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.

Under the Code, it appears that a TAMRA revocation (found at 415(B)(10)©(ii)) made on December 31, 1999 will subject a governmental plan sponsor to liability for any benefits paid to retirees in excess of the Code Section 415(B) annual benefit limitation for years after December 31, 1994. Why would the IRS permit a revocation but then subject the entity making the revocation to possible plan disqualification (for not meeting the 415 requirements)? Is the answer to my question that the governmental plan sponsor should have adopted a 415(m) "excess benefit" plan in 1995 to prevent the 415 limits from applying in later years? How can such an assumption be made (that the sponsor will immediately adopt a 415(m) plan) when an entity has up to 3 years to consider a revocation? I'd appreciate any thoughts. Thanks!

Our plan document states that forfeitures should be used to reduce employer contributions and that employer contributions need to be paid in to the plan by the tax filing deadline plus extentions.

When we process forfeitures, do we need to use them to reduce employer contributions in the year in which the forfeiture happened or (if the employer chooses) can they be used in subsequent years? Our document does not explicitly state either way. Is there code or common practice that would assist in resolving this question?

For example:

- 1999 forfeitures of $1,000 on 12/31/99

- plan match is pay by pay & has already

been paid in to the plan

- no top heavy contribution required

- employer elected not to make P/S contrib.

What to do with the $1,000?

In his recent press release, Mr. Gore's rhetoric sounds distinctly, and alarmingly, familiar. I pose the following comments for your consideration:

1) It has always been true that plan sponsors have "reduced" future benefits, for a variety of reasons. The most common, in my experience, has been a projected inability to continue to meet minimum funding levels, and usually resulted in a partial or complete termination of the DB plan.

2) Unless I missed a recently signed law, no plan guarantees future benefits. Benefits do not become payable until certain conditions are met, and the provisions of the plan in effect at the time of the termination of employment, with grandfathering, are the legal definition of the benefit.

3) It comes as no surprise to those of us in the industry that future benefits for older employees cost more to provide. I am personally chagrined to see a candidate for President use scare tactics in this fashion.

[Edited by Dave Baker on 07-16-2000 at 11:56 PM]

Does anyone see a problem in setting the normal form as a straight life annuity, but if a participant selects an optional 100% JSA, have the JSA subsidized so that it is the same monthly amount as the straight life annuity would have been?

[This message has been edited by mo (edited 11-22-1999).]

There is an employee of my company who has a speech impediment. He may go into a sort of marketing role (working at tradeshows)in the future (he is an engineer). The president has told him that we will pay for him to have speech therapy. My concern is that this may be preferencial treatment and we may face problems in the future if someone wants us to pay for similar treatment. The only other what-if scenarios I can think of would be physical therapy or paying for hearing aids. The question is- should we offer to pay for this person's speech therapy? Thank you for any help on this.

We have two employees who will get no pay for December. One is terminating and the other is going on unpaid leave of absence for the rest of the year. In a calendar year cafeteria plan, can we take three paychecks worth of their elected deferral amounts out of their last checks this month so that their annual elections amounts will be met for the plan year?

Employees are transferring from a taxable employer to a related tax exempt employer. Is it going to be possible to transfer the balances in their nonqualified deferred compensation plans to the "ineligible" 457(f) plans maintained by the tax exempt employer? If so, will the 457(f) rules for taxation apply to the funds, or are the taxation rules that apply to nonqualified amounts held under a taxable employer's plan grandfathered in some way?

This involves "single premium" purchases of annuities for plan participants (e.g., upon plan termination). I've heard that some insurance companies are providing additional compensation to agents brokering this business (e.g., 1% over and above normal agent commissions). While the commission is disclosed to the applicable plan fiduciary, the additional reimbursement is not. Basically, insurer position is that additional 1% isn't a commission payment so that it doesn't need to be disclosed to fiduciary (even though the plan is paying the additional amount). Any feelings on the propriety of this lack of disclosure. Should fiduciary be informed of this or is this something that must be disclosed to him. Also, is anyone aware of any current legislative/regulatory activity designed to require disclosure of the "reimbursement" in these situations. Thanks for any information.

Our document allows plan participants who have terminated and forfeited non-vested employer contributions to have these previous forfeited amounts restated upon being rehired only if the participant "repays" the amount that was previously distributed to him/her. My question is -- where does the money come from? If the part takes a cash distribution and spends the money can he buy in with non-qualified money? What source shoud the money be placed in? Same sources that it came from or a new source? One legal source says ANY money can be used to buy back in and it goes into a after-tax source. This does not seem true to me. This would allow participants to leave the firm roll over assets to an IRA come back to the firm and take their non-qualified money and place it into a tax-deferred account. Besides not all plans have after-tax source. Thanks for your help and if you have any references I would please reference them.

All things equal, should GUST amendment be made now or later? I have been waiting, hoping to get the last word/extension before amending plans.

What are others doing?

