A golf pro would like to take a hardship for "professional development". It's a class to further his golf career. Would this be considered under education for the hardship rules?

I really hate trying to wade through the prohibited transaction issues. Just so you know.

Not looking for chapter and verse here, just whether I'm headed in the right direction.

Is a trustee/director of a mutual fund allowed to purchase that fund using assets of his self directed 401(k) account?

I can't decide if it's really a retirement plan potential prohibited transaction or an issue that would cause a problem for the director regarding his independence on the board.

Thanks.

Plan allows for hardship withdrawal of both 401(k) and roth deferrals as well as 100% of rollover accounts.

One of the big 401(k) vendors is telling me that the participant cannot have 100% of her roth rollover account only the contirbutions. They apparently must have obtained an original contribution figure from the participant when she rolled the roth assets into the Plan.

Other than the taxation issues for the participant is there any reason she cannot take 100% of her roth rollover account as hardship if the Plan allows?

This appears to be a rare occurrence but I can't believe that this vendor has not come across this particular situation.

Is it still legal to limit HCE's to 4% of pay to get them into catchup area sooner?

Ii read something today that makes me wonder.

When calculating the number of active participants to determine whether or not an independent audit is required, is an employee who is new and has not satisfied the 1 year eligibility requirement to participate in the plan considered an "active" participant?

Quick scenario involving RMDs and payouts. Please let me know your thoughts.

Our recordkeeper sends out notifications to termed employees to take their funds at age 70.5 to be in tax compliance for RMD purposes. It notifies the participant about RMDs and to take their balance and instructs them to call. Our plan document requires full payout at that point, not just ongoing RMDs.

If the participant does not call, these funds can potentially sit there and the participant can have tax consequences.

For a plan that requires full payouts or RMD with a rollover of the remaining balance, what is a good procedure to capture people and have them paid out? If they have more than 5k in the account, what can anything be done to force them out to keep the plan in compliance?

Can someone explain to me why the Schedule SB, Line 18 contributions would not tie to the contributions on line 2a(1)A on the Schedule H or the audited financial statements? And provide a reference/source, if possible.

The Form 5500, Schedule H normally ties directly to the financial statements and most of the time the contribution amount differs from the Schedule SB, Line 18 that we end up getting from the actuary.

TIA

If a plan has a springing safe harbor non-elective contribution feature, does the plan have to be amended each year in which a safe harbor contribution is made, or is the notice to the employees specifically designating that the safe harbor contribution will "spring" for the year sufficient?

Hello,

Here is the fact patter:

• participant takes a loan
• loan payments are withheld according to amortization schedule
• loan paments are sent to the recordkeeper timely

This is where it gets interesting:

• recordkeeper rejects the loan payments (recordkeeper is the one who produced the amortization schedule and promissory note). the rejected loan payments are sent back to the sponsor and this goes on for two years (payment and rejection) and no questions are asked by the sponsor or the recordkeeper as to why their deposits don't add up. Plan sponsor thinks it must be some sort of fee rebate or something....
• participant receives a 1099 for the defaulted loan balance two years ago. The participant just thinks this is normal and does not question the 10% penalty or the taxable amount.
• sponsor then figures out what is going on and makes a deposit for all the loan payments that were rejected and sent to the sponsor. We have late deposit issues and we can deal with that.

The issue now seems to be a double taxation scenario (I understand the loan "double taxation" argument and am not asking for that to be debated again). I am saying that a 1099 has been issued and after the issue date now all the loan payments have been deposited.

Question: My solution is to prove to the recordkeeper that loan payments were withheld and sent "timely". The recordkeeper should then issue a revised 1099 showing that there was no taxable amount. Based on the fact pattern, would you agree with that solution?

Thanks

Form 5500 filed a year late but did NOT do DFVC. IRS sends letter with penalty notice for late filing. So we're suggesting DFVC program. The question is, do you have to amend the 5500 to check the DFVC box in this situation?

I say no, because it seems to me the point of the box is to avoid getting the letter we already got.

Appreciate any thoughts.

I have been speaking with a prospective client who rolled money from his previous employer's retirement plan into a new plan and then invested it in a distributorship he now owns (against the advice of his CPA).

He has no employees.

Now he realizes it is costing him too much to maintain the plan.

I don't have a lot of details from him yet, but he is asking us to help him terminate the plan.

Any ideas on the types of questions I should ask him?

I am not really sure how he is going to "unwind" this now, assuming the plan assets are still invested in the business...

