In the current issue of TIME magizine (January 11,'99) there is mention of a new provision to 401(k) plans. It says, "taking effect this month, companies no longer have a financial incentive to make new employees wait up to a year before becoming eligible for these [plans]. What is this referring to???? It doesn't sound like the harbor provision or the using of last year's discrimination test for this year's HCE contrib limit. Any ideas???

I was wondering if anyone had information on getting a loan from a profit sharing plan that is in the process of being terminated. Our company has been bought out, and the new company is in control of it. It still has the same administrator, but nobody seems to know whether or not I can get a loan from it for the downpayment on a principal residence. It has been sitting idle since December of 1998. Can anyone help me?

On a brand new 401(k)Plan if an employee is making over 80,000. do you need to check on his prior year compensation assuming he was at this company in the prior year?

I am a physician working as a contract employee of a for-profit corporation and physicain partnership. I will be eligible to participate in the 401k plan in July, but will be required to contribute the ER match portion out of my gross wages (pre-FICA) in addition to my EE contribution. The corporation pays the ER portion of my FICA. How does the definition of EE and ER differ in respect to the 401k plan?

I am new to the HR field, having been a labor/employment attorney for a couple years before I joined my current company. As most HR people know, the job market is extremely tight right now. In order to attract more blue collar workers who are lured by dollars rather than benefits, I want to propose to our company that we consider a policy whereby new workers can elect a higher starting hourly rate in exchange for waiving certain benefits such as medical and dental insurance. At the right hourly increase, this is a win-win situation. The company attracts more workers and there is a cost savings in insurance premiums. The employee gets more in his or her paycheck. I am looking for other companies who have considered and/or implemented this kind of policy, in order to have my facts before I make the proposal. It might be a stupid idea -- like I said I'm new to this. Any info anyone has would be most appreciated. Please email me at croach@adesa.com. Tx.

I am trying to locate the full text of ERISA on-line. Does anyone know if there is a website that has published the Act in its entirety? I searched the GPO website and could not find it, although I may not be searching correctly. Thank you.

How is the 401(a)(17) $160,000 limit applied in the salary reduction context? For example, suppose the plan allows a 6% salary reduction. The employee makes $200,000 and elects a 2% contribution. Suppose the plan allows a participant to change their election monthly. We have been advised that when the employee reaches the $160,000 compensation level, that the employee's allowable contribution drops to 0%, even though the employee did not make the maximum deferral under the plan for most of the year? It seems to me that the employee would be limited by the lesser of the 402(g) limit and 6% of $160,000, or $9600. And that the employee could raise his or her percentage to 6%, even though the employee at that time was receiving over $160,000 for the year, since the employee had not yet contributed his $9600.

A participant exceeded the salary reduction limit of 15% of compensation for 1998. Should the plan return the excess, plus gains and issue a 1099-R in the same manner as a participant exceeding 402(g)? How does this affect the discrimination testing. Is the excess included in the ADP test? Does the employer match on the excess deferral?

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lisa

When paying estimated taxes, 4Q98 due Jan 15, 1999, will there be any penalties associated with a large over payment? This question is due in part to unresolved issues surrounding my converted Roth IRA's. I'd rather pay them more than less just to cover my options. Thanks.

I have heard ERISA says it should be 15 days after the end of the month of the paycheck. Where can you go for help with this if it is true and your employer does not respond?

If you have more than one corporation in a controlled group, can you have more than one ESOP, assuming you can pass coverage tests? Can you have an ESOP at Co. 1 with stock issued by Co1, and an ESOP at Co. 2 with stock issued by Co. 2? Something tells me the definition of "employer securities" under 409(l) precludes multiple classes of stock issued by different corporations .

