I have a client that is starting up a new 401(k) Profit Sharing Plan. They do have some employees that fall under the Davis Bacon Act. They are wanting to exclude these employees and cover under a separate benefits package. These employees are not collectively bargained, therefore to exclude the 401(k) Profit Sharing Plan would still have to pass 410(B). My question is how would you word the exclusion statement under the plan to exclude those employees that fall under the Davis Bacon Act and no others. Once again they are going to set up a separate benefits program for Davis Bacon Employees, which as of yet I have not seen.

Any help here would be greatly appreciated.

We have three sisters who each own 33.3% of company a & company b. They do not work for either company, but their husbands work for company a. They want to set up a new plan for a but not b. Company a has 13 employees, company b has 50. I am assuming they have to offer a 401(k) to company b. Right? Any plan design ideas here?

Thanks for any input.

Can an employee make a salary deferral contribution 1n 1998 for the tax year 1997 up to due date of his employer's tax return, including extensions? If so, how would the employee report and deduct the contribution on his 1997 1040? Code sections 404 & 408 and commentary indicate that a contribution after the close of the tax year is allowed but I can find no guidance on how to report it. It can't be reported on 1997 W-2 because contribution was made in 1998. HELP! NEED AN ANSWER BEFORE OCTOBER 15 1040 DEADLINE!

Facts: A spouse is the designated beneficiary of an IRA owner. Owner dies when both owner and spouse are over age 70 1/2.

If the spouse elects to treat the account as her own or to rollover the account to an IRA of her own, can she have a designated beneficiary?

If her required beginning date is April 1 of the calendar year in which she attained age 70 1/2 (years ago) she would not have had a designated beneficiary on that date. Thus, only her remaining life expectancy (owner was recaluculating) can be used for determining required minimum distributions. The spouse can designate a beneficiary, but that beneficiary would not be a designated beneficiary.

Can anyone confirm that this is the right analysis or point me to a Code or regulation provision that would permit a spouse beneficiary over age 70 1/2 to have a designated beneficiary? Thanks.

Employee has an agreement with Company A to receive 1,000,000 (not to exceed 280G limits). Employee has second agreement with Corporation B, a shareholder of Corporation A to pay the difference between 1,000,000 and amount paid by Corporation A. Is agreement with B a golden parachute? Please note not sure Corporation B is a payor under 1.280G-1, Q&A-10. Any thoughts? Thanks. Ed

Does anyone know of a good consultant in the Chicago area that specializes in Work Family initiatives and the cultural changes surrounding these benefits? Look for help in putting together a work plan for my company.

Our firm has a large public company which bought significant amounts of COLI (corporate owned life insurance). The broker appears to have committed fraud, unfair sales practices, etc. Our client has filed a law suit.

Has anyone else been involved in any fraud or unfair sales practices cases?

Our firm has a large public company which bought significant amounts of COLI (corporate owned life insurance). The broker appears to have committed fraud, unfair sales practices, etc. Our client has filed a law suit.

Has anyone else been involved in any fraud or unfair sales practices cases?

Does anyone have experience using this web based management system? I'm considering it...

Thanks. Peg

Our company will experience increased activity with mergers and acquisitions, and I'm looking for learning tools, seminars, etc. relating to benefits during M&A work. Specifically, topics relating to due diligence, communications for integration, legal issues, avoidance of common problems, etc. Please let me know if you know where to obtain such information. Thank you.

In the September 14, 1998 issue of "Pension & Benefits Week", the following was stated - "Subject to certian pre-1987 carryforwards, the maximum contribution which an employer may deduct is 15% of the aggregate eligible plan year compensation (Code Sec. 404(a)(3). Because of this deduction limit, many plan sponsors wrongly conclude that the maximum contribution which can be made to a profit sharing plan is also 15% of eligible compensation. For tax exempt employers, a profit sharing plan that adheres to the 15% limit may unnecessarily preclude the employer from providing larger contributions during years of greater financial support or unduly restrict elective deferrals from employees where the plan contains a section 401(k) feature. However, the design of a profit sharing plan maintained by a tax exempt entity need not be limited by the Code Sec. 401 limits on deductible contributions."

Am I correct to assume that since a tax exempt employer does not take deductions, that is why they are not subject to the 15% limit - and we only need to worry about 415 limits and 401(g) limits for individual employees?