Client e-mailed asking if the down payment on a "rent to own" agreement will qualify as a hardship for the purchase of a principal residence. I'm not familiar with how that type of arrangement typically works or even if there is a "typical" arrangement. Any suggestions about what we should be asking?

As a TPA I am having a problem approving a Hardship withdrawal for an owner. The participant has an estimate to fix a roof and has termite, mold problems. This is not due to a loss from hurricane, flood etc. and he has not submitted a claim through insurance. He only has an estimate and has no intention on using the money to fix the problem since he is selling the house. Are we liable or are we just responsible for signing off on the vesting and the Plan Sponsor is liable for approving the hardship ? Under audit this could be a potential problem?

One of client asked a question regarding an employee who is a NRA and the plan excludes NRA's . The employee is no longer eligible to contribute to their 401K plan after the ESOP was put in place 9/1/2012. The employees 401K deduction were missed and not turned off so the employer continued to deferral pre-tax contributions until 4/16/2013.

The employer refunded the ineligible contributions and earnings that never should have gone into the plan however the refund back to the employee was subject to Federal Taxes at a percentage of 30%

The client question is should the refunded money be subject to Federal Taxes?

We have a plan with a deceased participant (the owner) with a balance of around $140,000 in his 401(k). Although there was no designation of beneficiary every submitted for the 401(k), his adult son claims to be the sole heir. He claims that his father had a living trust in which the 401(k) was addressed (we are getting copy), and his attorney assures him that will take care of him inheriting dad's 401(k).

Is there any way a living trust can address this, or will the money have to go through probate, or how else will the son get his inheritance?

With regards to Question 2 © on the Schedule C,

"Element ©. Enter any relationship of the person identified in element (a) to the plan sponsor, to the participating employer or employee organization, or to any person known to be a party-in-interest, for example, employee of employer, vice-president of employer, union officer, affiliate of plan, recordkeeper, etc"

When you disclose your firm (if your firm was paid $5,000), are you answering this question "none" or are you giving the relationship such as "record-keeper"? We want to answer this question correctly since third party administrators and investment advisors can be/are "parties-in-interest" but don't want to unduly put ourselves on an DOL audit list. Assume no ownership/relationship between plan sponsor and third party administrator other than providing administrative services. Thanks

According to my research, late deposits are corrected just like a 401(k) plan: late deposits are made and lost interest is deposited to the plan as calculated on the DOL DFVC calulator. (I know, technically, you should only use the calculator if you are going through VFCP, but I think most use the calculator anyway)

My confusion is on the next step: the prohibited transaction penalty (ERISA) and/or excise tax (4975). My research indicates that 403(b) plans are NOT subject to 4975, but they ARE subject (maybe) to ERISA 502(i). Further, Form 5330 cannot be used to pay the 5% penalty under 502(i). Is this true, even for ERISA plans?

After an ERISA 403(b) plan has corrected the late deferral PT, what is the next step? What penalties, if any, need to be paid and how do you pay them? And, does the penalty "pyramid" from year to year like it does with 4975 excise taxes?

I assume I continue to report late deferrals on Form 5500 until corrected, but I feel like I'm missing something if I don't also prepare From 5330.

This is a large plan, subject to a CPA audit, so any cites would be appreciated.

Craig Garner

Does anybody have an opinion as to whether an employer will still be permitted to offer cash in lieu of coverage in 2014, without running afoul of the employer mandate? My argument in favor of this continued practice is that if an employer makes an offer of affordable coverage of a minimum value, and also an offer (under a cafeteria plan) of cash in lieu of coverage, it is the employee's choice as to which offer to accept. But the employer's offer has been made, which should satisfy the mandate. Any thoughts out there? I haven't seen anything to support or refute my argument. Thanks!

In reviewing the minimum value calculator (http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mv-calculator-final-4-11-2013.xlsm) and the associated instructions (http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mv-calculator-methodology.pdf), I haven't figured out the answer to this question: how does the calculator work if your plan provides various coverage levels? (e.g. individual, individual + spouse, individual + children, family, etc.). Does an employer need to determine minimum value for each type of coverage?

Any comments are much appreciated.

If a late deposit of elective deferrals is corrected under VFCP, the employer qualifies for PTE 2002-51 (as amended), and the 15% § 4975©(2) excise tax is waived. It seems like there is no need to file Form 5330 at this point, but I'm getting pushback on that decision. If there is no excise tax, why go to the trouble and expense of filing the 5330?

Thanks for any wisdom. Cheers.