King Ozymandias of Assyria was running low on cash after years of war with the Hittites. His last great possession was the Star of the Euphrates, the most valuable diamond in the ancient world. Desperate, he went to Croesus, the pawnbroker, to ask for a loan.

Croesus said, "I'll give you 100,000 dinars for it."

"But I paid a million dinars for it," the King protested. "Don't you know who I am? I am the King!"

Croesus replied, "When you wish to pawn a Star, makes no difference who you are."

Who knows how many years from today we'll be using pre-approved plans, but at least it now exists...

http://www.irs.gov/pub/irs-drop/rp-13-22.pdf

Provided below is an abbreviated breakdown on how to calculate the "tesing comp" for a particpant in a partnership. I have included numbers for example purposes.…

Step 1 - Take K1 Wage (disregard partner portion of the nhce ps...assume that is zero) - $183,137.21

Step 2 - Back out URBE - $6,590 ($176,547.21 net)

Step 3 - Calculate ½ SE Tax on net amount in Step 2 - $9,190.30 ($167,356.91 net)

Step 4 - Back out personal PS - $7,969.38 ($159,387.53 net). Partner received a 5% profit sharing contribution.

Step 5 - Equals “testing comp” - $159,387.53

A portion of the $183k included non-taxable life insurance proceeds of $11,099.35. My question is how does the $11k impact the calculation?

A) Do I simply reduce the $183,137.21 by the $11,099.35 in Step 1 and then continue with Steps 2-5?

B) Would I only back out the non taxable portion for purposes of the ½ SE Tax calculation and then add the $11k back for the plan comp?

C) Include the $11k in the $183k since the $11k is only not subject to Federal Tax and is subject to Social Security and Medicare Tax.

I am trying to help a friend use some of his and his wife's IRA money to buy land. There would be no debt and I can help him avoid the pitfalls - UBTI, UBDFI, PT.. What I don't know any longer is a good IRA custodian to advise him to use. I looked on YELP and didn't see good things about Pensco.

Does anyone know a "good" IRA that would hold the real estate? "Good" here means, would meet whatever the legal requirements are but be a good value - not too expensive. The couple has been out of work and needs to limit their expenses.

Thanks -

Craig Schiller, CPC

Does anyone know whether the exemption under the 1933 Act covers former employees who are still participants (because they still have an account balance)? The plan (which does not offer employer stock) accepts such contributions by these participants, but I am unsure whether the securities exemption also applies to former employee.

Any thoughts would be very much appreciated.

Client has a SERP plan where executives are deferring compensation on a voluntary basis. The Plan's definition of compensation was amended to include these deferrals in the plan's definition of comp because otherwise, they would miss out on the regular match applicable to their 401k contributions.

When I run a 414(s) test, the additional comp for the HCE's is clearly de miminis (100.5 vs 100). But...

From the 414(s)-1 regs:

(d) Alternative definitions of compensation that satisfy section 414(s) —(1) General rule. In addition to the definitions provided in paragraph © of this section, any definition of compensation satisfies section 414(s) with respect to employees (other than self-employed individuals treated as employees under section 401©(1)) if the definition of compensation does not by design favor highly compensated employees, is reasonable within the meaning of paragraph (d)(2) of this section, and satisfies the nondiscrimination requirement in paragraph (d)(3) of this section.

In my case, the SERP is available exclusively to HCE's (not by definition, but of course it would be very rare for one of the executives to not be considered an HCE). So I think that under no circumstanc can I call this a 414s definition of comp. Does everyone agree? It's not a problem, because obviously I will pass the general test on the profit sharing (everyone gets the same %age, and the HCE's on average get only a tiny bump), and I have plenty of room on the ADP/ACP test. I just want to know which tests to run and which definition of comp to use.

Hello. I have found in the final regs (http://www.gpo.gov/fdsys/pkg/FR-2009-02-24/pdf/E9-3716.pdf), that the QACA provision provides for a plan to set an expiration date on the affirmative election.

I have not found in the final regs anything concerning allowing for a plan to set an expiration date on the affitmative election for an EACA, or the more general ACA.

I have referenced the IRS FAQs on the topic (http://www.irs.gov/Retirement-Plans/FAQs---Auto-Enrollment---Can-an-employee's-election-not-to-participate-in-the-retirement-plan's-automatic-contribution-arrangement-expire%3F), but the response is broad and unclear.

Is there an authoritative source someone can direct me to that can confirm if EACA/ACA allow for an affirmative election expiration?

Thank you

Given: Cash Balance (CB) Plan with Interest Credit = Actual return on assets.

Employer would like the situation where the sum of all participant's CB balances = Assets (similar to DC plan).

I think this situation is possible -- except for the existence of forfeiture (due to vesting schedule).

In a DB plan, forfeiture would be a "gain" used to reduce contribution.

Question:

Is it nevertheless possible allocate the forfeiture proportionately to increase CB balance and to remove this gain? (assume we will amend the plan document if this is legally possible).

Thanks.

This is my first time posting in here so I really appreciate any feedback.

The client has a pooled account that contains the account balances of all participants however the client allows participants to pick investments within the pooled account. The account is valued annually. Historically when a participant is paid out they are given their distribution based upon the last valuation done and do not share in gain/loss that occurs between valuation date and date of distribution. The gain/loss is divided up among the remaining participants within those specific funds. The basic plan document states that gains/losses in a pooled account with participant investment discretion should be applied reasonably.

The plan recently had a participant who took a distribution based on the last valuation date. In the following valuation period, it was discovered that the participant paid was the last participant who was invested in a couple of the funds therefore there we no longer had any remaining participants in the fund to be given the investment gain. How should that gain be applied?

