Lots of potential issues here and I'm looking for other's thoughts.

A commercial real estate broker contacted me about setting up a 401(k) plan. He is the only employee of the business. He wishes to fund a DC plan with $51,000 (comp is high enough to support the contribution) and then purchase a building with the money in the DC plan from a third party. $51,000 isn't enough to purchase the entire building so the remainder of the purchase will be by him personally.

My initial feeling is that this is not a prohibited transaction because he and his plan are each purchasing a portion of the building from a disinterested third party. They will own 100% together once the transaction is completed.

Yet I feel a little strange once the purchase is completed and he is now personally an owner of an investment that his plan is also an owner of. Presumably this building will be collecting rents (which I believe there is an exemption for rents with the UBTI issue)

Now owning an asset personally that your plan also owns seems ok if it is a publicly traded stock or mutual fund. Is it different with a building that you own 100% of?

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If the above is a problem then could he just set up an LLC (or must it be a C-Corp and issue shares of stock?) and give partial ownership to the plan in the amount of $51,000?

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Any other creative solutions?

In 2012 a participant had a 3% pretax election however ony 1% was withheld so a an additional $50 needed to be taken to true it up.

Two pay periods later an additional deferral was taken and made to the trust however it was $4 sort.

Not that his has been now discovered in 2013 my question is if this is de minimus or should 50% of the missed defferal be made and a corresponding lost earnings correction?

Thoughts?

A question concerning the taxation of long-term care (LTC).

Assume a C corporation, with shareholder-employees (in this case, law firm "partners"). At the beginning of the year, the law firm pays a LTC premium on behalf of a few partners in the amount of $5,000 each. At the end of the year, each partner is entitled to a $100,000 bonus. Instead, the law firm books each partner a $95,000 bonus, conducts the requisite withholding, and gives the balance as bonus to the partner.

The employer is not ultimately paying the premium. The employee is. The employer not deducting anything in connection with this LTC premium. If it did, I understand certain requirements come into play to permit the deduction, and that the this coverage isn't includable in the gross income of the partner. I also understand that any premium paid by the employee is after-tax and can be treated as unreimbursed medical expense (limited to an amount no greater than the eligible LTC premium). However, in the example above, the reduction in bonus is de facto pre tax, and that isn't allowed when an employee is paying the premiums. However, brokers are saying that this is a common arrangement, that everyone uses it, and that it's been done for years. One lone broker we've spoken with says you simply can't "pre tax LTC."

Who is right? Does the law firm have to give the employee $100,000 (minus withholding), and then reduce that amount by $5,000? Is there tax revenue the IRS is missing if the firm continues to do what it's been doing? Any thoughts will be appreciated.

I'm working on a calendar year balance forward profit sharing plan with pooled investments. An interim valuation was done as of 9/30/12 on behalf of one terminated participant (physician) because he had a very large balance. This was in accordance with the plan's written policy. He received a distribution in October 2012 based on the 9/30 valuation. The other plan participants are unaware of the interim valuation and were not given statements reflecting their balance as of 9/30. The physician will be receiving an additional PS contribution for 2012 due to retirement.

I assume the physician does not deserve any additional gain for 2012. Naturally, most aspects of the report (i.e. testing, Form 5500, etc.) will need to reflect the full year. Should the valuation reflect the period 1/1/12 - 12/31/12 with an override of the physician's gain? Or is it more appropriate to split into two parts and have an allocation report from 1/1 - 9/30 and a second portion from 10/1 - 12/31? I have never done an interim valuation like this and I guess I am uncomfortable overriding the gain.

My new employer has thrown some 403(b) plans at me - what testing is required for them? The plan I am currently trying to work on is deferrals (traditional and Roth) only. thanks for your help - I can't seem to access our online version of the EOB, so i gave up and came to the experts!

A law firm partnership has just discovered the 'deemed CODA' rules and is in a panic. My assurances that this has not been challenged, even with named partner groups, since the 1993 regulations doesn't seem to hold much water with them.

So I have been requested to find anything 'official' to give them solace.

I have looked at the ASPPA Q & As for 09, 11,12 and did not see anything. Anyone have something in any of the ASPPA Q &as?

How about the ALI-ABA Q & As?

My search here for deemed CODA and the like come back with the same result - IRS has not attacked any of these, but I am dealing with attorneys.......

Thanks for anything you find.

I'm having a brain cramp. Employee age 70.

High 3 consecutive comp is years for participant is 99, 00 ,01

Actual comp 230K, 240K, 240K

401(a)(17) limit for years 160K, 170K, 170K

If Eggtra amendment so provides comp limit 200K for each year.

