Controlled Group consists of two companies, Company A (with a 10/31 fiscal year) and Company B (with a 12/31 fiscal year). There are owners in each company. They want to start a profit sharing plan (or plans) covering both companies. Under the plan(s), HCEs will receive between 15% and 20% of pay; nonHCEs will receive 3% (older owners, as usual).

How can this plan (or plans) be structured to accelerate the deduction for Company A? [Note that as we speak, we are in early November!]

1. If we have two separate plans (one for Company A with a plan year ending 10/31 and one for Company B with a plan year ending 12/31), the first year for Company A's plan would have to be 11/1/99 to 10/31/00 and the first year for Company B's plan could be calendar year 1999. OK to start with, but can we do better?

2. If we have one plan (with a plan year ending 12/31) covering both companies, the first plan year could be 1/1/99 to 12/31/99. The deduction allocable to Company B would clearly be for calendar year 1999. However, how could the deduction allocation to Company A be structured to accelerate the deduction? Can any part of it be allocated to its fiscal year ended 10/31/99 because the plan was in effect for the entire calendar year?

3. Same as #2 with two separate plans. (I don't think this helps, but it's a thought).

Any other ideas?

What has to done to modify and exising cafeteria plan?

Client has 401(k) plan which also covers employees of other members of controlled group. One of the members is a newly formed financial services company which sells mutual funds unrelated to client (e.g., Fidelity). The client wants to use it's FSC to sell mutual funds to its plan. The FSC will get 12b-1 fees from mutual funds. This sounds like a PT to me since the FSC is a party-in-interest to the plan. Then I think, "Surely local megabank is using its investment affiliate to sell mutual funds (including the bank's proprietary funds) to the bank's plan. Why can't my client do it?" Is there a PTE or DOL Advisory Opinion which allows this?

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can anyone define this term? also, if a dr disables someone and states he needs surgery, can disability benefits be denied if the person doesnt want the surgery? is anything wrong or unusal to turn in paperwork from 2 different types of drs stating you are disabled?

THANX

I understand Rev Rul 81-35 & 81-36 requirement that in order for employee contributions to be considered "picked up" by the employer the ee cannot have the4 option of chhhosing to receive amounts diretly insead of having them paid to er; however, I am confused by more recent PLRs which seem to allow er "pick up" of voluntary contribution amounts (i.e., purchase of "permissive service credits" and "past service credits), so long as such voluntary amounts are contributed pursuant to irrevocable payroll deductions. (e.g. PLR 9737034 & 9832041). We've got a gov't er that has established a money purchase pension plan with a 12% employer contribution (not a picked up contribution) and, in addition, they want to have an option of allowing participants to make voluntary employee contributions which will then be "picked up" under 414(h)(2). Will this work? Did these rulings have the effect of extended the appl8cation of 414(h)(2) to elective contributions (so long as irrevocable salary reduction election is made by participant)?

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LKP

I am looking for anyone to share their telephone enrollment materials. I am also looking for examples of enrollment forms where the employee keys in the dependent names over the phone. We are just implementing telephone enrollment and I need some ideas on the communication/enrollment pieces.

How should the 1099R be issued for plan limit violations? ( For example, if the plan only allows a 10% deferral rate but a participant contributes 15% ) How should the refund be coded? Should the 402(g) rules be followed? Contributions coded as prior year and earnings as current year if distributed before April 15 or should the entire amount with earnings be coded as current year? This was a questions in the Q/A column but I do not think it specifically addressed the 1099R issue.

Any references would help.

A terminating 401(k) plan does not want to amend to provide for prior year ADP testing and wants to keep the pre SBJPA ADP correction method (leveling). Do we have to provide an amendment with the termination that basically states that we are electing to use provisions already in the plan? This is pretty much what the IRS is asking for with their "sample" ADP amendment.

Does anyone know the 2000 adjusted dollar limit for officer's compensation for the key employee definition? (It was $65,000 in 1999 and 1998.)

Also, the excess distribution dollar limit for partial distributions and lump sum distributions was suspended through 1999. Does anyone know the status for 2000?

I am new to the Roth IRA's, so please forgive me for my ignorance. My question is about when you can make contributions to the IRA. Specifically can you make a contribution in the same calendar year (even back-to-back days) as long as a different tax year is indicated on the contribution.

For example:

Can I send in $2,000 on Jan 1st, 2000 for the 1999 tax year and send in $2,000 on Jan 2nd for the 2000 tax year.

Thanks for your time!

