It depends on the state law applicable to incorporated law firms. Many state professional corporation laws would prohibit having a non-lawyer as a beneficial owner of the stock (as would be the case if a non-lawyer were an ESOP participant).

You might consider using a non-ESOP stock bonus plan to cover the lawyers, with a comparable profit sharing plan for the non-lawyers. An ESOP under IRC Sec. 4975(e)(7) may not be used in this manner, as an ESOP cannot be combined with a non-ESOP for purposes of testing under Secs. 401(a)(4) and 410(B). A non-ESOP stock bonus plan is not subject to the special ESOP nondiscrimination rule.

A private company maintains an ESOP. The ESOP portion of the plan is frozen (i.e., participants are no longer able to invest in company stock), and the plan becomes a 401(k) plan with several other investment alternatives. The plan continues the diversification requirement under Code Section 401(a)(28(B) with respect to the company stock fund.

Subsequently, the sponsor of the plan is acquired by a publicly-traded company, and the sponsor's stock held by the plan is exchanged for cash and stock of the acquiror. The plan will be continued, and participants will be able to exchange between any of the investment funds, including the publicly-traded stock. Must the plan continue to apply Code Section 401(a)(28)(B)?

I think that there is a distinction between being a union member and being "collectively bargained." Typically, owners cannot be part of a collective bargaining unit. If the "union" plan is not doing so, I would think that the owners must be disaggregated from the rest of the bargaining unit and tested separately. (No automatic 410 pass) However, there are certain "bargaining unit alumni" rules for multiemployer plans where someone who was once in the bargaining unit will be "deemed" to still be in the unit. If this is a multi, you may want to check the alumni rules.

I don't think that the alumni rules apply to single employer plans. To the extent that the owners are not truly collectively bargained, you could set up a separate plan for them and exclude all truly collectively bargained individuals from the Plan. However, since they participate in the union plan, watch out for top heavy aggregation and aggregation for 415 problems.

Upon hard times, my company has announced the divestiture of my division.

The summary plan description for our ESOP says that distribution will commence on the fifth plan year after terminating employment for reasons other than normal retirement age, permanent disability or death. Also no distributions will be made until any loan obtained to acquire stock is fully repaid. The employees are afraid there won't be any money left in five years. Is there anything we can do?

We have a client that has set up a 401(a) plan to receive matching contributions(410(m)) (they match elective deferrals under a separate 403(B) plan). They have drafted the plan to allow "hardship" distributions, using the 401(k) rules for allowing such hardship distributions. The plan does not contain 401(k) provisions, however. The plan also specifically precludes any "pre-retirement distributions". This seems weird to me--but I suppose it's okay to utilize the 401(k) rules relating to hardship distributions for deferral amounts and apply them to 401(m) amounts? They don't need to put such stringent restrictions on the 401(m) amounts, for pre-retirement distributions, but I don't see anything wrong with it? Any thoughts?

A participant in a defined benefit plan is currently in pay status. While on pay status, the plan distribution provisions were amended to allow lump sum distributions. May the plan be amended to permit participants who are in pay status to revoke earlier distribution elections and elect a lump sum for the remaining value of their annuity?

Thank you for any insight (and authority).

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A and B are members of a controlled group and, as such, maintain the same profit sharing plan. Each company's employee mix(HCEs v. NHCEs) varies from year - to- year. In order to ENSURE that the plan passes 410(b)for a year, both A and B must contribute to the plan for their respective employees so that enough NHCEs "benefit" for that year. However, I think that A and B must contribute the SAME PERCENTAGE OF PAY in order to ENSURE that the plan passes 401(a)(4) re nondiscriminatory contributions. Also, one company's contribution is deductible only to the extent it is allocated to the accounts of its employees. Finally, if A and B wanted separate plans, I think the provisions (eligiblity, allocation formula, vesting, loans, etc.) must be identical to ensure passing 410(B). Am I correct?

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A participant has died. His wife is his beneficiary whom also participates in the 401k. She would like the monies to be deposited in the 401k in her name. Can we roll these funds out to a conduit IRA and then roll them back into the 401k plan in her name?

if a plan changes the vesting schedule from a 6 year graded to a 5 year cliff, this is consider a 'less desirable' amendment...correct? if a plan does this, do all current participants become 100% vested, or do they just continue on the old vesting schedule, while new enrollees can be subject to the 5 year cliff? are their any other legal issues i should consider?

thanks.

Did I read correctly that people in reimbursement accounts in 2000 will be able to carry-over up to $500 of their un-reimbursed expenses into 2001?

I haven't heard much noise about this.

What is the impact of section 411 vesting in an affiliated service group? Can two companies have different vesting schedules as long as service with one company in the group counts as service with all other companies in the group? Thanks.

I am doing some planning for my daughter's college expenses and have done some research on using Roth's after we deplete the Education IRA. According to the IRS, this is permissible for qualified expenses, but Publication 590 does not seem to distinguish between which "buckets" of money can be used tax-free.

I read an article in Kiplinger's, however, that says that only the amount contributed to the Roth can be withdrawn tax-free for qualified education expenses; any earnings withdrawn, while not penalized, are subject to taxes.

Is this correct? I have not been able to find this distinction at the IRS website.

Thank you in advance for any answers.

Tim Lovelock

PS: I am confortable with my existing retirement planning and I'm planning to use the Roth as a combination "college fund/addt'l retirement" account.

We have a takeover that the prior TPA missed that the plan was top heavy in 1995 and 1997.

When I calculate the earnings on the 1995 TH minimum contribution, at what date do I start the earnings? Do I use the latest date that the contribution could have been deposited for deductibility purposes?

Do I include the earnings in the 404 limit?

Are employee contributions to a governmental plan that are picked up within the meaning of IRC Section 414(h)(2) by the employer subject to FICA withholding?

Are all RX eligible for reimbursement thought the medical reimbursement plan? I understand weight loss programs are not, but what about weight loss Rx, Meridia? Is there a list of specific Rx that are eligible? Thank you

Has anyone ever seen a 423 stock purchase plan with a match (e.g., for every 2 shares purchased by the employee, the company would

contribute an additional 1 share). Arguably, the 2 shares could be treated under 423, while the additional share would be treated under section 83. The concern is that the employee would be viewed as having purchased the additional share along with the other 2 shares, thus resulting a violation of the 85% requirement. Any thoughts?

If a 403(B) plan is subject to ERISA, and it adds another vendor under 403(B)(7), is a new plan document required? The plan itself has not changed. I don't think we do, but the third party administrator who would produce quarterly statements says we do. I have looked in ERISA, the CFR, and various places on Benefits Link, but am unable to document my opinion that a new document is not required. Can someone help explain this to me and give me a cite if possible? Thanks.

You can e-mail me directly at

westenberg@nwf.org

Thanks

What are major implications of using short plan vs. "full plan year" during initial plan year? Example: Calendar Year Plan adopted 6/3/99. If first Plan Year starts 1/1/99 vs. 6/3/99, what are major implications and potential pitfalls?

Does anyone know if Social Security, Federal, State and unemployment withholding contributions should be/can be taken into consideration when employees are "acquired" through a company acquistion? (assest, stock or cash)?

Does anyone know if Social Security, Federal, State and unemployment withholding contributions should be/can be taken into consideration when employees are "acquired" through a company acquistion? (assest, stock or cash)?