I guess I'll answer. The simple answer is because a) it is 10% cheaper and b) it only offers a benefit so long as the individual is employeed and giving a benefit to the employer. And changes in logevity mean that it costs less to provide as mortality goes down (the reason for the recent changes in the PS-58 tables).

I don't know about you, but it seems to me that when there is a death of a wage earner (which someone covered by group term is going to be by definition), there is a need for the benefit that is fulfilled.

As a CPA in a tax practice, I've seen this "worthless" benefit used a number of times just in the past year.

An employer makes group term life insurance for spouses and dependents available in the amount of $5,000.00. If the employee selects this coverage, the employee pays for this coverage out of after tax dollars. The employer does not pay any part of the cost of the coverage. Is there any tax effect to the employee of purchasing this coverage?

Most disability plans that I have seen pay 2/3 (or between 65-67%) of regular salary. The only plans that I have seen that pay higher than this are those negotiated by union contract, especially fire/police contracts. I know that in Phoenix, the police contract used to be for 100%, because so much overtime pay was lost if an officer went out on disability that paying 2/3 of regular salary would be a severe cut in pay. This was 3-4 years ago and a new contract may be in place, but that is the information I had at that time.

Have you asked your HR department about the discrepancy or are YOU the HR department!!!

Good luck.

Sheila K.

I have a PSP that allocates contributions and forfeitures to each eligible participant in the same proportion to which his or her Hours of Service bears to the total Hours of Service of all eligible particpants. I think I've got a design-based safe harbor under 1.401(a)(4)-2(b)(2)(i) --allocation of the same dollar amount for each uniform unit of service (not to exceed one week) performed by the employee during the year. I've got someone questioning whether this is a design-based safe harbor--who is right? Any help is appreciated.

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LKP

Do e/ee deferrals under 401(k) count against e/er's 15% contribution limit?? In other words, where e/er maintains PSP with 401(k) salary deferral, would deferrals by other e/ee's keep highly compensated e/ee's from getting to 30K limit because of overall 15% deduction limit on e/er's contribution??

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I attended a seminar in which the presenters said that by "rule 72t" I could take after-tax contributions from my 401K, and roll them over into a Roth IRA. I questioned them about this, and they said they would cover that later in the seminar, but they did not get back to it, and I did not get a chance to question them after the seminar was over.

I called Fidelity (my 401K administrator) and asked them about this. They said that I could do this type of rollover. I then called Waterhouse, where I have a Roth IRA, and asked them the same question. They said there was no such thing. I figure I can open a new Roth with Fidelity, and let them roll the after-tax money into that Roth (they said they could), and then transfer it to Waterhouse later, but I want to make sure its legal. I'm talking about moving roughly $15K, and I'm 42, so if it can grow in a Roth vs a 401K for 17 years, I thinks its a great deal.

All the searches I've made about rolling money into a Roth, find discussions on the conversion from a traditional IRA to a Roth. I cannot find anything "official" that says I can do what I'd like to do.

Does anybody know anything about this?

If there is any info, please e-mail me at megsdad@lucent.com

Thanks

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Mark Johnson

Do e/ee deferrals under 401(k) count against e/er's deduction limit of 15% of compensation??

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My company has four non qualified defined benefit plans, however, they just established a 401(a) plan and a 457 plan. They want these plans to meet IRS qualification status. There is also consideration being given to allowing employees to roll their DB monies into these new plans. If the DB monies were all withheld on a pre-tax basis, even though the DB Plans' were not qualified, would rolling those monies over into the new DC Plans affect the qualification status of the new plans?

Computation of minimum distribution period

I have a program that will compute the minimum distributions. I am curious, however, how does one compute recalculation for one annuitant and non recalculation for the other participant. I have copies of the IRS tables, but not the q 's. Does anyone have any experience in computing actual distribution periods.

Thanks for your help. Mike.

