Kirk Maldonado

Remember that if you change the plan year, that will change the deadline for filing the Form 5500.

I think that you have to do the true-up on an annual basis. The best situation to illustrate this point is where the plan only matches a participant's contributions up to 6% of his or her compensation. Assume that the participant contributes 3% for the first have the year and 9% for the second half. If you computed the matching contribution (only) as you went along during the year, you would get a different result than if you did it at the end of the year.

Although I don't have a citation to it, I know that there is a court case right on point; holding those state laws are not preempted.

You could always read Code Section 414(p). It's pretty short and there are only about 10 requirements that need to be met, and, at least in the case of a QDRO issued with respect to a defined contribution plan, they are all very straight-forward. For example, one of them is "what is the name of the plan?" I wouldn't recommend buying a book to explain what you could read and easily understand in a few minutes. At the least, you might want to consider trying to read the statute before you decide to buy the book. You could save a lot of time and money if you just read the statute yourself. [This message has been edited by Kirk Maldonado (edited 05-22-2000).]

While I agree with RLL that you should be able to amend the ESOP in accordance with the statutory provisions, I think you should know that the applicable regulations do not authorize amending the ESOP in that regard. However, this appears to be a technical glitch, and many practitioners feel comfortable taking action in reliance on the statute (even without support in the regulations). This glitch has been pointed out to officials at the IRS and Treasury Department on numerous occasions, and (to the best of my knowledge) none of them have ever indicated that the "glitch" was intentional.

Wouldn't you also need to issue a 1099 (or include the amounts in the person's W-2) as a result of the improper payment? Also, don't you have an obligation to withhold FICA and FUTA with respect to the improper payment?

That is exactly what the questions and aswers that are posed to the IRS are designed to address; unsettled areas of the law. These questions are posed in writing to the IRS, and the IRS representatives have full knowledge of the implications of their responses. Having been actively involved in the IRS questions and answers programs for over 10 years, I think your perceptions of it are not accurate.

PLR 9431021 approved the rolling vesting schedule.

I don't know about ASPA, but I think that most attorneys that are actively involved in the ABA would be offended if they were viewed as nothing but shills for their clients. Because the people are spending their own spare time on the ABA matters, my experience is that people are trying to find out what is the right answer, not just what their clients want to hear. In 18 years of working on ABA matters, Ihave found that the attorneys generally try to do the right thing, whether that helps or hurts their clients.

I have to agree with KJohnson. The ABA has presented this question to the IRS a number of times (in a format similar to that used by ASPA), and the response that the IRS has consistently given is that once the employment has been terminated, no more Section 401(k) contributions.

Is there anything on point in the recently issued privacy regulations?

pax: Thanks for the cite.

I don't think that the participants are the record holders of the stock. The record holder is the plan.

That's a complicated issue. If you want to learn more about this topic, I wrote a very detailed article discussing it. The article is Basis Issues Complicate Qualified Plan Distributions of Employer Securities, 77 Journal of Taxation 334 (1992)

I seem to recall that The ESOP Association had a discussion of this topic in their newsletter about 6 months ago or so. Unfortunately, I don't remember the content of that article.

pax: What is your authority for the fact that certain parts of the Form 5500 must be provided free of charge, even though the participant received an SAR?

I agree. The child ceasing to satisfy the conditions for status as a "dependent" is a qualifying event.

I'm not sure that I agree that COBRA would apply. I don't know what is the qualifying event. Divorce and legal separation are qualifying events, but (merely) changing residence isn't.

You should check whether this must be reported on the Form 5500.

Be careful about unrelated business taxable income from certain investments.

My understanding is that there are laws affecting sharing of fees. I would make very certain you don't run afoul of those rules. You should retain somebody that is an expert in those areas to help you (and your client) stay out of trouble.

The DOL doesn't like this arrangements. See DOL Ad. Op. 76-32. However, some courts don't find them per se bad. See Ershick v. Greb X-Ray Company, 12 EBC 2323, 706 F. Supp. 1482 (D.C. Kan 1989), Brock v. Citizens Bank of Clovis, 10th Cir. 1988, 9 EBC 1609, and Friend v. Sanwa Bank California, 9th Cir. 1994 LEXIS 24805. I certainly don't like them because of the conflict of interest, but there are a number of ESOP practitioners who do them. If you enter into such a dual relationship with a bank, I recommend that you have an independent fiduciary approve any transactions involving purchasing or selling company stock. [This message has been edited by Kirk Maldonado (edited 05-05-2000).]

You should check out State laws also. For example, California has laws regulating vacation pay plans.

Check out Revenue Ruling 90-29, 1990-1 CB 11.

Check out Revenue Ruling 90-29.