Should the gain go to that specific participant and he would be given a trailing distribution on those funds or should the gain go to the rest of the plan participants since historically no other participant ever received a gain after they took their distribution? My concern is that if I give him the gain when one has never been applied in the past to other participants, that this would be discriminatory. I also have a hard time in giving him a gain in only some of the funds he was invested in. If I think he is entitled to the gains to the 4 funds that he was the last person invested in, shouldn't i need to give him gains on all the funds that he was invested in?

I try to think about what I would have done if the plan had experienced a loss and there was not enough funds to pay him out. I probably would have told the client that I needed to do an interim amendment and in that case he would have received the gain/loss through the interim date but again that would have been based up a new valuation being done.

We took over a plan in 2012 and restated their plan on to our document.

The prior plan document stated that "discretionary bonuses" were excluded from the definition of compensation for ER contributions only.

When we restated we misread stated "bonus" compensation was excluded from ER cont (not specifying discretionary bonuses)

Now that we are calculating the ER contribution for 2012 the client has informed us us that they have a "contract bonuses" that should be included.

Is there a way we can do a retroactive amendment for 2012 to fix the document for 2012 only. (We have corrected going forward) The amendment is not decreasing benefits and the ER contribution has not been funded yet. Is it too late since the plan year is closed?

One of my non-safe harbor plans here at my new job did not send me the census data for 2012 until after 3/15. the plan does fail the test. So I am sitting here with a 5330, trying to figure out which "section" number this falls under. I have only completed this form once, and not for this reason.

the excise tax I need to caluclate is 10% of the total refund (which includes the earnings), correct?

On what basis are companies able to offer free food (meals) to their employees as a perk (not as part of requirement to keep employees on-site because they are needed to work)? Must the value of the food be included as income on the employees' W-2s? Are employers able to take a deduction for the expense? Thanks.

Because of an acceleration of amortization installments under the 2010 funding relief, a plan's minimum required contribution is larger than it's shortfall. i.e. - the MRC would overfund the plan by about $300K.

I've tried to find language in 1.430(a) that basically says "MRC shall not exceed the shortfall", but no luck. Does anyone have any suggestions? Is the sponsor really required to overfund the plan?

Details (such as they are) follow:

The Plan made use of the 15-yr amortization schedule for the 2009 and 2010 years. An extraordinary dividend is paid out in 2013, triggering an acceleration of the amortization installments for those years.

Sum of all the amortization installments is $500K, and the acceleration amounts for both basis total $1.8 million; thus the minimum required contribution for 2013 is $2.3million (plan is frozen). Apply a credit balance of $1million and the sponsor has a funding obligation of $1.3million for 2013.

Market value of assets (ignoring credit balance) is only $1million shy of the Funding Target.

Thoughts? any reliable justification for limiting the required cont. to the amount that would fully fund the plan?

A client has a safe harbor match with a profit share contribution. They hired someone new to upload contributions in 2012 who did not do a good job. Most participants had the wrong amount of match uploaded. We are correcting them. Two participants who had too much deposited into their account have already withdrawn their funds. They will get a profit share contribution. Can the correction for the erroneous amounts of safe harbor match be deducted from their profit share contribution? One participant had loan payments continue to be made by the company after he had left and was no longer receiving compensation. Can the company take back the amount of loan payments from the profit share contribution?

Client has a fiscal year of 7/1/11 - 6/30/12. Allocation of discretionary match is based on deferrals for the calendar year ending in the fiscal year. Plan year is calendar. For the 2011 Plan Year, a match of $10,000 is reported on 2011 Form 5500, allocated on benefit statements as of 12/31/11 and deducted on 1120 for YE 6/30/12.

It is discovered that the matching contribution check was never written. The only participants were three owners.

So, the dedection looks bad. If the 1120 is amended, can the company still fund the 2011 contribution? Must it?

When restating a M&P plan that has break-in-service rules elected in it, for example for vesting - must I carry those over onto the new document? My concern is that I know that the recordkeeper relies on our TPA firm to provide vesting information and there is no way for us to be able to have the recordkeeper correctly administer a participant account where the pre-break vesting % is different than the post-break vesting. Can I just eliminate the BIS rules to make the recordkeeping for rehired employees easier?

I understand that the SIMPLE IRA is disqualified for the current year and all contributions for this year must be refunded.

Is this done by the employer writing a letter to the investment company explaining that these contributions were not allowed and the money should be sent back to the employer?

With regard to the MAP-21 supplement, how should the supplement be incorporated into the model notice? For example, does it get added to the front, added to the back, or somehow worked into the model notice? Also, should the entries in the supplement under "Minimum Required Contribution" "net" amounts (before reflect any application of a carryover balance or prefunding balance) or should they be "gross" amounts (before application of any carryover balance or prefunding balance)? Thanks in advance, any help is greatly appreciated.

I have an employee in a 401k with 100k. She wants to take a 50k loan. She also has another 401k from her other job with 120k. Can she take a second 50k from the other 401k? The two companies are not related and she is not an HCE in either company.

The IRS website says,

“Generally, if permitted by the plan, a participant may borrow up to 50% of his or her vested account balance up to a maximum of $50,000.

The participant must reduce the $50,000 amount, above, if he or she already had an outstanding loan from the plan (or any other plan of the employer or related employer) during the 1-year period ending the day before the loan. The amount of the reduction is the participant’s highest outstanding loan balance during that period minus the outstanding balance on the date of the new loan.”

Since the two 401ks are not related in anyway, it would appear that she could take two 50k loans. I am right?

Does anyone know if creditor protection generally extends to federal non-tax penalties and fines?

I've already recommended an ERISA attorney (although it's not an ERISA issue). And I know that IRA protection varies by state. Just curious.