What are the consequences and what corrective action needs to be taken if a plan sponsor refunds a deferral during the year of the deferral (rather than doing the refund after the end of the plan year) in anticipation of failing the ADP test?

Does it matter which of the following 2 actions the plan sponsor took;

1) left the deferrals in the plan, reduced subsequent deposits of deferrals by a certain amount, and paid that amount as salary; changed the accounting for the deferrals appropriately

2) paid the deferrals out of the plan, just as would have occured after the end of the plan year?

I HAVE A CLIENT WHICH IS TWO PERSON LLC. IS IT PERMISSABLE TO MAKE A CONTRIBUTION TO ONE

PARTNER WHILE THE OTHER PARTNER OPTS OUT OF THE PLAN? I KNOW THIS IS PERMISSABLE IN A

PROFIT SHARING PLAN.

I want to implement Work/Life benefits for my small business, specifically LifeCycle Accounts, can you give me any info. about where I can find out how to start?

For a 401(k) Plan, are the deferrals for a shareholder of an LLC limited to the payments they receive during the year or on their net income? Where is this spelled out?

What constitutes an amendment to trigger 204(h) notice in a DB plan?

1st Board meeting: Board adopts the "idea" of a new pension design and names key features which are supposed to be presented to the Board at a later date for formal approval when the plan document is finalized. (Assume amendments trigger 204(h) notice.)

2nd Board meeting adopts the final plan document which specifies features that were not specifically named in the 1st Board meeting. These features include an early retirement subsidy, a deferred annuity interest crediting, and variations to the plan for a certain subsidiary.

Which Board meeting starts the timing for the 204(h) notice?

Recently we converted to a safe harbor. We will do a 3% non elective contribution. We also have a 50% match, up to 6%. Everything now is 100% vested. Does this 3% non elective match satsify both the ADP and ACP test? Our administrator, Paychex, said "yes". But my reading has left me unsure.

Thank you.

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[*Thanks* to Sal Tripodi of TRI Pension

Services, for permission to reprint and edit the

following article, which appears on his site

today at http://cyberisa.com. TRI Pension

Services, started in 1994, is committed to

providing consulting, professional training, and

reference material in ERISA-related subjects.]

Current DOL regs exempt "small" pension plans from

the annual audit requirement that applies to larger

plans (i.e., engaging an independent qualified

public accountant to examine the financial

statements of the plan and to issue a report to be

attached to the Form 5500). A "small" plan is one

that has fewer than 100 participants at the

beginning of the plan year (or has between 100 and

120 participants and elects to be treated as a

small plan).

Proposed regulations issued today would require

small pension plans (e.g., profit sharing plans,

401(k) plans, money purchase plans, or defined

benefit plans) to meet certain conditions in order

to be exempt from the annual audit requirement.

Small pension plans that cannot meet these

conditions would have to engage an accountant to

audit the plan each year and attach the

accountant's report to the plan's Form 5500.

The regulations are proposed to become effective 60

days after they have been finalized, and would

pertain to plan years that begin after the

effective date.

Small welfare benefit plans would not be subject to

these new rules, and would continue to be exempt

from the audit requirement without any of the new

conditions.

To be exempt from the audit requirement, a small

pension plan would have to:

(1) have at least 95% of its assets invested in

"qualifying" plan assets, or

(2) obtain a bond for any person who handles

assets that do not constitute qualifying plan

assets, in an amount that is not less than the

value of such assets.

Qualifying plan assets are:

- qualifying employer securities,

- participant loans which meet the prohibited

transaction exemption requirements,

- assets held by a bank or similar financial

institution, as defined in DOL regs,

- assets held by an insurance company,

- assets held by a registered broker-dealer, or

- assets held by an organization that is

authorized to act as a trustee of IRAs.

In addition to meeting one of the two requirements

described above, the summary annual report would

have to include:

(1) information about the name of each

institution holding qualifying plan assets and the

amount of such assets held by such institution as

of the end of the plan year,

(2) if applicable, information about the surety

company issuing the bond described above,

(3) a notice that the participants and

beneficiaries may request a copy without charge of

any such bond and statements received from each

institution holding qualifying plan assets that

describe the assets held by the institution as of

the end of the plan year, and

(4) a notice that the participants and

beneficiaries should contact the DOL's Pension and

Welfare Benefits Administration if they are unable

to examine or obtain copies of these items.

