Alf

LRMs are available on this site that have sample language for most of the new law changes that were effective pre-1999. Of course, you can file the plan "as is," ask for GUST review, and the IRS will (should) send you a listing of the items in your plan that need to be revised.

We have had RECORDKEEPERS ask for as much as 90 days, but the actual amount of time that the system is down is always much less. However, your post mentions trustees. A transfer of trustees should not require much of a black out. I assume that you are referring to trustee/recordkeepers. My experience is that the "system" (investment and deferral election change capabilities and the ability to recieve deposits) is down for 2-4 weeks.

Ditto the question from Wessex. The presence of forfeitures in this situation spells trouble considering the fact that forfeitures are not permited to remain unallocated after the close of a plan year (so the excess forfeitures would have to have occurred in the year of termination) and the termination would have fully vested all active participants (so the excess forfeitures would have to have come solely from accounts of participants who terminated prior to the proposed termination date). If, after considering the above rules, there really are excess forfeitures, it seems like there would have had to have been a large number of terminations immediately preceeding the termination. You might consider whether a partial termination occurred. Assuming that there is a surplus, don't forget about the expenses relating to the new law compliance amendments that are required to be adopted by terminating plans (whether or not they are filed with the IRS), the IRS Form 5310 filing, and the Plan's final Form 5500 filing. These expenses are often overlooked.

If the plan is carefully drafted, the actual safeharbor contributions are the only contributions that have to be immediately vested. Of course, you need to have the ability to track contributions that are subject to different vesting schedules depending on when they were contributed. The "old" (pre-safe harbor contributions are subject to the old "grandfathered" vesting schedule and only the "new" safe harbor contributions are immediately vested.

We have two employees who will get no pay for December. One is terminating and the other is going on unpaid leave of absence for the rest of the year. In a calendar year cafeteria plan, can we take three paychecks worth of their elected deferral amounts out of their last checks this month so that their annual elections amounts will be met for the plan year?

Employees are transferring from a taxable employer to a related tax exempt employer. Is it going to be possible to transfer the balances in their nonqualified deferred compensation plans to the "ineligible" 457(f) plans maintained by the tax exempt employer? If so, will the 457(f) rules for taxation apply to the funds, or are the taxation rules that apply to nonqualified amounts held under a taxable employer's plan grandfathered in some way?

At the risk of getting off of the topic of this board (but not this message) does anybody know of any special rules or restrictions that would apply to multiple employer money purchase plans (as opposed to 401(k) plans). I am familiar with multiple employer 401(k) plans and the issues mentioned by IRC401, but the issue of multiple employer money purchase plans recently came up and I cannot find any differences.

I don't think that I have ever seen any guidance on this, but it should be treated the same as a 402(g) correction. The earnings should probably be reported in the year of correction becasue that is when the participant first had access to the money. The contributions are taxable in the year of deferral under the constructive receipt rules.

You are correct.

You shouldn't have to amend the plan to specify that you are making the election. I've been sucessful by simply retaining the pre SBJPA ADP/ACP testing language and mentioning in the response letter to the IRS that no amendment was necessary because the election was made by the plan for that year.

With this approach, the only real problem will be when the plan terminates. Then, you will have to purchase an annuity or arrange for an interest bearing account to be established (which will be extremely difficult for the small sums of money that are usually involved). Tom

Has anyone been affected? I would just amend the plan to correct the discrepancy. Of course, make sure that the amendment is consistent with how these provisions have been administered. I don't see how this provion could be submitted in one of the EPCRS programs. If it has come up, can you say that the plan has not been administered in accordance with the document if the document has provisions going both ways?

If they received IRS approval for their standardized prototype, don't they have reliance under 7805(B), even though their document doesn't comply with the Rev. Proc. 89-9 series of requirements for prototypes? If you have a letter, you shouldn't have a plan document defect.

The "What's New of Benefits Link" page has the following link to a Chicago Tribune article that is on point. Trying to dig up the documents [This message has been edited by Alf (edited 11-06-1999).]

We originally filed a full Form 5500 without the required audit report, but we are eligible to file a 5500 C/R (with no audit requirement). Can we now file a Form 5500 C/R for that prior year to replace the full 5500 that was originally filed?

