I have a client terminating a Profit Sharing plan. I know that at termination, all participants are 100% vested - does this also apply to participants that already terminated employment in previous plan years with vesting less than 100%. This plan includes 3 employees who terminated in 1995 or 1996 (last valuation was PYE 1/31/98) and were 20% or 40% vested, but they have never taken distribution on their money. Upon termination of the plan, do they retain that 20% or 40%, or become 100% vested?

Situation as follows employer has a DB plan that cover six employees (owner, wife, son, daughter) two unrelated "common employees".

wife and son quit in 1997 and are paid out the company adopts an ammendment "freezing" the plan in early 1997, CPA say whoa you need deduction ammendment adopted to unfreeze plan. subsequently two common law employees terminate employment. question becomes are terminated common employees (ie non family, non owner related), vested 100% given freeze unfreeze and 60 % of all employees being gone?

California Probate Code Secs. 260-295 allows a beneficiary to disclaim a fractional IRA distribution. Can the owner of an IRA leave a 100% interest to her husband with the proviso that to the extent Husband disclaims any portion of the IRA distribution, such disclaimed portion shall go to the Family "by-pass" Trust. Again, the amount to go into the Family Trust is determined solely by Husband, NOT IRA owner.

What is the standard percentage that is used to determine the annual profit sharing contribution for your company and what method of calcualtions are used? Of the money allocated for Profit Sharing, is matching and excess benefit plan funding taken or do these plans have separate funds?

Did any othe employees become eligible for the plan? If not, and the assets of each plan were less than $100,000 he should still be under the 5500 EZ exception. Since this plan has been in existence I am assuming other participants have become eligible.

In that case, you can use the Delinquent Filer Voluntary Compliance Program to reduce the penalties. (DFVC) If a report is filed within 12 months after the required date, the penalty is $50/day up to a maximum of $1,000 for a 5500 C. If filed more than 12 months after the required date, the penalty for a 5500 C is $2,000. Note that these penalties can not be paid from plan assets. This program is sponsored by the DOL, but the IRS has indicated they will not impose penalties if DFVC is used.

Another option you could try is the reasonable cause. The IRS and DOL may waive the penalties if the plan administrator can show its failure was due to reasonable cause. This is based on a facts & circumstances test. For example, I have had penalties waived for a plan that filed one year late due to the fact their prior accountant told them it was not required. Good Luck!

You may also want to review his prior contribution calculations. I would be suprised if he did the self-employed contribution calculation right.

[This message has been edited by Dawn Hafner (edited 10-02-98).]

A recent article in the National Underwriter, (Sept. 21, '98, Employee Benefits Report Supplement, p. S-11) has me confused. It states that 'The IRS has put 457 plans at an even greater disavantage by prohibiting the use of employer matching contributions as a incentive to participate.' I've reviewed this issue a number of times, and I can't find anything which supports this statement. I just did a LEXIS search and came up with zip, and my "Answer Book" contradicts this, too. Can you provide any guidance?

Thanks.

BTW, your discussions have provided very valuable insights to me. Great site.

If a company offers company stock as an investment option, I believe the company is not required to allow participants to vote the shares. I'm having trouble confirming this point with certainty. Am I correct? (This is not an ESOP.)

Assuming the company is not required to pass through the voting to participants, how do companies handle this? Do companies generally allow participants to vote the shares anyway? If the participants do not vote the shares, who does? If it is the trustee or plan sponsor, are they subject to any particular guidelines for voting the stock?

Does putting a SPD on the company benefits web site satisfy the regs/rules for proper delivery? What techniques/web design would you suggest for max compliance and user friendliness?

Just read in a newsletter from a regional CPA firm that the IRS has approved concept of automatic enrollment in 401(k). i.e. when eligible the ee is enrolled at X% in a given fund (e.g Moderate Lifestyle) and must take action NOT to be in plan. Anyone heard of or done this? Must be given plenty of advance notice to say "no". What about beneficiary choices?

My employer gives all the other employees the Jewish holidays off, but not me ( I'm christian). I am salaried, but so is one of the employees receiving the days off. Is this legal and if not where do I find info about such??

Failed to file a 1099R when loan defaulted. Revenue Agent (and supervisor)claiming that the penalty is unlimited at $25 per day. Our research shows that it is $25 per incident. Has anyone else had this come up and any tips on fighting the service on this.