The DOL believes this regulation would increase the

security of assets in small plans, by conditioning

the waiver of the audit requirement on enhanced

disclosure of information to participants and

beneficiaries, and, if the plan invests more than

5% of its assets in nonqualifying plan assets, by

strengthening the bonding requirement.

Written comments on the proposed regulation must be

received by the DOL by January 30 of next year.

A reprint of the full text of the proposed

regulation appears online at

http://www.benefitslink.com/erisaregs/audit

[This message has been edited by Dave Baker (edited 12-01-1999).]

Can anyone point me to information regarding how to handle the administration and/or govt. reporting for a spinoff 401(k) plan which occurs mid-year?

1. Can the beneficiary (the spouse) do NUA on employer stock that her deceased husband held in his 401k? The stock is still held in the 401k and the wife is now going to take the money out of the plan.

2. Does privately held stock qualify for NUA?

Thanks for any input.

I've a plan whose contributions are allocated equally among all eligible participants. IF they go to a safe harbor for 2000, and do the 3%ER, can we keep that allocation, IF everyone is getting at least 3%? Or, must we do 3%, then the difference (supposing there will be more than a 3% contrib made) could go equally?

What is the current/most recent figure for the Taxable Wage Base?? For 1998, $68,400 was the TWB. Is the 1999 TWB out already??

Thanks..

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Client owns 100% of the shares in Corp A and owns 50% of the shares in Corp B. If Corp A maintained a Profit Sharing Plan, the controlled group rules would not require the e/ee's of Corp B to be covered by the Corp A plan because client does not own more than 50% of Corp B. Is that a fair assessment of the controlled group issue? The other shareholders of Corp B are all individuals unrelated to client.

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I'm taking a "poll" -- When using current year pay in calculating each participant's EBAR, in cases where the cross tested contribution allocation is based upon post-entry pay only (this only affects each new participant's initial entry year calculation), would you also use the post-entry pay in the denominator for the EBAR calculation, or would you use the entire plan year's wages including pre-entry pay for the year. Use of post-entry pay seems to be supported under the 401(a)(4) regs (because the pay definition is tied to 414(s) compensation which allows pre-entry pay to be disregarded) but I seem to remember some issue a long time ago that caused practitioners to use the entire year's pay (which lowers the EBAR result). Thanks in advance for any comments!

[This message has been edited by JL (edited 12-01-1999).]

May a Plan be amended to require Mandatory 401(k) contributions as a condition of employment? Has anyone had experience with doing this?

I have a Plan that in the document does not suspend 401(k) contributions for 12 months for employees who take hardship distributions? Is this permissable?

I need to know if Roth IRA's are protected from creditors in North Carolina. How can I find out?

I have been instructed by a tax lawyer to list my spouse as primary beneficiary of my regular IRA with trust as contingent beneficiary.

My desire is to maximize the unified credit against estate tax to pass assets to my children.

I have segregated sufficient assets (not IRA assets) for my wifes side of the trust; however, the only other assets available for my side of the trust is my IRA that I have sole ownership of.

It appears to me that if I leave the IRA to the trust or to my children, I will get the unified credit but loose the income tax advantaged nature of the IRA through rapid distribution of the funds. However, if I leave it to my wife, I retain the income tax advantage of the IRA but loose the unified credit.

Is there some loophole I am missing that allows both my wife access and use of the money during her lifetime and the unified credit when the monies are passed on to my children?

Is it safe to say that ERISA does not impose express obligation to provide individual participant account statements on an annual or more frequent basis but that doing so is necessary to obtain limited fiduciary liability pursuant to ERISA Section 404©?

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In 1983 Participant makes a TEFRA 242(B)(2) election to defer distribution until retirement and to take a lump sum at that time. Participant is now in his mid-80s and is retiring. How much of the distribution can be rolled over into an IRA? All? The balance minus what he would have had to take but/for the TEFRA 242(B)(2) election? Any cites on this?

[This message has been edited by KJohnson (edited 12-01-1999).]

Does an employer who sponsors a SEP on a Form 5305-SEP have to purchase a fidelity bond meeting the minimum requirements of ERISA?