A client is terminating an ESOP. May the employer eliminate stock as a form of distribution and instead elect to pay everyone in cash? Any thoughts? Thanks.

On Jan 7, 1998, 6th CCA decided the above

case concerning the issue of whether an

employer may cancel life health care offered

to prospective retirees as an inducement for

them to retire. Does anyone have knowledge

as to status of this case before the USSC,

the schedule for briefs and oral arguments,

and whether there is any organized retiree

cooperation supporting the position of

retirees. Respond to rwseas95@ccnet.com

How do you handle the situation if someone overfunds their SIMPLE IRA (put in $12,000 of deferral instead of $6,000)? How is the money refunded? 1099?

Company has a service based restricted stock award that lapses after a straight 6 years of service. Exec covered in plan goes to sub after 4 years of service. Plan defines participation to continue if he moves to sub (no forfeiture). Parent wants to be reimbursed for 2 years of service from sub for time exec spends there. Parent wants to condition the distribution of the shares at the end of six years on reimbursement to the parent for the 2 years of service at the sub. Market price of shares may only be determined at lapse. Parents tells sub to pay market price on day of lapse, or no shares for exec. Any issues under Section 83 restricted property? Is it a non-lapsing condition?

The IRS has indicated a concern that although all governmental section 457 plans must be amended on or before January 1, 1999 to meet new trust requirements, many employers are unaware of this requirement. An article from the October 19 RIA Pensions & Benefits, which discusses what the requirements are and pitfalls in implementing them, is now available online by clicking here.

Re:FRANK V. AARONSON et.; al. CA 2nd 96-9456 decided July 18,1997

The Congress has recognized that key points of law were overlooked or misapprehended in FRANK V. AARONSON. The Court of Appeals decison in this matter has prompted a specific legislative "clarification" that the early distribution triggering events of paragraphs (7)(A)(ii) and (11) of section 403(B) DO NOT apply to eligible rollover distributions. Section 1601(d)4(A) of Taxpayer Relief Act of 1997 as amended by Title VI Section 6016(a)(2)(A)(B) of Internal Revenue Service Restructuring and Reform Act of 1998.

Why are 403(B) carriers still requiring an early distribution triggering event before one may effectuate a rollover.?

Does anyone know of a resource I could look at or have an answer to the following?

FACTS:

A Professional Employee Organization (PEO) is in existence to lease employees to other companies and handle the benefits of those employees. Let's say the PEO leases employees to company A and to company B. A and B are unrelated companies and neither A nor B sponsor a qualified plan. The arrangement prevents A and B from having to worry about providing benefits and administering those benefits - the PEO handles those issues. The PEO wants to install a profit sharing plan with a 401k provision for it's employees that it leases to A and B. A wants to fund a 3% of pay profit sharing contribution to A's people leased from the PEO. However, B does not want to deposit profit sharing for B people.

QUESTION:

Is the plan of the PEO a multiple employer plan? If so, then it would be no problem for A and B to do their own thing with regard to profit sharing because testing is done separately.

Any advice would be appreciated. Thank you.

I just got the Quantech 5.0 mailing this week. There were some good surprises on the features list, like "unlimited money types" ans "internet access for participants". However, there were some bad surprises: divisionalized NDTs was not on the list. Anyway, I'd like to know if there are any "beta" testers out there for Quantech 5.0 that have some feedback on the new features.

Does anyone know of any reason that a rollover from a qual. plan to an ESOP can't be used to purchase employer securities?

How are you explaining this Plan to Employees in the SPD - as far as the Classification Groups and the way the contribution is allocated? Since these Plans are in general not favorable to the NHCEs I wonder how to explain it without antagonizing the NHCEs.

(Assuming they actually read the SPD)...

In the case of a 403(B) with employer contributions only and where the participant receives a statement each pay period indicating his or her account balance, is it appropriate to use the entire years salary to calcuate the employer's contribution for the month, or should compensation be prorated for that period? Is the account statement merely for book keeping purposes?

What ideas do you have to reduce (or eliminate) the IRS penalty.

A 1994 5500C/R was filed for a 40-employee profit sharing plan indicating that there were 2 employees who terminated vested. No SSA, however, was attached, due to an oversight by their administrative firm (since fired).

About a year later, the IRS sent a form letter asking for the SSA. The company sent in the SSA.

This year, the IRS sent letter(s) to the company indicating a penalty of about $7,500 ($25 per day times 300 days, roughly), plus interest. Naturally, the company ignored the letter(s), until the IRS sent a Notice of Intent to Levy. Then, the company got interested.

What do you think of the following issues to raise with the IRS.

1. Shouldn't the penalty should be $1 per day per participant (hence about $600 plus interest) rather than $25 per day. (I'd probably be satisfied with this result.)

2. This isn't material. The account balance for Participant Number 1 is about $50 (he still cannot be located). The account balance for Participany Number 2 is about $9,000; it was paid in 1996, and he is the brother-in-law of the owner. (I'm stretching here.)

3. There are extenuating circumstances. The Chief Financial Officer (responsible for the Plan around that time) died in early 1995. The business owner is ill (heart condition, surgery). Also, the administrative firm was incompetent and has since been fired. (I'm stretching here.)

[Of course, the company could go after the prior adminstrative firms for damages, but that's another matter.]

Thanks

Has anyone moved 4.1 Quantech from a Gupta database network to a standalone pc with an Oracle personal database? I am curious about any "glitches" in data conversion you experienced, if any. Thanks

How do other companies celebrate employee birthdays? We currently host lunch, exchange gifts, and give a monetary bonus for each employee. Our company is growing and we would like to change the policy and would like help in communicating the change to employees.

I was talking to the walk in CAP coordinator in Baltimore recently about an appropriate correction method for an ACP failure thinking that we would ultimately have to make QNECs and he said something that surprised me. He said that as long as the two year correction period under APRSC had not elapsed we could correct by making a refund as if we were in the year following the year of the failure. Has anyone else had similar conversations with any other IRS officials? Did I just catch him on a "good" day or is this the way the IRS is formally interpreting what you can do during the two year period for correcting significant errors under APRSC?

I cannot be alone. I need a contribuiton report that I can use to reconcile all daily contributions received by our office. The ledger reports separate by account and offer no totals. The summary of accounts reports lists all participants/plans even though they did not have any activity for that day (too long). Any suggestions or reports out there? Maybe we are trying to do Trust Accounting that the system cannot do?

I am writing a sick time policy for our company and am wondering what other companies offer. We want a liberal policy, but our current policy of "sick time as needed" has been taken advantage of by a few. Any suggestions will really be appreciated.

I've checked pub. 502 and did not get an answer....does anyone know if laser surgery to correct eyesight is a covered expense for a medical reimbursement account?

A tax deferred annuity is a type of 403(B) plan. But 403(B) plans also include tax deferred custodial accouts, as set forth in Internal Revenue Code section 403(B)(7), certain other plans maintained by churches, and some grandfathered governmental qualified plans which include 403(B) features.

I work for a small employer who has a supplemental life insurance plan. They take employee contributions for this plan after-tax. I would like to switch it to pre-tax but have seen conflicting information about whether or not supplemental life insurance plans qualify. Please clarify.