Cathy from Chicago

Thanks for affirmation that I'm correct! Sent a fax to my accountant requesting explanation of my return so will wait to hear from him.

In January '02 converted about $12,000 of my IRA to a Roth; due to market decline (well, my stock picks!), value in Roth fell to roughly $5700 so in October '02, converted all back to IRA. Received 2 1099-r's from brokerage firm...one for initial IRA conversion of the $12,000 with Box 7 code 2 (early distribution); the second 1099-r for $5700, Box 7, code N (recharacterized IRA and de-characterized also in '02). On my prepared taxes, the accountant shows the difference of $6300 as taxable - why is that? I thought there would be no taxable event since, in essence, I did nothing taxable as all done within same year. Does anyone have a clue? Thanks in advance for your help!

Client needs 2001 5500 forms - ordered from IRS, never received, filing deadline next week. I sent him blank EFAST forms and am now wondering if they may be completed by hand (he does their 5500). If not, would the best approach be to complete the EFAST and wait for the DOL to reject it, thereby providing him with the forms for handwritten cases? Please advise...Thanks in advance.

Participant terminated in Oct. of '00; In January '01 she returned part-time for 2 weeks and received a W-2 for earnings and received a SH 3% contribution for the year. She took her entire distribution in '02. Again, her W-2 for '02 shows she had minute earnings for another part-time two week gig in Janauary...obviously this appears to be an ongoing thing. Question...does the employer have to continue to give her the 3% as long as she receives W-2 earnings? Could she just be 1099'd for her work? She no longer has her 401(k) investment account since taking her distribution last year. Thanks in advance.

In my opinion, yes, an EZ may be filed since all employees are owners.

In 2001, 3 ineligible employees participated in employer's 401(k) and 5 participants had excess deferrals. Both situations were corrected by reissuing 2001 W-2's as discovered in early January, 2002. However, all 8 had earnings on their deferrals (amazing!) so my intention is to issue a 1099 for 2002. Question: is 1099-R to be used, versus 1099-INT? Since I'll only be reporting earnings since the actual excess deferral was 'wiped out' due to revised W-2, are Boxes 1, 2 and 3 of the R coded just with the earnings amount and Box 7 (distribution code) listed as 8? This is my first experience with an excess being corrected via a revised W-2. Thanks in advance.

We left off the entity code on one investment on the Schedule D and the DOL wrote the client asking that it be corrected and an amended return be filed. Question - does the entire 5500, including all schedules, have to be sent in or can the client simply send in the 5500 stating it's amended and the revised Schedule D? Thanks for any assistance on this.

I can't find a quick reference to the changes the DOL made for plan years beginning after April 18, 2001 on bonding, etc. so as to avoid an independent qualified audit. Could someone take a moment and either explain them or refer me to a site? Thanks, in advance.

Client has a Safe Harbor plan, using the 3% comp formula. Plan participant terminated in October. Severance pay will be paid to him through 12/31 and be included in W-2 earnings. Is the employer responsible for making the 3% on the severance pay received from October-December? Thanks in advance!

One man plan, assets never >$100,000. Plan is terminating end of the year - does a final 5500EZ need to be filed even though a 5500EZ has never been filed?

At the ASPA meeting and heard that if a plan has a discretionary P/S contribution it is only allowed to be deposited annually rather than throughout the Plan Year. Is this true and, if so, where can I locate the code siting it. Thanks in advance for any help on this issue.

Lynn, in my opinion, yes, an EZ should be filed for each plan. I would think he would want to get his Keogh EIN changed to match his new EIN. What I don't know is if you can simply change the EZ to the 'new' number or if some formal change has to be made with the IRS.

We file EZ if combined assets >100,000

Doc A owns 100% of a few companies and 50% of other companies with Doc B. As of a month ago, all employees of all companies became employees of a new company (of which Doc owns 100%) and are leased back to his other companies (both the 100% and 50% ownership ones). Ideal situation - give as little as possible to everyone except Doc A, including Doc B. Doable situation? - An accountant did research on this and feels that if a 10% Safe Harbor contribution is made to all leased employees, Doc A can pretty do whatever type of plan he selects. I am not familiar with the 10% SH rule - so, is it true? Of course the call with the question just came in and they all wanted the answer yesterday so...any help or reference anyone can give me is much appreciated. Thank you.

