At the beginning of this year, our company bought a small company of about 60 employees. The employees of that company currently have a 401(k) plan that they will continue to contribute to until we merge their plan into our plan. When we bring those employees into our plan, will we have to terminate their current plan? I need some guidance as to how to go about this.

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Julie

Some Blue Cross Blue Shield health insurance carriers have demutualized over the last few years and have issued shares of stock to corporate policyholders in the process of converting to stock ownership. Has the DOL issued any rulings on whether that stock is a welfare benefit plan asset that must be sold and used for future benefits or whether it may be retained by the employer as a general corporate asset?

Had an audit today of a one-man MP Plan in the SF Bay area. Never had an EZ audited.

Anyway, the auditor (nice lady, like all SF auditors) raised, to me, a really curious issue. My client is 65+ and has begun distributions. She wanted to know where in the plan it said that he could begin to receive distributions, unless he was "retired".

My initial reaction was "What the hell are you talking about?" except, the document really doesn't address (by my cursory reading) the issue flat out. It talks about when terminated people get their benefits, disabled people, dead people, etc., but doesn't specifically say a person, still employed past Normal Retirement Age may elect to begin receiving benefits.

It felt like arguing "Show me the air, and I'll believe it's keeping me alive". I mean, it's a retirement plan, but "retirement" isn't defined, but Normal Retirement Age and Date are (or course).

Anyone else feel that you actually have to quit working and shut down your business to begin receiving benefits?

Can you imagine trying to defend a practice of not paying a rank-and-file guy against the DOL unless he quits?

We never did agree on the subject (closing letter will be some weeks) but, I argued, the whole document is about getting benefits, and only the special cases when they can be delayed are addressed.

BTW, it's a prototype from a big Illinois company with some smart people working for them.

Assuming a plan year ending 12/31/98, what is the latest date the Top Heavy minimum contribution must be made to avoid plan disqualification?

Can someone provide a cite?

What do I do if a potential new client decides 4/1/99 to set up a new 401(k) plan and wants to use safe harbor provisions? Does the fact that notice was not given by 3/1/99 preclude the possibility of such a plan for the calendar year 99?

Can you tell me if I will suffer the 10% early withdrawal penalty if I take out money from my roth IRA to help pay back a graduate student loan?

Does anyone have a more recent table of the safe harbor definitions of compensation other than the one published March 14, 1994 in Pension and Benefits Week? Thanks

Company A, B and C are related companies. Company D is not related. Company D leases employees to Companies A, B and C (no payroll for these 3 companies).

Companies A, B and C would like to merge their 401 (k) Plan with Company D. Would this create a Muliple Employer Plan?

We currently use an outside software package (Lawson). Does anyone have any comments positive or negative regarding this package? We are also upgrading from the 6.0 product to the 6.1 product. Has anyone recently gone through an upgrade? Does anyone have any feedback regarding this process? Does anyone have any feedback about other payroll processing software vendors?

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I have a partnership 401(K). 3 partners and 2 staff. The plan's adoption agreement specifies "415 Comp" as the comp. definition and I'll be using this comp. for ADP and 415 limits.How do I define "415 comp" for the partners? Deriving "earned income" from K-1 involves several subtractive items. Do I just add-back deferrals to "earned income" or do I add back more?? Also, for deductibility under 404, is the calculation still 15% of "earned income" for the partner portion?? Any direction or help on these would be appreciated!!

I'm having trouble filling out Form 8606. Here's my situation:

In April I converted my traditional IRA to a Roth IRA and made my $2000 annual contribution (to the Roth IRA).

In October, I recharacterized my entire Roth IRA back to a traditional IRA, then immediately converted it all back to a Roth IRA to take advantage of the drop in the stock market.

My question is how do I account for my $2000 contribution on Form 8606? Since the $2000 was already taxed before I put it into my Roth IRA the first time, it doesn't seem right that it would be taxed again as part of my second conversion from the traditional IRA to the Roth IRA.

Any help would be greatly appreciated....

A calendar year 401k plan receives a profit sharing and match contribution after 12/31. If 5500 prepared under cash method is this contribution reported on 1998 form, or in the year received? Does it make any difference if this is a first year filing?

Employer that has maintained a 105(h) plan for over six years without a plan document now wants to adopt a plan document - need the plan document be effective as of inception of informal plan, or can it just be effective going forward (due to fact that 105 does not require written plan document).

Having a child in the 1st year of college, I was thrilled to learn of the $1500 Hope Scholarship tax credit. I was also thrilled with the thoughts of tax free retirement money so I converted my Traditional over to a Roth without realizing I was pushing our combined taxable income over the Hope limit even if I spread out the IRA distribution over the four year period. Is there anyway around this short of recharacterizing the Roth IRA back to Traditional status? I can't believe this is happening!

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Chuck W

Can someone please claify the following:

For family attribution rules to determine HCE for Plan years after 12/31/96, do you apply the effective control test, when the father and adult son owns the company, that is if the father is a 20% owner and the son is a 2% owner with compensation less than 80,000, would the there be attribution between the father and son? What if the son did not own any stock and his salary was less than 80,000, would he be HCE. All that I have read has indicated that there would not be attribution to him from his father if he is under age 21 and as such would not be deemed a 5% owner and as a result would not be a HCE. Can someone verify this?

Thanks.

i am offering a two day study course on the c-1 exam one weekend in May in Albany New York-if interested please e-mail me @ amy.cavanaugh@milliman.com. My last study group all passed with an 8. While I cant offer any guarantees, I think that I have been quite helpful in helping ASPA students prepare for this comprehensive test.

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I will be offering a two day comprehensive study weekend in May. The course will be held in Albany, New York and will address all matters of defined contribution plan administration. For more information e mail me @ amy.cavanaugh@milliman.com

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Will the plan satisfy the ACP safe harbor under VI.A. in this stuation?

3% safe harbor nonelective contributions are made.

Additional matching contribution satisfies VI.B.3. (other matching contributions). To receive these other matching contributions, the participant must work 1,000 hours and be employed on the last day. The other matching contributions are subject to vesting.

The 100% vesting and no accrual requirements do not appear in VI. and the Plan has a 3% safe harbor contributiion.

I understand that only self employed individuals and employers with less than 50 are eligible to contribute tax free and earnings grow tax free. What about a larger employer? Can a large employer establish MSA but there will not be any tax advantages; employer cannot deduct contribution and it is subject to inclusion in employee's taxable gross. Is there such a thing as a non-qualified MSA? Must the employer contribute then to all employees?

I have a cross tested Profit sharing plan covering 2 corporations and 1 sole proprietorship. Each entity will decide how much to contribute to the plan. When determining 415 limits, is the limit computed per entity for each participant, or is the 415 limit determined by counting all compensation from all 3 entities? Thanks for input...