Say you have a 401(k) that is 59% top heavy on 12/31/97. You add a DB on 1/1/98. The DB has no accrued benefits as of 1/1/98, but would definitely be TH on its own on 12/31/98. Since you have to calculate the top heavy percentage using both plans, what date do you use for the DB?

Related question - say this combo is TH now or eventually, and there are people in the 401(k) who are not covered by the DB (both key and nonkey). Say you'd prefer to use the DB minimum for those in the DB. Can you provide the TH for the nonkeys who are only in the 401(k), without running into other problems?

Thanks.

I saw a similar question on PIX, although the situation was reversed. I'd like opinions (or facts) from others.

I have a client who has failed testing the last two years on their 401(k) plan. We have made QNEC and QMAC contributions both years. We are discussing changing (amending) the plan to be a Safe Harbor 401(k) Plan. The plan year is Nov 1 thru Oct 31 (obviously not a calendar year plan). My understanding is the employer must inform the employees of the change on or before March 1 for 1999. Is this only for calendar year plans? If yes, when must my client inform his employees or must the plan be changed to a calendar year? Can he make the change before Nov 1, 1999 since they are technically not in 1999 for their plan?

Does anyone have experience with this issue? I feel as if I have lost all my analytical skills, because I am having a hard time parsing through the Code provisions. Unlike Section 3121(e), which explicitly includes Puerto Rico as a "State" for FICA purposes, the general definitions in 7701(a) of "United States" and "State" do not. Thus, it would seem that Puerto Rican citizens would be nonresident aliens. However, if Puerto Rican income is not U.S. source income, why would Section 933 (which excludes Puerto Rican income) be needed? Are Puerto Rican employees nonresident aliens who do have U.S. source income? Thanks to anyone who can respond.

After posting the preceding message, further research indicates that Puerto Rican citizens are U.S. citizens (although with limited rights); therefore they could not be treated as excludable for 410(B) purposes.

[This message has been edited by Wessex (edited 02-10-99).]

We converted to Roth IRA and had taxes withheld at the time. After discovering we are over the 100K AGI limit we want to recharacterize back to a traditional IRA. Can the withheld taxes be restored to the traditional IRA as well, or are we required to pay both taxes and 10% penalty on this money?

Re-humanization is the process of re-building the business through concentration on the value employees can add if treated partners in the future of the organization. Under re-humanization, corporate values are made to harmonize with employee values.

Benefits are classified as traditional--money oriented and non-traditional --value oriented. The human resource function stops being the "policy police" and becomes a strategic partner of the other business functions. Have you seen concrete examples of re-humanization? Is anyone practicing it?

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A co. has both a 401k and mp plan. if a participant has reached their 415 max through 401k deferrals, should the mp cont take precedence since it is a required cont and subject to minimum funding standards i.e. return enough 401k deferral to allow for the mp cont. even if the doc instructs to return employer cont. first?

i was wondering if someone could tell me why the banks are trying to talk me out of educational iras. I opened one last year and when i went to contribute today, i had 3 people tell me to be careful. I would truly appreciate any and all information, articles and or criticism of this ira as i am trying to do the best for my son as possible. My son just turned two and i am really worried about college expense. Thank you in advance for any wisdom or plain ole' advice. have a nice day...jennifer

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hoottater

An employer allowed an in-service distribution that was not allowed by the plan document. What options are available to the employer to correct this defect if the employee does not have the money to pay back the distribution? I would appreciate any help on this matter! Thanks!

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I understand that there has been some recent rulings that might allow a company to charge more than the "102%' threashold.

Any thoughts?

I was notified in 1/99 that our plan was top heavy as of 12/31/97 due to highly compensated employees having more than 60% of the assets (therefore requiring top heavy contribution during 1998). Our services provider faxed me two letters they say were mailed last year, but I did not receive either one and they are not addressed to me (I am the Plan Administrator). We could have adjusted the plan as of 12/31/97 but now they say it is too late. Is there any alternative to not making the required 3% contribution for 1998???

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CFM

Question: Can a bank or trust company[with valid trust or custodial powers and otherwise meeting the requirements of 408(n)] establish a custodial account to hold mutual funds as a vehicle for the 403(B) plan, or does the custodial account need to be established and maintained by a registered investment company?

