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An employer sponsors a SIMPLE IRA for 2000. His fiscal year end is 3/31. It is my understanding that the deduction for fye 3/31/01 would be all contributions made in 2000 (January through December). He would now like to establish a Money Purchase Plan as of 1/1/01 and take a deduction as of 3/31/01 for 25% of compensation paid from 1/1/01 through 3/31/01. Would he be allowed a deduction since he is also taking a deduction for a SIMPLE IRA? It seems that it would need to be a short plan year because if it is a full calendar year, the deduction would be taken 3/31/02 for the minimum funding requirement for 2001. Any thoughts on this?

Has anyone had any experience recently with the PBGC regarding timing on the distributions in a plan termination? We had a client who missed the date by 6 days and I'm wondering if they nullify the termination what does that really mean? The plan was frozen so there are no additional accruals.

We have taken over a case where an ESOP has been used as part of a floor offset with a DB. I know that this can cause a prohibited transaction because the ESOP is no longer considered an individual account plan and therefore is subject to the 10% limit on Employer Securities. If we rescind the floor offset amendment in 2000 to correct the prohibited transaction, do you think the prior DB valuations would be effected? Or could they stand as is, since the offset was not really a problem?

I don't think 401(g) is prorated, because that is an individual taxpayer limit. Also, the other limits (415,401(a)(17)) would not be prorated if you don't have a short limitation year. I really want to know if the safe harbor provision could be effective 4/1 but the plan effective 1/1 for profit sharing contributions.

If a new plan is implemented in April, 2001 and wants to use the safe harbor provision, must the first plan year be a short plan year or can the plan be made effective retroactive to the beginning of the plan year (i.e 1/1/01)?

What is the remedy for an overcontribution of a match in a SIMPLE IRA?

If a defined benefit plan has the standard language for payouts at NRA (60 days after close of plan year in which later occurs.....) and a participant does not elect to defer payment of the benefit is it the plan sponsor's responsibility to make payment? If the participant is missing for several years, should back payments be made to the NRD or actuarial increases to actual annuity starting date? The document is silent on what to do if you can't find a participant. We have been to issuing a notice to participants when they terminat that states that it is their responsibility to apply for benefits when they attain NRD. Now I'm not so sure if that language is appropriate. Does the plan sponsor need to make an effort to find participants? We normally remind them with the annual val who is attaining age 65.

We had this situation and were told to enter a loss on the receivable account to bring it down to the amount invested. Then you can transfer the entire receivable as the transactions take place. After posting each transaction, you enter a gain to the receivable account to bring it back to the amount still due. It was a bit of a pain, but it worked. Of course, all the gains/losses net to zero.

Do non-412 plans need to complete the Schedule R? It seems like all you are doing is reporting the EIN under which payments were made on line 2. There is nothing to report in Line 1 and nothing to report in Line 3. What are other preparers doing?

A participant is covered under a MP and 401(k) plan. The sum of her MP + Deferrals + Match is greater than $30,000. The 401(k) plan document provides that deferrals may be returned to satisfy 415. What happens to the match associated with the return? Is it forfeited? reallocated? They are failing the ACP test and will make a QMAC. Another alternative would be to prorate the correction between deferral and match. The excess match would then be used to reduce her matching contribution for the next year. Any help is appreciated.

Plan document allows the employer to defer distribution of any stock encumbered by a loan until the loan is repaid. If in some years, the emloyer has sufficient cash to repurchase the encumbered stock available for distribution, does this mean that he has to do so in subsequent years? Does this become a 411(d)(6) issue? Can he decide on a year by year basis? Any help is appreciated.

I have a client who converted to a ROTH at end of 1999 to avoid further minimum distributions. However, when she did this the bank did not tell her she would be taxed on the conversion. Now she wants to undo the conversion. Can this be done prior to April 15? What are the reporting requirements?

He is still working. We agree, we're not sure why he was granted actuarial increases after he began drawing.

We are in the process of taking over a case from another actuary. One of the owners has been receiving monthly benefits since 4/1/96 (his RBD). He began drawing the full 415(B) limit actuarially increased to age 71. Each year since then, the actuary has increased the monthly payment to reflect the change in dollar limit and an actuarial increase due to his age as of January 1. Is this correct, or should the actuarial increase for age cease when benefit payments begin (4/1/96)?

If a plan sponsor has not adopted an amendment to pay lump sums at GATT rates, should we continue to pay at the greater of GATT or PBGC in 2000 until the plan is amended? Or should we begin to only pay at GATT?

Employer X sponsored a DB plan prior to 1986 and terminated plan. The same employer now wants to put in a new DB plan in which he will have only 5 years of participation. Can he count the participation in the prior plan toward meeting the 10 year participation requirement to get a full DB benefit? I understand that we will need to offset the current benefit with the prior benefit. Do we offset 50% of the DB limit or the DB limit adjusted for the sum of the prior participation and the current participation.

Both spouses maintain IRA accounts and both are beyond age 70 1/2 and receiving minimum distributions based on joint life expectancy (not recalculated). One spouse dies and the other wants to rollover into their account. Can the minimum distribution on the total account continue to be calculated under the joint life expectancy?

We have a medical practice in which all of the nhces are leased employees. The leasing company has a 401(k) plan to which many of the employees make salary deferrals. The medical practice also has a 401(k) plan. we are exploring the possibility of counting the deferral made in the leasing company plan as deferrals in the medical practice plan and making a safe harbor matching contribution in the medical practice plan. Any opinions about doing this?

We have a client (former?) who was an attorney. About two years ago he was indicted and sent to prison. While in prison, he was diagnosed with liver cancer and recently died. His defined benefit plan was established roughly five years ago. He took out a loan and there is only $10,000 left in the trust. His two former employees accrued benefits are valued at more than the $10,000. He did not file his 1997 or 1998 Form 5500 to our knowledge. We actually fired him prior to his prison sentence for failure to pay our bill. Now, we're feeling sorry for the employees and would like to get them some money if possible. Is it worth the trouble? Should the IRS be notified? One employee has already filed a complaint with the DOL. Any suggestions would be appreciated.

I have a client who has been told by their attorney, that in the first plan year they can make two separate top 20% elections. They are going to make an election for the 401(k) test and not make an election for 410(B) purposes. Is this possible? I thought if you made the election it applied to all discrimination testing. I was not aware of an exception in the first plan year.

I am taking over a plan for a law partnership in which several of the partners are PCs. Should plan compensation for these partners be the W-2 income from the partnership?

Yes, we are going to file for a determination letter. We are considering adding that lump sums can be paid at the 30 year rate (GATT) plus 1%.

If a governmental defined benefit plan is terminating and wants to pay lump sums, are they subject to the 417(e) rates or can they pay at any reasonable rate?

That was my opinion also. Someone else in my office felt that since she did not make $150,000, she would not be considered key. Thanks for your input.

He is an officer but is not one of the top ten owners. She is not an officer. He is a 1% owner who makes more than $150,000. She makes $48,000.