Is anyone aware of the IRS tax laws regarding the Section 129 participation ($5K pre-tax) of an employee who is now divorced and a noncustodial parent? This staff person knows that they can claim the exemption for the child based on their divorce decree..., But, are there different rules that apply in determining the child as a *qualifying* person in this instance vs. when someone simply wants to use the dependent child care tax credit on their taxes? (up to $4800)

I have read the IRS Publication 503 (page 4) -- and it is not clear to me. We have called the IRS and they gave us a number for the IRS in Wash DC who deals with cafeteria plans.

Any help would be appreciated.

Thanks,

AMB

We currently file approximately 350 5500s annually. A local soft ware company is developing a product for electronic filing of the 5500. We have been asked to provide a sample of various 5500s with schedules for testing purposes. Names and ID #s would be removed. Does anyone see any legal issues here? Once filed, 5500s are part of the public domain anyway. Just thought I would check.

Is there any other reason that someone would be eligible to defer their RMD OTHER than the fact that they are still employed and not a 5% owner?

I am currently in the process of doing research on what most employers are considering fulltime work weeks. I work for a regional CPA firm and we consider 37.5 hours per week full time in order to be eligible for benefits. Does anyone have any surveys or other information regarding this, or would like to share their policy with me. I am having a very difficult time finding any information regarding this. Thank you in advance.

I am changing the form of a plan from an ESOP to a profit sharing plan. I anticipate that, shortly thereafter, the company stock will no longer be readily tradable on an established securities market. Currently the stock is publicly traded on the NYSE.

When the stock becomes no longer readily tradable, must I include a put option in the profit sharing plan thereby preserving what would have otherwise been required to be done if the plan were still an ESOP? Alternatively, can I eliminate in-kind distributions once the stock becomes not readily tradable as I would be able to do if the plan were still an ESOP under the ESOP and stock bonus plan exceptions of the 1.411(d)-4 regulations? If so, how do the limitations of the ESOP investment requirement of 1.411(d)-4 Q&A 2 come into play once I change the plan to a profit sharing plan?

If an employee is part time (working 25 hours a week) and not eligible for health benefits but otherwise a regular employee and all full time employees performing the same work in the same divison are entitled to 401(k) benifits is the part time employee also entitled to benefits?

ARE YOU AWARE OF ANY COMPANIES IN CHILD CARE OR YOUTH PROGRAM INDUSTRY THAT HAVE FORMED AN ESOP OR STOCK OWNERSHIP PLAN? I AM INTERESTED IN THE SUCCESSES, ROADBLOCKS, LESSONS LEARNED.

Based on the current 415©(3) definition of compensation (i.e., adding back in deferrals), can someone confirm that you cannot back out 457(B) or (f) deferrals to bring someone below $80,000.

It is typical in an S Corporation and now in LLCs for the owner to take a W2 salary from the corporation, "leave some money" in the corporation at the end of the year, and this amount is included on his 1040 as a corporate distribution or dividend (I'm not sure of the exact term).

Does this "corporate distribution or dividend" count for various definitions of compensation which affect retirement plans.

For example:

Assume the owner's W2 is $25,000 and his "dividend" is $20,000. (Use higher numbers if you would like.)

1. For the 415 limit on DC and DC plans, do we use a pay of $25,000 or $45,000?

2. For the compensaton used in the denominator of the 401(a)(4) tests, do we use $25,000 or $45,000?

3. For the compensation used in the denominator of the ADP/ACP test in a 401(k) plan, do we use $25,000 (plus his deferral)or $45,000 (plus his deferral)?

4. For testing in a 401(k) plan against the 25% of pay limit, do we use $25,000 (plus his deferral) or $45,000 (plus his deferral)?

5. For determining the 15% of compensation company-wide profit sharing contribution limit, do we use $25,000 or $45,000?

If we define "compensation" in the plan to include this "corporate distribution or dividend", does this help?

Does it make a difference whether the company is an S Corporation or an LLC?

Does anyone know of any authority aside from the Cotter and Canseco cases that address whether a DB plan must make retroactive payments (or an actuarial adjustment to future payments) to a participant who does not file a claim for his pension for say 2 years after his initial eligibility for his pension at age 65? In other words, does he get payments (or actuarial credit) for the period of time he was eligible but had yet to file his claim, or does he just lose those payments? Any thoughts on this issue would be greatly appreciated.

Thanks.

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Adam Stone

A's only business is the performance of management functions for B. A (which has one HCE and no NHCEs) is not related to B which has dozens of NHCEs). This is a management ASG under 414(m)(5). In order to avoid ASG status, A begins performing management functions for C, a wholly owned subsidiary of A which is also not related to B. Assuming that the services performed for C are legitimate and that they represent a sufficiently high percentage (whatever that may be) of A's revenues, it appears that A and B will not be a management ASG because A will not perform such functions for (1) one organization (since it does so for B and C) or (2) one organization and others related to the one organization (since B and C are not related). In effect, A can end run 414(m)(5) by creating a second customer for its services. The proposed regs might have stopped this maneuver, but have been withdrawn. Am I missing something?