A company with an existing medical plan wants to establish a new medical plan for 3 of its executives which will provide for greater benefits than those offered under the existing plan. Currently, the company's cafeteria plan allows for pre-tax contributions of an employee's share of premiums. Under the new plan, the 3 executives will have a higher premium than all other employees, who will remain under the existing plan. Assuming that the 3 executives are all highly compensated participants (but not the only ones), will the fact that they will contribute a greater dollar amount in premiums to the cafeteria plan cause the cafeteria plan to be discriminatory? The medical plans are fully insured, so there is no discrimination issue under Section 105(h).

[This message has been edited by Scott (edited 06-07-99).]

I would like to know what certifications are more valuable to an employee or employer, CEBS, CBP, CCP, PHR, SPHR, other?

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L T

Active employees may still defer into a 401(k) plan whether they are over 70 1/2 or not.

As far as the RMD rule, recent legislation had allowed those that reach the age of 70 1/2 and who are not considered a 5% owner to defer taking RMD's until such time as they terminate their employment. However, this should be incorporated into the plan document.

What are the reasons for 401 and 415 limits on defined benefit plans?

 Is it, at least in part, to limit the amount that employers can reduce their tax liability by putting profits into a qualified plan?

 Is it to limit the retirement income available to executives as compared to other employees?

 Is it to limit the tax qualified investment earnings available to employers for the purpose of funding the retirement plan?

A relative of mine has been on COBRA coverage since she left her job to care for her mother. Her last month (18th) month of coverage was May, 1999. During that month, she went for a physical and cancer was disovered. She underwent surgery and had a radical mastectomy. The surgery was performed in May. She will obviously need more medical attention / follow-up and possibly some radiation. Is there any way for her to extend her COBRA coverage - what options does she have at this point?

MPPP has 1,000 hours and last day of plan year requirement. E/er required contribution is 10% of compensation. E/er is going to amend MPPP to freeze contributions and change contribution percentage for current plan year to 0% of compensation. Does anyone see any problems with this?

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I understand that the distributions are tax free (under the qualifying rules of the Roth). However I wonder if the Dividends/Capital Gains paid in, for instance a mutual fund, that are reinvested are taxable. Can somebody answer this maybe simple question for me.

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Bernard Hamburger

Treas.Reg. 3121(v)(2)-1(d)(2)(i)© does not define what is a reasonable rate of interest for taking into account income attributable to an account balance plan (for purposes of the non-duplication rule). What authority could be used to test a rate such as the long-term applicable federal rate or, E.G., 110% of the LT AFR? Considering that the AFR's, especially the mid-term AFR, are relatively conservative, what are the guidelines?

Can anyone advise if a participant who has terminated employment and has an outstanding loan balance can repay the loan after termination? If so, what is the time limit in which he has to repay? The reason is, I have a client who wants to send a letter to terminated participants offering them a chance to pay their outstanding loan amount. Can they do this?

Thanks!

I am a TPA. One of our clients was taken over by a larger parent company. The Flex plan only affects the client. Does their plan need to be restated to be in compliance?

Does anyone have any experience with a 401(k) plan that has eliminated plan loan availability?

I am curious as to what you think would be the reaction if we eliminated plan loans - but adopted a safe harbor plan with the safe harbor match and a discretionary profit sharing contribution. Our current design has a match and profit sharing - together in the last few years if participants contributed 4% they would get about 7% in employer contributions to the plan.

If we went with a safe harbor match, old participants would not care too much about the immediate vesting - would they give much credence to the guaranteed 4%? How about if we added, at the same time, some type of broad-based stock plan - like an ESOP or maybe stock options for all employees? We'll keep hardship distributions available so in a real pinch they can get something.

With a safe harbor we obviously don't need to entice people to participate (although we do want them to) and the loans are just a bear to administer and are the source of lots of complaints (besides being a stupid thing to do - but if people want to do it - its their decision). Besides the screams from the few who abuse the program - how negatively would this be perceived?