Has anyone dealt with an abandoned 401(k) plan? The Employer disolved the business in 1997. He did not terminate the 401(k) plan. He also did not provide participants with any distribution options. Participants are calling the investment company and Trustee to withdraw balances. The protoype document states that the Employer serves as the Plan Administrator. Further the Trustee is a "directed" trustee and can not process benefit payments without direction from the Employer. Finally, the TPA firm resigned from the account because the employer did not respond to any inquiries. It is assumed that 1997 deferrals were never deposited and form 5500s have not been filed for either 1996 or 1997. Any experience or guidance that you can share would be helpful. Also, are there any DOL guidance on this issue? I have found several cases were the PBGC stepped in to terminate the plan but nothing for 401(k) plans.

Plan defines service by 1000 hour rule and accrued benefit by fractional rule; no special definitions.

Situation: EE hired at (say 25) works full- time for 6 years (total projected service is 40). Terminates employment with more than 500 but less than 1000 hours, is rehired two years later and again works 1000+ each year. when he finally terminates, is the denominator of his fraction still 40? Or is it reduced by the "missing" years in which he did not work (or may have worked a fraction of the year, getting between 500 and 1000 hours)? My point is that the definition of the fraction refers (numerator and denominator) to the defined (and capitalized) term "Years of Service".

We have a difference of opinion in our office on this. Some say that because the EE did not work 1000+ hours, it does not meet the definition of "Year of Service" and should be ignored. Others say that this does not make sense because it means that an accrued benefit can increase merely because an EE worked parttime, thus reducing the denominator by one each year. Taken to an extreme, this means that an EE who works several years full time and then changes to partime for the next 30 years will end up with a fraction of 1 at NRD.

Any comments? Thanks.

Under VCR, will the IRS accept a QNEC based on the testing results of separating the plan into two component plans under Reg. 1.410(B)-6(a)(3)?

We have an integrated profit sharing plan (integrated on the taxable wage base), but use compensation only for the period in which a new participant is eligible for the year. If a person is onlly eligible for 3 months of the year, should we be using 1/4 of the wage base for his integartion level, or do we use the whole wage base for everyone?

I have a client terminating a Profit Sharing plan. I know that at termination, all participants are 100% vested - does this also apply to participants that already terminated employment in previous plan years with vesting less than 100%. This plan includes 3 employees who terminated in 1995 or 1996 (last valuation was PYE 1/31/98) and were 20% or 40% vested, but they have never taken distribution on their money. Upon termination of the plan, do they retain that 20% or 40%, or become 100% vested?

Situation as follows employer has a DB plan that cover six employees (owner, wife, son, daughter) two unrelated "common employees".

wife and son quit in 1997 and are paid out the company adopts an ammendment "freezing" the plan in early 1997, CPA say whoa you need deduction ammendment adopted to unfreeze plan. subsequently two common law employees terminate employment. question becomes are terminated common employees (ie non family, non owner related), vested 100% given freeze unfreeze and 60 % of all employees being gone?

California Probate Code Secs. 260-295 allows a beneficiary to disclaim a fractional IRA distribution. Can the owner of an IRA leave a 100% interest to her husband with the proviso that to the extent Husband disclaims any portion of the IRA distribution, such disclaimed portion shall go to the Family "by-pass" Trust. Again, the amount to go into the Family Trust is determined solely by Husband, NOT IRA owner.

What is the standard percentage that is used to determine the annual profit sharing contribution for your company and what method of calcualtions are used? Of the money allocated for Profit Sharing, is matching and excess benefit plan funding taken or do these plans have separate funds?

Did any othe employees become eligible for the plan? If not, and the assets of each plan were less than $100,000 he should still be under the 5500 EZ exception. Since this plan has been in existence I am assuming other participants have become eligible.

In that case, you can use the Delinquent Filer Voluntary Compliance Program to reduce the penalties. (DFVC) If a report is filed within 12 months after the required date, the penalty is $50/day up to a maximum of $1,000 for a 5500 C. If filed more than 12 months after the required date, the penalty for a 5500 C is $2,000. Note that these penalties can not be paid from plan assets. This program is sponsored by the DOL, but the IRS has indicated they will not impose penalties if DFVC is used.

Another option you could try is the reasonable cause. The IRS and DOL may waive the penalties if the plan administrator can show its failure was due to reasonable cause. This is based on a facts & circumstances test. For example, I have had penalties waived for a plan that filed one year late due to the fact their prior accountant told them it was not required. Good Luck!

You may also want to review his prior contribution calculations. I would be suprised if he did the self-employed contribution calculation right.

[This message has been edited by Dawn Hafner (edited 10-02-98).]