MarZDoates

We are in the process of terminating a SAR-SEP and replacing it with a safe harbor 401(k). I've seen in prior posts that it's a fairly simple process. It is my understanding that we can prepare a simple amendment to the plan to terminate it. I understand that we have to notify the participants. Does anyone have a sample notice to participants? Or can it be a simple memo explaining that we are terminating the plan and that salary reduction deferrals will cease. Do we have to give them advanced notice, or can we stop the deferrals immediately? Is there any citation that backs this up? Thanks in advance for the help!!

Employer's tax year is calendar year. They sponsor a 401(k) Plan with a plan year of July 1 through June 30. When would the matching contribution be due for plan year ending June 30, 2002? I assume they would be due by the employer's filing deadline (including all extensions). Is that correct and can anyone point me to the correct citation to back it up?

I have a technical question regarding IRA minimum distribution requirements and the new regs: Client began receiving minimum distributions in 1988. We are unable to determine what method (joint, single, etc.) he was using. He died in 1994 at which time a trust was established and his wife began receiving distributions. She was 69. The initial divisor was "17" and declines by 1 each year. The question is: Can we change the method to distribute based on HER life expenctancy under the new regs? Objective is to slow the distributions down.

Employer X maintains a 401(k) plan with a discretionary ps contribution. Their document excludes from eligible compensation "bonuses". Due to a change in payroll systems during 2001, employer inadvertantly did not exclude the bonus amounts from their calculation of employer match and ps contribution. Also deferrals were withheld from the bonuses. I have read through Rev Proc 2001-17 and while I don't see anything specific to this example, I would gather from the other examples that this would be an "insignificant operational error" and that the employer should utilize the self correction program. If I'm totally off base, where can I go to determine what the employer should do? Any assistance would be greatly appreciated.

Client has a PSP and MP Plan. He is terminating his MP plan effective 1/02....no benefits will accrue after this date. Per plan provisions, forfeitures reduce future contribution. There is a participant that terminated in 2000 with no vesting. Her forfeitures were never used to reduce the 2000 or 2001 contribution. Now what do we do with the forfeitures left in her account? I would think we could reallocate among remaining participants and then terminate and distribute the assets. That's probably too easy. Any suggestions? Thanks!

Employer maintains a Money Purchase Plan and a Profit Sharing Plan. Both plans cover the same employees, including keys. Do I need to group these together for top heavy test? If you can point me to the correct citation that backs up the answer I would appreciate it. Thanks very much!

That appears to be the answer I was looking for. Thank you!!!

Do the "controlled group" issues apply to Section 125 Cafeteria Plans as they do in retirement plans?

Kewl Beans. Thanks for your help!

Client is age 58 and wants to take $2,000 per month out of one of his IRAs beginning in 2002. In order to avoid the 10% penalty he will have to take distributions that are part of a "series of substantially equal periodic payments" based on his life expectancy.....AND has to continue to receive these payments for at least five years, right? Okay.... Question 1: Can we use old life expectancy tables or must we use new tables? Question 2: Trying to determine which of his IRAs to take distribution from. His values change daily...so what date do I use to determine the value? Example: $24,000 x 25.9 (old table) = $621,000 is how much he would need in his IRA to get him the $2,000 per month. Do I use values af of 12/31/01 or "current" value? Any input is GREATLY appreciated.

Is anyone aware of any "classes" or "continuing education" seminars pertaining to new comparability/cross tested plan design?

Should this be reported on Form 5500-Schedule I as untimely contribution?

Client is a Partnership and sponsors a 401(k). The two Partners elected to defer $10,500 each for the 2001 plan year. They submitted their contributions to the Trust March 1, 2002. I understand that a Partner's compensation is deemed currently available on the last day of the partnership's taxable year (12/31 in this case). However, their "earned income" could not be calculated by their CPA any sooner than March 1, 2002. Question is: Does this violate the DOL requirement that employee deferrals be seggregated from employer's plan assets and placed in Trust as soon as possible, but in no event later than the 15th business day following time of deferral???? Any input is greatly appreciated!!

Oh....that is too funny!!! I laughed so hard I cried!!!! Thanks I needed it.

I have a similar situation. Participant's account balance as of 12/31/01 was $160,000. She has the following two outstanding loans: Loan 1 - $4,000 taken out 4/10/98 (five year term). Outstanding balance as of 12/31/01 = $1222. Loan 2 - $7,000 taken out 1/29/99 (three year and 3 months term). Outstanding balance as of 12/31/01 = $851 Total: $11,000 loan 2,073 outstanding She wants to borrow the "maximum" and pay off the first two loans. Question 1: What is the maximum available? I have calculated as follows, but not sure I've done it correctly: I think I may be missing a step or two. $50,000 8,927 current loans $11,000 minus outstanding 2,073 $41,073 Question 2: Will she be considered as having three loans or one?:confused:

Ben, thanks for the input. The plan would not have been top heavy at 12/31/01 had we added back in the distributions for the 4 years prior to determ year. Sounds like I'd better get busy! Thanks again.

Ben, I just looked at one of our border-line top heavy plans. By NOT adding back in distributions for 4 years prior to determination year, the plan becomes top heavy as of 12/31/01. Employer did not want to have to fund a top heavy minimum in 2002. A couple of questions: 1) Would there have been any way to avoid the plan becoming top heavy had we "caught" this prior to 12/31/01 (i.e. freeze plan, terminate, etc.) 2) Could we go ahead and freeze or terminate the plan now to minimize employer top heavy contribution? Any input is greatly appreciated. Thank you.

Thank you very much!

Partnership adopted SIMPLE IRA (prototype) in April, 2001. Effective date of the SIMPLE IRA was January 1, 2001. Deferrals began in April. Question: With respect to calculating the 3% match, do we use compensation for the whole year or do we use only compensation from April thru December?

Has anyone begun amending their plans for EGTRRA? I know we have until the end of 2002, but I'm concerned about violating the anti-cutback rules if we wait that long. Thanks for the input.

Belgareth: As a child, I didn't get it either. Learned the correct "language" later in life. Anyway, that's what my mama used to call me and I thought it would make a unique handle. Glad you got a chuckle!! --------Mary

Joe and Tom: Thanks for the input. I was able to find the sample notice. Much appreciation!

I have a client that has an integrated Profit Sharing Plan. It is a calendar year plan. They want to add a Safe Harbor 401(k) for 2002. By what date must the plan be amended? By what date must the notice to employees be giving? I've looked at Notice 2000-3 and Notice 98-25. It is my understanding that they have up until October 1, 2002 to amend their Profit Sharing Plan to a Safe Harbor 401(k). However; I am uncertain as to when the notice must be given. Also, is there any where I can find a sample notice which contains the required language? Any clarification is greatly appreciated! Thanks.

I have a doctor that purchased an office building. He wants to know if he can use the property as an investment inside his Defined Contribution Plan. My first reaction is that he can not. Can anyone point me in the right direction as far as research? Also, any input is greatly appreciated. Thank you. Mary

MGB, thank you for your clarification and you are correct in that I did not word my question correctly. DUH! Must have had a brain gliche. Well, it had (after all) been a long day. Thanks again. Mary