[Posted for Josie K by Dave Baker]

posted 11-26-1999 11:42 AM

I hope that someone can help clarify this issue for me. A child born to a Cobra continuant is a qualified beneficiary and the continuant has 60 days to inform us of the birth of the child. Is the 60 day time frame correct? Or is the notification requirement limited to 30 days? Thanks

I converted my Traditional IRA to a ROTH in January, 1999, thinking my Adjusted Gross for 1999 would be less than $100K.

After a Big bonus in 3/99 (s/b so lucky!!@#$$#%), even after a $3,000 Capital Gains loss, my proforma 1999 AGI looks like about $100,700 if all stays “as is” for the rest of 1999.

QUESTION: Is it legal for my Employer to “defer” $1,000 of December, 1999 pay until January, 2000, so that my AGI would come in at below $100K? Ie, I would like my 12/15/99 pay check reduced by $1,000 and my 1/15/2000 pay check increased by $1,000 as a way to defer 1999 earnings into 2000. Would this be a violation of any law? Could this action in any way be a problem for my employer? If OK, how can I prove this to my Employer, who's worried that it's legal?

I have a client, group of 3 doctors w/ no employees. They want flexibility to contribute different levels year to year to each of themselves. Cross testing does this in a breeze, but how to designate? All equal prts., all hired same day. Another topic on the board discussing ownership attribution mentioned "naming" the doctors as group members. (A=smith, B=jones) I always thought naming was not allowed. Comments?

[This message has been edited by Earl (edited 11-24-1999).]

Banks frequently will not accept tax deposits if the check is drawn on an account not maintained at that bank. I have been having clients mail tax deposits to the Federal Reserve, with details letter and 8109 coupon. Lately, a couple of checks have come back saying "Submit to IRS." What are others having clients do?

A participant in a qualified plan has who has an account balance of $200,000 has $21,000 of after-tax money and is age 70 when the MRD payments begin. The employee will recove $100 tax free ($21,000 divided by 210). When the participant is 72 he request a $10,000 distribution. At this time the after-tax contributions have been reduced to $17,500 and due to great investment performance the account value is $225,000.

How is the taxation of the $10,000 handled - is any of it treated as after-tax. Maybe 10,000 divided by 225,000 times 17,700?

Can a DB or DC plan established in 1997 have the following provisions for active employees (non-5% owners) over age 70-1/2?

A. Assuming they are still actively employed, they must start taking their distribution by age 70-1/2 (actually the April 1st, etc.) as if they were 5% owners.

B. Assuming they are still actively employed, they must wait to take their distribution until they terminate employment. (No problem here, right)

C. Assuming they are still actively employed, they are given THE CHOICE of taking their minimum distribution by age 70-1/2 (and each succeeding year) or waiting until they actually terminate employment to receive their distribution. (Any issues of contructive receipt here?)

Any differences between DB and DC Plans?

Any differences between plans in effect prior to SBJPA and those established after SBJPA?

Thanks.

Question: Can an individual who is eligibile to participate in a 401(k) plan but chooses not to do so contribute to a deductible IRA?

An individual earning above a certain dollar level cannot contribute to a deductible IRA if he is a participant in a qualified plan.

In a profit sharing plan, to "participate" means to receive an allocation of contribution or forfeiture.

Also, an employee cannot "waive" participation in a plan to become eligibile for a deductible IRA.

So, what about a 401(k) Plan? If an employee is eligibile for the 401(k) plan and doesn't elect to defer, can he make a deductible IRA contribution? Does it matter whether or not there is a match?

Thanks.

An individual terminated employment from Company X, and rolled his DC balance into a rollover IRA.

He is now employed with Company Y which maintains a DC plan. This DC Plan accepts IRA rollovers.

He would like to roll over PART BUT NOT ALL of his IRA account into Company Y's DC plan.

Does the IRS allow him to do so?

I'm a TPA who works exclusively with Qualified Plans.

Occasionally, we do POP plans for our clients and the 5500s.

One of my clients asked me about premium only plans, flexible spending accounts and medical spending accounts, as of they were one thing.

I don't know anything about MSAs or FSAs and must get educated rather quickly or someone else will get the business.

