Hypothetical - John converts $300,000 regular IRA to Roth IRA prior to 12/31/98. Does John report $300,000 of income on his 1998 1040, computes the additional tax due to the $300,000 income inclusion, and then spreads that tax over four years, 25% per year

OR

does he include an additional $75,000 in income during each 1998, 1999, 2000, and 2001?

My understanding from reading technical literature is that mechanically, the latter is the proper way to report. Can anyone confirm this? Thank you!

Notice 96-64 extended the TRA-86 remedial amendment period for plans of tax-exempt employers to the last day of the first plan year beginning on or after 10/1/97. For calendar year plans, this means that the RAP ends on 12/31/98.

Has this deadline been extended by Rev. Proc. 97-41, which generally deals with the RAP for SBJPA, etc. amendments? Specifically, Sec. 6.05 of the Rev. Proc. reads as follows: "The remedial amendment period with respect to all disqualifying provisions of new plans adopted or effective after December 7, 1994, and all disqualifying provisions of existing plans arising from a plan amendments adopted after December 7, 1994, that causes the plan to fail to satisfy the requirements of Sec. 401(a) as of the date the amendment is adopted or effective (whichever is earlier), will not expire earlier than the last day of the first plan year beginning on or after January 1, 1999."

Many tax-exempt employers set up new 401(k) plans in 1997. This Rev. Proc. appears to say that those plans can be submitted the the IRS by the end of the 1999 plan year. Because this language applies to ALL disqualifying provisions, it appears that it could cover also TRA-86 provisions under existing tax-emempt employer plans that are now being restated.

Am I missing something?

Can anyone give me a definitive answer as to how long a transit district can hold employee contributions to a 457 plan before submitting them to the brokerage firm? Thanks for your help.

Here in Maine, public school employees are covered by the state retirement system's defined benefit plan. Both the employee and the state contribute to the employees' retirement fund. My question: do either the state's or the employee's contributions to the defined benefits plan affect the amount which the employee can contribute to a 403(B) plan which is funded exclusively by the employee's dferred compensation contributions?

I read the feedback from Roger Kuehnle that said a mid-year change from safe-harbor to regular is not permitted. What about year-to-year changes? Can a plan choose safe harbor for 1999, then choose a fully discretionary employer contribution for 2000? If going "in and out" year by year is workable, wouldn't a plan amendment be required for each plan year?

Welcome to the Group Health Benefit Plan Policy message board ... please feel free to start a discussion of a particular topic (or post a question) by clicking on the "Start New Topic" button, or add a message to an existing topic.

[This message has been edited by Dave Baker (edited 11-26-98).]

A corporation with over 100 employees is comprised of 90% foreign nationals (mostly from India) working in USA on 3 or 6 year visas. The employer would like to implement a 401(k)(all have benefits)however; employees responded that they did not want one. The person in charge feels that they are confused and wants to know the best way to convince them that this is not an IRS scheme to take their funds. Many are upset that they have to pay into social security but it will not be returned so they'd like to emphasize the portability aspect and that it is their money. We're doing the logical but wondering if anyone has: 1) Direct experience so that we don't have to reinvent the wheel 2) Any culturally sensitive advice?

The owner would like a plan implemented January 1 and it is already December!! Thanks so much. Appreciate any feedback.

Which of the following types of investments are not permitted under ERISA?

(Let us assume that the plan sponsor is sophisticated, has proper advice, the overall assets are properly diversified, and these "exotic investments" are used either to hedge DB plan liabilities or the other DB plan assets.)

Buying stock (or index) options

Selling covered stock options

Buying (or selling) interest rate options

Buying (or selling) interest rate futures

Buying (or selling) commodity options

Buying (or selling) commodity futures

Buying (or selling) foreign exchange options

Buying (or selling) foreign exchange futures

I've just started working for a company that is allowing employees to add and delete dependents on the health plan for reasons I find unusual. For example, if an employee's spouse has open enrollment at their workplace and decides that their plan has become very expensive, my company's employee wants to add their spouse at a non-open enrollment time to save on household expenses. Is that acceptable? Legal? I know that there are legal reasons (change in family status or qualifying events) for making a change, but I need to know if the arbitrary reasons people want to add or drop coverage for themselves or a dependent are governed by the employer, the government or by the insurance carrier.

