Are there any problem areas involved in changing custodians?

We have land in a custodial IRA account, and are considering switching to different custodians (banks).

Has anyone ever done one of these transactions?

Thanks!

Is there any way to "fix" a defect in a 457 plan? Specifically, the 457 plan participant made a deferral election, but the employer failed to follow the election. Now the year has closed, the error has been discovered, and the employee would like the deferral election to have been followed. Could the employer make the contribution on behalf of the employee and issue a corrected W-2? In such a case, the employee would reimburse the employer for the contribution.

A company has a frozen PS and MP. Plans are terminated and distributions are processed to all participants. The month following the distributions, the company starts a 401(k) SIMPLE.

I believe the company should have transferred the balances to the 401(k) SIMPLE as this is a successor plan. Is this correct? What actions can the company take to try and correct any plan violations?

We have a plan that has a provision that states" Any other Employee shall be eligible to become a Participant at the beginning of the first month following completion of a Year of Service; provided, however, no such Employee shall become a Participant who had attained the age of Sixty (60) years when his service commenced."

Is this provision legal? If it is not, and the plan has not been amended to removed it, how is it applicable?

The long-proposed COBRA regulations have gone final. IRS issued

them today. Hypertext version is online at

http://www.benefitslink.com/taxregs/54.4980B-final.shtml (click)

An overview, from the preamble to the new final regs:

The regulations are intended to provide clear, administrable

rules regarding COBRA continuation coverage. The regulations

give comprehensive guidance on many questions under COBRA,

with a view to enhancing the certainty and reliance available

to all parties -- including employees, qualified

beneficiaries, employers, employee organizations, and group

health plans -- in determining their COBRA rights and

obligations. The guidance is designed to further the

protective purposes of COBRA without undue administrative

burdens or costs on employers, employee organizations, or

group health plans.

For example, the regulations:

* Prevent group health plans from terminating COBRA

continuation coverage on the basis of other coverage that a

qualified beneficiary had prior to electing COBRA

continuation coverage, in accordance with the Supreme Court's

decision in Geissal v. Moore Medical Corp.

* Give employers and employee organizations significant

flexibility in determining, for purposes of COBRA, the number

of group health plans they maintain. This will reduce burdens

on employers and employee organizations by permitting them to

structure their group health plans in an efficient and cost-

effective manner and to satisfy their COBRA obligations based

upon that structure.

* Provide baseline rules for determining the COBRA

liabilities of buyers and sellers of corporate stock and

corporate assets and permit buyers and sellers to reallocate

and carry out those liabilities by agreement. This will

significantly enhance employers' ability to negotiate and to

plan appropriately for the treatment of qualified

beneficiaries in connection with mergers and acquisitions,

while protecting the rights of qualified beneficiaries

affected by the transactions.

* Limit the application of COBRA for most health flexible

spending arrangements. This will ensure that COBRA

continuation coverage under health flexible spending

arrangements is available in appropriate cases without

requiring continuation coverage where that would not serve

the statutory purposes.

* Eliminate the requirement that group health plans offer

qualified beneficiaries the option to elect only core

(health) coverage under a group health plan that otherwise

provides both core and noncore (vision and dental) coverage.

* Give employers, in determining whether the small-employer

plan exception applies, the option of counting by pay period

rather than by every business day, and provide, for that

exception, for the consistent treatment of part-time

employees through the use of full-time equivalents.

This topic is "closed," which means that messages cannot be added to it, because it is only intended to provide an anchor to the full text of the final regulations; to post a message about the final regulations please click on "Start a new topic" below.

[This message has been edited by Dave Baker (edited 02-03-99).]

How do you terminate a SIMPLE IRA? Are you required to continue the SIMPLE IRA for the entire year, or can it be terminated by giving a 60-day notice? This question has arisen in an acquisition context where the acquiror would like to bring the acquired company's participants into its plan, but the participants are presently (for 1999) covered by a SIMPLE IRA. Certain provisions of Section 408(p) seem to indicate that it would have to be continued for all of 1999.

401k_question: It seems that employers are more concerned about their liability upon implementing a 401(k) plan than ever before. The vendors say offer employee education, a diversified and quality monitored fund selection, get a bond and that's it. However, as one employer put it, "Today I have no liability because I do not have a 401(k) I want to offer them this benefit, but they are "street smart" now and I want to know exactly what the risks are." A co-trustee can help but isn't it the employer's ultimate liability? Is there anyway he can cover himself completely from lawsuits, such as insurance specific to a 401(k) lawsuits? I can't find anything. This account has one officer and one CEO (the same). Any thoughts?

What does this mean Contributory Roth Ira for 1998 should be set up by 4/15/99. Does this give you a tax break if I contribute $500-2000 by the deadline.