We originally filed a full Form 5500 without the required audit report, but we are eligible to file a 5500 C/R (with no audit requirement). Can we now file a Form 5500 C/R for that prior year to replace the full 5500 that was originally filed?

We originally filed a full Form 5500 without the required audit report, but we are eligible to file a 5500 C/R (with no audit requirement). Can we now file a Form 5500 C/R for that prior year to replace the full 5500 that was originally filed?

In order to have a valid trust under state law, the trust must have a settlor, corpus, etc. . . Therefore, a trust will not legally exist until some minimum level of contribution is made (we usually say $50) and in order to be tax qualified under Code section 401(a), every retirement plan must have a trust.

Announcement 97-24 is the only guidance I can think of that is on-point. It states that, under certain circumstances, an election to stop receiving destributions may violate the qualification requirements such as 411(a)(11) and 417. I believe that it is speaking more directly to distributions to people who turned 70.5 before 1995, but I don't see why it wouldn't apply on your example as well.

It sounds like it meets the "deemed financial need" and "deemed necessary" safeharbors. If the plan has adopted both of these, the distribution is probably proper. The "general" financial need rules include needs that are voluntarily incurred, so the proposed withdrawal passes that too. However, the "general" deemed necessary rules require that the need exceed other resources of the employee and the regulations include an example where the participant's vacation home is included in this determination. I would think that a rental property similar enough to a vacation home for these purposes, so if the plan is using the general deemed necessary standard, it would be reasonable to make sure that the equity in the rental property offsets the amount of the hardship distribution (it may even be required because the plan administrator would have actual knowledge that the need could be relieved by liquidation of the employee's other assets).

I think you are correct. The only "exceptions" I can think of are the first plan year rule (which would only apply in the first year the plan provides matching contributions) and the plan coverage changes rule (which requires you to use a weighted average of the ACPs for the prior year subgroups for certain plan coverage changes that occur during the year). In the facts you describe, the ACP for HCEs would be zero.

The bottom line is that a plan that has not been amended since 1994 cannot legally terminate because its document does not reflect the statutory changes that became effective after 1994. An amendment needs to be executed to update the plan document. Normally, standardized plan language does not have to be filed with the IRS because it has already been approved by the IRS. However, the IRS has not yet begun approving M&P plan language for recent law changes(also, in this case, the prototype sponsor in out of business). Therefore, in this case, the fact that the plan is standardized does lessen the need to file the terminating plan with the IRS.

Whether it is withheld by the employer or not, the tax is due by the employee. Withholding is just a method of securing the payment of taxes to the government. It is not a tax itself. Therefore, the employee would owe the same taxes whether or not the employer withheld, there are just fewer "pre-paid" amounts that can be offset against the employees tax liability if there is no withholding. Normally, employers are not responsible if their employees do not pay taxes. However, if the employer fails to follow the mandatory withholding rules, the employer can be liable for the tax if the employee does not pay. The employee would have to fail to pay his taxes (not a common occurence)in order for the employer to be liable. Also, I do not believe that the employer would be the first source of funds tht the IRS would look to. I assume that the IRS would first look to levy the taxpayers other assets.

I have seen a lot of press lately on projections for the 2000 rate brackets, standard deduction, and tax credit amounts in the individual tax area. Although I know that these numbers cannot be finalized until later in the year, has anyone heard about the projections for retirement plans? I understand that the following limits are indexed: annual compensation limit, annual limit on elective deferrals, highly compensated employee threshold, the defined contribution plan contribution limit, and the defined benefit plan contribution limit. Does anyone know what the most current projections are?

I have seen a lot of press lately on projections for the 2000 rate brackets, standard deduction, and tax credit amounts in the individual tax area. Although I know that these numbers cannot be finalized until later in the year, has anyone heard about the projections for retirement plans? I understand that the following limits are indexed: annual compensation limit, annual limit on elective deferrals, highly compensated employee threshold, the defined contribution plan contribution limit, and the defined benefit plan contribution limit. Does anyone know what the most current projections are?