eilano

Client would like to know the latest time frame for filing suit against their former TPA. It relates to the administration that was completed for the December 31, 1998 plan year end.

Partners of a partnership are being paid as leased employees with a leasing organization. Can they do this? If not, is it corrected simply by pulling the partners out of the leasing org?

An employer does not want to adopt the EGTRRA amendments. For 2002, they want to continue using a compensation limit of $170,000, the 15% deduction limit and still count elective deferrals as employer contributions for section 404 deduction limits. It is my understanding that all plan sponsors need to adopt the EGTRRA amendments. Can a plan sponsor continue to use the old rules (pre EGTRRA) for plan years starting in 2002?

Employer sponsors a money purchase plan and the plan year end is 9/30/01. Employer is having financial hardship and does not think they will be able to deposit the contribution by the filing deadline of their corporate tax return. The are past the 2 1/2 month deadline after the plan year end to apply for a minimum funding waiver. What options are available to the employer, if any.

We have a partnership with approximately 20 partners and staff of 100. The company wants to put in a cash balance plan for the partners only (already have a xtested and 401(k) plan) and then loan monies from the plan to the partnership. In reading the definitions of who is a party in interest we believe this is truly a prohibited transaction. Two of the partners are attorneys who argue that the definition is not clear on who are the employees of the employer? Any thoughts regarding this is appreciated.

We have a client whose employees are part of a PEO. The PEO maintains a 401(k) plan and the employees participate in that plan. The owners of the company have their own 401(k) and a cross-tested plan (which covers all employees). The question we have been asked is can the owners have the PEO employees participate in the owners' 401(k) plan instead of the PEO 401(k) plan without severing the PEO relationship. If yes, the PEO employees would have access to a larger number of funds then currently offered by the PEO's plan. What issues do we need to be concerned with?

We've got a client that allows participants that have account balances of at least $10,000 the opportunity to self direct their accounts. Another client is thinking about adopting this policy also but only allowing those participants with balances of at least $25,000 to self direct their accounts. Is there any problem establishing a threshold this high for self direction to occur?

Plan terminated and distribution paperwork was prepared after 6/30/01 valuation report was prepared. Valuation reports are prepared quarterly. Executed distribution forms were returned from 90% of the participants to the plan administrator by 8/2001, however, the participants did not receive distributions until 11/2001, in which the distribution amounts were based on the 9/30/01 report. Participants are screaming due to lesser distribution amounts. Plan administrator wants TPA to rerun 9/30/01 report and show distributions as a liability but remaining 10% of participants would share in the loss for the third quarter (approximately 77% loss per participant if we show a liability for the third quarter). Are there any options available to the plan administrator to appease the participants that were paid out and the remaining participants?

Plan document provides for a discretionary match and employer notified employees that match for the plan year would be 25% up to 6% of compensation. Matching contribution was deposited every payroll period. After valuation report for the plan year was completed, it was discovered that the matching contribution that was deposited was 25% with no limit on compensation. No one exceeded the annual addition limit. Employer wants to know if they can withdraw the matching contribution in excess of 6% of compensation since it was communicated to the employees that the matching contribution would be limited to 6% of compensation. Participant statements have already been distributed but corporate return has not been filed. Can employer take “excess matching contribution” from the participants? What other options does the employer have?

Company A's health insurance is run through their cafeteria plan. They have a new employee that doesn’t want to participate in the cafeteria plan, but wants to be part of Company A's health insurance plan. This new employee wants a company that he formerly owned, but is now owned by his former company’s employees to reimburse Company A for the employee’s share of the health insurance premium. There would be no withholding. Can Company A allow this type of arrangement? Does this effect the cafeteria plan?

A company recently went out of business (the owners abandoned the company) and there are legal issues amongst the owners. I'm still in contact with the trustee of the plan who was a former owner of the company. He wants to terminate the plan since the company no longer exists and the participants are asking for the plan distributions. Normally, a board resolution would have to be prepared but since the company no longer exists, can the plan trustee sign a resolution and amendments to terminate the plan?

