John A

Tom, Thanks for the reply, but what does that mean in practical terms? Would you say that using a cash basis rather than accrual basis is an operational defect (probably what I should have asked in the first place rather than plan defect)? Does a 50% penalty apply to the participant for the amount of the underpayment? If it is not a plan defect, does that mean it is not a qualification issue? Are you saying that no correction program (APRSC, VCR, etc.) would need to be used?

If a plan uses a cash basis to determine a Required Minimum Distribution (and there is an accrued contribution), is there a plan defect? The proposed regulation clearly states that an accrual basis should be used, but the regulation is neither temporary nor final, only proposed - so would the fact that the regulation is only proposed be enough to prevent using a cash basis from being a plan defect?

Which safe harbor definitions of compensation include severance pay and which do not? The sources I have available seem to disagree. All seem to agree that severance pay is included in W-2 wages (the Wages, Tips and other compensation box on W-2). However, some say included and some say excluded for 3401(a) withholding wages, 415©3) "long list", 415©(3)"short list", and 414(s). Can anyone clarify whether severance pay is included or excluded under these definitions? Any cites that specifically mention severance would be appreciated.

Can plan assets be used to pay real estate taxes (as an investment expense of the plan) if the plan holds real estate?

Thanks, Andy. I agree. Upon request, the participant must be given both the total accrued benefit and the nonforfeitable benefit, but no more than once a year.

Thanks, MR. As I looked at Code Section 404, it seems to me that the pre-87 carryforward only applies to profit sharing and stock bonus plans anyway, and not to pension plans. It was a little less clear to me whether or not you could use the pre-87 carryforward from a stock bonus plan that had been terminated if a profit sharing plan had subsequently started, especially if the same trust was used for both plans. I don't see a specific requirement that it be the same plan, although that would make sense to me. Any other thoughts?

If a plan has a pre-1987 carryforward for deductibility purposes, and that plan has been terminated, may the employer use that pre-1987 carryforward in a subsequent plan (for example, money purchase plan terminates, plain vanilla profit sharing plan starts - can the profit sharing use the pre-1987 carryforward from the money purchase)?

Is there any requirement that vesting be shown on a participant's annual benefit statement, or is it enough to show the total accrued benefit before vesting?

Good point. But is either plan sponsor responsible for tracking excess deferrals when the participant has not notified either plan that there has been excess deferrals? In the specific case discussed, does a TPA have a responsibility to notify the plan sponsors and/or plan participants that excess deferrals exist, but in which plan will not be known until the participant notifies the plan(s)? Is the participant responsible for keeping track of the excess deferrals and earnings up to the time of payment, or up to the time of notifying the plan(s)? Are you aware of any guidance on the participant's responsibiliy in the case where the participant has not notified the plan in time for the distribution by April 15?

Why would either of the plans need to keep track of the excess deferrals and the related gains separately at this point?

Thank you for a very thorough and helpful answer!

Thanks, Paul. Any reason the owner could not start a SIMPLE plan as of January 1 of the following year?

In your daily recordkeeping system, how do you track accrued contributions for individuals for purposes of determining the balance to use for required minimum distributions? Would your system automatically add a contribution made on September 1, 2000 for 1999 to the 12/31/99 balance to show you the amount to use for a year 2000 required minimum distribution?

Thanks, Greg. Does anyone else have a problem tracking the accrued contributions for this purpose in their daily valuation systems?

Kirk, do you know where I could get a copy of IRS Technical Information Release 1408? Also, do you know if any of the recent changes to the same desk rule would change the answer in a situation where the plan merger is in conjuction with a corporate merger and the same desk rule applies?

Is the following correct: The same desk rule has no effect on vesting, so participants in the terminated plan have to be 100% vested in the money from the terminated plan, even though those same participants are not entitled to a distribution from the terminate plan. Thoughts?

Does the account balance to use to determine the Required Minimum Distribution include accrued contributions? In a daily valued profit sharing plan, if a participant has a 12/31/99 cash balance of $25,000 and receives a profit sharing contribution of $1,000 for the 1999 plan year, is the balance to use $25,000 or $26,000 (assuming there are no other adjustments)? A cite would be appreciated! Thanks.

What is the difference between: 1) a 411(d)(6) protected benefit that can be eliminated by plan amendment (like hardship distributions), and 2) a benefit that is not protected under 411(d)(6) (like ancillary life insurance)? If they can both be eliminated by plan amendment, what's the difference?

The excess deferral must be distributed, and the participant must inform the plan that the participant wants the distribution from. Failure to distribute the amount by April 15 following the year of deferral will cause double taxation to the participant - taxed on the excess in the year it was deferred and in the year it is distributed. And if the amount is not distributed by April 15, then the amount cannot be distributed until a "distributable event" occurs. The excess could not be distributed after April 15 and before a distributable event under a correction program like APRSC because, as you note, the plans do not face disqualification for this issue. So the distribution is only a "must" from the standpoint of the participant avoiding double taxation. Anyone else agree or disagree?

1) Are amendments restricting in-kind distributions subject to the same effective date requirements as amendments eliminating optional forms of benefits (no sooner than 90 days after an SMM is issued to participants), or are there separate timing rules for in-kind distribution cutback amendments? 2) Can defined benefit plans be amended to restrict in-kind distributions, or is it only defined contribution plans?

Has anyone heard anything (perhaps at the ASPA conference)about possible changes, new questions, etc. for the 2000 Form 5500 and schedules?

I would suggest clicking the "More Like This One" button above your question to get a list of threads on the Same Desk Rule. Do any of those threads answer your question?

alanm, thanks for the response. Could an employer set up a nonqualified plan for independent contractors?

Richard (or anyone else with an interest), did you ever get a definitive answer to your question? Can a qualified plan be set up to cover a group of employees who truly are independent contractors?

An employer has a frozen money purchase plan. The employer starts a 401(k) plan and uses one trust for both the money purchase plan assets and the 401(k) plan assets. There is a section in the 401(k) plan covering how to treat frozen money purchase plan assets. If this section is used, are the plans merged automatically with no further action? Does there have to be a specific amendment to each plan document stating that the plans have been merged? Other than meeting the 414l requirements, what action is necessary to merge the plans?