Where can I go for help. I tried to view those FSA IRS audit guidelines, but quite obviously, they want you to buy their service to get the full view.

Any assistance is helpful.

Steve

Some administration firms use unit accounting pools in which cash is pooled with the ESOP stock. Therefore, diversification becomes problematic because diversification must either occur in units or the units must be converted to shares prior to diversification.

I recently became aware that in the early 90's the diversification/unit accounting issue did receive some fairly widespread consideration in the ESOP community. Can anyone provide further information on whether diversification of units rather than shares is deemed a proper practice by the IRS?

An individual is under 59-1/2, has 2 IRAs and wants to take substantially equal payments. Can the individual determine the amount of the substantially equal payments based on the value of only one of those accounts or must both accounts be aggregated to determine the amount he must take?

To complicate this. If employer adopted the the SARSEP on form 5035A-SEP this would preclude sponsoring another qualfied retirement plan. Would adopting the QRP effective 1/1/99 invalidate (disqualify) the SEP for 1999. What are the ramifications of this? Is there a work around? It think one option might be to restate on a Master Proto-type or individually designed document. ANy thoughts?

Is there any way to pay deferred compensation to nonhighly compensated employees who terminate after age 61? A company would like to pay them until death and does not want to purchase an annuity. Please provide cites.

An employer is considering allowing eligible employees to sell a portion of his/her annual vacaction days to purchase benefits under a Section 125 plan. For example, an employer provides an employee with 3 weeks of vacation each year and permits the employee to use 1 week of vacation days (designated vacation days) to purchase additional Section 125 benefits.

If the employer implements this program, does it convert the designated vacation days into elective vacation days? If so, must the designated vacation days be used or cashed in by the end of the year or can the designated vacation days be carried over to the next year?

Could anybody tell me what they use to determine the interest rate on loans from 401(k) plans? I know that the plan doc says that a "reasonable rate of interest" must be charged, but I've heard of a couple of ways to determine the interest rate. (i.e. prime + 1%). Any information would be appreciated.

IRA “Time Bomb”. Let’s suppose that your unmarried client has an IRA at Fidelity, and, following your sound advice to split that IRA into several accounts so that the life expectancy of each beneficiary can be used for Joint Life Expectancy, for Required Minimum Distribution purposes, she splits the account into several accounts - each with a different child or grandchild as beneficiary. Fidelity remains the custodian for all accounts.

Now, suppose that she later decides, for whatever reason, to change the beneficiary of one of those accounts or adds a new IRA account, and, for that newer account, she wants to name her church as beneficiary. She uses the Fidelity form to do that.

But the boilerplate just above the signature block on that form says that this beneficiary information shall be effective for ALL IRAs of which Fidelity is custodian,including Roth, rollover, SEP-IRAs, and Traditional IRAs, and SHALL REPLACE ALL PREVIOUS BENEFICIARY DESIGNATIONS ON ALL FIDELITY IRAS.

She’s just made the church the beneficiary of ALL her Fidelity IRAs!

Would a "heads up" to our clients who have Fidelity IRAs be in order?

John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO

We have an employee who was eligible to begin deferrals on 1/1/99. She was not given election forms until 11/23/99. What is the corporation's responsibility to make up her "lost" deferrals and match. What about earnings?

I am looking for a copy of a self-funded medical plan document.

If an employee switches employers mid-year, and that employee is covered under 457(B) plans of both employers (who are unrelated), can he/she have two $8,000 deferral limits? It appears that the 457 (B) limits are on a plan-by-plan basis, which would mean that a person could have multiple deferral limits during a year.

Based on the above, if the contribution under the first 457(B) plan was offset by a deferral under a 403(B) plan, will that offset also apply to the limit under the second 457(B) plan? It appears so, because the offset rules are based on what the individual has been able to exclude from income.

Am I missing anything?

Two calendar year 401(k) Plans merge effective January 1, 2000. Each Plan will have a different profit sharing contribution amount for the 1999 year. Does the profit sharing contribuiton for the 1999 year have to be in by the effective date of the plan merger, or does the employer still have until March 15th to make the contribution under each Plan's 1999 allocation formula?