Does anyone know the current status of the impending restatement of plan documents in the 1999 plan year? Has anyone heard any talk of extensions by the IRS and/or opening up of DL program post '98 approval? Time is running short if we're to redo all plans by 12/31/99 (I know that we all have laser printers in 1999 rather than daisywheel printers in 1985, but time is running short!)

Seriously, has anyone have any insights as to when we can expect to start generating documents for ALL of our clients?

My understanding is that cross tested formulas are discretionary. Cross testing is simply the allocation method.

Question: A super integrated formula provides for x% on the first say $54,000 of comp and xx% on comp above that. It would seem that this contribution is required each year. Can someone explain it to me?

I am a key employee in a small business that has great potential. We are publicly traded on the OTCBB. My boss has promised an ESOP for a long time now. He has asked for the input of all the key employees, but does not want us to collaborate on our input. I have no knowledge of standard ESOP models, and need to get some information so I can negotiate a favorable ESOP. I have looked in book stores to no avail. Does anyone have any suggestions as to where to find good info on ESOPs, or have advise or experiences to share with me? Thanks, the Spanish Prisoner (It's a good movie, check it out).

We have a participant who exceeded the 402(g) limit for 1997 and 1998. The vendor has told us that the correct manner to correct the problem is to issue corrected W-2s. Everything our payroll department reads indicates that the vendor should refund the excess contribution (and interest) and issue a 1099-R. (Note: today is 2/2/99 so they'll be late) Has anyone ever dealt with a problem like this and are there sources on the net that can help us? The vendor's general counsel is pushing the W-2 solution, citing Treasury Regs that we can't locate.

I have been unable to determine if 1) an employer can have a SEP and a money purchase plan at the same time, and 2) how the SEP contribution affects the deductibility of the money purchase plan contribution.

The study guide for the Fall 1997 ASPA C2-DC review course states that "a deduction for a contribution to a SEP reduces the amount of deduction otherwise available for contributions to a qualified defined contribution plan", and reference code section 404(h)(2). 404(h)(2) discusses the effect on a stock bonus and a profit sharing trust of a contribution to a SEP plan, but not a money purchase plan. Since the code section does not specifically reference the effect upon money purchase plans, I am hesitant to think that it applies to this type of plan. Any thoughts or experience with this issue?

I have read a number of older posts that indicate that in order for the employer to receive credit for prevailing wage contributions to a plan, those contributions must be fully vested. It is my understanding that this is generally true for a defined benefit or money purchase pension plan. However, according to a knowledgeable DOL person I spoke with a couple of years ago, it is NOT necessary to fully vest profit sharing contributions in order to receive full credit for such under Davis Bacon. The DOL Field Operations Handbook says that compliance with ERISA vesting requirements is all that is necessary. See 15f13(e). It also provides that while profit sharing contributions are not ordinarily creditable toward the employer's prevailing wage obligation this can be remedied by quarterly contributions to a plan or to an escrow account. Does anyone have the bottom line right answer to this issue?

Company A sells Company B, a wholly-owned subsidiary, to Company C. Company A sponsors a 401(k) plan, under which Company B was a participating employer prior to the sale.

Code Section 401(k)(10)(A)(iii) allows for a distribution of elective deferrals in the event of a disposition of a subsidiary, provided certain conditions are satisfied. However, Company A's plan does not specifically provide for such a distribution. Must Company A's plan be amended to provide for the distribution, or can the distribution be made without amending the plan?

Company A wants to clear out the accounts of the employees of Company B. Company A would like to avoid amending the plan because the plan is a prototype document, and such an amendment would cause it to become an individually-designed plan.

I have a client who used his account under a DC plan to purchase a substantial share of the stock of a start-up company several years ago. The client then left the old company to run the start-up and has built it into a successful company. The old company is terminating its plan and the client wants to know whether he should roll the stock over into an IRA or into his DC plan in the start-up. Assuming the stock will appreciate over the next few years, can we take advantage of the net unrealized appreciation rule of IRC 402(e) to avoid future appreciation? Should we consider a transfer to an IRA and then a Roth coversion?

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Now that governmental 457 plans must set up a trust for the exclusive benefit of its participants and beneficiaries, are they allowed to distribute benefits to alternate payees via a domestic relations order? Am I reading too much in to the exclusive benefit requirement? A gov't 457 plan is not subject to ERISA and is not qualified so the QDRO exception does not seem to apply here.

I have been told by our FSA administrator that when on maternity leave, an employee is no longer considered an active employee, and therefore, not eligible to continue her Dependent Care FSA. However, maternity leave (time before delivery and until doctor's release back to work) is considered disability. When an employee is out on disability, why would that disqualify them from participation? I can understand once the employee is released back to work, and she chooses not to return and FMLA kicks in, that during that time period she would not be eligible. Appreciate any help.

may a participant deduct on their personal tax return the interest they are paying on a loan they are repaying into a pooled account if the source of the loan is from 401k moneys. i know that er moneys loaned and paid to a pooled account are deductible but not sure if there was a distinction if it was from 401k moneys.