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We work in the Boston, MA. area. Last week

we had a big debate with potential client-we said Qualified Plans offer best creditor protection for assets. Far superior to IRAs

for ex. which can be attached in MA. He said

prove IRAs can attached in MA. Anyone know

cites in MA. that IRAs are vulnerable? Thank You for help.

A non-spouse beneficiary inherits an IRA where the owner had begun minimum distributions. The beneficiary continues distributions as rapidly as the owner was taking them.

Question: Can the beneficiary name her own new beneficiary to inherit the IRA upon the beneficiary's death? Or do the proceeds automatically go to the beneficiary's estate?

It would seem that some designation should be able to be made (leaving it to her trust or to another individual) but in all my research I cannot find an answer to this.

Thanks for any help.

I would like to know if there is anything we can do to help our company. I'm a chairman on our ESOP Advisory committee - and we've got a major problem at the office. Our President is driving the company into the ground, the retired owner wants nothing to do with the company, and all of the good employees are leaving - which means new employees coming in, higher expenses for training, and lower productivity. Our costs have been raised to our clients 2 times in 7 months becuase of the salaries being paid to administration now - yet when it comes time for a raise for production level people - they say there is no money. Our President is sucking us dry and I can't seem to find anything we can do about it. SOMEONE HELP!!!

client wants to set up a Profit Sharing or Money Purchase Plan for business owner only, no other employees work or will ever work 1000 hours, therefore, would never join Plan. Is there any way to permit these "non-eligible" Employees to make 401(k) deferrals without running into the top heavy requirement? These Employees would never be vested in the top heavy contribution...and it seems there should be a way to avoid it?

Can anyone shed some light on how the adoption assistance Section 127 works under a cafeteria plan. Is it a reimbursement type benefit? Help!

Since my spouse and I are taking advantage of the 4-year averaging on our $100,000 IRA Roth conversion we are faced with reportable income that bumps us up near the 28% tax rate. I currently contribute the maximum allowable under my salary reduction agreement with my employer's 403(B) plan. We also both have self-employment income which is expected to boost us up into the 28% bracket during the 1999 - 2001 period that we can spread out our conversion tax liability

We have both set up SIMPLE IRA's to provide the opportunity to tax defer enough of our self employment income to get us back down to 15% for at least the 1999 - 2001 period.

We are considering the following strategy for the next several years:

1) Divert enough of my 403(B) salary reduction funds into our SIMPLE IRAs to reach the maximum allowable (max. of $6,000/yr, or 100% of net self employment income).

2) In Jan. 2002 transfer funds in our SIMPLE IRA's to regular IRA's (which is permitted 2 years after initially setting up a SIMPLE IRA) then convert to a Roth IRA. By 2002 we will have significantly reduced our reportable income (by $25,000/yr) since we have finished the 4-year spread from the first conversion. We would project that we could still report the income resulting from the 2nd Roth conversion and still stay within the 15% marginal tax rate for that year.

I would see this as a way to expose additional tax-deferred funds to the Roth advantages yet still pay taxes at the minimum 15% rate during this time period.

Any weaknesses in this strategy that I should consider before I alter my 403(B) salary reduction agreement with my employer?

In a plan that does not allow in-service withdrawals, a participant with a 1998 Required Minimum Distribution of $190 received a $2,000 distribution during 1998. The 1999 Required Minimum Distribution (based on the actual 12/31/98 account balance) was $750.00. The participant was paid $3,000 during 1999.

What are the consequences and correction for this?

Should the 1999 Required Minimum Distribution have been based on the 12/31/98 account balance increased by the amount of the excess payment in 1998 (increased by $2,000- $190)?

Is this a Prohibited Transaction requiring the employer to file a Form 5330?

Is the proper correction to have the participant repay the amount of the excess?

If the participant refuses to repay the excess, may the plan sponsor reduce the year 2000 Required Minimum Distribution amount by the amount of the prior year excesses?

Can APRSC be used or is there another IRS correction program that would be more appropriate?

It is unclear if the definition of includible compensation in IRC 403(B)(3)would allow a disabled employee to use the rate of compensation described in 415©(3)©. It seems that for 415 compensation the answer would be that the disabled employee may use a projected compensation assuming that he/she was still working, but for calculating the exclusion allowance in 403(B)(2)(A)the employee could only use W-4 increased by any deferrals. Is this true?

If the disabled employee could use the compensation rate for the exclusion allowance, it there any non-Code explaination available?

Under the final regs, spouses and dependents of covered employees must be given an indepenent election to continue benefits under COBRA. Is this true for medical reimbursement plans? My thoughts were that COBRA elections should be limited to the employee-participant (who could then submit claims on behalf of spouses and dependents).

The before tax benefits were not available to spouses and dependents, and I'm not sure what benefit would be available for the remainder of the plan year to spouses and dependents.

Any thoughts? Also, do participants in premium conversion plans need an additional notice beyond that provided by the underlying health insurance plans. Seems to be duplicative.

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