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Roth IRA holders can commingle Contributory and Conversion Roth IRAs in a single Account. Recently I was advised that we may wish to require customers at least to maintain a separate account for any amount converted from a Traditional IRA to a Roth IRA in calendar year 1998, as IRS guidelines require a withdrawal from a 1998 conversion Roth IRA within the first 5 years to be reported on Form 1099-R with a "special letter code." I'm advised that all other withdrawals from Roth IRAs are reported on Form 1099-R with a different letter code. Thus, requiring a separate account for 1998 conversions may help comply with this requirement.

QUESTION: Are separate accounts in this situation necessary, or hasn't TTCA-98, by reason of ordering distributions, done away with the advisability of separate accounts for 1998.

A DB plan was frozen in 1993. In June 1998, the sponsor adopted resolutions to terminate the plan. At that time, the GATT interest rate would have required the sponsor to contribute approximately $90,000 to fund the plan upon termination. The sponsor gave participants the Notice of Intent to Terminate as the first step of filing the termination with the PBGC.

Neither PBGC Form 500 nor IRS Form 5310 has been filed yet (both would be due at the end of December 1998). The plan's actuary has informed the sponsor that the GATT interest rate has dropped significantly since June, which will now require the sponsor to contribute approximately $180,000 to fund the plan upon termination. Because of the unexpected increase in the cost of terminating the plan, the sponsor desires to reinstate the plan on a frozen basis and wait for the interest rates to go back up.

Can the sponsor do this? If so, what steps would be required?

One thing that comes to my mind is that, as a result of the sponsor's resolutions terminating the plan, all participants became fully vested. Even if the plan can be "unterminated," that vesting probably can't be taken away. Other than that, I can't think of any reason the plan can't be placed back into a frozen status.

Is anyone aware of any changes to the calculation of the 404 deduction limit effective January 1, 1999.

Have talked with some individuals who seem to think it is higher than 15%, and that Sec 125 salary deferrals do not have to be deducted from compensation prior to calculation.

The following is from a post I read from another Site message board:

"The following is from "The Roth IRA. An explanation Prepared by the staff of the Senate Finance Committee, William B. Roth Jr., Chairman":

"If, during the four-year period that for income recognition for the 1998 conversion, a taxpayer takes a distribution from the Roth IRA, any amounts withdrawn which were not included in income will become included in income in the year that the amounts were withdrawn.

For example, if $100,000 was converted to a Roth IRA in 1998, each year for the next four years, the taxpayer must recognize $25,000 in income. If, in 1999, the taxpayer takes a distribution of $60,000 from his Roth IRA, the taxpayer will have to include an additional $10,000 in income in 1999 in addition to the $25,000 that the taxpayer was scheduled to include in income. That will mean in the year of withdrawl, at least $60,000 was imcluded in income in this or any preceding year"

My breakdown:

1998 $25,000

1999 $25,000

1999 ** 10,000 35,000

Total 60,000

I don't understand this???

If a leased employee is not considered to be an employee for pension purposes until they complete a year of service, does the compensation which they earned during that first year count in determining if they are an HCE in year 2 or is year 2 considered there first year of service and therefore they could not be and HCE in year 2. For example if a leasted EE earned 100K in year 1 and therefore they would be considered an EE in year 2, would they be considered an HCE in year 2?

An employee plans to terminate in December (prior to end of 1998). The employer says they do not have to make a 401(k) contribution on behalf of this person. Is this necessarily true and where are there Regulations addressing this issue?

I'm trying to find the current owner(?) of THE SINGER COMPANY GPE SALARIED EMPLOYEES RETIREMENT PLAN OF THE SINGER COMPANY. The last owner was Bicoastal Corp of Stamford, CT but they filed for bankruptcy. My address has changed since the last communication in 1991 and I want to be found when I'm ready for retirement. Thank you.

If a plan provides an insured death benefit, is the funding such that the cash value build up is considered a plan asset, thus reducing the retirement benefit funding requirement, but where the total funding is greater due to the additional payment for the premiums? Any thoughts would be appreciated

A business owner wants to start a one person plan for 1998. Is it acceptable for this person to just open up, say a money market account, contribute $1 prior to 1999 and have this be designated as the pension trust? I know it is a very trivial qustion, but I have never actually implemented a new plan.

IRS prescribes the 83 GAM table for 415 and 417. How can it be explained that we use a table with the year 1983, when it is 1998? Curious to hear some thoughts.

If a plan is to have lump sums as a benefit option, how low is a reasonable interest rate for determining the lump sum value? That is how low can the rate be and still not be disallowed by the IRS?

A small company wants to have a db plan where a key ee with a salary of $1,000 (no assumed future pay increases) is to receive a projected benefit of $10,000/yr. , but the plan formula is proposed to be something like 150% of pay. How can they arrive at such a benefit under such circumstances? Even if 415 allows for such a benefit, it doesn't seem to work under this criteria.

A church-affiliated elementary school currently offers school employees a tuition reduction program under IRC Sec. 117(d), where children of school employees can attend the school for reduced tuition. The school wants to offer a comparable benefit to church employees. I believe that Section 117(d) is inapplicable without an employer-employee relationship but was wondering if there are any special interpretations of this requirement due to the church affiliation, or any other way to provide the tuition benefit to the church employees on a tax-free or tax-deferred basis.

What happens to loans in a plan to 5% owners when the corporation converts to an LLC which is taxed as a partnership? Since the LLC can't have loans to greater than 5% shareholders, are the loans deemed distributed as of the date of conversion? Does anyone know of any resources on this issue?

Thanks for your ideas.

Katharine Jungkind

Plan amended in 1995 for TRA 86 etc. Prior to the 1995 amendment, all terminated EEs were paid after a year had elapsed following termination. No language in the Plan to this effect, the Plan allowed employer discretion, and a pattern was established. The 1995 amendment(inadvertently) liberalized timing to specify that a terminated EE would be paid "as soon as administratively feasible" after the end of the Plan Year following termination. No one has terminated since 1989. Now an HCE has terminated abruptly just before the end of the Plan Year, and the owner wants to pay him in 1 year. (terminee is owner's son). Is there any legitimate way to do this?

Can an executor of a dead farmers estate make a SEP contribution on the final return in the year of the farmers death.

A basic question: Employee is in a 401(k) plan that vests 100% in the fifth year of employment. If the employees position is eliminated, is there a rule mandating immediate vesting? The employer provides contract health services at a hospital. There is a chance that the entire contract service provider will be eliminated.

Company has self-insured health plan administered by large insurance co. and under a cafeteria plan. Company's subsidiary wants a bare bones catastrophic coverage plan to start mid-year. May EEs of that sub switch to the new plan (does not sound like a change in family status)? What if the new plan is not a part of the cafeteria plan? What considerations?

If a person wants to roll over their account balance (which contains a large after-tax balance) from one 401(k) plan to another (that does not allow for after-tax contributions), what are their options? If the person rolls, are they forced to take a distribution of their after-tax contributions? Would this be subject to the 10% early distribution penalty? Any comments appreciated.