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?

Due to a court settlement EE will receive W-2 showing gross income of $55,000 for 1998. As part of the settlement EE resigned effective 12/31/97. Is he in the SEP for '98 because of the W-2 or is he out because he performed no hours of service in '98?

Can a Multi-Employer Pension Plan use Plan Assets to pay membership dues for a city's Chamber of Commerce? The Plan's Trustees feel the membership would benefit the participants. What if the Plan wants to join the City's African American Chamber of Commerce (majority of participants are African American)?

I will be holding a 2 day review course for the ASPA C-2DB exam on Monday and Tuesday November 16 and 17 in Jacksonville, FL. I know its the last minute, but if you are interested please email or call me at 800 361-4635.

A welfare plan has two insurance contracts. The premium payments are sent to another entity, which acts as a clearinghouse of sorts, and then forwards one check to the insurance company. Are those premium payments considered plan assets? If so, what is the authority for that conclusion?

I think the legislative push should be to get back to DB plans. I think retirees have lost out big on the shift from DB to DC

We are a small independent TPA - 2 people - 1 primarily for sales and 1 for administration. We are approaching the point where we need to look at recruiting an additional sales person and would like to know what a typical job description and compensation package would be. We are located in Southern California, and work in the market of defined contribution plans for small businesses (generally 1-50 participants). We are heavily into New Comparability and are moving into the area of combined Profit Sharing 401(k) Plans. Would appreciate any ideas. Thanks.

At this time, rollovers from 403(B) plans into 401(k) plans (and vice versa) is not allowed. I seem to remember seeing something in legislation in the last 9 months, but don't think anything ever happened with that.

if you had access to Santa Claus (read Congress) what specific provisions would you want changed in order to simplify the administration of plans while maintaining "budget neutrality"?...and, perhaps, encouraging more firms to sponsor plans ...

e.g., eliminate separate definitions of hce and key; get rid of either minimum funding or PBGC (my favorite)

PLEASE CORRECT ME IF I'M WRONG! HERE'S MY UNDERSTANDING OF NEW DISCRIM. TEST RULES...

IF USED CURRENT DATA FOR ALL PREVIOUS YEARS INCLUDING 1997, CAN ELECT TO USE CURRENT OR PRIOR IN 1998. IF USED PRIOR IN 1997, THEN CAN ELECT TO USE PRIOR OR CURRENT IN 1998, BECAUSE YOU CAN ALWAYS ELECT TO USE CURRENT YR DATA. IF USE PRIOR IN 1997, CURRENT IN 1998, THEN MUST USE CURRENT IN 1999. YOU CAN NOT ELECT TO USE PRIOR FOR 5 YEARS. RIGHT?...OR AM I TOTALLY CONFUSED?? PLEASE ADVISE!!

Being an Temporary employee of a large US firm for 17 years, never being offerred direct employment with Customer. Person

dies unexpectedly in auto accident, (fell asleep)on there way home from working a

19 hour workday. Can this persons spouse and

children sue the Firm at which the person

worked at for seventeen years for full

benefits? Actual Situation, state Florida

I requested tuition assistance this quarter and it was approved by my employer. about a week ago, i was laid off. i have requested the tuition reimbursement but have received no response. are they under any obligation. problem is no job no money, i put the tuition & fees on my credit card.

This thread has gotten huge - and contains numerous "subthreads". It seems that anyone who has a question or issue relating to Safe Harbor 401(k) Plans posts it here.

Please don't do that. Instead, start a new thread with your issue.

I will wait a few days to close Mac Lewis's thread to allow time for posting specific responses to items already posted there.

Thank you.