Assume employer does not file a 5558 - what is the fine for filing 5500 late? Is it a 'set' fine or is it on a daily basis? I'm sure the info in on the web somewhere, but what is the address? Thanks in advance!

Mind has suddenly gone blank - when is the GUST amendment deadline for a non-calendar year prototype plan? EX: Plan anniversary 3/1 - is (or was!) the GUST amendment deadline 3-1 or can it be done effective 1-1-02 allowing for the extension to 12/31? Thanks.

Thanks, John, for your post. I'll combine the two Schedule A's, I guess, and only put the NAIC code for Company 2 but include the commissions included from Company 1.

The group annuity carrier (Company 1) sold all retirement assets on 6/30/01 to another carrier(Company 2); however, two schedule A's were produced, one by each insurance company. Even though no assets remain with Company 1, but commissions were paid, is a Schedule A required for this Company? Lastly, is a Schedule D also required for Company 1? Thanks in advance.

Your first scenario is correct - list the actual fund that is included in Penn Mutual's group annuity (Fidelity Equity Income) if that's what it is called. We use some group carriers who have both types of funds, those that use the name of the investment company, such as Fidelity Advisor's Equity Growth fund, as well as funds that do not have the money manager's name, simply the fund name, such as Select Growth.

Thanks, Michael, for your response. Based on it, it appears then that the forfeitures that will occur this Plan Year (2002) will be reallocated at the end of the Plan Year unless we amend the PS plan from having forfeitures reallocated to reducing the contribution, right?

MP had five-year cliff vesting, with forfeitures used to reduce contribution. MP merged into PS this year. PS plan has forfeitures reallocated on same basis as 401(a). In 2002 there will be forfeitures due to terminations of many non-vested employees. In order for the forfeitures to be used to reduce, does the PS plan have to be amended due to the merger? Has this situation come up with anyone else yet? Please advise. Thanks.

We used to have quite a few plans also using individual annuities as the funding vehicle and, like you, were stumped by the Schedule A query since the premium amount listed had absolutely nothing to do with contributions. I called the insurance company a few times to learn exactly what comprised that number and never got an answer..well, got answers but they were merely runarounds. If I recall correctly, I think sometimes I put down the number and sometimes I did not..the times I did not were when we exchanged the individual contracts to a group annuity and the Schedule A for the group annuity were then huge (as included the transferred amount, or somewhere near that amount). To date, no client has yet been questioned by the DOL on the Schedule A. How's this for a 'forsure' answer!

A. Company has a MP and PS on a calendar year basis. B. Company wants to merge the MP into the PS plan. C. Company hasn't made the 2001 MP contribution yet. D. Can the company put the MP contribution into the PS plan or does it have to maintain the MP until the contribution is made and then merge?

I spoke to someone 'in the know' and he referenced 414 v 3-5, which I did not check out but it apparently states that catch-up contributions may be made by any participant (50+) who defers the maximum allowable, whether due to IRS limitation ($11,000), plan document (10%, etc.) or regulatory testing. This explanation seems really logical to me so, of course, I'm leary since when is the IRS logical! Now what I don't know is: 1)how or if catch-up contributions are reported on W-2? and 2) can these contributions be mixed with actual deferrals in the investment (I realize from an admin point of view they'll be separated) since we have a few plans where all contribution types (deferrals, match, etc.) are lumped together in one vehicle and, we separate them for our reports. I'd like to know if there's a problem if they're not separated with the investment firm. thanks

I have the same query as Mike and since it appears the catch-up is fine if testing limits amount of deferral, can anyone cite an area here or some other link where it officially states that anyone over 50 can do the catch-up even if the plan allows maximum deferral but the testing prevents the max deferral? I'd like to be certain on this before I advise all our owners who are limited in deferral amount due to ADP testing. Thanks!