated analogous to excess deferral losses, or is there other guidance?

I'd have the same 3 questions noted above for losses in these areas.

Finally, does the answer change for any corrective distribution with an allocated loss due to when the distribution is made (before or after March 15, before or after April 15)?

We have a plan where the additional fees incurred for maintaining self-directed accounts are charged directly to the self-directed account. One participant wants to pay these fees directly instead of having them charged to his account. One issue is whether we should allow him to make the payment directly to the trustee from his own funds, as that might look like an after-tax contribution. However, we also have some reservations about running the payment through the plan sponsor, as that might look like the plan sponsor is paying this participant's self-directed expenses (of course he is an HCE) and not paying anyone else's. Any thoughts?

We are in the process of implementing both Medical and Dependent Care Flexible Spending Accounts. We've been advised by our third party administrator that employees' dependent care expenses when they are not at work, such as vacation, sick leave, LWOP, are not eligible expenses, even if the employee is out for only 1 day. How do most employers handle this type of situation? Do you agree that we should advise employees that even 1 day of absence should make their dependent care expenses for that day ineligible? Do you specifically ask employees on their dependent care reimbusement claims forms something like: "Did you and your spouse (if married) work the entire time you are claiming for expenses?"

Situation: Death of IRA owner before age 70 1/2. Multiple children as beneficiaries (no spouse as beneficiary)in a single IRA. I believe I saw something from the IRS within the past several months indicating that each beneficiary could use his/her own life expectancy in electing out of the 5 year rule, rather than being forced to use the period associated with the beneficiary having the shortest life expectancy. If this new rule exists, please direct me to the proper authority. Alternatively, let me know if this was simply an optimistic dream. Thanks.

Under the 415 regulations, it is clear that earnings are required to be calculated on returned deferrals or employee contributions, but, by negative implication, it appears that earnings do not have to be forfeited on employer contributions that are forfeited as excess annual additions.

I'd appreciate anyone confirming this. Thanks.

Has anyone ever looked at if Cancer Insurance premiums can be an included benefit in a POP? I wasn't even aware of what this was. Cancer insurance provides for reimbursement of travel, meals & lost wages associated with their cancer treatment. It does not seem like this type of coverage would be allowed, but wondered if anyone else was familiar with this. Thanks.

A client has exceeded the 15% deduction limitation with just deferrals and mandatory match for the plan year. Two questions: 1) Can this be corrected by refunding deferrals and/or match prior to the end of the year? 2) If so, how does one determine which participants must receive the refund(s)?

I am a self-employed actuary and I am looking for other actuaries who would be interested in networking in order to go over and discuss technical issues (past and present). Please let me know if you are interested in corresponding on a as needed and frequent basis. Your email address would be appreciated. My email is mevoco@mindspring.com

Thank you.

gary

Employer wants to implement db plan for 1999. plan is required to be written (401(a)(1). To my knowledge primary provisions can be adopted prior to end of year, then full document drafted later, to implement prior to end of 1999. Where would this allowance or leniency be found? i.e. what citation or section of code or regs mentions this.

Does anyone know of a good article or general outline on the issues to consider when there are multiple testing failures (for example: someone has deferred in excess of the plan's limit which will be corrected through APRSC, there is a 402(g) excess, a 415 excess, there is hanging match, ADP and ACP fail and when corrected, multiple use fails)? The solution of multiple test failures is probably way too broad a topic, but I was hoping someone knew of a good article which discussed the issues, including what is required by regs and what is document-specific.

Corporation C is owned 100% by Dr. A. This corporation develops and sells Medical software. No medical licensing is required to be in this business.

Dr A ownes 51% of a Medical Practice with another individule who is not related. The Practice provides no services to Corp C and there is no sharing of employees.

I read the Brother Sister rules to state that Dr. A only has common ownership of 51% and therfore does not pass the 80% common ownership test. Although she does pass the 50% identical ownership test she does not pass both and therfore is not a Brother Sister Relationship.

Can Corp C set up a Defined Benefit Plan and not include the Employees of the Medical Practice. I think they can. Am I missing anything?

I have a partner who has been participating in a money purchase pension and profit sharing plan for several years. He now believes he has enough money to retire on and want to stop having contributions go into the plans.

Since he didn't elect out originally, I can't find a way for him to do it now without causing a problem for the other partners. Is there a way I am missing short of him quitting work?

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Paul

I would appreciate information about anyone who can translate SPDs and other plan communication materials into Spanish. I'm hoping to find someone with employee benefits experience. I understand ERISA does not mandate the translation. Thank you.