For purposes of the 100% of comp limit is his high 3 (230 + 240 + 240) / 3 = 236K

is it (160 + 170 + 170) / 3 = 166K

is it 200K if egtrra amendment allows for "walk back" of 200K comp limit?

Company A has a 401k plan. Let's say they want to terminate the plan 12/1/13. They plan on paying everyone out by 12/15/13. The following questions are posed:

- Can the 401k be aggregated with their Cash Balance plan for the 2013 plan year due to the 401k having a short plan year?

- The company will be starting a new 401k plan. When can the successor plan be started? Is it 12 months from plan term (12/1/14) or final distribution (12/15/14)?

In an LLC taxed as a partnership, is the following correct?

The elective deferral can be contributed up until the tax filing deadline -- with deposit coming from the K-1 income of each partner.

Thanks for all responses.

I'm finding it hard to believe that I haven't had to deal with this issue before, but here goes.

Eligibility requirements in a profit sharing plan = Age 21 and completion of 6 consecutive Months of Service during which the Employee completes at least 500 Hours of Service, or completion of One Year of Service, if earlier.

Entry Dates = 1st day of month following completion of eligibility requirements

John Doe is age 22 and completes 450 Hours of Service in his first 6 Months of Employment.

The plan's subsequent Eligibility Computation Period is the Plan Year.

So, now we look at the overlapping Plan Year for John Doe.

Question: does it matter how many hours John works in the first 6 months of his SECOND eligibility computation period? Or do we just test for 1,000 hours worked in the full 12 months of the second eligibility computation period?

I'm amazed that I can't find an answer in Sal Tripodi's ERISA Outline Book. Maybe I'm just blind?

One of my 401(k) Safe Harbor plan sponsors has elected to send the SH contributions to a ESOP they also have. Both have the same plan year. And both plans have existed for several years. And this will be effect for the first day of the 2014 plan year.

Which plan should have the SH employer contribution formula provision? Or should both have it? Both Notice 89-52 and 1.401(k)-3(e) are not 100% clear. We did one plan with the ESOP only have the formula, but now I am not so sure and having second thoughts.

Thank you.

Does anyone know of a work around on Relius to test coverage separtely for 401(k) and 401(a)? We want to use statutory exclusions for the 401(a) coverage testing and nondiscrimination testing, but we do not want to do it for 401(k) coverage testing and ADP testing. The client uses prior year testing and statutory exclusions were not used last year.

As wel know, the Central States Pension Fund Trustees have adopted a hybrid method for calculating withdrawal liability which for current contributing employers, allows them to pay their liability now and switch to the direct attribution method. I am familar with this change. However, it is my understanding that the Trustees amended their hybrid method at the end of November 2012 to provide some new rules as to how a mass withdrawal event impacts those employers who have elected the hybrid method, Is anyone familar with this change. I assume it is a favorable result, in line with the Trustees' desire to encourage employers to switch to the direct attribution method. Any help would be most appreciated.

Employer has two 403(b) plans. Don't ask me why, I don't know.

Some participants want to change their investments, and transfer the funds from one plan to another. The "other" plan apparently offers different investments.

The regs under 1.403(b)-10 generally permit this, but I have a question on one item in the reg. If you look at the section I underlined, I'm concerened that if the investment in the transferor plan, let's say an annuity with TIAA, has a surrender charge, then the accumulated benefit immediately after the transfer won't be at least equal. If read literally, this would prevent ever transferring any investment with a surrender charge, which seems crazy. Any thoughts on this?

(3) Requirements for plan-to-plan transfers —(i) In general. A plan-to-plan transfer under paragraph (b)(1) of this section from a section 403(b) plan to another section 403(b) plan is permitted if each of the following conditions are met—

(A) In the case of a transfer for a participant, the participant is an employee or former employee of the employer (or the business of the employer) for the receiving plan.

(B) In the case of a transfer for a beneficiary of a deceased participant, the participant was an employee or former employee of the employer (or business of the employer) for the receiving plan.

© The transferor plan provides for transfers.

(D) The receiving plan provides for the receipt of transfers.

(E) The participant or beneficiary whose assets are being transferred has an accumulated benefit immediately after the transfer that is at least equal to the accumulated benefit of that participant or beneficiary immediately before the transfer.

(F) The receiving plan provides that, to the extent any amount transferred is subject to any distribution restrictions under § 1.403(b)-6, the receiving plan imposes restrictions on distributions to the participant or beneficiary whose assets are being transferred that are not less stringent than those imposed on the transferor plan.

