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.

If a plan sponsor has not adopted an amendment to pay lump sums at GATT rates, should we continue to pay at the greater of GATT or PBGC in 2000 until the plan is amended? Or should we begin to only pay at GATT?

If 1999 eligible payroll is 450,000 and deferrals are 50,000, the 15% deduction limit is 60,000 (15% of 400,000). However, the safe harbor 3% non-elective contribution is 13,500 (3% of 450,000). Is the deduction limit 60,000 or 63,500? I know there is no guidance on deductions for safe harbor plans yet (Notice 98-52 is all). I think a good argument can be made for the extra 3,500 being deductible since it is "required" to meet the safe harbor requirements, much like a money purchase contribution is required. Any thoughts????

Caf plan provides for cash, health care fsa and dependent care fsa. To what extent must either of the nontaxable benefits be funded through a trust? My understanding is that they are to be funded from the general assets of the employer (i.e., no trust required). Any replies greatly appreciated.

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For Tax Year 1998, I converted a traditional IRA to a Roth IRA and chose to claim the "income" over 4 years. Because of casualty losses in 1999 due to Hurricane Floyd, I think it may well be to my advantage to claim the balance as income in 1999, rather than spreading it over the 3 remaining years as originally planned. "Do"able or not?

Employer to set up cafeteria plan with FSA for Health Care Reimbursement as well as Dependent Care Assistance. Employer initially going to cap the Dep. Care at 1,200, but possibly will change it later. If said change is made effective for the next plan year then it's a no-brainer. BUT what if employer wants to change the limit mid-year 2000? Employer to make contributions to the caf Plan on a quarterly basis so would it be possible for employer to notify e/ee's that the limit will be increased by $x effective next quarter and have all eligible employees make an election prior to that quarter??

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Announcement 2000-1 sets forth the IRS position that no W-2 reporting is required for a plan which meets either the requirements of, or the exceptions to (e.g., the exception for bona fide severance plans), I.R.C. § 457(B). The implication is that plans which do not meet such requirements must do W-2 reporting for amounts includible in income under their plans. This, of course, flies in the face of TAM 199903032, which had stated that no income tax withholding or W-2 income tax reporting was required until amounts under a failed 457 plan were actually or constructively paid out, even if the employee was subject to income tax withholding on such amounts at an earlier date. I guess this is IRS's happy new year's message?

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[This message has been edited by CVCalhoun (edited 01-11-2000).]