Belgarath

No. Oddly enough, under EGTRRA, you can roll over a distribution FROM a Simple IRA to a workplace plan (assuming the 2 year period has been satisfied), but you cannot roll from the pension plan TO a Simple IRA.

Have them contact a good ERISA attorney, and have them do it NOW. Depending upon the amounts involved, the amount of time which has passed since the participant elective deferrals should have been submitted, what the employer did with the money in the meantime, etc... - you are looking at possible plan disqualification, certainly prohibited transactions, civil and possibly criminal penalties, etc. There is a PWBA program called VFC (Voluntary Fiduciary Correction)which was established a little over a year ago. It DOES NOT cover criminal violations, but can be used for "normal" late submission of elective deferrals. Again, I can't emphasize enough that they need qualified legal counsel immediately. Good luck.

Thanks MGB - what a waste of energy, for the IRS to take this interpretation of the regs they wrote, and then have to go back to Congress! Oh well, as long as they get some relief through...

2001-63 is in addition to 2001-61.

Just saw (but haven't read yet) IRS Notice 2001-63. Do you suppose this is what they were referring to when they told ERIC that it didn't apply to minimum funding? I remain convinced that 2001-61 does apply to minimum funding. Will have to read 2001-63 to see if 2001-63 trumps 2001-61, or merely adds to it.

Grrr! Things like this in the morning make me grumpy. I agree with MGB. This statement is just plain wrong, if in fact the IRS said this. But was it anyone in authority, or some minor knucklehead who doesn't know what is going on? I can't believe they would win on this in tax court. And further can't believe they would dare (nor should they) to try to apply this - imagine the extended crucifixion by Congress and the media? 301.7508A-1©(1) lists several acts - among them, the making of deductible contributions to certain retirement plans. Under section (4) of Notice 2001-61 Grant of Relief, it specifically grants 120 day postponement "to perform the other acts described in section 301.7508A-1©(1) of the regulations." I don't see how anyone could interpret this to say minimum funding deadline not extended. If in fact the IRS is taking this incredibly stupid position, we'll have to start calling our Congressmen, and some of the big newspapers. Let's see if an IRS official is willing to be quoted on this one! Whew, I've worked myself into a lather on this...

QDROphile - I tried to reply, but it didn't work, so I'll try again. I think you're right. Yet when I look at 1.411(d)-4, Q&A 2(e), it provides the rules for eliminating optional forms of benefits from a defined contribution plan (note that it does not specify profit sharing). I find the whole thing rather confusing, and the more I think about it, the less sure I am! It appears that you can eliminate optional benefits, but must retain a QJSA benefit for the prior money purchase benefit, because QJSA overrides the provisions of this regulation. Does this jive with your understanding? Any additional thoughts? Thanks for questioning this.

PAX - I came to the same conclusion. I wasn't at all sure about it until I actually looked at the 301.7508 regs on Friday, but it seems clear to me that you are correct. So if I'm wrong, we'll probably be cellmates. Naturally, I tell them to consult with their accountant before making any decisions!

Here's my opinion, for what it's worth... EGTRRA section 645 directs Treasury to develop final regulations to address such issues. Unfortunately, they have until 12-31-2003 to develop such regulations, although they may do it much faster due to the screams and howls from plan administrators! Absent such guidance, I think you must rely on 1.411(d)(4). This provides that you can eliminate optional forms of benefts, as long as you provide for a lump sum distribution option. HOWEVER, the amendment cannot apply to a participant who had accrued a benefit while other optional forms were available, if that participant has an annuity starting date which is earlier than the earlier of (1) the 90th day after the date the participant has been furnished with a SOMM explaining the changes, and (2) the first day of the second plan year following the plan year in which the amendment was adopted. If anyone out there can figure out a way to ignore this requirement, I'd be delighted to hear it!

I'd consider referring to an attorney who is familiar with the EPCRS program. (See Rev. Proc. 2001-17 for reference) This can be corrected, and for a heck of a lot less than would have to be paid if it is discovered upon audit.

Thanks PAX! One other question which occurred to me, which is probably galloping paranoia, but the DOL does that to me... The intent of the regulation is very clear - but when I look at the 301.7508A-1©, it doesn't specifically list 5500 forms. It seems to me that these fall under the "other" category, and I can't imagine that the DOL would ever attempt to assert otherwise, lest they be publicly lynched. And that's what I'm going to tell people. Nevertheless, I'd feel better if someone agreed with me that the extensions apply to 5500 filings as well. What do you think?

I agree that 9-15 is still technically the minimum funding deadline. I also agree with PAX that it would be nice to think that there would be some relief, or some "non-enforcement" on this issue, in absence of Congressional action giving official relief. Does anyone know if ASPA is planning some sort of letter to Treasury on this issue?

