For split-dollar plans, some insurance carriers apparently have added a term rider for two years after a withdrawal, issued at rollout, which maintains the death benefit in the plan. This was an attempt to sidestep the application of Section 7702(f)(7)(E), and delay the cashing out the plan. Any comments on this practice?

Company x owns 51% of stock of z corp., indiv. y owns remaining 49%. according to stock attribution rules of 414©, z corp. is treated as controlled group with x and participates in x's 401(k) plan. Individual y will purchase the remaining 51% of stock in z and start up a new 401(k) plan. Do the z participants in x's plan have a distibutable event upon the acquisition of all the stock in z corp. by individual y?

Does any one know where there is a cite for the definition of the begining of the loan repayment period. I thought the DOL defined this as when the loan funds became available to the participant, not by amortization schedule about four or five years ago. This was due to plans not beginning the payment periods until one or two months after the loan check was issued, but I can't find where the advisory is printed. Can anyone help?

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Philly

Ahhh, one of my favorite issues -- secondment of employees!

First, whether someone is an employee of Z depends on good, old fashioned common law principles. Which company directs and controls the day-to-day activities of the workers? The fact that the workers' compensation is charged to another entity is not determinative.

Second, even if they are common law employees of Z there is no requirement that they actually participate in the plan. I only get involved with individually designed plans so I'm not sure of the limitations of a prototype. Many of the plans I'm familiar with would exclude these employees if the employees are participating in another plan sponsored by the employer (or an affiliate). In this case its a good bet that the employees continue to be covered in their home country plans.

You are right that even if these employees could be excluded you still have to take them into account when running your 410(B) coverage tests. Again, you are right that nonresident alien employees of X can be excluded from 401(B) testing if they have no US source income. But even if these workers are "true employees" of X they cannot be excluded from testing because they have US source income.

Bottom line: apply the common law employment test to see which company is actually the employer. Since the employees have US source income they will be taken into account for 410(B) testing regardless of whether employed by X or Z. Your big issue is what does the plan document provide -- if employees of X I think they are in the plan; if employees of Z you can exclude them (again, assuming 410(B) is satisified).

Good luck.

A 401(k) Plan currently provides that employees will be eligible to participate on the January 1 following their date of hire. An amployee hired on February of 1998 would complete a year of service in February of 1999. Due to the 18 month rule, the employee would have to participate in the plan sometime during 1999. Is company able to exclude employee from test (not plan) for 1999? A consulting firm told me that its position is that anyone hired before 7/1/98 could not be excluded from ADP test under 401(k)(3)(F). Any thoughts? Thanks. Ed

When I turn 70.5 and start taking mandatory annual withdrawls from my traditional IRA, can I pay the tax, then convert the remaining part of the withdrawl to a Roth IRA each year? Maybe it ultimately won't matter because the "outside" money will probably never be taxed anyway - my heirs will inherit it with a stepped up basis, tax free. Is this the case?

Can you use an Elapsed Time vesting Method and also exclude plan years prior to adoption of plan?

I wouldn't think you could but can anyone confirm for me.

Thanks.

Can a Roth IRA be set up thru a stockbroker by a qualified adult whereby an infant(no earned income) can be the beneficiary and upon death of the adult,say 20 years later, the built up wealth in the Roth IRA remains untaxed and becomes the Roth IRA of the now 20 year old ?

Te 20 year old would continue on for decades building up more tax free wealth in the same Roth IRA he/she was once the beneficiary of.

Than you for your interest.

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richard paul

We are considering updating to Crystal 6.0, (not on Quantech 5.0 yet). I was wondering how people are finding the additional functionality of Crystal 6, particularly subreports, conditional formatting grouping and running totals. Any success using some of the new features?

I have a general question about HIPAA and college-sponsored health plans.

First, my understanding is that college plans are deemed "bona fide associations" and as such the individual markets rules under HIPAA apply. Is this correct?

If so, what are the ramifications in terms of creditable coverage in each of these situations:

(i) If someone moves from a group plan to a college sponsored plan, must the college sponosred plan apply the creditable coverage from the group plan?

(ii) If someone changes colleges and moves from one college-sponsored plan to another, must the second plan apply the creditable coverage from the first?

(iii) If someone moves from a college-sponsored plan to a group plan, must the group plan apply the creditable coverage against any pre-existing condition exclusion period?

Thanks very much.

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Rob Gutowski

Can an order which otherwise satisfies the Code and ERISA but is not signed by the judge be considered a QDRO? 2nd question: would it be considered a "reasonable procedure" if a plan administrator imposes a time limit on the amendment period for an order which initially fails to satisfy the QDRO reqs.? Is it correct to conclude that if an order is not determined to be a QDRO by the administrator within the 18-month period, the segregation req. is over and the administrator can allow the participant to take a distribution?

Person X owns 100% of Companies A and B; hence both companies are in the same controlled group. Both companies have employees, and both are calendar year companies.

