A prospect is dissatisfied with the institution that sold them their SIMPLE-DFI (Form 5305). They now want to allow employees to direct their deferrals to any institution. Since this is prohibited as long as they are on the 5305, can the employer amend to Form 5304? If so, can this be done mid-year?

Also, if employer decides to just invest with us, can the employer amend to 5305 with us? If so, can this be done mid-year?

Thanks for any info you can offer, Gary!

I notified my IRA trustee towards the end of December 1999 to convert my IRA to a Roth before year's end. They indicated the conversion would occur before the close of the year. I have just received notict that they made a mistake and did not do the conversion. Can they correct the coversion, and make it still valid for 1999? If not, I am certain this will result in a significant loss to me due to large differences in tax rates between 1999 and 2000. Is there legal recourse against the trustee for failing to complete the transaction? They have offered to issue a letter stating there error, but are not clear what tax documents for 1999 will reflect.

Employer has cafeteria plan with employer contribution and health insurance option and health FSA.

Employer would like to include part-time employees but wants to make a lower dollar contribution (seems reasonable since they won't be working as much they shouldn't get as large of a contribution). Employer could exclude part-time employees completely from plan so if they are allowed to participate can they be given a lower employer contribution? It doesn't seem fair to punish the employer for giving lower benefit contribution when other employers give nothing. Before you answer consider the following points:

1. Section 125 has special nondiscrimination rules for health benefits that requires employer contribution to be equivalent dollar for dollar up to a level equal or greater than 100% of health benefits received by majority of similarly situated HCEs or 75% of health benefits of HCE with largest health benefit. This rule appears to prevent lower contributions for part-time employees at least to the extent that the lower contribution does not meet the 100%/75% rule. When determining the HCE health benefit level do administrators include benefits under a health FSA? A health FSA is after all required to be a health plan under the regulations. If administrators do not include the health FSA benefits can you cite some authority or reasoning why not.

2. Can employer set up a separate cafeteria plan with a lower level of contributions for part-time employees? These employees are excludable so they would not cause the full-time plan to flunk the elegibility test.

any thoughts on the

Do QDRO's get reported on 1099-r's?

Okay, what if the beneficiary rolled it to an IRA, would it be a code H? And would the 1099-R be made out to the beneficiary or the participant?

[This message has been edited by Theresa (edited 01-18-2000).]

I have a small employer with just a few employees. He wants to provide the maximum benefit to himself utilizing a Profit Sharing 401K and a Money Purchase Pension. (Does not want a Cross-tested Plan).

Which plan should he integrate with Social Security?

I administer a vanilla nonstandardized prototype 401(k) plan which allows for loans. One of the plan participants would like to take a loan. However, this participant has read a book by Charles Givens entitled "Wealth Without Risk". In this book, there is a passage where Mr. Givens indicates that if a participant borrows money from a retirement plan to make a down payment on a home, the participant never has to pay the borrowed money back (paraphrased). He states that this is a "little-known, major opportunity Congress threw into the qualified retirement plan rules". No citation was given. I have not come across this in the reading of the regulations I have done. Can anyone comment on this? Is there a regulation I can be referred to?

I understand the IRS final and proposed regulations and the successor employer issues. But, if a person would have become a QB had the small employer had over 20 employees in the prior year and that potential QB's election period would still be running (again if they had > 20 employees), will COBRA apply to this "QB." The regs say adding a large employer causes COBRA to apply "immediately." Would it apply to this person? It seems to me the answer is no because this person is not really a QB, because at the time of his/her qualifying event, COBRA did not apply. For example, Q&A-1(d) of the B-4 regulation seems to indicate that COBRA coverage will not apply retroactively. Does anyone agree or disagree?

[This message has been edited by RMM (edited 01-14-2000).]