I understand that a participant can elect a direct roll over of his account balance, including outstanding loan notes, to another eligible plan. Has anyone encountered any traps for the unwary in where loans are rolled over to a different plan?

Any good advice on top vendors, credibility, etc. for software (esp. for stock option plans)?

a former employee would like to have his pension reviewed, but the employee terminated over 10 years ago. My understanding is that an employer must maintain records for six years, thus that being the period of time for the statute of limitations. Any comments as to if it makes sense to review this pension and what is likelihood of employer making a correction?

In "What's New" on Benefitslink, an 11/16/98 Pension & Benefits Week article, "Analyzing Notice 98-52" was hyperlinked. Has anyone else read this article? Under Section G of the article, the authors state that

"The pre-plan year amendment rule, requiring an advance commitment to the safe harbors, may be driven in part by the advance notice requirement. However, it can be argued that the pre-plan year amendment rule is more restrictive than necessary or desirable, as it ... would appear to entirely prevent an employer from amending its plan to discontinue safe harbor matching contributions during a plan year, at least unless the 401(k) arrangement was also frozen or the plan was terminated".

While I see that an amendment/election to USE the safe harbor must be made before the beginning of the applicable plan year, I DON'T see anything telling me that I can't opt OUT of it during the year. I admit that I would still have to fund whatever contributions were accrued before adoption of the amendment opting out. Am I missing something?

[This message has been edited by mberk (edited 12-01-98).]

Ran across language in a public 457 plan that absolves the trustee (plan sponsor) of all possible transgressions involving investments, employees, assets and possibly the kidnapping of the Lindbergh baby. This appeared to be an attempt to also qualify the plan for Jan. 1, 1999 "exclusive benefit rules".

Could we have input from our learned members of the legal profession as to the efficacy of this type of language under common and state trust laws for fiduciaries?

Law firm with 2 partners wants to set up a cross tested plan with 1 classification group for each partner, so that one partner can get a larger contribution (incomes are equal) with all other EEs in the 3rd classification group. Partners are the only HCEs. Would this work or are we in a problem area where the IRS might say this is a 401(k) Plan?

The way I am reading Reg 1.401(k)-1(d)(2)(iii) and/or (iv) is that a safe-harbor plan participant can have a $1,000,000 CD and still not be excluded from applying for and receiving a hardship withdrawal. It appears to me that only the facts and circumstances plan participants are required to satisify the need from other sources that are reasonably available outside the plan. Can that be true? Thanks in advance.

Can a non-profit org. convert a MPP to a 403(B) plan? If so or if not, can you please cite a reference? Thanks!

May a government educational institution's 403(B) plan spill its contibution in execess of the 415 limits into an excess benefit plan? Although 403(B) has provisions that allow one to conclude that a 403(B) plan can be a governmental plan, usually a 403(B) plan is treated as the plan of the participant for section 415 limits (no aggregation with other plan of the government sponsor).

If a 403(B) plan can feed an excess plan, does the answer change if the governmental employer also has a 401(a) plan that is not hitting the 415 limit for the participant that is hitting the limit under the 403(B) plan?

The participant is hitting the 415 limit under the 403(B) plan because of a one-time irrevocable election. Does this run afoul of the 415(m)(3)(B) proscription on elections to defer income?

An underfunded plan feezes benefits but will not terminate for several years. They would like to fund up to 110% of CL so that HCE's can take lump sums without restriction. How can this be done on a deductible basis without unrealistic assumptions? The deductible limit can bring you up to 100% of CL but how do you ever get to 110% of CL without terminating the plan?

I have a client company who sponsors a SEP and a new 10% Standardized MPPP. The SEP came first, and the company uses Form 5305-SEP, which according to the instructions on Form 5305 it can no longer do. We assume that a prototype must be used instead. Attempts to locate one have been futile. The SEP assets are invested at Schwab, who apparently tells sponsors to use Form 5305.

Am I missing something here? What are our alternatives? If there are any SEP experts out there, I thank you in advance.