A rather small 401(k) plan with no HCE's exceeds the 15% of aggregate wages deduction limit with the 401(k) and matching components alone for calendar year 1999. The matching formula is discretionary (not fixed unlike an earlier posting).

Assuming the plan provisions don't conflict with the following options, some of the current thoughts are as follows: (1) The employer could scale back on the match and be within the deductible allowance (massive PR problem even if they get participants to voluntarily scale back on 401(k) deferrals in the year 2000 and "make up" the 1999 lowered contribution next year), (2) make a nondeductible contribution and pay the 10% excise tax, then scale back on the year 2000 401(k) levels to a point where the 1999 + 2000 match deduction is within the year 2000 allowance.

What do all of you think about option (3) refund 1999 deferrals to a few amenable participants in the same manner of excess contributions reportable on the year 2000 1099-R taxable in 1999(all the 1999 deferrals were deposited prior to 12/31/99). Under this scenario, would the 10% non-deductible tax still apply if the refund were done before 3/15/2000? Would earnings be also refunded (and would it be taxable in year 1999 or 2000)?

How about option (4): Return a portion of deferrals to the corporation (for refund to the participant) and amend the 1999 W-2's (should earnings be returned?)

Any comments or thoughts would be greatly appreciated!

In a plan effective 1/1/99 that covers a participant who's 75 years old and an HCE, is there still a 401(a)(9) requirement if the contribution will not be made until after 4/1/00? Or must the employer make the contribution before 4/1/00 so that this HCE can be paid his MRD (since contributions, no matter when they're made, are deemed to be in the plan as of 12/31/99)?

We have a client that is a partnership. The plan is a 401k Safe Harbor Plan. The plan limitation of 15% is exceeded by deferrals and the 3% safe harbor contributions only. Can you return the excess amount to the employer and classify that amount as a mistake in fact? Or do you blow them into the IRS on a 5330? We're thinking we have to report the excess amount as the safe harbor contribution is required?!

Plan document provides for total pass-through as required under Section 133. However, loan has been repaid, so can voting rights only be provided for significant corporate events as the plan provides if there is not intended to be a loan pursuant to Section 133.

Can 2 key employees of a non-controlled group entity be included in a top hat plan sponsored by the entity owning 50% of the non-control group entity?

I was wondering if someone would be able to offer some insight into the following situation. I was contacted by a friend and am trying to assist with a situation.

There is an employee who has been working at the employer for less than a year. This employee has been diagnosed with a life-threatening illness. At this time he is out of work, collecting short term disability and hospitalized, which will be for approximately a 3 month stay - but hopefully should return to work in 6 - 9 months.

The question is how should the premium for the medical coverage continue. Due to the fact that FMLA will not apply (he has not been employed for a full year at time of disability) and under that legislation it states that the employer continues coverage as if still active - this way the employee would only have to pay the contribution level he would have been responsible if actively at work. How does it work when you are not covered by the FMLA legislation?

Also, with ADA is there any legislation/provision that would cover this member to assist with the premium payments?

Your prompt attention to this urgent request will be greatly appreciated.

For a not-for-profit entity, what are the issues (advantages/disavantages)to be considered when choosing between a 401(k) and a 403(B) Plan?

For a not-for-profit entity, what are the issues (advantages/disavantages)to be considered when choosing between a 401(k) and a 403(B) Plan

A 401(k) plan participant and his wife died due to a car accident. The participant died immediately. The wife died about 2 weeks later from injuries sustained in the accident. Is the money paid to the secondary beneficiary named in the participant's beneficiary designation? Is the money paid to the wife's estate and then controlled by the wife's will? Is this another case where it would be best for the plan to file an interpleader action?

We are looking for Retention Tools, preferably no cost or little cost to company, that will help us keep our valuable employees from jumping ship...keep them happy and motivated.

Nonqualified deferred compensation plan permits distributions in form of either lump sum or installment payments over period of a maximum of 10 years. What issues arise if plan is amended to permit distributions in installments of amounts selected by participant (i.e. 10,000 the first distribution year, $5,000 the next two years, and none the fourth year, etc.)?

What are the rules for the earliest one can take distributions from an IRA? Cites?

The administrator of a 401(k) plan failed to notify some eligible employees that they were eligible to participate in the plan. We're in the same plan year, but the 3 month de minimis period has expired. We'll notify the excluded employees of their eligibility, but is there a way to fix the period of exclusion before we calculate ADP/ACP at the end of the year? We'd rather clear this up now since these are generally short term employees and will likely be gone by the end of the year. Then we'll have to find them just to give them a very small plan distribution. Any ideas?

Has the fine/penalty for failure to provide a summary plan decription been increased from $100/day?.

We have a 401(k) plan that was established back in '95. We have always tested on a current year basis. This year is the first year they have failed the adp testing (no match is made). I have heard it is possible to use prior year numbers for testing the '99 and then it is still ok to flip back to current year for the 2000 year if we so desire. Is that true?

Thank you.

My client acquired 100% of stock of a competitor. The transaction closed 1/4/1999. All eligible employees of acquired firm were let into my client's plan.

For purposes of defining HCE for 1999 plan year (which is calendar), is former owner of acquired business an HCE due to ownership interest or compensation (well in excess of $80,000 in 1998) from acquired firm?

Does anyone know what discrimination testing is required for TSA plans? Are both ADP and ACP tests required?

I have a client who is looking for a institutional trustee for its ESOP. The company is closely-held with approximately 140 participants in the ESOP. Currently, the president of the company is acting as trustee. The ESOP is not leveraged (though it was leveraged in the past - the loan has been repaid). There are approximately 100 participants.

If anyone has any recommendations, please let me know. We have some preference for a southeastern-based trustee, though this is not a requirement.

Can a very small company still have a top hat group? An employer with 4 full time employees (increasing seasonally to approx. 8) wants to put in a NQ deferred comp. plan for the key employees - the salesperson and the fulfillment person - who essentially run the company and earn more than the rest. However as a percentage of total employees this group is no where near the 5% safe harbor. Seeking any comments from persons with experience in similar matters.

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I'm looking for some guidance on the calculations involved to determine the lump sum value due a participant in a frozen contributory DB plan that is finally terminating & paying out next month ( using the Feb.2000 30-year Treasury Rate & 50/50 83GAM) ; the employee is withdrawing (i.e. electing lump sum) their entire account including the EE portion; here are the facts: employee terminates employment in '92 with a fully vested accrued benefit (AB) -life annuity normal form-and a mandatory contribution account balance of (EEC); the lump sum basis was PBGC until last year when GATT was adopted;in order to determine the accrued benefit due to EE contributions, do I first (1) accumulate EEC from '92 to today using 120% AFR and from today to NRD at 30-year Treasury or (2)accumulate EEC from '92 to last year at PBGC and then use 30-year Treasury to NRD ;and then convert the accumulated amount at NRD to an annuity using GATT assumptions ?? ; the employer portion of the accrued benefit at NRD would then seem to be AB minus the annuitized EEC account; I would then convert this employer portion to a lump sum using GATT again; my questions : which of the accumulations noted above are correct,i.e. (1) or (2) ? would a current SPD or the plan document give guidance? what would be the lump sum amount based on the EE portion of the benefit that is due to the employee at plan termination ? has the IRS provided more recent guidance since Rev. Ruling 89-60 ?