I have an inquiry concerning a way to wrap-around a n-q plan with their 401(k) plan. Any ideas or suggestions?

If a participant is age 69 when they die and their spouse is the beneficiary of their account in their 401(k) plan, when must the distribution be made from the account (either lump sum or annuity payments) in order to avoid paying a 50% penalty? As I understand 401(a)(9) they have two options: A. take a cash distribution by the end of the fifth year after the participants death (which would be the year that the participant would have reached age 74) OR B. start taking annuity payments by 12/31 of the year the participant would have turned 70 1/2.

I have been told that the 70 1/2 rule takes precedence over the 5 year cash rule. Is this true or can the spouse wait to take a full cash distribution until the 5th year? Am I missing something here?

Participant A is grandfathered under 401(a)(17) in state plan X. A goes to work for state plan Y after the final grandfather date. Plan X covers state agencies and Plan Y covers public universities. Both groups of employees are considered state employees. Participant A is permitted to transfer service back and forth between Plan X and Y. Is participant A grandfathered for 401(a)(17) under Plan Y , too? If service is transferred from Plan Y to Plan X ,will that service become grandfathered in Plan X?

David

Recently, I posted a question regarding whether a governmental 401(a) plan can have mandatory pre-tax contributions, the answer was yes pursuant to section 414(h).

It has been our understanding that in order for employee contributions to be pre-tax in a 401(a), they MUST be mandatory. All Voluntary Contributions must be after-tax - Is this correct? Do you know a IRC look up reference?

Legally, should a company payout or hold accrued vacation/sick time while an employee is on STD/LTD?

We have a new client adopting a nonstandardized prototype. Are people submitting these to the IRS for approval now or are you waiting to file when the new nonstandardized prototype is issued for the new remedial amendment period?

We desire all of the original loan documentation. This should include loan amount, rate, length, payment amount, etc. We certainly need to receive loan amortization schedules as well as current status of loan within the context of amortization schedule.

I am unaware of any reason to demand payment of outstanding loan balances because of plan recordkeeping or investment provider changes.

Be sure to monitor payments during transition. If payments are made and credited properly, the participants should have no impact whatsoever.

Participants must make loan payments promptly, even if employer does not remit them promptly to investment provider. And payments should be sent as soon as possible after receipt. However, loan payments do not have same statuatory time standards that appply to deferral contributions. Good Luck.

I am the Board President for a small non-profit art gallery. This past fiscal year, earned and contributed income exceeded our budgetary goals by 10% while expenses were only 1% over budget. We want to pay a bonus to the 2 part-time staff members (20 hours/week each). The Board agreed to a bonus last spring, but no plan was set as to how to determine the amount. Are there "standard" calculations tied to budgetary indicators that are used for bonus incentives in retail, educational industries such as ours. We want to appropriately reward their hard earned success this year, as well as set an annual compensation formula into this next year's budget. Thank you for any suggestions!

Has anyone given any thought to what kind of liability a third-party administrator or a plan administrator may have pursuant to the final COBRA regulations if they fail to give a health care provider (physician, hospital, or pharm) a complete answer regarding a qualified beneficiary's right to coverage during an election period or a premium grace period? Who is on the hook to the h.c. provider - the individual, the plan, the TPA, etc.?

I absolutely hate the choices I have in my nonprofit employer's 403(B) plan, which I haven't yet contributed to.

I have contributed the maximum to my Roth IRA for both 1998 and 1999. What are my options if I decide to set up my own retirement plan? There is no employer match in our 403(B), so other than the amount I can put away (up to $10,000, or 20% of earnings), and the fact that it is tax-sheltered, I don't see much benefit to a bad 403(B) that ties me down for the next 10 years at least.

So what are my IRA options in addition to my Roth if I have no other qualified plan? And what would be the maximum I could contribute given that I've already contributed to the Roth?

All suggestions appreciated!

Lyric

I am the author of a book on the importance of asking the right questions in the workplace. I believe the most successful companies and successful managers ask and encourage others to actively ask questions.