Analysis:

Under Code Section 403(B)(7), a qualified employer/sponsor may establish a "custodial account for regulated investment company stock" to provide a valid vehicle for maintaining

investments (in mutual funds) under the

403(B) plan. The custodial account is required to satisfy the provisions of

Section 401(f)(2).

Code Section 401(f)(2) and definitions under the regulations, indicate that the custodian may be a bank under 408(n). Thus, it would seem clear that a bank or trust company which meets the 408(n) definition can be the custodian and hold the mutual fund assets.

My only misgiving about this conclusion is that I have not seen this done in practice, at least where the bank (or trust company) was not affiliated with any mutual fund (i.e., a captive trust company of a mutual fund family).

Please indicate if you agree. Thanks

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michael

Treas. Reg. section 1.401(k)-1(d)(2)(iv)(B)(4) provides that the 12-month suspension of "elective contributions and other employee contributions" that is required as part of the safe harbor for a deemed immediate and heavy financial need includes contributions under "a stock option, stock purchase or other similar plan." Question: Does this apply to any exercise of an option, or only to those which require an actual cash outlay by the employee (such that where an option plan permits "cashless exercise," options under such a plan could be exercised during the 12-month suspension period)? Anyone know of any definitive IRS authority on this issue?

A ISO Plan provides that employees will vest 1/36th for each month of employment following the ISO grant. To avoid having optiobns treated as NQSO because of 100,000 annual limit, may the employer and employee agree to extend vesting schedule? For instance, could the vesting schedule be amended to provide that employees would vest 1/60th for each month of employment following grant.

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It is very frustrating using the Quantech Financial Interface Link with Manulife Financial as you cannot deselect fields of data you do not want to import. It is either all the data or none of the data. Has anyone out there using this link found a solution to this problem. Help!

With the amendment of 457 through the SBJPA of 1996 to add paragraph (g), does this mean that 457(f)assets could be protected from the bankruptcy of the sponsoring entity?

Regards,

David

f a participant loan meets all of the requirements for the interest to be deductible,

(i.e. source is not from elective deferrals, lien on residence, non key person) but the

interest is being paid to their individual/fbo account, is it deductible on their personal

tax return?

in irc 72(p)(3), there is no refernce as to where the interest is being paid.

an married ira owner receiving mrd dies with a trust as primary beneficiary. the trust is not irrevocable at death. must the plan assets be fully distributed within the year following the year of death? any way to avoid, such as a disclaimer by the trustee so the surviving spouse which might allow a rollover?

When the prices go up, the tough get budgeting....With healthcare cost increases several percentage points north of general price trends heading this way, I'm sure many firms are dusting off the plan design/forecasting/budgeting tools they applied annually during the late 80's - early 90's. If you're the chief tool-sharpener at your firm, what implements do you plan to hone first? Do you have your sights set on any emerging cost-management techniques?

On the other hand, if your firm's yawning in the face of impending price increases - maybe because none are in sight for you - can you shed some light on your reasons for calm in the face of the brewing storm?

Facts: Law firm with 6 attorneys (young) and 4 staff (old). New comparability doesn't work. They want the minimum commitment and maximum flexibility. Any comments on this safe harbor 401(k) design? Contribution type (1) 3% nonelective safe harbor to NHCEs only; (2) elective deferrals to lesser of $10,000 or 415 limit; (3) 3% discretionary profit sharing to HCEs only; (4) discretionary profit sharing allocated using permitted disparity (i.e., not trying to use the 3% safe harbor as a base); and (5) discretionary profit sharing allocated pro rata if any 404 room left. Company's maximum commitment is 3% to NHCEs, but HCEs can defer full $10,000 and add to that amount in increments to optimize disparity.

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RWS

IRS Notice 98-52 makes it clear that 401(k) plans that are in effect and have fiscal years beginning on or before April 1, 1999, must give Safe Harbor notices no later than March 1, 1999, in order to take advantage of 401(k) safe harbor treatment for 1999.

However, is it safe to assume that a new (calendar year) 401(k) plan can be adopted long after March1, and still elect safe harbor status for 1999? (e.g., sponsor adopts a calendar year k plan on November 1, 1999 - this plan can elect safe harbor treatment for 1999 - right?)

How about an existing calendar year plan that was not a k plan until it is amended on November 1, 1999, to add k features. Can this plan elect safe harbor status for all of 1999?

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