My bank is custodian for an IRA. The customer is having securities trades directed by his broker (with a major brokerage house). The broker claims he needs the bank's own TIN for tax reporting purposes. I thought that the customer's SSN was normally used. Am I missing something?

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Code Section 401(a)(26), which required that qualified plans cover the lesser of 40% of an employer's workforce or 50 employees, since the plan year beginning in 1997 doesn't apply to defined contribution plans. However, there's still a cross-reference to 401(a)(26) in Code Section 403(B)(12).

Normally, I'd say that 401(a)(26) doesn't apply to the nonelective deferral portion of a 403(B) plan either because it's not a defined benefit plan. However, the IRS audit guidelines that were updated this summer still refer to 401(a)(26) rules, not that they elaborate at all.

Does this mean that the IRS thinks that the nonelective deferral portion of a 403(B) is still subject to the 50 employee / 40% rule? Has anyone already spoken to the IRS about this?

A question has come up regarding adding dependents following a family status change. Scenario is this, an employee is enrolled as employee only but has children that are not currently enrolled in the group plan. The employee has a family status change, gets married, and makes a mid year change from single to family coverage. Can he add dependents, the children not covered previously, and new dependents at the same time or will the children he had not previously covered have to wait for the next open enrollment period?

A question has come up regarding adding dependents following a family status change. Scenario is this, an employee is enrolled as employee only but has children that are not currently enrolled in the group plan. That employee has a family status change, gets married, and makes a mid year change from single to family coverage. Can he add dependents, the children not covered previously, and new dependents at the same time or will the children he had not previously covered have to wait for the next open enrollment period?

The accounting firm for a new client performed a limited scope audit on the defined contribution plan. The problem is that a limited scope audit is only available if the plan's assets are in trust and the plan's assets are in custodial accounts. The problem has been corrected prospectively, but what do we do about past years?

We have plans written that Normal Retirement Date is anniversary date nearest attainment of Normal Retirement Age.

If NRA is 65 and plan is calendar year, a person born prior to 6/30 will have a NRD of 64 years and x months.

We would like to change NRD to first of month coinciding with or next following attainment of NRA.

Will this be a cutback that is not permissable?

A parent company with several subsidiaries, all of which participate under the parent's 401(k) plan, is about to acquire another company (the "target") which maintains a SIMPLE IRA. The acquisition will take place before the end of 1999. The parent would like the target's employees to participate in the parent's 401(k) plan after the acquisition.

What would be the best way to accomplish this, in light of the prohibition against maintaining a qualified plan and a SIMPLE IRA? There are 3 options as I see it, but I'm not sure whether each can be done or what the ramifications of each are.

First, the parent could require the target to terminate its SIMPLE IRA prior to the acquisition. The target's employees would begin participation in the parent's 401(k) immediately. Note: this has been the parent's practice in past acquisitions of companies with 401(k) plans to avoid the "successor plan" rules under 401(k). It seems to me that this might avoid the possibility of an "employer" maintaining a qualified plan and a SIMPLE IRA at the same time.

Second, the SIMPLE IRA could be continued until the end of 1999, with the target employees continuing their contributions, at which time the SIMPLE IRA would be terminated and the target employees would begin participation under the parent's 401(k) plan effective 1/1/2000.

Third, the parent could terminate the SIMPLE IRA after the acquisition at some time in 1999, at which time the target employees would begin participation in the parent's 401(k) plan.

Any thoughts or suggestions?

I need to ascertain whether people's plans are electing to use the top paid group rule when determining HCEs.

Your help and experience with this is greatly appreciated!!

Samantha

In 1998, I met all the criteria to roll my traditional and Simple IRA's to a Roth. My Fiancial Planner received my signed paperwork and acknowledged receipt with their signature. In Feb. 99', I found that they never rolled the money. Amount to roll as of 12/31/99 was $118,000. How can I find out how much this mistake cost me?

Pursuant to a corporate merger, a top heavy plan and a non-top heavy plan merge mid year. The resulting plan would be top heavy. However, since the "determination" date is the last day of the preceding plan year--what do you do? The plans were not in a required aggregation group as of the determination date. Could you have an argument that the top heavy contribution only needs to be made on the participants in the "old" top heavy plan? The "transfer" rules indicate that you include all amounts in the top heavy determination, but do you do this retroactively for periods prior to the actual transfer?

[This message has been edited by KJohnson (edited 09-24-1999).]

Yes, it can.

There's plenty of conditions to be met, but the fact that the contribution is made to a separate money purchase plan doesn't prevent it from being a safe harbor contribution. All NHCEs in the 401(k) plan must be eligible to receive that year's money purchase pension plan contribution.

