Two C Corps (A&B) are in the same controlled group under 414. Each maintains a separate health care spending account with different maximum contribution elections defined by the respective plan terms. Per 125(g)(4) ees of A and B are treated as under a single employer. What happens if an ee in B elects $2000 contributions to health care, and then moves to A which only has a maximum $1500 election? EE can still seek reimbursement for expenses incurred while at B, but what if ee wants to continue to use the $2000 maximum from previous employment? Any other issues or problems?

What exactly does a Simple 401(k) have to file with the IRS annually?

A little background:

1. In Jan, my employer stoped the 401k program. This was done without any prior notice to the workers.

2. By February 1 the plan had be fuly liquidated, and informed us that the fund were had been placed in a money market account.

3. We were not asked or given any options or information.The excuse given was tat we had change payroll companies which meant we could not keep the 401k. (this we discoved was untrue.

4. The new plan didnt start until Sept. 1 (despite our understanding that it had already been done).

5. No interest appeared on the statement recieved in October.

Concerns:

a. Can they do this?

b. Where my interest?

c. What can I do?

d. Where was my money all that time?

Thank you

4. Our statement shows only a 9 cent increase, I do not believe the funds were actually reinvested for months.

5.

Would it violate 411(d)(6) to amend a DB plan to cease future benefit accrual for individuals currently on LTD, where plan provides that individuals on LTD continue to accrue benefits until NRA or the date on which they elect to commence receipt of early retirement benefits?

I am caught between a rock and a hard place, and I am looking for some advice/guidance. The Taxpayer Relief Act of 1997 amended the Current Liability Full Funding Limitation, and changed the amortization period for the FFL bases to 20 years from 10 years. The Conference Report for TRA '97 states that existing amortization bases will use the 20 year period reduced by the number of years since the base was established (to also get the existing bases on a 20 year schedule). The Conference Report also states that no amortization is required with respect to funding methods that do not provide for amortization bases. Our firm uses the Aggregate Method and we have many plans which have been maintaining FFL amortization bases. We also use a beginning of year valuation date, and so we will begin to process 1/1/99 valuations in January. Assuming the IRS does not come out with any guidance between now and then, here is my conundrum: Do we continue to set up amortization bases and maintain existing amortization bases, since what is in the Conference Report did not make it into the IRS Code yet? If that reasoning is followed, then we should not be using a 20 year period for the existing bases, since that change was also in the Conference Report. Or do we follow the Conference Report and get rid of the FFL amortization bases? Or do we just not set up new FFL amortization bases, but continue to maintain the existing bases? Is anyone else in this predicament? I am desperately trying to find out how others are interpreting this regulation.

My client's primary goal is to allow his non spouse beneficary to continue to defer as long as possible at his death. Second goal is to take out as little as possible to meet RMD. This is the first distribution for this client. I have been told that we should use a joint life expectancy, utiling the max 10 yr spread. We should recalculate during his life, and at time of his death, the beneficary should use nonrecalculation. Thoughts, comments, input?

We are revamping our vacation/absence policy. I am in favor of no distinction between vacation, personal and sick days. I believe this is becoming more popular but do not have much evidence to support. Is this a trend that is increasing? If your company does it how was the transition?

Are there regs requiring insurance companies to provide information for completion of Schedule A? Many insurance companies I request info from are not even aware of Shedule A. If I had copy of regs that list the info they are required to provide, I could fax it to them.

What is the "first" plan year and what is a "successor" plan for purposes of the deemed 3% nhce adp under section 401k(3)(E) ?

If you have spin-off plan from plan sponsored by prior, non-controlled group employer, is that a new plan? Is there a definition of "successor" plan in the regs somewhere?

In first year of 401k plan, who are the HCEs if you have no 5% or more owners?

Does plan get free pass on adp/acp testing?

If a corporation sponsors a plan and the corporation ceases to exist, can the remaining non incorporated entity continue to sponsor the plan?

In my situation, there are two retirees, both of whom are deceased, and the plan has been making the minimum required distributions. The retirees both elected distributions without recalculation. Can the plan continue to be maintained following the elected distribution schedule, even though the sponsor is changing? Alternatively, can the beneficiaries roll the funds over into an IRA and extend the distribution schedule? Thanks for any feedback.

