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?

What is the maximum deferral limit for 2000?

I have a client who owns multiple gym/fitness centers. He is trying to put together a sales presentation for businesses to show how a wellness program can benefit them. His questions...

1) Can dues, etc. be paid from a cafeteria plan or would the company need to set up a separate wellness plan to offer these kinds of benefits?

2) Are there any professionally done brochures, pamphlets, etc. he could incoporate into his sales presenation to avoid having to create something on his own?

Any suggestions or links would be greatly appreciated!

First part of my question involves the definition of HCE. I'm of the understanding that unless there are employees of a nonprofit entity that meet the compensation amount of the HCE definition ($85000), then there are no HCEs. Is this correct?

If this is correct, the plan then only benefits NHCEs and would automatically pass 401(a)(4) and 410(B)? The point is this. The plan sponsor wants to provide a benefit for the executive director that is greater than the other employees. Is this permissable? My first thought is that since there are no HCEs benefitting, there would not be a problem with providing a different level of benefits for the various HCEs. Any thoughts on this issue would be appreciated.

I should point out that the discrepancy between salary levels of the executive director and other EEs is considerable.

Does anyone have a safe habor Notice they would be willing to share.

Thank you

Does anyone interpret that ERISA 104(B) provides that a deferred vested, retired or luimp sum recipient can request for a copy of their benefit calculation?

For the same group of participants stated above, how long does a company need to keep employee records that are necessary to compute the participant's benefit? This I believe is addressed in ERISA 209(a)(1), but I am not clear fot this group of participants.

Plan has four HCE's making 1999 contributions in excess of $160,000 limit. Can this be corrected by doing refunds in the current year?

A individual formerly participated in a 401(k) plan and then terminated employment. The individual never incurred a break in service. The plan currently provides that an individual will be able to make deferrals as of the entry date following their date of hire. During 1999, entry dates were the first days of each calendar quarter. In 2000, the plan will have been amended to provide for a single entry date ... January 1. The individual in question was reemployed on November 10, 1999. Can he make deferrals immediately or does he wait until 1/1/99? Additionally, if an individual becomes reemployed on 1/5/2000, does the individual need to wait until 1/1/2001 to begin making deferrals? The plan is silent as to reemployed individuals. Any thoughts? Thanks. Ed

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I think I already know the answer to this question, but anyway, can employer contribution money that has been put in to a profit sharing plan be transferred to a money purchase plan in order to meet the funding formula?

They are trying to get away from having to put more money into the money purchase plan by taking some money that was put into the profit sharing plan and moving it to the money purchase plan.

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

When considering which fees may be passed onto qualified plans (settlor vs. nonsettlor distinction by DOL), how do feasibility study fees fit in?

Does it make a difference if it is an ESOP already in existence, reviewing the feasibility of becoming 100% employee owned vs. 15% employee owned? It doesn't seem to be an administrative or compliance type of fee, but it is a fee to determine the prudence of an investment and in taking on debt. Any cites are appreciated.