It's the same answer whether the SIMPLE terminated or not, as long as any money was contributed. As an "active participant" in the SIMPLE plan for, I'm presuming, 2001, his regular IRA deduction is governed by the income limitations. (Joint, if married) He could, of course, make a non-deductible contribution to the regular IRA. But in general, assuming he qualifies, he'd be better off with a ROTH IRA rather than a traditional non-deductible.

An interesting question. And I think that your interpretation is technically correct, under a literal reading of the regs. BUT, opinion was that this was an oversight, and the IRS agreed. According to something I read a while back, this question was actually asked at an ASPA conference a year or two ago, and the IRS agreed that the contribution you describe would count as an annual addition for the prior year. You may want to check with an ASPA person to confirm that my memory is correct.

I'm no 403(B) expert, so I'll defer to those in the know. First, is this a deferral only plan? If not, then they can certainly exclude different classes of individuals, subject to the normal qualified plan nondiscrimination requirements. Assuming deferral only, they can, under 403(B)(12), exclude employees who work less than 20 hours per week. I'm not aware of any provision to allow exclusion of union employees. The independent contractors, (if they truly are) can be excluded, as they are not "employees." Hope this helps, but I'd wait for some more informed opinions before you take mine!

With the numbers you have given, yes, he could get the 15%. Be careful, however, not to just take 15% of 170,000. You need to do the appropriate earned income reductions. For example, if his income was 176,000, and you contributed 6,000 for the employees, leaving 170,000, you would NOT be able to contribute 25,500. Basically, (for 2000 calendar plan year) the employer would need at least 202,942.00 remaining AFTER deducting the employee contribution, in order to receive the maximum.

I'd be concerned too, if I were in their shoes. This is one of those nasty "facts and circumstances" situations. SBJPA was supposed to help clear up some of this, but I think it only made it worse! 414(n) doesn't give a lot of direction, but the conference committee reports to SBJPA are instructive. Assuming these employees aren't common law employees, I'd have to say it sounds very much like they would qualify as leased employees, based upon the facts you presented. If I were the employer, I'd sure want a legal opinion before I attempted to exclude them from my plan.

I had the same question a while back. I couldn't find an "official" cite that I could use to back my assumption that you can use the new rules for 2001 for 403(B). There are sideways references and hints, but I couldn't find anything in black and white. I still think you can, but if asked to prove it, I'd have to do some tap-dancing.

I'm going to tell this client to consult an attorney, but I'm curious for my own information. Client has both a money purchase and a profit sharing plan. 3 HC's, currently no NHC's. In 1994, they had a NHC who was a participant. Their certified census data for 1994 said the NHC terminated employment. Lo and behold, it now turns out that this wasn't true. Don't have the details yet, but it appears that at that time, they shifted employee over to some sort of leasing organization, but continued to employ him full time. NO contributions were made for him in 94-97, when he did actually terminate employment. My best guess is that this would have to be handled under VCP. (took me 20 minutes to figure out which letters went with which correction program - changed a lot since I last looked!) Possibly under VCO, but I'd be concerned that this would be considered an "egregious" failure. Any opinions on this? Also, since contributions under the money purchase plan were missed, will the client have minimum funding penalties as well? Thanks in advance for any opinions you might have.

Here's a good one! A participant in a 457 plan died. 60 years old. Spouse is sole beneficiary. An insurance agent read that you could roll 457 to IRA now, but didn't realize that you couldn't until 2002. The 457 plan was funded with a deferred annuity. What they now want is to 1035 exchange the annuity in the 457 plan to a new annuity, in the name of the Trustee of the 457 plan, but with the deceased as annuitant! Then in 2002, the 457 Trustee, acting upon the instructions of the spouse beneficiary, will roll the money to an IRA in the name of the spouse. I don't have a problem with the second part of the transaction, but how the heck can you do a 1035 exchange when the annuitant is deceased? (The logical approach, to me at least, if the 457 Trustee agrees, is to keep the money there until 2002, then just do a rollover.)

The plan has an operational failure. For correction, you can look to the SVP program - I'd have to look, but I think you'd generally correct under APRSC.

I was wondering about this myself. I didn't look at the conference committee report on this, because I deal very little with 403(B)'s. Was this intentional, or is this a likely target for a technical corrections bill, since EGTRRA axed the exclusion allowance calculation, thereby making the 403(B) tantamount to the "old" C election? Obviously you use the law as is until changed, but for those of you more in tune with the 403(B) world, would appreciate your thoughts on this.

EGTRRA 641© expands this to include 403(B) and 457. My question is, who is the "administrator" under a typical 403(B) salary deferral arrangement? In other words, who will be responsible for this - the employer, or the insurance company, mutual fund, etc.? Thanks.

You can use either. IRS Notice 98-52 originally required that plan year was required. Then they modified this in IRS Notice 2000-3 to allow the "payroll" method. Check Q & A-2 of 2000-3 for the details.

Was the plan effective 1-1-2000, or 1-1-2001? Assuming the latter, you are correct - you would calculate his minimum distribution for 2001 based upon a zero account balance on 12-31-2000 - therefore a zero minimum distribution.