If you have a brief moment, I was wondering if you have thoughts about these three ideas.

Do you agree that successful companies have a questioning culture...and if so, is there a company or manager who you think I should talk to about his or her unique questioning style?

What are the five most important questions you should ask about benefits when applying for a job?

I'm trying to find practical punchy questions that the job candidate can ask to make sure they are not missing any benefits they could receive.

Since I understand how busy you all are, I appreciate any reply. I hope you find these questions intriguing...the response from others I have been in contact has been very enthusiastic.

Andrew Finlayson

Author and journalist

Questions That Work: Turning Ideas Into Action

finlaysn@ix.netcom.com

The maximum income for Roth IRA contribution is $150k for married filing jointly and $95k for single. My question is what if a couple making over $150k file tax return separately, can they each contribute $2000 into Roth IRA?

Second question is if a couple find out that their 1999 income is over $150k in 2000, but they each made $2000 contribution to Roth in 1999. What is IRS rule for this scenario? Can they convert the overcontributed portion to a nondeductible IRA, or they have to pay excess contribution penalty?

Thanks for the help.

I am approaching 70 1/2 yrs old..should I switch to an IRA?

A participant was paid out 1/99 based on his 6/98 acct bal. Unfortunately, the 12/98 value was down, so now he must repay the difference (around $340).

the question came up as to whether he must repay the whole $340, or only 80%(since he received a lump sum).

I'm also assuming that the ER must reduce his next tax deposit by the difference.

thanks for any input.

Would like to switch to class allocation by specific $$ for each class. Can anybody provide a sample of employer notification to trustee as to amounts to be alocated to each class? Also, what is the timing of such notification (I guess it is before corporate tax return)?

The IRS apparently requires also the document to incorporate language re above. Would appreciate a sample. Must we amend the doc. or would suffice to incorporate this language in the allocation section of the Adoption Agreement. Thanks for help.

AlexCalin@netscape.net

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Here is a Brain Teaser. Would anyone care to comment?

In performing the 402(g) test, both HCEs and NHCEs have excess deferrals, and received a match on the excess deferrals. The ACP and ADP tests pass without the need for any refunds. Must the company do something with the match which relates to the excess deferrals which are refunded?

Regs under 402(g) say that the excess deferrals of the HCEs are counted in the ADP test, and are also counted for purposes of 401(a)(4), even if refunded. Thus, if the match is not distributed or forfeited, there should not be a discriminatory rate of match under 401(a)(4) because the excess deferrals for the HCEs continue to be counted. (Note 401(a)(4) regs address match relating to ADP or ACP failures, but not relating to 402(g) failures.)

Plan does not say no match is made on excess deferrals. Plan says match made to HCEs attributable to excess deferrals MAY be distributed or forfeited, but does not say match made to NHCEs may be distributed or forfeited. Since there is no discriminatory rate of match, can the related match be left in the plan for both HCEs and NHCEs?

If two employers are not part of a related group, an individual's section 415 limit under plans maintained by each employer is determined separately. Does the same apply for the 401(a)(17) compensation limis? Everything I find refers to the cap as a plan limit. Thanks.

A profit sharing plan without QJSA does not require spoual consent for a participant loan. If a participant borrows 50% of his or her account balance without spousal consent and secures it solely with the account balance, is the loan inadequately secured? Also, even though spousal consent may not be required, do state community/marital property laws still require consent, or are they preempted by ERISA? Thanks.

Is anyone familiar with the current IRS position regarding plans with no sponsor, sometimes referred to as orphan plans?

A company is considering reducing the match formula mid-year, and at the same time changing the definition of comp. to exclude certain types of pay (ex: bonuses). Match is currently calculated and funded once per month, and the change is not anticipated to be retroactive (could it be?). Do both of these fall under the reduction in benefit rules (ie, does the prior match have to be 100% vested now)? Are there other considerations that must be made (I am anticipating ACP testing to be fun)?