Never mind....I think I figured it out. Compensation had not yet been entered for those individuals, so the system figured they weren't employed that year.

Could you please clarify; If a sponsor abandons a safe harbor plan design at mid year by amending their document to change a matching formula to one that no longer meets the "Basic Matching Formula", then is the plan simply subject to ADP/ACP testing or do they now have a defect similiar to failing to meet a full funding requirement?

Help settle an office discussion. If a 401(k) plan invests in a group annuity contract with participant direction (eg. Manulife, Nationwide, etc.) is it a daily valuation plan for purposes of the plan document? If a 401(k) plan has segregated accounts with a broker that produces monthly brokerage statement, is that a monthly valuation plan for purposes of the plan document? Our TPA firm does annual administration and prepares an annual valuation report, but some in our office believe that these are daily or monthly valued plans.

Company A exchanges shares of its common stock with Company B. Company B has a defined benefit pension plan which holds Company B stock. Company B pension plan holds Company B stock in excess of 10% of total plan assets for Company B Pension Plan. However, the excess is result of stock appreciation and actual purchases of Company B stock by Company B Pension Plan never exceeded 10% limit. Does the exchange of Company A shares for Company B shares represent an acquisition or exchange which results in the Company B Pension Plan owning in excess of 10% of its assets in employer stock?

[This message has been edited by PWBAer (edited 11-12-98).]

Trustee is missing the Plan sponsor. Company stopped withholding deferrals approx 18 months ago with intent to terminate the Plan. Plan sponsor never executed Board Resolution officially terminating the Plan. Plan sponsor has "disappeared." How does trustee go about terminiting Plan without signficant legal costs to Plan participants?

Panel Publishers (NYC) will soon release the Roth IRA Answer Book. The book is currently in press and will be available in about 6 to 8 weeks. It is rather comprehensive and will answer all of the mysteries of life, have millions of examples, and so on.

An employer has nonqualified stock option ("NQSO") plans, as well as an incentive stock option ("ISO") plan described in section 422

of the Code. The employer wants to exclude income from exercise of both NQSOs and ISOs from the definition of compensation for pur poses of determining HCEs for the ADP test.

Can both types of income be excluded using the 415©(3) definition of compensation? More specifically, can ISO-related income be

excluded under 415©(3)?

Under reg 1.415-2(d)(3)(ii), the 415©(3) definition of compensation excludes income from exercise of NQSO. Reg 1.415-2(d)(3)(iii) excludes "amounts realized from sale, exchange, or other disposition of stock acquired under a qualified stock option." But there aren't any qualified stock options any

more. This reg was adopted in 1980, when "qualified stock options" (under old IRC sec 422) had only one more year of life (they were phased out from 1976 to 1981). Incentive stock options ("ISOs") were not added under IRC sec. 422A until 1981. The code section for ISOs was changed from 422A to 422 in 1990.

Under IRC 422 and 421, no income is recognized under an ISO at grant of option, and income at sale of stock is capital gain. But if employee sells within 2 years of grant or 1 year of receipt of stock, then it is a "disqualifying disposition," resulting in

ordinary income reported on W-2, but from which no FIT withholding is required.

Are ISOs treated as "qualified stock options" for which all amounts realized from sale, exchange, or other disposition is excluded

from compensation? Or is income from a disqualifying disposition of ISO stock treated as being from the exercise of nonqualified stock option and therefore excluded?

The other safe harbor definitions of compensation will not work. W-2 income includes both NQSO and ISO income. 3401 includes NQSO income (but does exclude ISO income).

Could the answer be as simple as "it all depends how compensation is defined in the document" !/?

Question Posted by DESTRUO:

Does anyone feel uncomfortable about allowing Canadian employees who work in Canada to contribute "after tax" monies into a profit-sharing/401(k) program?

I am not as concerned about the "exclusive benefit rule" as I am about 415 and compensation that can be taken into account.

Dealing with a Controlled Group with operations in Canada.

Would appreciate any feedback. Thanks,

Oscar

Can a S-Corp. buy back stock from the ESOP?