Gruegen

Just curious....does the IRS publish, or does anyone know, the approximate number of applications made under the Voluntary Compliance Program (VCP) during 2003 or any other period? 100? 1,000? 10,000?

I am curious how the HCE aggregation rule under Reg 1.401(k)-1(g)(1)(ii)(B)(1) is applied during the coverage transition period under IRC 410(b)(6)©. For example, suppose Company A buys Company B on 1/1/03 and both Companies maintain qualified 401(k) Plans. The plans are intended to be kept separate for non-discrimination testing for the 2003 and 2004 plan years pursuant to IRC 410(b)(6)©. Further, suppose an HCE transfers employment in 2003 between Company A and Company B, earns compensation at each company and makes 401(k) contributions to each Plan - - when performing the ADP test for Plan A, are all contribution amounts added together in computing the HCE's ADP under each Plan? Or does the coverage transition rule permit each Plan take into account only the deferrals made to that Plan? Thanks for your help.

Thanks for all of your responses. I have two more questions pursuant to Scenario #1: 1) Assuming the participant puts the shares back to the company and elects to rollover the proceeds pursuant to IRC 402©(6), how is the Form 1099-R for the distribution from the Plan prepared? 2) Assuming the participant puts the shares back to the company and elects to rollover the proceeds pursuant to IRC 402©(6), does the participant have any NUA in the $1,000? In other words, is there a need for the plan to supply the participant with NUA information if they roll over the proceeds?

A company's bylaws provide that shares of the employer may not be held outside the ESOP. As such, the ESOP document indicates that terminated participants are required to put their shares back to the employer. Question: What is the tax implication to the participant of the "put option?" Which of the following scenarios are anything resembling correct? Can a plan provide for either scenario? Any help would be greatly appreciated. 1) John Smith holds 100 shares (market value $10/sh; cost basis of $3/sh) of ABC Company in his ESOP plan account. The ESOP distributes the 100 shares to him as a "distribution" - - as such, he is subject to income tax on the $300 (lower of cost or market) and the trustee of the Plan prepares a Form 1099-R reflecting a $300 distribution with $700 of NUA. He immediately sells the shares to the employer and receives the $1,000 cash. He now has a taxable capital gain of $700. The $1,000 cash he received from the employer cannot be rolled over. 2) Kathy Smith holds 100 shares (market value $10/sh; cost basis of $3/sh) of ABC Company in her ESOP plan account. Before a distribution is made to her, the ESOP buys the 100 shares from her and replaces it with $1,000 cash. The participant is then provided an opportunity to elect what to do with the $1,000 of cash in his ESOP account - - rollover to IRA, rollover to QP or distribute to participant. To the extent that it is paid to the participant, there is no NUA and the participant is subject to income tax on the full $1,000.

Could someone please provide me the authority (besides the Form 5500 instruction, I am looking for the DOL Regulation cite) for the requirement that the Realized and Unrealized Gains on Form 5500 Schedule H be prepared on a "current value reporting" basis? I think this basis may also be referred to as "revalued cost reporting."

Assume that the following: Plan Information * matching formula is 50% of deferrals up to 6% of compensation * maximum deferral rate is 8% * plan allows for catch-up contributions * employer wants to match catch-up contribution in same formula as 401(k) deferrals Participant Information * compensation = $40,000 * 401(k) = $3,200 or 8% of compensation * catch-up = $1,000 or 2.5% of compesation Is the participant's matching contribution $1,200? [40000*.06*.5] Or is it $1,700? [(40000*.06*.5) + (40000*.025*.5)] Or does the answer depend upon the verbiage in the plan document?

My understanding of the catch-up regulations is that a participant does not have to make any type of affirmative election to make or designate amounts as catch-up contributions. However, assuming that a plan document states that an employee may enter into a salary reduction agreement to withhold amounts from their paycheck only up to the 402(g) limit, does the participant have to give their employer an affirmative election to withhold catch-up amounts which are beyond the 402(g) limit?? I guess I see three options: 1) Amend the plan document to provide for a maximum salary reductions equal to the sum of 402(g) + 414(v). 2) Make the participant complete an additional salary reduction agreement for catch-up contributions. 3) Amend the participant's salary reduction agreement form so that the participant authorizes salary reductions beyond the 402(g) limit. Anyone see any other options. Just curious how other shops are handling this issue.

Do state & local governmental plans have plan numbers (ie - 001) even if they do not file Form 5500's?

Does anyone have any experience regarding required minimum distributions under 401(a)(9) where the participant's entire account balance in a qualified plan is held in an illiquid asset (such as a frozen Executive Life GIC)? The participant has taken a distribution of the rest of their account and all that remains is a small amount (say $300) of the Executive Life GIC which is still pending payout. Are there exceptions to 401(a)(9) if there are no liquid assets? Can the plan sponsor "contribute" the cash to the participant's account and use that to pay the RMD? If so, how does the company get made whole for the advances made to the participant?

The guidance in the Treasury Regulations at 1.72(p)-1, Q&A 10 regarding deemed distributions assume: 1) The 1st and subsequent payments on the loan were made timely; 2) The participant was "mailing in" monthly checks to the plan; 3) The participant made a conscious decision to stop making loan repayments. However, my understand of the fact pattern of this thread is that: 1) The 1st scheduled payment was never started due to administrative error or oversight; 2) The participant's loan payments were to be made via payroll deduction; 3) It was the failure of the recordkeeper or the administrator to set up the payroll deductions, NOT the participant. I feel that the participant is essentially an innocent party for a period of time - - the participant has to realize at some point that loan payments were never being withheld from his paycheck, but that could easily be after the cure period has ended. In my opinion, the consequence of deeming / taxing the loan to the participant is appropriate given the assumptions implicit in the Regulations because it was the participant's decision to stop making repayments. But for purposes of this thread, the remedy of deeming the loan does not seem to "fit" the administrative error of the recordkeeper or administrator. Although I agree that the Regulations to do not provide alternative remedies other than deeming the loan, I am wondering if anyone has discussed this with the IRS or had any experience with a situation like this under audit. I would imagine that the kindler, gentler IRS would not want to punish participants for the sins of the recordkeeper or administrator.