Effective June 1, 1999 (for example), X sells his entire interest of Company B to an unrelated person Y.

When are both companies no longer in the same controlled group?

Can Company A set up a pension plan effective June 1, 1999 (say for a 7 month initial plan year) and ignore employees of Company B?

Or, must Company A wait until January 1, 2000 to set up a pension plan? (In other words, are A and B in the same controlled group for the entire 1999 year?)

Or, must Company A wait until 2001 (or later)because ownership (for determining controlled group status) includes ownership interests in the last 5 years?

Would the answers to the above be any different if the original companies were in the same brother-sister controlled group, and the ownership change resulted in them no longer being in the same brother-sister controlled group?

Never dull!

A sole proprioetor has no employees. The profit sharing plan contribuition is 15% of compensation. What is "compensaton" for this purpose.

I know there are certain adjustments to the bottom-line number in the Schedule C to reflect Social Security -- what are these adjustments?

Thanks

Posted for Jan Hufnell:

"As an owner of a small corporation, I have a SEP-IRA plan for retirement. As of May 31, the end of my corporate year (FY'98-99), I have overfunded the plan by about $900.

"My questions:

"(1) Do I have to move these funds out now - that is before May 31 - so I don't receive a penalty, or can I wait until I file my fy yr end tax return to 'clean up' the excess - by August 15? Last year I underfunded and had until Aug 15 to put funds in to match 15% of my salary.

"(2) When I do move them out, where can I put them? Can I add this to next year's SEP fund and just 'paper move' the funds to next year like I do whenI add money for underfunding after the end of the fiscal yr but before tax deadline of Aug 15?

"(3) My statements from the SEP plan are issued and reported annually; I am working on a corporate year to calculate what I owe. I use my salary taken from June 1, 1998 to May 31, 1999. My accountant and investment mgr both keep records of movement of monies and adding when underfunded, but nothing official is done otherwise. Is thisthe correct way to calculate the SEP?

"Thank you.

"Reminder: this is not a "simple" plan; it is a standard Sep-IRA for one

employee. Is this the best plan?"

-- Jan Hufnell

Hufnell, Inc.

P.O. Box 9058

Wilmington, DE 19809-0058

(302)764-5084

fax: (302)764-3289

Have a client who wishes to amend & restate existing 5% MP Plan into a Safe Harbor 401(k). Is this possible?

does anyone have statistics on mumber of employers offering 125 plans on first day of employment?

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rjadministrative@worldnet.att.net

Does anyone have statistical imformation on the number or percentage of US employers offering 125 plans on the first day of employemnt?

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rjadministrative@worldnet.att.net

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

AGENCY: Internal Revenue Service (IRS), Treasury

ACTION: Notice and request for comments.

SUMMARY: The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Pub. L. 104-13 (44 U.S.C. 3506©(2)(A)). Currently, the IRS is soliciting comments concerning Form 5309, Application for Determination of Employee Stock Ownership Plan.

DATES: Written comments should be received on or before July 6, 1999 to be assured of consideration.

ADDRESSES: Direct all written comments to Garrick R. Shear, Internal Revenue Service, room 5571, 1111 Constitution Avenue NW., Washington, DC 20224.

FOR FURTHER INFORMATION CONTACT: Requests for additional information or copies of the form and instructions should be directed to Carol Savage, (202) 622-3945, Internal Revenue Service, room 5569, 1111 Constitution Avenue NW., Washington, DC 20224.

SUPPLEMENTARY INFORMATION:

Title: Application for Determination of Employee Stock Ownership Plan.

OMB Number: 1545-0284.

Form Number: 5309.

Abstract: Internal Revenue Code section 404(a) allows employers an income tax deduction for contributions to their qualified deferred compensation plans. Form 5309 is used to request an IRS determination letter about whether the plan is qualified under Code section 409 or 4975(e)(7).

Current Actions: There are no changes being made to the form at this time.

Type of Review: Extension of a currently approved collection.

Affected Public: Business or other for-profit organizations.

Estimated Number of Respondents: 462.

Estimated Time Per Respondent: 10 hours, 6 minutes.

Estimated Total Annual Burden Hours: 4,666.

The following paragraph applies to all of the collections of information covered by this notice:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Request for Comments

Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (B) the accuracy of the agency's estimate of the burden of the collection of information; © ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

Approved: April 28, 1999.

Garrick R. Shear,

IRS Reports Clearance Officer.

I have a client who set up a Roth IRA for his employees where he contributes $10 per pay period and the employee contributes $10 per pay period. Should the whole $20 be added into wages for income tax purposes (with social security, medicare, federal and state income taxes)? The client thinks that his $10 share should be a deduction for income taxes but then when would the taxes be paid?

Our employees are requesting that their dependents be covered under our Self insured Medical Reimbursement Plan. What are other company's doing about this? We have no proof that they are not insured somewhere else? Should we care?

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Dawn Forest