Cathy from Chicago

Plan year-end is 4/30. Plan is a MP which has been frozen since '99. Vesting is 100% after five years. Forfeitures are reallocated same as ER contribution. Received a call from client today advising that wrong census data was given to us for plan year ending 4/30/00. Per their original data to us, a participant terminated during the plan year without completing enough hours, thereby forfeiting his account; however, the Company now realizes he did complete enough hours and his account needs to be restored. News every administrator loves hearing. Not. To make participant whole, my thought is to use any forfeitures from the 4/30/01 valuation (hasn't been done yet) and if sufficient to pay him amount he should have received 4/30/00, fine; if not, have the Company make a non-deductible contribution to make him whole. Am I on the right wavelength for this? Secondly, is he entitled to the exact amount due him in '00 or do I figure in earnings/losses up to a current date? Thank you for anticipated help.

I have a client who is terminating the company SEP on 12/31 and starting a SIMPLE IRA 1/1/02. Can the existing SEP account money be rolled into the SIMPLE IRA account for each employee? Thanks in advance....

The mandatory match does not have to be made by the employer until he files his taxes, including extensions. This should allow ample time. Should the match still not be made, my gut feeling is the plan would be disqualified and all deferral contributions subject to income taxes and penalties (only my gut feelings, keep in mind!)

We charge two different fees for eligibles; one fee if eligible and participating and one if eligible and not participating. For 401(k) plans that also have a P/S contribution, our charge remains the same for those participating in the 401(k) but the eligible but not participating increases to our usual fee for P/S plans. For terminees we bill a set price for all terminees at the end of the plan year, regardless if they've been paid out during the plan year. If a terminated participant for whatever reason does not get paid out at the end of the year in which they terminate, they are again charged at the end of the following year. We increased our charge this past year for terminees and, to date, have received no feedback on the action.

FYI - a modification is coming from Blaze for the SAR - you may have noted that if you leave the plan year dates blank on the 5500 (which is logical to do if a calendar year plan), the SAR plan year dates show as 1/1/99 - 12/31/99 even though the financial data, etc., is for the 2000 plan year. One of our clients noticed this, called me, I groaned, notified Blaze and re-did all SARs for previously completed plans. I don't have any idea when gov form modification will be completed but do know all you need to do is put in the plan year on the 5500.

Yes, it's now totally clear! Whew! I think it'd be ok to take the risk on the quarterly entry date change to 12 months!

I don't think the logic if there are four entry dates you can change the eligibility to 2 years, since 1 year is the most you can delay someone entering unless 100% vested within 2 yrs...yes, I know..you'll say, but hey there's only deferrals and they're 100% veseted immediately...well, I know, but the old phrase 'if it doesn't smell right, it isn't' comes into play in my mind....changing to 2 years just seems to easy to resolve the failure problem. that's my take on the situation!

I'll join cynical Stephen in my view of splitting tests...just one more way to create more money. Yes, the tests are hard and require a big time commitment but I personally much rather take fewer exams despite the exhaustive depth and breadth of each than have multiple, yet more focused exams. I view the completion of each designation by the number of exams required and I'd hate to think I have ten exams to pass before getting the designation.

We use the same method Earl referred to in his post - simply change the participation requirements in EBPII, run it, open up RTS, bringing over new plan and employee data and running RTS. Works for us and seems pretty simple. If the testing passes due to the EBPII change, we save that test result and use it for the valuation package. I apologize for the delay in answering - I used to automatically get notified when posts were made so as to hop right on them, but for some reason I wasn't notified. Like you Earl, I rarely check the BlazeSSI area as no one ever seems to post.

Hard to believe your software provider hasn't yet completed the SAR! I'd look into getting a new provider! In any event, the 2000 is slightly different than the '99 so to go the template route, my opinion is that you'll have to get a copy of the new SAR and use that as your basis for your accounts. Sounds like a ton of work to me.

thanks so much for a specific answer. I knew there was something 'special' about company stock in a 401(k) but I just couldn't remember!

Where can I find information on the tax implications if one chooses to keep the shares of company stock which is a part of ones 401(k)?

My accountant used to file two Schedule C's - one (from the insurance company that also made a contribution for me) and the second Schedule C was for strictly 1099 income...on that Schedule C he would calculate the maximum SEP contribution. Since this Schedule C had a lesser income, we showed no expenses affiliated with it. Although I am not an accountant, the system always worked. In the last couple years my tax life changed so my two Schedule C's have pro-rated expenses and I make no SEP contribution due to ownership of a company. hope this helps

no, it doesn't work that way. The cost basis is $500 so any amounts withdrawn (not due to borrowing) would be treated as ordinary income.

We have one PS plan that has a two year of service and age 21 for eligibility requirements. Once eligible, of course, 100% vested immediately. Does the 1000 hour rule apply as it typically does for the usual one year/age 21 plans? One employee has her two years in but only worked 973 hours each year and I want to confirm she's still not eligible. Thank you.

Thanks, Steve, for your prompt answer!

Can a participant name a trust as his beneficiary? If not, why? If so, why isn't it done more frequently? thank you.

Are Section 457 plans also subject to the 15 day rule?

Do Section 457 plans have a required due date for employers to deposit employees payroll deductions? Is there a legal timeline as there is with 401(k) contributions? Thanks for any info - I know nothing about 457 plans.

I am but haven't a thought to exchange since I haven't started studying yet! UGH is my only thought!

Thanks for your quick response!

This year we installed a MP plan and a SEP (using proper prototype)in '99, both one person plans - in '99 and this year, he contributed $30,000. SEP is now valued over $200,000 due to rollovers, making assets of both plans greater than $100,000. Does a 5500EZ need to be filed due to the SEP or does the EZ requirement refer simply to 'real' qualified plans? Thanks.

We have a standard prototype 401(k) which will be terminating as the Company was purchased. Typically we do not file IRS 5310 for a standard prototype plan termination but do notify employees of the plan termination as well as explain distribution options, etc. The attorneys hired to handle sale of the Company now think they should file a 5310 for the 401(k)and, of course, want us to provide all the backup document information, etc. Do all of you apply for a determination when terminating a run of the mill plan? Thanks.

In a couple posts here, I've noted that plan termination fees may not be paid from plan assets. We're terminating a Plan and the Trustee asked that our fee be taken from the assets. This is a new experience. So, is it the IRS rules that prohibit termination fees being paid from Plan Assets or is it some Trust documents? Thanks in advance.

I didn't check out their website. we get periodic faxes on issues and this was the latest. I assume we pay for this service but can't tell you much more about it than this as I don't know. I just know 10/16 is approaching too quickly!