LCARUSI

ESOPwizard - When would the contribution have to have been made by in order for the contributions to be annual additions for 1997?

It seems to me there are two issues here: 1) If the company makes the contribution now, can it still be considered a contribution for the 1997 *plan* year? And can it,therefore, be allocated based on employee participation and compensation in 1997? It doesn't make sense to say yes, but I can't come up with a specific reason why the answer must be no. So I'll say yes. 2) If the company makes the contribution now, can they take a contribution for their 1998 *fiscal* year? Yes if it is prior to their filing deadline for 1998. In fact I guess they could deduct it for 1997 if they are still on some sort of extension for 1997 (but I doubt that's possible).

Chester - What regulation are you referring to?

GW - What is your relationship to the Sponsor?

I believe you can also use W-2 compensation to calculate the TH benefit (see 1.416-1 question M-7 ). I don't know if this has been changed by SBJA.

To Tom Poje (or anyone else who can help) - What do you mean by the following excerpt from your posting: (e.g. you now have 2 formulas - x% for most employees and 3% for top heavy people) Thanks

Yes, you can exclude your sub501 group from the testing because it is an allowable exclusion under 410(B). Your standardized prototype uses this eligibilty to guarantee compliance with 410(B). The rules for the 410(B) testing are not dependent on the type of plan document you use.

Kathy - Try calling the IRS Employee Plans Division's taxpayer assistance telephone service at (202) 622-6074/6075 between the hours of 1:30 and 3:30 p.m. Eastern Time, Monday through Thursday. I have always found them to be very helpful. They'll either give you a quick answer or get back to you pretty quickly. Please don't forget to post whatever information you get! P.S. I'm guessing (notice I said guessing) that it does not count as a successor plan.

I think for anyone to give you an accurate answer, you should if possible provide more information: 1) How are the Plan's assets invested? 2) Is the recordkeeper also the investment manager? 3) If the recordkeeper is not the investment manager, does the recordkeeper receive any subsidy from the investment manager based on the level of assets in the Plan? 4) What is the total Plan assets?

If the plan has a "last day clause" and the employee is not there on the last day, then the matching contributions and profit sharing contributions never belonged to the employee. Therefore, there is no forfeiture. The funds belong to the employer. Why would the employer fully fund these contributions over the course of the year if there is a last day clause? P.S. Check the Plan document.

Phil L - If the check is made payable to the deceased (or to the estate of the deceased), then I assume the refund amount would become part of the decedent's estate. Couldn't the check be deposited by the executor/executrix and included in the estate?

I don't see how you can issue a 1099-R to one person (SS#) and then issue the check to another person with a different SS#. I suggest you issue both the 1099-R and the check in the name of the deceased (or issue the check to the estate of _______). The check amount would then be included in the deceased participant's estate and the 1099-R would cause it to be included in his or her final tax return.

I'm sure you can't do this under a prototype, but I think you could do it under a custom plan: 1) Eligibility is immediate for anyone working at a rate expected to exceed 1,000 hours per year, 2) Eligibility is 1 year (1,000 hours) for anyone else. Thus, those employees who are expected to work less that 1,000 hours will not enter the plan until they exceed 1,000 hours for one year. (The employees who tip over 1,000 hours and enter the plan will count against you in the 410(B) test in the year prior to entry, so it might be a problem if you have too many of them. It desn't sound likely.)

You're saying you want to separately test the people who are not 21/1 who are in the Plan by virtue of the initial enrollment waiver. I don't see why not!

Can't the client just start drawing down the forfeiture account now to fund future matching contributions until it is depleted? Why distribute the forfeiture account to the employer so he can then recontribute the funds to the plan to fund the future matching contributions?

ICAPS - If you were going to work in a foreign country for two years and then return here, would you want to leave an IRA (or that country's equivalent) behind in that country? Then for the rest of your career here or until you took a distribution, you would have that investment "out there" in a foreign country subject to strange tax laws. I think those employees are smart to say "no thanks" to a 401(k) and they should ask for the match or company contribution in cash.

I agree with QDROphile. However, why not merge the plans? What is achieved by maintaining separate plans - other than multiple 5500s and multiple audits. The only situation I've seen where it might make sense to maintain separate plans is where a union group wants their own plan with its own pension committee.

I don't believe there is any statutory requirement relating to vesting in a nonqual plan. It would depend on the provisions of the plan document.

How about the Plan issuing the rollover? Will the Plan sponsor roll the loan and issue the appropriate 1099-R?

Most plans will not accept a loan note as part of a direct rollover. As an alternative, a participant can do the following (assuming he or she has a $12,000 total account balance consisting of $10,000 invested in the Plan and a $2,000 outstanding loan): 1) request a direct rollover of the $10,000 2) come up with an additional $2,000 and roll it into the plan (be careful of 60 day rule) 3) take a loan from the new plan for $2,000 (or some other amount as the participant desires)

What does the Plan Document say?

If you are a participant in a qualified plan (active or inactive participant), you should be receiving a Summary Annual Report each year which summarizes the financial activity of the Plan. It also gives key information as to who is the Sponsor, trustee etc. Have you been receiving this? Also, your name and SS# should have been reported by the Plan Sponsor to the Social Security Administration as a terminated employee with a vested benefit when you ceased active employment and participation (form SSA). The Social Security Administration (who will always have your current address) should notify you when you are due for a benefit. But it is better for you to identify the plan sponsor and give them your current address. You should also request a Summary Plan Description which will explain when you are eligible for your benefit and how to calculate your benefit. [This message has been edited by LCARUSI (edited 12-01-98).]

Two suggestions: 1) Put in a regular 401(k) Plan. Participation is of course voluntary and if the citizens of India choose not to participate, that's their choice. (You might have a testing problem if too many of them are HCEs.) 2) How about a plan which allows both pre-tax AND after-tax contributions? The employees who anticipate a return to India could contribute on an after-tax basis and receive the matching contribution (if there is one). Their tax liability would be smaller when they take a distribution. The US citizens could contribute on a pre-tax basis. ***************************** I would recommend #1. Administration of a plan with after-tax contributions is more difficult and many service providers will not support it. Also, why design a benefit program for employees who are for all intents and purposes temporary employees?

Some points: 1) In general, there is no requirement to vest an employee if an employer dismisses the employee for any reason, including elimination of position. 2) If a plan is terminated, all non vested participants become fully vested. 3) There is an "in-between" position. If the employer discharges a large enough number of employees to cause a significant contraction in the size of the Plan, then there might be a partial termination of the plan. If there is a partial termination, the participants affected by the termination (i.e. those who were discharged) become 100% vested. Whether or not a partial termination has occured is a facts and circumstances determination. Take a look at 1.411(d)-2 and 1.401-6(B)

Can anyone comment on the other part of BJcontreary's question: "If going "in and out" year by year is workable, wouldn't a plan amendment be required for each plan year?" I believe the answer would have t be yes, but I am not certain.