Small DB Plan terminated with PBGC and all EEs paid off. Sole Shareholder was paid balance of Plan Trust after all other EEs paid off. Now one of the NHCE's checks has bounced and Trustee realizes that sole shareholder recd too much $, due to a miscalculation of the "balance in the trust" (because one check had not been cashed). All funds have been rolled to IRA's and there are no remaining funds in Plan and we owe the PVAB of $7,000 to 1 EE. Does anyone have experience in solving this - how to approach IRA custodian (insurance co) and how to approach overpaid HCE? Must they relinquish the excess funds by law?

1) the employer ded limit for a psp is 15% of comp. On a 401(k) is the comp number before or after deferral. Ex: $100,000 payroll, $5,000 deferral. Is it 15% of $100K or $95K?

2) What is the actual employer deduction on tax return. The employer match, the employee deferral or both. Ex: EE deferral $5,000, ER match $2,500. Is the line item $5k or $7.5k limited by 15 percent of question 1?

Basic, but confusing!

Thanks

We are a not-for-profit organization with an existing voluntary 401(k) plan (no employer match) and a discretionary gainsharing plan (a % of gross comp, paid quarterly) for all ee except executives and other HCEs. Could we pay the gainsharing directly to the 401k plan and what might the ramifications be from a testing standpoint? Our plan participation is currently about 30% of eligibles.

Can you put the safe harbor match in place (100% to 3%; 50% on 3% to 5%), but also have a portion of match on top of the safe harbor that is subject to vesting? I am also having trouble understanding the enhanced matching formulas in Notice 98-52. Can anyone explain more clearly? Thanks!

We are revamping our daily 401(k) plan are changing the investment options. We are mapping each existing option to a new option. After the conversion, participants can use the VRU to make election changes.

Any samples which have been useful would be appreciated.

An employer's group health plan will only cover an employee's spouse if the spouse is not covered under his/her own employer's health plan or if the spouse's employer's health plan pays less than 50% (or some other designated percentage) of the premium. Does anyone know of employers who are utilizing this type of plan design? If so, how does it work? How is it received by employees? How was it transitioned in? This type of design could clearly save an employer substantial dollars. Any thoughts or feedback would be appreciated. Thank you.

You need to look at the plan's early retirement provision. If the employee, as of the date he leaves the employer, has the years of service that would entitle him to a benefit (if he were age 55), then he will be entitled to a benefit at age 55.

The amount of the benefit at age 55 may or may not be the amount shown on the statement. Check the caveats on the statement. Is the stement truly showing the participant's accrued benefit? Or is it showing a projected accrued benefit?

Also, note that early retirement benefits are frequently "subsidized" for employees who remain employed until early retirement age (55 in your case). If the participant is entitled to a benefit at age 52, it may be reduced more dramatically than is shown on the statement.

Geta copy of your client's SPD. Some of the answers should be there.

Say I convert at the end of 1998, when the market finishes on a relatively high note, can I recharacterize (or revalue) my portfolio (for tax purposes) if the market goes down (spring '99) and I make no changes to my portfolio mix during that time....or can you only recharacterize if you are beyond AGI limits or some other qualifying factor?

Per news articles posted on Roth IRA we site, I redeemed all shares in a traditional IRA and received a check for a "premature distribution" from my existing traditional IRA. Check is dated 29 Dec 98. According to the articles, I should be able to place the funds directly into a Roth IRA account, within 60 days, and use 4-year tax treatment. However, Janus, Vanguard and Schwab state this is not possible--funds must go into traditional IRA first; and, then be converted to a Roth. This defeats the purpose as I cannot then use 4-year treatment (as stated in the articles). Where can I put this "distribution" from my traditional IRA in 1998 to qualify as a Roth to pay tax over 4 years? All companies I have spoken to state the "conversion" had to be accomplished in 1998 to qualify (redemption and conversion). I am at a loss. Obviously, I have to act within 60 days for the rollover; but, I would like to put it into a Roth for the 4-year treatment. According to the companies, the only option is to place the entire amount in a traditional IRA and convert 1/4 in 99. Any ideas would be greatly appreciated.