MY HUSBAND AND I WERE MARRIED IN AZ IN 1987 AND LIVED TOGETHER UNTIL WE SEPARATED IN 1993

ALTHOUGH WE NEVER AGAIN MAINTAINED A HOME TOGETHER WE NEVER DIVORCED OR MADE ANY ARRANGEMENTS ON DIVIDING OF OUR ASSETS. WE SIMPLY MAINTAINED SEPARATE HOMES. ON AUG. 15TH OF LAST YEAR MY HUSBAND TOOK HIS LIFE. FOUND AMONG HIS PERSONAL THINGS WAS A DIVORCE DEGREE ALLEGEDLY ISSUED FROM A MEXICAN COURT DISSOLVING OUR MARRIAGE IN 1994. FURTHER WAS A NEVADA MARRIAGE LICENSE TO ANOTHER WOMAN IN 1994. APPARENTLY THEY HAD MAINTAINED A HOME TOGETHER IN COLORADO FOR A FEW MONTHS. IN THE SUPERIOR COURT OF AZ WE HAVE ESTABLISHED THAT THE MEXICAN DIVORCE IS NOT LEGAL EVEN IN MEXICO AND COULD NOT LEGALLY TERMINATE OUR MARRIAGE. THE COURT FOUND I WAS ASTOPPED FROM CONTESTING THE MARRIAGE OF HE AND THE OTHER WOMAN AS I DID NOTHING ABOUT IT TILL AFTER HIS DEATH. THE FALSE CLAIM BEING MADE BY THE OTHER WOMAN THAT I HAD KNOWLAGE OF THE DIVORCE AND THEIR MARRIAGE BEFORE HIS DEATH. SINCE THERE WAS NEVER A LEGAL DIVORCE OR SETTLEMENT BETWEEN MY HUSBAND AND I, DOSE THE STATES ASTOPPLE ISSUE DICTATE THE LEGAL SPOUSE FOR PURPOSES OF ERISA ON OUR 401K?

When matching contributions that are not used to satisfy the ACP test are used to satisfy the top-heavy minimum requirement, are they still considered matching contributions or do they need to be reclassifed as nonelective employer (profit sharing) contributions? Since the sources have different vesting schedules, the answer is important. Regulations 1.416-1 M19 Q&A, and 1.401(m)-1 (12) (iii) cover this issue, but I am not sure how to interpret them. Which vesting schedule should apply, the one for match or the one for nonelective employer contributions?

I have a client who recently passed away. He had an IRA that list a Trust as the sole beneficiary. The beneficiary said they were told that they could leave the money in the IRA and take the distributions over the life expenctency of the oldest beneficiary OF THE TRUST. I thought if a Trust is listed as the sole beneficiary, the asset must be paid out immediately to the Trust and the Trust document would determine the payout. Obviously, if the benficiaries could keep the money in the IRA there would be some major tax savings.

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Is an annual 5500 needed for a 403(B)(7) program of church employer? The employer is putting in 5% of pay for a couple of officers of an organization, one of whom is using a 403(B)(7) custodial account rather than a 403(B)(1) insurance company annuity contract, and I'm sure the arrangement is a "church plan" as defined in ERISA.

I think no 5500 is required, even though some of the money is going into a custodial account -- the 1998 Form 5500 instructions say "Do not file a return/report for an employee benefit plan that is any of the following ... A church plan not electing coverage under Code section 410(d)."

But the Tax Management Portfolio (388-4th) author (Tax Deferred Annuities--Section 403(B)) says church (and governmental) sponsors must make the filings "if funded through tax-deferred custodial accounts," citing a provision in a Treasury reg under Code section 6058(a) (the 5500 statute). The reg specifically includes 403(B)(7) custodial accounts in the definition of "funded plan of deferred compensation," for purposes of the reg's requirement that each funded plan of deferred compensation file an annual information report with the IRS. (Treas. Reg. 301.6058-1.)

But the reg goes on to enable the IRS Commissioner to relieve, in his disretion, an employer from filing information on the forms prescribed by section 6058(a). This seems to be the basis for the Form 5500 instructions' language specifically excluding governmental and church plans from filing, whatever the kind of plan being sponsored (but with a specific exception to the exception in the instructions for "statutory fringe benefit plans" such as cafeteria plans).

[This message has been edited by Dave Baker (edited 09-23-1999).]

I have a client who will be terminating their Profit Sharing Plan and we will be setting up a SIMPLE IRA plan. Can the employees rollover over their account balances into their SIMPLE IRA account or must they set-up a regular IRA outside the SIMPLE plan? Thank you!

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We primarily use standarized prototype docs that have been issued an opinion letter (dated 6/1/90)by the IRS. When completing the 5500 (Q 22a) we answer yes that it qualifies under code 401(a). We use the date of our opinion letter for 22(B) as we have no determination letter. We have been told by a pension atty we should leave 22 b & c blank because we have only the opinion letter. I feel the form would reject without a response. Anyone have any ideas here?

What specifically is considered a protected benefit?

Plan A is merging into Plan B, which has more stringent eligibility (protected), but Plan A employees are also concerned about losing the loan provision and having a much lower deferral max, among other differences

Before the merger actually takes place, we want to be sure that as many potential litigation or hr-relations issues are addressed.

Is there anything else besides protected benefits that we should be looking out for?

We have just been informed by our record keeper that a distribution check has been outstanding for 18 months!

What should I do?

Sure I'm going to reissue but am I liable legally to give earnings on that amount?

If an 80 year old owner of a company starts a retirement plan in 1998, he presumably would have to receive a MRD for the 1998 year. However, his account balance under the plan as of 12/31/97 would be zero which means he doesn't have to take a distribution for the 1998 tax year.

If his 12/31/98 account balance is greater than zero, he would have to take a MRD for the 1999 tax year, but when is his required beginning date, 12/31/99 or 4/1/00? I didn't see this addressed in the 401(a)(9) regs, but maybe I missed it.........

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