Client is a 50% general partner and a 51% limited partner in a limited partnership which has as its sole purpose to purchase, hold, sell, etc... any and all types of business investments. Client wants bank who is custodian on client's IRA to invest $X from client's IRA in the limited partnership. The transfer would fall under 4975©(1)(D) but the issue is whether or not the limited partnership is a disqualified person. Clearly the 50% or more limit of 4975(e)(2)(G) is met, but would the fact that the limited partnership has no employees cause it to fail 4975(e)(2)©? Also, IRC 408(e)(2) provides that an IRA will lose its qualified status if the IRA owner engages in a 4975 prohibited transaction with respect to the IRA. 408(e)(2) provides that the person for whose benefit the IRA was established will be treated as the creator of the IRA. Does anyone have any comments as to the application of 408(e)(2)? It appears to me that the only thing that might possibly prevent the application of 4975 is the fact that the limited partnership does not have any employees. Possibly the IRS could deem client to be an "employee" of the limited partnership, in which case 4975(e)(2)© would be satisfied? Can anyone help me out on this?? Thanks....

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[This message has been edited by chris (edited 01-14-2000).]

My spouse was reimbursed for taking classes to earn an MBA. His employer has told him consistently that it is job-related and he does not owe taxes on the reimbursements he received. Yet everything I read seems to indicate that graduate education is not included in the tax exclusion (only job-related undergraduate education is excluded). Who is correct?

My understanding is that the only consequence of a partial plan termination is that the affected participants become 100% vested. Are there other consequences? Does the partial plan termination affect participant loans? Any other issues that should be considered?

Can anyone update me on the status of proposed age changes for medicare? There has been discussion and it may be a few years away, but what is the status? Thanks !

My suggestion is a "wrap." Develope a short supplement to the insurance company booklet. The supplement would include the employer-specific information and any other disclosures the insurer might have omitted. For example, if the Women's Health and cancer Rights explantion was no in the insurer's booklet, it could be included in a supplement.

The plan offers optional dependent life. The employee insures her spouse. After five years, they divorce. Employee leaves change in status for first of the year plan change, but files divorce papers with company in order to change her name. Spouse dies six days after the divorce is final. Is the employee entitled to the death benefit? Both events occurred in the same month.

An employer sent a Notice of Discontinuance without knowing that a substantial early withdrawal penalty would be associated with its action. The employer then tried to rescind its decision. The insurance company replied that the Employer was unable to rescind its decision. Are there any options available to the Employer? Thanks. Ed

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Our cross-tested plans are set up almost

exclusively with NRA of later of age 65 or 5

years of participation (an uniform retirement

age). For cross-testing purposes, we utilize

SSRA per IRC section 401(a)(5)(F)(i).

In filing for determination letter with IRS, the agent said that Treasury Regulation

1.401(a)(4)-12 prohibits this methodology. Any thoughts?

How are the after-tax premiums in a cafe plan used? Client currently pays all of the premium for disability, so when disability income is received it is taxable to employees.

They want to give employees the choice between being taxed on the premiums or taxed on the benefit. Can this be done through the cafeteria plan by allowing employees to pay premiums with after tax dollars? Isn't this allowing them to pick from a taxable benefit (inside the cafe plan) and a pretax benefit outside of the cafe plan? Anyone encountered this issue and have any suggestions?

My husband's AGI is over $100,000, but I have no income of my own. Do I qualify for a Roth IRA? If so, what is the maximum contribution I can make in the first year?

We would like to rollover a traditional IRA (in my husband's name; a rollover from an old 401K)to a Roth IRA. My husband's gross earnings are about $200,000. Since we file jointly, is that income divided in half to calculate AGI for purposes of qualifying for a Roth IRA?

Notified by letter dated 12/30 that my 1998 401K contribution was in excess by nearly $9000 (nearly my entire 1998 amount) due to compensation and the plans failure on ADP/ACP. It looks like the company did not comply with regular testing as this was a complete surprise to me. To complicate matters, I have since left the firm and the excess was rolled over into an IRA. I imagine that this will occur again next year.

I was in a subsidiary organization an an executive and in a different plan than the executives in the corporate office, who were not affected by this. Please point me in a direction for counsel. Thank you.

What is typically done when a participant continues to make quarterly loan payments 60-75 days late?

Assuming the plan document, loan policy and loan document/promissory note are silent on this, is it typical to charge (i.e., accrue) additional interest during the delinquent period? If so, is this accrued interest added to the loan principal resulting in a larger level amortization payment or does it extend the amortization period (assuming the period was originally under 5 years).

Does it make a difference if the plan covers only the owner of the business (so the investment returns on these additional loan interest payments would be tax deferred)?

Thanks