Does anyone know the latest on where the Treasury is with providing a model notice that can be used to satisfy the safe harbor notice requirement in IRC Section 401(k)(12)(D)? If the Treasury fails to provide timely guidance here, any thoughts on the type (length, etc.) of notice that people will be providing? Thanks for your response.

Where a nun is receiving income from an employer that is associated with her order, and she turns over her income under a vow of poverty, the IRS has ruled that her income was excludable from income tax and was not wages subject to withholding (RR68-123).

How are qualified plan withholding rules applied to a nun, assuming the vow of poverty continues to apply?

Sec. 3405(a) indicates that withholding on periodic payments should be the amount which would be withheld if such payment were the payment of wages from an employer to an employee. In this case, it would appear that no withholding would be required.

Sect. 3405©dealing with eligible rollover distributions, however, specifically states that 3405(a)does not apply and that withholding shall equal 20%.

Query-

Is there any justification for not withholding on an eligible rollover distribution? (The eligible rollover distribution withholding rules were intended to encourage rollovers. Is that goal any less desirable where the distributee is a nun? Since the distribution will be turned over to the order under the vow of poverty whenever it is distributed, does it make any difference? If wages paid were not taxable to the nun, presumably the pension distibution is also not taxable.)

What are plans actually doing?

Does anyone know how I go about getting a list of self-insured health plan employers in my area? It is Okaloosa County - Florida (panhandle). Thanks

Since it appears that there are no regs on who is a predecessor employer for purposes of the service crediting rules, does anyone have any ideas whether service must be counted under 414(a)(2)? We have a situation where an employer purchased the assets of certain corporations and hired the employees. The corporation from whom assets were bought maintained a 401(k) plan. The purchasing employer is going to establish a 401(k) plan. The new plan is not receiving a transfer of assets, although it may get rollovers. Is the previous employer a "predecessor employer"?

my question is. under what format can the employer of union employees recieve the tax benefits associated with a normal non union employer type of "match" but still make it a required or mandatory collectively bargained contribution type of arrangement. I think it might be able to be done under a profit sharing contribution but then wouldn't the employer need to maintain a plan for the non union employees? any help on this would be greatly appreciated. thank you in advance for your help. brett

Where a nun is receiving income from an employer that is associated with her order, and she turns over her income under a vow of poverty, the IRS has ruled that her income was excludable from income tax and was not wages subject to withholding (RR68-123).

How are qualified plan withholding rules applied to a nun, assuming the vow of poverty continues to apply?

Sec. 3405(a) indicates that withholding on periodic payments should be the amount which would be withheld if such payment were the payment of wages from an employer to an employee. In this case, it would appear that no withholding would be required.

Sect. 3405©dealing with eligible rollover distributions, however, specifically states that 3405(a)does not apply and that withholding shall equal 20%.

Query-

Is there any justification for not withholding on an eligible rollover distribution? (The eligible rollover distribution withholding rules were intended to encourage rollovers. Is that goal any less desirable where the distributee is a nun? Since the distribution will be turned over to the order under the vow of poverty whenever it is distributed, does it make any difference? If wages paid were not taxable to the nun, presumably the pension distibution is also not taxable.)

What are plans actually doing?

A 501©(3) organization has a SEP/IRA established fbo employees. The organization

funds the SEP/IRA. Employees choose mutual funds for their account. This organization

also has in place a employee maintained 403(B) in which the employees choose the

mutual fund investment. The responsibility the organization has is to deduct the

contribution from each employees check and send it to the custodian. During an audit,

the CPA doing the audit says this is a possible conflict in interest and may violate ERISA. Is this a conflict? When the plan was set up this organization was not allowed to do a SAR/SEP IRA so the 403(B) was chosen. Any help or suggestions would be

most appreciated.

We are trying to find out a name and phone number for a participant who may have had money escheated to the State of California. This possible escheatment of a participant's Profit Sharing balance occurred back in the 70's. It occurred while we were not Trustee of the Plan.

If anyone knows how a Plan Sponsor or Participant would go about researching whether or not the State has funds in the partipant's name (or previously did), please let us know.

Thank you!

I recently started a company preparing personal financial forecasts for participants in 401(k) plans. I would be interested in input from employers on whether they currently provide such a statement to employees; whether they even think it is a good idea; and the best way to market such a product to the employer. Thanks in advance for all input.