I am working with two clients with a similar problem. They both have a 401(k) Plan with a loan provision. They have both made isolated errors in that they neglected to take loan repayments for a couple of participants. The periods of nonpayment vary from 2 months to almost one year.

Counsel for one sponsor has said it is not necessary to default the loans as long as they can get the participant caught up on repayments within a five year period (measured from the original loan date).

Counsel for the other sponsor says failure to make repayments is a default - regardless of how or why it happened.

I would really appreciate anyone else's thoughts or comments on this issue.

I am looking for guidance on how to do a Qnec....all comments are appreciated!

Can someone clarify the date on which to stop counting interest in the example below. Thanks.

Example: A takes a loan from a 401(k) plan on 1/1/96 and begins making weekly payments, but then stops on 8/1/96. A's grace period is over on 12/31/96 at which time his outstanding balance is $5000, but the administrator takes no action. On 8/1/98, administrator decides to issue a Form 1099 for the "deemed distribution". Should administrator issue a Form 1099 for the $5000 [amount which was in default on 12/31/97]OR should administrator accrue and add the amount interest from 12/31/97 to the date administrator issues the Form 1099?

If you think the answer is $5000, would your From 1099what year would it be [1998 or 1996].

All thoughts appreciated!

We recently took over a 457 plan that appears to be ineligible. While reviewing the records, I noticed that as distributions were made over the last few years the client has been reporting the distribution via the employees W2 versus a 1099R. They has requested we continue this practice. We are now looking at terminating the entire plan and distributing the assets because it appears the plan is ineligible (rank and file employees are the only ones in this nonprofit plan). Are we asking for problems as a 3rd party TPA not requiring 1099Rs be issued?

Any assistance would be appreciated.

Thanks

Looking for the following:

1. Any good resources to obtain information about adding an employer match an existing 401k plan -- pros, cons, costs, common features, things to watch out for.

2. Same as above but need specifics about employer match in the form of company stock.

3. Does anyone have any experience with an employer match with company stock if the company is still private? High probability that the company will go public eventually, but no one knows when. Can this be done?

Thanks for your help.

Kathy

Has anyone seen guidance (or heard IRS folks opine) about the multiple use test after SBJPA? I'm particularly curious on how to do the multiple use test if, for some reason, an employer wants to use current year testing for his ADC and prior year testing for his ACP.

Ernst and Young publishes a monthly letter now called "upshot." This month (http://199.50.26.12:80/upshot/sneakpeek.asp) they speak to the issue of plan fees and employer's potential liability to their employees.

E&Y said "finally, the Labor Department recently issued a warning to plan participants about excessive 401(k) plan fees and expenses. Burdening plan participants with above-average fees could leave an employer facing not only employee displeasure, but also legal action."

My non-profit employer will shortly terminate most of its employees due to loss of funding and a number of employees have 403(B) savings. Can you indicate what are the advantages or disadvantages in those employees rolling over their 403(B) savings into an IRA. Most of the 403(B) savings are now maintained at various mutual fund companies. Is there any difference between such an IRA and simply letting the 403b accounts continue other than the wider selection of investment vehicles (e.g., stocks)?

Thanks!

Does anyone know if a Sect. 125 plan document can have a "wraparound" provision referencing a self insured health plan (reference to an SPD). By having this statement in the 125 plan, I have heard you can avoid having a plan document for the self insured medical plan.

Thoughts?

[This message has been edited by Peg H (edited 08-25-98).]

A US citizen on US payroll is working at one of our overseas locations. He is covered under US benefits. We decide to make him an employee of our local subsidiary and on the local payroll. The local subsidiary does not offer medical or dental. Do we owe him a COBRA notice? My impression is that no termination of employment or reduction in hours has occurred, since he is still employed by a member of the controlled group, therefore, no qualifying event. It would seem like transfering an employee to a US location or subsidiary which does not offer benefits. Does anyone have similar situations that you've had to handle?

I recently read an article regarding LTD Insurance policies in qualified plan. The article made the point that the premium would taxable to the participant.

I have not been able to locate any IRS reg or publication on this issue. I assumed the author is making an interpretation from how PS58 cost for Life Insurance is handled. However their is a table to calculate the taxable portion of the Life Insurance premium.

If anyone has any knowledge of an IRS publication on the taxability of the LTD Premium, I would appreciate any help.

If a $1000 plan loan is taken out from a 401 (k) account by a participant with a $2000 vested balance and the account is used as collateral, can the same participant with a legitimate hardship of $2000 request the loan collateral of $1000 still in the plan be paid to him under the hardship rules?????

EMPLOYERS WITH EXISTING PLANS WHO JOIN OTHER EMPLOYERS UNDER ONE PLAN ( NOT A MULTIPLE EMPLOYER PLAN)USUALLY MERGE OR CONSOLIDATE THEIR EXISTING PLANS UNDER THE TRANSFER OF ASSETS AND LIABILITIES RULES. BUT WHAT IF THEY INSTEAD AMEND THEIR PLANS TO SUBSTITUTE THE ONE PLAN FOR THEIR OWN. WOULD THERE BE ANY RELIEF FROM FILING AND WOULD THEY HAVE TO TERMINATE THE OLD PLAN?????

CAN YOU SET UP A 403b (7) CUSTODIAL PLAN FOR THE PURCHASE OF MUTUAL FUNDS. THE PLAN WOULD REQUIRE THAT EXISTING EMPLOYEES IN A NON PROFIT HOSPITAL WITH TSA'S CONVERT THE ANNUITIES TO CASH AND TRANSFER THE FUNDS TO THE NEW PLAN????? I UNDERSTAND FROM IRS RULING 90-24 AND PLR'S THAT THIS CAN BE DONE.

ALSO, AS A SIDE NOTE INDIAN TRIBES CAN TRANSFER FROM 403 (B)S TO 401 (K)S

Congress is considering legislation to allow trade associations to sponsor health plans and grant them exemptions from state mandated benefits.

One of two plans may be self insured, as long as one is fully insured. DOL and many state regulators "frown" on MEWAs...Any opinions?

Our HMO and PPO carrier is Trigon/Blue Cross-Blue Shield in Virginia. Today, I receive a questionnaire with the request to sent the latest Payroll Tax Return to them, marking employees in their plan, full time, part time and temp employees, as well as those employees not in the plan, are they Champus, are they on their spouses' policy, Medicaid, Medicare, etc. I don't think it is any of their business. Trigon is not Government (Fed or State) run, how can they request a payroll tax return, we don't even ask our employees if they are married, how

can they ?

Would appreciate some insights ....

Thank you,

Anna

I am seeking info on 401k matching practices for companies with less than 500 employees.

Thanks.

Can anyone email me a list of deductible items for a flexible spending account?

beacun@yahoo.com

If plan sponsor of $100,000,000 ESOP sells a subsidiary for $50,000,000, can plan sponsor contribute entire amount as a dividend and release approximately 50% of stock in suspense account without Code Section 415 concerns? Or would amounts need to be paid out over several years in light of Code Section 415 limitations? Any thoughts? Thanks.

I am seeking info on 401k matching practices for employers of less than 500.