My wife and I converted Rollover IRAs to Roth IRAs in December 1998. At the time we were working/living in different states. How is it determined which state gets the roth ira conversion tax money? Does it matter when the conversion took place and when I moved out of the state where my wife resided? How does the 4 year tax benefit work if you move out of state?

Situation #1: C-Corp has only one "employee" who is also the 100% shareholder. Since a 105 plan has to benefit "employees," can sole shareholder set up a 105 plan in which he pays all his uninsured medical expenses thru the 105 plan and the corporation takes the deduction? My question is, is the sole shareholder an employee for purposes of IRC 105 even though he does not take a salary.

Situation #2: Same company, same sole shareholder. I know there is a discrimination test under IRC 125 regarding key employees. I have been told that there is no exception for corporations where the only employees are also key. E.G. the discrimination test would automatically fail, so this type of company cannot have a 125 plan. I have done a lot of reading and cannot find anything definitive that says a 105 plan will automatically fail its discrimination test if all employees also happen to be key/HCE. In the case of my sole shareholder "employee" the test would automatically fail. 401k plans have a caveat that a company of only HCE's and no NHCE's will NOT automatically fail the ADP test. What about 105 plans?

Situation #3: From the reading I have done, it does not appear that a 105 plan has any IRS notification requirement upon installation (e.g. you don't have to notify the IRS that you have installed a 105 plan). Is this true?

Any help would be appreciated, thank you.

Is there anyway to correct a failure to withhold? It appears that (1) the plan administrator is still liable to pay the 20% to the IRS; (2)the employee's 1099R should show no witholding and he/she will receive no credit; and, therefore, the IRS will receive 40% of the distribution. Or could the plan show the 20% on the 1099R and recover this payment from the employee?

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I'm confused. With the 98 changes, is there still a five year period on converted dollars to Roth IRA that is separate from the 5 year non-exclusionary period based on my first contribution? example: If I open Roth in 1998 (with contribution) then convert traditional IRA dollars in 2000, am I penalized on withdrawal of converted money prior to 12/31/2004???

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B Ryan

Some of the information necessary to perform the MEA calculation is not available to the employer unless the employee provides it (i.e., amounts previously excludable while the employee was employed by another employer). Thus, unless an employee complies with a request from the employer to provide such information, the employer cannot accurately run the MEA calculation and risks violating 403(B).

An employer is considering making a request for this type of information from its employees and telling them that if they do not provide it by a certain date, they will be prohibited from making further salary reduction contributions to the 403(B) plan until they provide the information. Can the employer do this? It doesn't seem right to me, but if this can't be done, what other steps can the employer take to get this information from the employees?

Any help would be appreciated.

I frequently have used the prototype provided by the investment provider, for a plan, for example, Aetna.

Does anyone know of a document service (and phone and address if you have) that can provide prototype plan documents that are not investment company specific (I assume for a fee)? I have a situation where the trustee is making all the investing decisions and buying individual stocks, bonds etc and wants to use a prototype.

Any help would be appreciated.

Has anyone heard any recent developments on offering a stable value fund as an option in a plan meant to comply with 404©. The fund would be one of eight or more options and prices and allows withdraws and buys daily. All options under the plan will allow at least monthly changes.

Can I amend the allocation section of a non-standard prototype for cross testing allocation and submit to IRS.

My income is under the $100,000 limit for IRA contributions and my wife earned a minimal income of around $500 reported to us on a 1099-MISC statement. I read somewhere that a spouse can contribute up to $2000 in an IRA for a non-working spouse. Can I make 1998 Roth IRA contributions of $2000 for both myself and my wife ... regardless of her income?

Is anyone interested in starting an informal virtual study group for the CEBS courses? I began taking the classes last year and would be interested in finding others on-line who are going for the CEBS designation.

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Belinda Fulco

A plan's fiduciaries have decided to move the plan's assets to another provider. Some assets are invested in GICs, and a penalty will apply to some participants to get out of these contracts. The total dollar amount is small, but the employer wants to pay these fees for the participants as it is not their fault the plan is moving to another provider. Would these fees be considered fees that can be reimbursed? The plan document allows the employer to pay fees that relate to the ordinary and necessary administration of the plan. Is this an administrative fee due to moving or a charge against the earnings of the GIC, and therefore similar to an asset management fee of a mutual fund. Any DOL opintions letters in this area? Thanks.

The Small Business Job Protection Act added a new section under 457(e) which allows for contributions to volunteer firefighters. However, there is little or no guidance from the IRS on what type of plan could be used to fund the contributions. Has anybody had any experience with trying to set up a plan for volunteer firefighters?

[This message has been edited by rkanar (edited 02-16-99).]

Lets say you have a premium only cafeteria plan for converting employee contributions for health plan benefits to pre-tax instead of post-tax contributions and your health plan is an insured plan. If the employer pays the entire premium for highly compensated employees but only pays a portion of the total premium for every other employee, do you have a discriminatory 125 plan? Obviously, the HCEs don't need the 125 plan and won't use it. We could gross up the HCEs (ie increase there salary so that they must elect like the nonHCEs) but we don't want to do that if we don't have to.

the non-trustee partner would like to become the rep (and recieve commissions) on the companies 401(k) plan). The company provides brokerage/advisory services to their clients and this is the companies own plan. Are there any prohibitions? Is this a conflict of interest? Thank you.

In June 1998, I converted a traditional IRA, then made a $2,000 1998 Roth contribution to the same account. I want to make a 1999 Roth contribution in the near future, but there is a (small) chance that my 1999 AGI will exceed the limit. I assume if my AGI did exceed the limit, I could convert my 1999 Roth IRA to a traditional IRA. Should I go ahead and make the contribution now, but to a separate IRA account? Thanks for any advice.

Am I correct in assuming that once a plan year has ended and an employer decides he wants to change the match formula for his 401(k) plan for the plan year that just ended, that he has 2 1/2 months after plan year end to make that amendment?

We currently use the SunGard STATs recordkeeping system and are considering converting to a new system.

All of our plans are balance forward, but we are planning to go daily in the future.

Any pro/con comments for Quantech, Datair or whatever else you use would be appreciated. Thanks.

The company is a C corporation. The ESOP purchased stock in 1994 with the proceeds of a loan. The ESOP again purchased stock in 1998 with the proceeds of a loan. The ESOP used dividends paid on the 1994 stock to make payments on the 1998 loan. Obviously the dividend is not deductible. However I also believe that the use of such dividend would be a prohibited transaction. But I am getting mixed answers.

The exemption for ESOP loans under 54.4975-7(B)(5) does not allow dividends paid on company stock other than dividends paid on the collateral stock for such loan to be used for debt payments. IRC 404(k) expands acceptable sources of repayment without violating the prohibited transaction exemption to dividends paid on allocated shares purchased with the proceeds of the loan being paid if other requirements are met. Therefore, does the use of such dividends cause a prohibited transaction? If so, what should be done to correct the problem?

What benefits does your company offer its executives who may be working outside the US (Europe)but continue to be US citizens? Who are the vendors?

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Thank You. Jodi

Where can I find additional help in determining just how much tax I will pay when converting my tradional IRA to a Roth?

I am trying to find some type of convient form or way of figuring the tax.