I encountered an interesting situation today. A firm sponsers a SARSEP and the owners of the firm have been excluded as they are union employees. For some reason not made perfectly clear to me, the union owners have been retroactively excluded from the union plan for 1998 (it was amended to a 401(k) plan) and the firms contributions to this plan, on behalf of the owners for 1998 is going to be returned to the firm soon. How late after 1998 can a sponsor amend a SARSEP (or any SEP for that matter)? Specifically, can this plan now be amended for 1998 to allow the union owners to participate? If so, is there any way for them to "defer" for 1998? Lastly, am I correct in assuming that there is no equivalent of the ACP test in a SARSEP? I never work with these things but lately have been getting questions about them.

Sincerely,

Michael Spaid

If a client has a short plan year or a plan year other than a tax year, how should the $5,000 tax year limitation on the exclusion of dependent care assistance reimburements be handled in terms of administering the plan?

For example, if an employer adopts a plan year beginning July 1, and an employee may elect to defer $5,000 for the full plan year, it is possible that such employee will submit claims in excess of $5,000 in the next taxable year. At a minimum, I would assume that the employer, if not the plan administrator, would be required to monitor the limits on a tax year basis, due to its withholding obligations on excess amounts. Any thoughts?

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Here is the situation. Pending divorce and parties want to reconcile. Wife wants husband to give her control over part of IRA by rolling it over to a new IRA and making her the owner. If they were divorcing, and she was becoming his former spouse, this seems to be ok. But how do you do it if they are not divorcing? Other ideas on protecting wife's interest in IRA?

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drdcreek

drdcreek@yahoo.com

Florida charges $.35 on eah $100 for a promissory note executed in FL. My client is a FL company which has its trust located in Florida. Its plan administrator is a Massachusetts company. When individuals want to borrow money from their 401(k) Plans, will the plan be required to pay the documentary stamp tax because the note will be executed in Florida and repaid using payroll deductions from a Florida company. The Florida DOR says yes but it seems to me that this would place an extra burden on 401(k) funds because individuals would have trouble getting there own money -- it seems like it would be preempted by ERISA. Anyway, does the FL documentary stamp tax apply or is it preempted by ERISA? Does anyone know where I can find something in writing that says this. I found a technical advice memo from 1997 which seems to say it does apply, has this been changed?

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Sarah

For those of you who may have attended the Quantech Southern Users Group Meeting in Atlanta, I was curious if there was anything that we might have missed by not coming. Are there any notes or material that might be obtained for those who did not attend?

At a recent local employer's group meeting, I heard a reference made to an

employee who was able to take a tax-free

distribution of his 401(k) while he was

unemployed. Is this correct?

Perhaps it was not necessarily tax-free, but penalty-free? Where would

I find written information on this?

If a full time employee is called up for active military service is he still covered under the employer's health/welfare plan? For how long? Is the employers still responsible for dependents? Also, if the employee and employer are cost sharing and the employee is no longer drawing pay from the employer (he is in receipt of active military pay)does that change the cost or the coverage for either the employee or employer?

[This message has been edited by Jean K (edited 06-28-99).]

Have a client terminating their plan effective 9/30(this is the amendment effective date not when all assets distributed). They would like to make a final profit sharing contribution but cannot make the contribution until October. If they prepare a resolution prior to the termination effective date to make to contribute a specific dollar amount would it matter that the deposit is after the plan term date? I would appreciate any help.

Here is my situation. I was just advised by my HMO that they were unable to renew their contract with the organization representing the (2) area hospitals and some 200 doctors. With this change, my family will have to find new primary care doctors, and travel an additional 20 miles to the nearest hospital in network. The regulation states if "coverage is significantly curtailed or ceases", plan may permit changes. Do you feel these circumstances qualify??? Thnaks for your input!!!

I am wondering if somebody could give me a suggestion of what to do. I ran the ADP/ACP test for one of our clients assuming that all employees' eligibility was coded correctly in our system and the ADP test failed. The HCE's have been paid out to correct the test I ran. I am now completing the SAR and now realized that some employees were coded as ineligible so they were not included in the test. Had they been included, the ADP test would have passed. What do I do?