A question that has been probably been asked many times, but I need help/clarification:

Item 6 of Schedule F asks for total costs of the fringe benefit plan for the year. The instructions (note) then indicates to "enter the amount of the salary reductions and other employer contributions... Nonelective contributions...are the employer's portion of the cost or premium contributed as employer-provided coverage under a cafeteria plan arrangement."

Therefore, for the premium coverage under a cafeteria plan, do the costs include both the employee portion of the coverage (paid on a pre-tax basis), as well as the employer paid portion of the coverage? The rest of the costs (Reimbursement, Dependent care coverage) are not at issue here.

Thanks much!

A straight profit sharing plan that is currently integrated with SS (integration level=$15,000 and a maximum integration level percentage of 4.3%) is adding a traditional 401(k) feature effective 1/1/2k.

Will the fact that the plan is integrated have any bearing on the 401(k) addition?

If it will not have any negative impact on the plan, they want to continue integration.

How does one make a decision as to what tax base and integration percentage is best? Does anyone have any suggestions for me to help guide this client?

thanks in advance for any help.

Short answer is that stating that the maximum elective deferrals is the Section 402(g) limit ($10,000 in 1999; $10,500 in 2000) is permitted. One doesn't have to state a maximum contribution percentage

Some reasons why having a maximum contribution percentage might be a good idea:

- Your 401(k) recordkeeper might require that its plans state a maximium contribution percentage.

- To keep contributions (especially from nonhighly compensated employees) rising when employees' compensation rises, you might prefer employees to make elections in terms of percentages of compensation, not dollar amounts. Elections as a percentage of pay may be more consistent with your communications campaign.

- Elective deferrals in excess of the 415 limits may be refunded only for certain reasons. I'm paraphrasing the regulation very loosely, but in general one can only correct 415 amounts if the error wasn't reasonably foreseeable. This is the reason most plans set the maximum contribution percentage at no higher than 25% minus the percentage of pay of all other defined contribution plan contributions and forfeitures.

Can anyone assist me with information concering Multiple Employer 401(k) plans? Do Employee Leasing companies use them? How do they differ from single employer plans?

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An IRA owner must calculate the RMD on each IRA separately but is allowed to withdraw from all or any one. Can an heir who has more than one inherited IRA do the same?

When a nonspouse beneficiary inherits an IRA after the RBD (joint life expectancy, owner's life recalculated and beneficiary's term certain) what is the proper method of determining the RMD? Pub 590 page 25 under "If you die and your designated beneficiary is not your spouse" states that the heir must use his life expectancy as adjusted by the single table. (Start with the joint life expectancy in the year of 70.5, subtract the number of years that have elapsed, find the closest to, but less than figure in Table I). This is quite different than Section 1.401(a)(9)-1 Q & A E-8 Example 2. In the reg, you simply subtract the number of years that have elapsed from the intial joint life expectancy.

Also, has anyone noticed the error in this Example 2 of E-8?

"The calculation of the minimum payment for 1989 is as follows:

1) Life expectany of brother (DOB 7-20-1920) (using age as of birthday in calendar year 1988 from Table V of section 1.79-9) = 18.4"

1987 was the year of 70.5 in the example. 1988 was the year of death. The life expectancy of 7-20-1920 brother would be 17.6 when 68 years old not 18.4 as stated.

Do you agree that the error is in the year? 1988 should read 1987--the year of 70.5. Right?

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I have a client who has a 401(k) plan which is currently matching 50% of each participants deferrals. Matching contributions cannot exceed 6% of salary. Also, the plan is top-heavy. The client would like to adopt a safe harbor plan to avoid the ADP & ACP failures it consistently encounters as well as meet its top heavy contribution requirements. If the plan makes a safe harbor contribution via the 3% nonelective contribution, am I correct that the top heavy minimum contribution requirement as well as ADP safe harbor test would be satisfied? And, I believe the current matching provision would need to be amended to limit matching contributions on no more than 6% of salary to meet the ACP test safe harbor. Comments please...

I am trying to compile information for my understanding on worker's compensation (wc) insurance from an employer's standpoint.

I understand there are classification codes for different industry areas. What are they?

How much wc coverage does an employer have to carry? Is that their call or does some governing body determine that amount?

Am I correct in my understanding that interest on a participant loan to an HCE is never deductible - even if loan is secured by the HCE's home?

Sole-proprietor currently sponsors SEP (via model Form 5305-SEP). Wants to adopt paired MP & PS Plans for 1999. Glitch - has already partially funded SEP for 1999. Rather than transfer SEP to a prototype (to allow a companion QRP) and coordinate the "discretionary" contributionn between the SEP and the PSP for 1999, can client request a refund of his 1999 SEP contribution (plus income) in order to, in effect, "un-do" the SEP contribution?