Two questions. Must a sec. 125 plan file a separate 5500 form from that of the underlying benefit, e.g., a medical plan? Also, must a sec. 125 plan advise participants in the underlying plan's SPD that the plan is a sec. 125 arrangement?

Does the maximum amount an employee can defer in a 401K plan for 1999 remain at $10,000?

Also what is maximum amount that an employer can contribute to an employee into an employer sponsored profit sharing plan for 1998 and 1999?

Can my spouse contribute to a Roth without any earned income?

Employer makes several amendments to plan and restates. The prior plan had an immediate distribution policy, but new plan is completed by checking a 1 year break before distributions. This is obviously a 411(d)(6) protected benefit. Employer failed to catch the change.

No terminated employees during this period. Employer wants change plan back to immediate distributions.

Any thoughts on this method of correction? Is this a CAP issue?

The corrections act specifically said that SIMPLE IRAs can be converted to Roth IRAs for past years accumulations, but there is a catch 22. All SIMPLE IRAS are, by definition, 1 year old. The trustee (Franklin) won't convert because ther is a penalty for the first 2 years. Congress must have overlooked this, otherwise there's no point in OKing SIMPLE IRAS for conversion. Any ideas, or other experiences? I'd like to convert by 12/31/98 if I can find a way.

Does anyone know if it is acceptable to

distribute SAR's via e-mail as opposed to hardcopy? Thanks for your help.

If a conversion is made and the four years elected, if in year 2,3,or 4, a large capital gain occurs and puts me in a very high tax bracket, can I go back and file an amended return for 1998 to pay the entire tax as of that year?

An HCE in a 401(k) plan did not particpate throughout the plan year because of prior years failure of ADP test. He would now like to contribute as much as he can before the end of the plan year based on data now available; however, the plan allows for changes in allocations only twice a year, Jan and July. Is he out of luck because he didn't make the change by July 1, or does he have any options available to allow him to defer before year end?

A company maintains both a profit sharing plan and an ESOP. The profit sharing plan trustee is considerinf selling the stock to the ESOP. The company has a current valuation. Is this a prohibited transaction? Any thoughts? Thanks. Ed

An employer has a "last day clause" (the employee has to be employed on the last day of the plan year to get any matching or profit sharing contributions). If the employer made matching & profit sharing contributions throughout the plan year and an employee terminates, are the employer contributions forfeitures or do they go back to the employer? (Forfeitures are allocated to employees)

our standardized prototype uses a the safe harbor requirement of 501 hours to receive a contribution for ALL employees rather than the employed on last day (regardless of hours) requirement.

My question is, in a non-standardized plan, with a last day rule and 1000 hour requirement, can we consider those employees who worked <501 hours but NOT terminated to be excludible in the 410b test? We have always used this requirement when determining who is excludible and not excludible since it "corresponds" to our standardized prototype.

for plan years beginning in 1998, can/should you use 415 comp that has NOT been decreased by 401k, 125 contributions to calculate the TH Minimum contribution?

I have been using "grossed up" 415 comp if the ee has elected not to use the reduced comp.

Several clients have 457 plans with life insurance - set up by insurance agents. The employee chooses the life insurance as an investment. If the employee dies while employed, the death benefit from the insurance is paid to the employer, but it is then paid to the employee's beneficiary. The employee doesn't recognize any current income for the insurance coverage. Apparently when the employee dies while still employed, the entire amount is treated as taxable income and is included in the estate. If the employee retires, the contract is distributed to the employee, who takes the cash surrender value into income.

I think this is a problem, in that I think that the insurance coverage was taxable income to the employee each year that the insurance was in force. The 457 regulations say that you can have insurance in a 457 plan, and that it will be treated as described above, BUT the death benefit has to be paid to the employer, and the employer must be under no obligation to pass through the death benefits to the employee's beneficiary. This is not the case here, in that the plan provides that the beneficiary gets the death benefit determined by the face value of the insurance.