(G) If a plan-to-plan transfer does not constitute a complete transfer of the participant's or beneficiary's interest in the section 403(b) plan, the transferee plan treats the amount transferred as a continuation of a pro rata portion of the participant's or beneficiary's interest in the section 403(b) plan (for example, a pro rata portion of the participant's or beneficiary's interest in any after-tax employee contributions).

(ii) Accumulated benefit. The condition in paragraph (b)(3)(i)(D) of this section is satisfied if the transfer would satisfy section 414(l)(1).

Hi all, I'm usually over on the retirement plans side of the boards but have a question about my own health insurance plan. There are just two of us on the plan, and I'm about ready to start a high deductible plan with an HSA for myself, and keep my employee on a more traditional plan (if you can call the ugly mess that the plan has become traditional...and yes, we're in NJ so we're allowed to split the plans as long as we are with the same carrier). Is there non-discrimination testing on the HSA part, as there would be for a POP plan or full cafeteria plan? Does it matter if the HSA is employer or employee funded or some combination? (I haven't looked at it for a while but I think it is problematic if more than 25% of the "benefits" go to HCEs.)

Sorry for my ignorance and thanks for any help.

What are TPA's doing regarding RMD's for 403b plans (perhaps TIAA in particular). Because a participant can take the RMD from any of the 403b accounts held by a participant, it is basically impossible to say with certainty whether or not the RMD rules have been complied with.

TIAA apparently just sends out a letter on the date they turn 70.5, but that is it.

My client who is an ER directed only plan, has an EE going out on military leave. The plan provides for a profit sharing contribution with a 1000 hrs requirement. When the EE returns to work my client doesn't think that this EE will have met his normally required 1000 hrs. for the profit sharing contribution.

Is the client required to give them credit for 1000 hours of service while on Military leave to qualify for the profit sharing contribution?

In light of recent revelations concerning IRS practices over the past few years, I can't help but think I may have a client that's been similarly targeted.

It's a Cycle E plan that was filed on the last day of the cycle (1/31/11). I've checked in with the IRS a few times to check on the status, and the last time I did so (early April, 2013), the plan still had not even been assigned to an agent for review. It's an on-cycle filing that's been sitting on a shelf for more than two years, and nobody's even looked at it yet.

When I called, the agent I spoke with explained that this was just their normal timing and it wasn't unusual. I understand their queue is pretty backed up, and I get that filing on the last day isn't the best way to get a quick determination letter, but this still didn't sound right; particularly since the filing in question was sent in the same folder as half a dozen other filings; all of which have received letters at this point (some in less than a year from the filing date). I've yet to find an explanation for why plans are being treated so differently.

But before I get too paranoid, I wanted to see what others' experiences have been.

1) Does anybody else have on-cycle Cycle E filings that have yet to be assigned to an agent?

2) Is there any non-tinfoil hat reason a Cycle E plan would be unassigned for so long?

3) Have you been getting letters on Cycle A plans, yet?

4) Has anybody else had clients with multiple filings that were treated this disparately?

Any input/feedback would be most appreciated.

Okay, I recently got confused...which is not too hard for me.

It may not matter, but client has an individual, trustee-controlled 401K plan. He initially is funding the plan with a rollover/transfer. The account, while trustee-directed, is maintained at a national financial services company (e.g,. Merrill Lynch).

I have always told clients that when they are moving funds into a 401K plan that they MUST report the rollover via thei 1040 tax return for the same year via line 15A/B or 16A/B....the difference between the two line items on the 1040 being whether the rollover funds are coming from an IRA (line 15) or other qualified plan (line 16). Also, the IRS wants one to write rollover in the margin and attach a note of explanation of what they did.

In a recent conversation with the financial services company and their department that deals with rollovers, they stated if the funds from custodian 1 are sent to the new 401K plan at company #2 via ACAT, that a 1099 will not be prepared by company #1 and, as such, it is not a rollover but rather a direct transfer. They stated that the key is that it is an ACAT transfer and, if so, company #1 will not prepare a 1099 coded G (for rollover) and the individual does NOT have to report the event on their 1040 tax form.

IF this is correct, great. Maybe I have been too conversative, but I have always operated that when funds come into a 401K, the event (rollover? direct transfer?) MUST be reported on the 1040 tax form. If the client doesn't have to, great...but I would feel more comfortable getting feedback from others?

Any help out there? Thanks.

With recent mastectomy news (Angelina Jolie), I have been asked about mastectomy benefits and have come to learn there is a law requiring annual notice of such reconstructive benefits. I for one have been covered by these benefits for years by multiple employers but have never seen such a notice. Are these notices being done? Are they being combined with other types of annual notices? Who seems to be taking responsibility for guiding employers about this requirement?