I'd like the thoughts of our esteemed reader group on when do you considere a contribution to actually be made.

This affects two areas. For contributions made near the tax filing deadline (plus extensions), is it deductible for the prior year. And, for defined benefit plans, what date does the actuary put on the Schedule B.

Several possibilities that I could think of:

1. The client wire transfers the contribution on date X and it is posted on date X. (duh, this is simple).

2A. The client dates the check as date X, gives the check to the broker on date Y (Y usually equal to X), and it appears on the brokerage statement (i.e., the broker posts the check) on date Z.

3A. The client dates the check as date X, mails the check to the broker on date Y (Y usually equal to X), and it appears on the brokerages statement (i.e., the broker posts the check) on date Z.

2B. Same as 2A except substitute "bank"

for broker.

3B. Same as 3A except subsitute "bank" for broker.

Thanks

I am changing the form of a plan from an ESOP to a profit sharing plan. I anticipate that, shortly thereafter, the company stock will no longer be readily tradable on an established securities market. Currently the stock is publicly traded on the NYSE.

When the stock becomes no longer readily tradable, must I include a put option in the profit sharing plan thereby preserving what would have otherwise been required to be done if the plan were still an ESOP? Alternatively, can I eliminate in-kind distributions once the stock becomes not readily tradable as I would be able to do if the plan were still an ESOP under the ESOP and stock bonus plan exceptions of the 1.411(d)-4 regulations? If so, how do the limitations of the ESOP investment requirement of 1.411(d)-4 Q&A 2 come into play once I change the plan to a profit sharing plan?

I converted my IRA to a Roth IRA in 1998. My accountant is telling us that we have to pay the penalty tax this year. I understood that I could spread it for 4 years. Our joint income was $137,000. Our income was high this year because my husand earned an extra $7,000 that we will not see in 1999. Is my accountant right and we have to pay the taxes this year or should we spread it out over 4 years? Thanks

We are reviewing and working with a group and its board of directors and they are wondering if they should shop their acturial services. I wondered if anyone has a good feel for the range of hourly fee rates charged in the marketplace and an explanation for the variances. Some of the board can't seem to grasp the reasons for the hourly rates charged. I would greatly appreciate any feedback about rates and justification for these rates.

Thank you,

Garry

A participant terminated employment in 1998. The Participant signed and dated his distribution election forms July 1998. The election forms were mailed back to the plan administrator, and postmarked three months after the date on the election forms. Participant wants his benefit determined using the July 31 1997 valuation, but the Plan Administrator feels that the July 31 1998 valuation should be used, and is taking the position that the Participant back-dated the election forms (which were signed subsequent to the July 31 1998 vaustion date) in order to take advantage of the higher 1997 valustion.

Should the Aug 1997 or Aug 1998 valuation be used?

I apologize in advance if this has already been discussed but I could really use some input. A client wants to implement a 125 plan at his company. He intends to use the plan to cover his wife's aunt's nursing home expenses of $2500/month. Does this fall under dependent care (I don't know if he does/can claim her) or as medical reimbursement? Can someone fill me in on the dollar limit that might apply to this? Is this even allowed?

I can't find the answer to this anywhere in the code or regs. Reg § 1.402©-2 indicates that pre-tax 501©(18) deferrals cannot be rolled because it does not define 501©(18) as a qualified plan. But, on the other hand, 501©(18) affects 402(g) deferral limits, IRA deductibility, and is subject to certain 401(k) rules. This would suggest that it should be treated as qualified for rollover purposes, too.

Any precedence or citation on this? I am working with a retiring client who very much needs to avoid a big tax hit. Thanks!

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How do I determining the tax "basis" for ROTH IRAs (re: 8606 line 15) if the traditional IRA(s)converted to ROTH IRAs had comingled deductible (pre-1987)& non-deductible contributions?

My conversion amount totals over $83K because I'm a long time investor, and it came from some 20+ mutual funds.

Other Concerns: 2) The ROTH "income" for 1998 (even IF carried over four years)pushes me into a higher 31% backet (i.e. higher taxes); 3) I've read about penalties being slapped on for under-reporting income in 1998 due to "new found" ROTH income; 4)apparently I have to file to pay quarterly an estimated min. tax to avoid more penalties in '99,'00, '01.

I'm thinking of having to "recharacterize" about half of the converted funds back to Traditional IRAs just to avoid all the penalties let alone finding the money to pay for the taxes, and hit on my Misc. deduction threshold alone. Is there a spreadsheet on the web that you can point me toward that already has all the tax implications figured in for 98 and the out years?

Thanks.

I'm a first time BB user so pardon me if I should have made the above all diffent questions. I'm sure I'm not alone in discovering ROTH's downsides.

After I open a Roth IRA with cash, can I use the money to purchase stock in the company I work for through an employee stock purchase plan where we receive a discounted price? Are there any tax consequences to this which are different than simply purchasing stocks through a broker with my Roth IRA money?