I don't see how you can provide a pretax death benefit, unless it complies with IRC ss 79.

Any insights would be greatly apprceiated.

We have 1900 participants in our plan. We pay $6.25 per participant, per quarter, a base fee of $375.00 per quarter, $6.25 per loan per quarter, a new loan setup fee of $75.00 and $550.00 annual fee for Non-Dicrimination services.

Does this see reasonable?

If an employer has a deferral limit of $4000/yr on their medical spending account & they have a married couple who are both employees of the employer, what is the annual limit each spouse can defer? Does each spouse get to defer up to $4000/yr or does the IRS limit them to $4000/yr as a combined total?

Can anyone point to a good source for statistics on how plan sponsors are complying with their ADP tests? For example, what percentage of sponsor meet the ADP test by posing a dollar or percentage limit on HCEs in the beginning of the year? What percentage wait 'til the end of the year to give HCEs back their deferrals that are in excess of the ADP limit? What percentage cut back during the middle of the year (in October restrict HCEs who are contributing above a certain ADP from deferring any more through the end of the year.

Two companies have a 401(k) plan. They then merge into one company. Which plan does the new company adopt? Or, does the new company keep both plans? The plans have minor differences as far as matching, etc. is concerned. If both plans are kept, which plan do the new employees go into? Please advise as to advantages and disadvantages of each.

Plan has an investment "program" where participant completes a questionnaire, identifying his/her investment goals and objectives. Investment manager actively manages account for participant. Can this qualify for 404© protection? How are accounts reported on plan audits? Do all investments have to be identified separately on financial statements or can this "arrangement" be considered one investment? Does your answer change if participant completes questionnaire, investment manager makes recommendation for investments, but participant ultimately chooses his/her own investments (either the recommended funds or funds of his/her own choice)? Any other compliance or audit-related issues to address?

We amended plan for OBRA 93 for $150 cap (indexed for inflation) and are using the extended wear away method to calculate benefits upon retirement or termination. Fresh start date is 1/1/94. Best method is frozen benefit accrual until 1/1/94 plus current year benefit accrual for benefits after 1/1/94. Assuming we can calculate frozen accrual, does the second part of calculation requires us to treat as if ee started over on 1/1/94?

The Internal Revenue Service has finalized its regulations on the 15-day advance notice requirement of ERISA 204(h), which affects sponsors of pension plans (but not profit sharing, stock bonus or ESOP plans) who wish to lower, freeze or terminate the continued accrual of benefits for covered participants.

The regulations are online at:

http://www.benefitslink.com/taxregs/1.411d-6.shtml

The regulations basically restate the proposed version issued in 1995, but a few new items are significant:

* First-class mailing of a notice is sufficient, and the date of mailing is considered to be the date on which the notice is provided to that employee

* An example has been added to show how a defined benefit plan sponsor can run into trouble if the plan is subject to PBGC termination procedures but the PBGC rejects the proposed termination date. The standard PBGC-required notice of intent to terminate does not provide enough information to be a 204(h) notice if the PBGC rejects the termination date, but it is sufficient if the PBGC approves the proposed termination date. Lesson: adopt a special amendment freezing benefits as of the proposed termination date, and separately describe that amendment in the notice to interested parties.

* The notice can be given by the end of the 15th day before the effective date of an accrual freeze or reduction. For an amendment reducing accruals effective as of December 1, notice could be delivered by making a first-class mailing on November 16, which is the 15th day before December 1. Hence it appears that an amendment that is effective December 31, 1998, such an amendment that reduces or eliminates the plan's promised benefit for 1998 under a calendar year money purchase plan, would need to be provided on or before December 16, 1998 (tomorrow). (Some practitioners believe such an amendment is permitted, if the plan contains a last-day employment requirement, such that no protected right to a benefit accrual would arise until the end of the day on December 31.)

[This message has been edited by Dave Baker (edited 12-15-98).]