My question concerns the election provided by Internal Revenue Code section 417 to waive a qualified joint and survivor annuity (QJSA).

Section 417(a)(2) says that the spouse must consent to this election. Section 417(a)(2)(B) provides an exception "because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary may by regulations prescribe."

Where I can find any written guidance that addresses the exception in section 417(a)(2)(B)? Are there any revenue rulings, revenue procedures, notices, court cases, etc., that elaborate on this?

I was asked about this by a plan participant whose employer is in the process of going out of business and terminating their plan. The participant is estranged from her spouse from whom she has lived apart for about 15 years. They are still legally married however. She is being told by the plan administrator that she cannot transfer her plan balance into her IRA without first obtaining a QJSA waiver from her husband.

Attempting to convert in a large plan using a 907 file from Onmiplus. The prior recordkeeper and Sungard have both said that this is a new version of the system and they don't yet have a record layout. Can this be true? Not sure which is worse, if they do and won't share or if they really don't. Tks

On 1-1-98 my company converted from a traditional pension plan to a cash balance plan. They used the UP84 Mortality table and the PBGC rates. If I retire after the year 2000, will they have to recalculate my cash balance plan using the IRS mandated mortality table and interest rate under GATT which would produce a larger benfit for me ?

My question concerns the election provided by Internal Revenue Code section 417 to waive a qualified joint and survivor annuity (QJSA).

Section 417(a)(2) says that the spouse must consent to this election. Section 417(a)(2)(B) provides an exception "because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary may by regulations prescribe."

Where I can find any written guidance that addresses the exception in section 417(a)(2)(B)? Are there any revenue rulings, revenue procedures, notices, court cases, etc., that elaborate on this?

I was asked about this by a plan participant whose employer is in the process of going out of business and terminating their plan. The participant is estranged from her spouse from whom she has lived apart for about 15 years. They are still legally married however. She is being told by the plan administrator that she cannot transfer her plan balance into her IRA without first obtaining a QJSA waiver from her husband.

The employer has a self-funded group health plan with a plan year beginning June 1. An employee and his spouse become covered on July 1, 1997 after satisfying the waiting period (HIPAA does not apply). The spouse is approx. 2 months pregnant on the July 1 effective date, but has not seen a doctor yet. The plan has a pre-existing condition exclusion that applies to injuries and illnesses that first manifest themselves before the coverage date. Spouse experiences complications with her pregnancy in October that result in a successful c-section birth after a 2-week hospital stay. The plan denies the claim on the basis that the spouse was pregnant prior to the coverage date and all claims related to the pregnancy are excluded under the pre-existing exclusion. Any specific case law supporting the denial under these circumstances? Thank you.

If a plan was using a non top heavy schedule and participants were terminated before changing to a more favorable top heavy schedule should they be vested based on the new vesting schedule? They still have balances and therefore would still be considered partipants for the 5500. My thinking is that they should be able to based on the new vesting schedule. Or is their vesting frozen at the date of termination? Please referrence the code section if possible.

We have plan where a participant reveived a hardship distribution. In spite of instructions to do stop the participant's deferrals for one year, the employer failed to do so. How is this corrected?

In the event a Qualified Participant fails to make an election during the six year period, do the Diversification Election "rights" expire? EXAMPLE: Employee "X" born in 1940 attains the age 55 during 1995, completes 10 years of participation in 1996, makes no election during the six year period 1997 - 2002. Seven years later, in 2003 may Employee "X", still employed, still a Plan Participant, make a Diversification Election?

I know the protection of IRA's can vary from state to state, but is there a state gov't department you can call to find out how IRA's are treated in your state?

It has always been my understanding that a plan has to be executed by the end of the plan year for which it is effective. Our pension attorney has been asked to advise on a situation where an employer adopted an existing plan maintained for members of a controlled group in June of 1993 for the plan year ending December 31, 1992. The employer's taxable year is June 30th. The counsel for the employer advised them that the deadline for adopting the plan is the last day of the employer's taxable year. We thought that we would be able to find a cite to support our opinion and understanding very easily, but we were wrong. It is our understanding that in this situation, the employer should have adopted the plan by 12/31/92 in order for its participation to be effective in 1992. Can anyone help us with this? All comments greatly appreciated, especially those with cites!