Independent contractor would work 36 weeks out of the year (>1000 hrs), and the remainder she would work other places. Her income would be reported on a 1099. Could this employee be excluded from the plan since she is not being paid any W2 income?

Distribution date is the August 1st of the plan year following a participant's separation from service. Can the plan sponsor payout earlier than the distribution date as long as they do this on a consistent basis?

Plan terminated and is currently being audited. All assets have been distributed except for some artwork that they were unable to sell through various dealers and auctions. In order to expedite closing out the plan, could several employees of the TPA purchase the artwork from the client or would this be considered a prohibited transaction.

Takeover plan was determined to be top heavy for 1998 and 1999 but not all non keys received minimum contribution for 1998 (liberal eligiblity requirements for 401(k) feature)and no profit sharing contribution was made for 1999. Regarding the deductibility of these contributions, it is my understanding that the employer would be able the deduct part of these contributions for the 2000 plan year as long as the 404 deduction limit is not exceeded for the 2000 plan year. Can someone cite a regulation or revenue ruling that addresses this?

QNEC went to NHCE's only and the QNEC was deposited after 9/15/00. It was deposited 12/2000.

You might want double check your facts by referring to question 13:47 of the 2001 401(k)answer book or Treas. Reg 1.416-1, M-18. QNECs may be used to satisfy the employer's minimum contribution liability to the non-key employees without jeopardizing the status of those contributions as QNECs for purposes of the ADP test.

Can the current owners of a privately held company capitalize and buyout their ESOP because of concerns about trustee liability? It's a non leveraged ESOP. Are there any issues regarding this?

A Plan failed the ADP test for the 1999 plan year and is also top heavy. To correct the ADP test and satisfy the top heavy contribution requirement for 1999, the client decided to put in a QNEC. When does the contribution have to be deposited to satisfy the top heavy contribution requirement for the 1999 plan year? Normally, the QNEC would have to be deposited by 12/31/2000 but for top heavy requirements, would the contribution have to be deposited by 9/15/2000?

Can an employer have a Simple IRA for 2001, decide to stop the Simple IRA during the year and then adopt a 401(k) qualified plan during 2001?

S corp has a SEP IRA. Can the client set up a SEP IRA with a new financial institution and transfer the old SEP money to the new SEP account?

Employer A currently sponsors a profit sharing plan and is top heavy. Employer A uses the services of a leasing organization, Employer B. All employees of Employer A are leased through Employer B to Employer A. Employer B sponsors a 401(k) plan with liberal eligiblity requirements. The 401(k) plan of Employer B is not top heavy. Two employees of Employer A are ineligible for the profit sharing plan for the 2000 plan year, however, they met the eligibility requirements for Employer B's 401(k) plan but are not currently deferring any amounts. Under normal circumstances, if both plans were sponsored by the same employer and were top heavy, Employer A would have to provide a top heavy contribution for the two employees that were ineligible for the profit sharing plan but met the eligiblity requirements for the 401(k) plan. With the leasing organization scenario, does Employer A have to provide a top heavy contribution for the two ineligible employees?

401(k) and match portion's eligibility requirements are immediate entry, enter on the first day of the quarter following his or her date of employment. Profit sharing portion requires one year of service and age 21, enter on the first day of the quarter following completion of the requirements. Suppose for the 2000 plan year that an employee was hired on 9/15/2000, he enters the 401(k) and match portion of the plan on 10/1/2000 but he will not enter the profit sharing portion until 10/1/2001. The plan is top heavy for the 2000 plan year. It is my understanding that this employee would be eligible to receive the top heavy minimum contribution for the 2000 plan year, correct? Suppose that the 401(k) and profit sharing plans are actually two separate plans, would this employee also be eligible to receive the top heavy minimum? Also, suppose the employer had a previous plan that terminated and was top heavy. New profit sharing plan was established the following year. Wouldn't the new plan be top heavy?

John Hancock

An employer is thinking about establishing a cafeteria plan that is entirely funded by the employees. The employer will not pay for any premiums. All contributions will be made by the employees' pretax dollars. Can this be done?