What is the most commonly used practice in determining the effective date of a benefit change request in a qualified life status event? Current regulations state the effective date can be as early as the date of the event or not later than the first of the month following the actual receipt of the enrollment change request as long as it is within the 31 day grace period.

An employer wishes to set up a retirement plan with a large brokerage firm and the brokerage firm has different minimum investment limits for various perks. For example, the brokerage firms requires $20,000 to have a "personal advisor" assigned to that account. If the employer creates a retirement plan that uses this brokerage firm, will the employer runa afoul of the discrimination rules? Assuming that the plan itself is open to all employees, and all employees can invest with this brokerage firm, but the only difference being that higher paid employees will probably have the $20k to be able to obtain a personal advisor. The *type* of investment choices (i.e. mutual fund families etc) will be the same for everyone.

May an ESOP borrow money for any other purpose than the three uses (a) to acquire qualifying employer securities; (B) to repay the loan; or © to repay a prior exempt loan? For example, may an ESOP borrow money to invest in something other than qualifying employer securities?

Can anyone provide some insight as to where we start correcting some violations regarding timing in when contributions became plan assets, as subsequent opportunity loss which may have been experienced by participants.

Can you drop the 401(k) safe harbor contributions in mid-year - suppose it was too expensive (because your business was doing poorly)? The change would apply only after participants were notified of the change.

I know that the IRS Notice says that the contributions have to be made for the entire year. But is that just a condition for the safe harbor, or is it something more menacing?

Do you think that the employee notice to participants about the safe harbor, and the plan language, would somehow create an accrued benefit right for the safe harbor contributions for the rest of the year?

I would think under normal accrued benefit concepts that the notice to employees (with the accompanying plan language) would NOT create an accrued benefit right for the rest of the year. You can always suspend accruals in mid-year (provided the proper procedures are followed) so that you wouldn't have to provide a benefit based on compensation after the suspension date.

You also have the argument that you could always terminate the plan in mid-year.

But others differ with this analysis. Has the IRS said anything on this?

Your comments would be appreciated.

The only

If you offer a safe harbor 401(k), are you permitted to offer additional matching contributions subject to a vesting schedule? After reviewing Notice 98-52, these are my conclusions, but I could use some help in verifying them:

1. With a 3% nonelective, you could offer a forfeitable match, but you would have to perform ACP testing (non-elective meets ADP & top-heavy, but nothing in 98-52 says it covers ACP safe harbor)

2. By offering a safe harbored match which matches up to 6% of comp, you cannot offer an additional match subject to vesting because VI.B. states the maximum is 6% that may be matched. However, this may only mean you that match up 6% and have it be safe harbored from ACP. Additional matching might be subject ACP or eliminate all of the match from safe harbor status. (Why you would want to offer both a safe harbor & non-safe harbor, I don't really know. But that's the question I need to answer). My interpretation is that you cannot offer an additional match on top of your safe harbor match.

Thanks in advance for your help!!!

If an employer sent a health insurance company monies, the insurance company deposited that money in its account, is the interest earned from those monies considered a plan asset?

Does the 20% withholding requirement for "eligible rollover distributions" apply to amounts distributed to the IRS to satisfy a tax levy on a participant's account? A citation to the applicable authority (if there is any) would be much appreciated. Thanks.

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If a self-employed person amends his schedule C and lowers his income, does he need to change or amend his PST contribution as well, if he paid in the maximum? Does he need to receive a refund of part of his prior year contribution, including earnings?

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bravojk

Is there an available securities law exemption for the participant's interest in a voluntary, contributory ESOP?

Plan sponsor dissolved business in 1997 and decided to terminate DB plan. Standard terminaton. Now that we finally have all IRS and PBGC approvals, we are proceeding with distribution of final benefit amounts.

But the custodian of the funds does not do 1099's. Neither do we (actuary). Since there is no longer a corporate entity (I think), who is repsonsible for the 1099's and IRS reporting? Stupid question, since the sponsor is responsible. (The plan is self-trusteed.)

The practical question is what suggestion can I give the former owner of the company to get the tax forms done?

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