LCARUSI

I agree: $4,000

MWeddell - Must the participant take the maximum allowable loan? What if the loan repayment would constitute an inordinately large percentage of the participant's net pay?

What is the age of the business owner relative to the employees? That's the first issue. Plan won't work real well if the owner is younger than the employees.

Kirk - First of all, I doubt the plan would allow a rollover (into it) of anything but cash. But, if it did allow a rollover of securities and the security is the employer security, I'm not sure what the tax treatment would be. I doubt you could use the original cost basis for the stock from prior to its first distribution from the plan. Maybe you establish a new cost basis, based on the MV of the stock at the time the shares are rolled back into the Plan.

What is the definition of compensation? I find it hard to believe it could be silent on bonuses

It's permitted and there are no tax consequences - favorable or adverse. She already lost any favorable tax treatment on the unrealized appreciation on the company stock when she rolled the shares into the IRA. [This message has been edited by LCARUSI (edited 06-26-2000).]

I received an unsolicited Advertisement from this Firm. They used the BenefitsLink White Pages to do this mass mailing, so many of you also received it. Do you think this should be allowed on BenefitsLink? [This message has been edited by LCARUSI (edited 03-10-2000).]

Assuming: 1)It's a calendar year plan year, AND 2)Plan document allows it Yes, you can use prior year method for 1999 and current year for 2000. But there are some unfavorable issues if you used QNECs or QMACS to pass using current method in 1998. Use of current year method in 2000 would prohibit reverting back to prior year in 2001.

Ed - I think it will depend on the policy of the individual service providers. They should allow it since it is a conservative/hedging strategy. However, some might have a blanket prohobition on all option activity. I don't understand why UBTI figures into this discussion.

Does anyone have any statistics concerning the percentages of employees who make the election to opt out of a plan when they are negatively enrolled?

I'll be argumentative and say: 1) The plan provides a 25% match. 2) If I invest my contribution in company stock, I receive an additional contribution equal to 50% of the contributions directed to stock 3) The contributions in (2) don't sound like matching contributions to me. I receive it by virtue of my investment election. Therefore it might be subject to other testing under 404(a)(4).

Chip- I doubt that. Matching contributions can be used to satisfy the top heavy contrib requirement but only to the extent they are not also being used to satsify the 401(m) Test [This message has been edited by LCARUSI (edited 02-14-2000).]

Connie - R year is the two out of three years you are filing a 5500-r. C year is the year you do the more comprehensive 5500-C. Assuming you are under 100 employees

I was involved in a similar situation recently. Client's counsel took the position that future earnings is also a protected benefit. That position is different than Alf's. (And I'm assuming Alf meant to say $10,000 and not $2,000.)

Participant reports the additional income on 1999 tax return even though he/she does not have 1099-R. The 1099-R which will be issued in Jan-2001 will have a code indicating it is taxable income for a prior year, i.e. 1999. [This message has been edited by LCARUSI (edited 02-05-2000).]

What does the plan document say?

I think it's $60,000. I'm aware of no basis to treat a safe harbor contribution differently than any other type of company contribution for purposes of 404.

Does anyone have any statistics as to what percentage of plan sponsors are offering investment advice to participants? (My definition of investment advice is giving participants specific instructions as to how to allocate their accounts among available options in the plan.)

I have some literature from Fidelity indicating they allow option trading in brokerage accounts in 401(k) Plans. It is limited to level 1 and 2 option trading, but that would clearly permit covered calls. Participant must fill out a separate application for option trading and be approved.

Consider a side effect of this type of election (12/31 to 12/30 plan year): You've effectively delayed the increase in the 401(a)(17) limit for a year - to the plan year starting on 12/31/2000 and ending on 12/31/2001.

It's old news. Assuming everything is currently calendar year: If the client changes plan year to 12/30/99,then client could opt to deduct contributions for plan year 12/31/99 to 12/30/00 in the fiscal year 1/1/99 to 12/31/99 (because of the one day overlap)

Shareholder-employee (5% owner) can not borrow from an S Corp. This includes certain relatives of the Shareholder-employee. For partnership or sole proprietorship: plan can't lend to owner-employee or to the spouse and certain other employees Check 401(a)(13),4975(d)

What do you mean by prospectus? A summary plan description or a prospectus for one of the investment options?

Some thoughts on this: 1) New employer probably won't accept a rollover of stock. 2) If the employer does, it clearly will no longer qualify as an employer security for ura purposes etc. (New Employer would only do it if it has a brokerage account option in its plan) 3) Best thing to do is to rollover cash and then repurchase the stock if the new plan has a brokerage account. 4) Whether or not its advisable to stick with a losing stock waiting for a recovery is another issue (might be like betting on a horse that keeps losing because it's overdue for a win)

Kelly - You're proposing a compensation based allocation - but only if employee made 401(k) contributions. Sounds to me like you'd be making a benefit (other than a matching contribution) contingent upon employee making 401(k) contributions. You can't do that.