I just want to verify whether an individual has multiple SEP limits when working for multiple employers.

"A" is self-employed, earning $300,000 annualy and sponsors his own SEP making a maximum contribution of $51,000.

"A" is also an employee of non-related company X where he earns $200,000 in W2 compensation.

Company "X" also sponsors a SEP and contributes 25%.

Can "A" receive his $51,000 SEP contribution from his own company and an additional $50,000 SEP contribution from company "X"?

I know this is possible in qualified plans but the "individual" limit wording for SEPs makes me nervous. Thank you for your help!

one of the items our good friends at the govt are 'talking' about requiring is an illustration for a participant of a lifetime income illustration.

enclosed is sample statement (or at least an attempt just to see how this would work) which comes close to matching the sample provided by the govt at

http://www.askebsa.dol.gov/lia/

govt assumptions:

How the Calculator Works

The calculator uses the safe harbor assumptions described in the ANPRM for estimating future contributions, investment earnings, and inflation:
Contributions continue to Retirement Age at the Current Annual Contribution amount increased by 3 percent per year.
Investment returns are 7 percent per year (nominal).
An inflation rate of 3 percent per year is used for discounting the projected account balance to today's dollars.

In converting the account balances into lifetime income streams, the calculator uses the safe harbor annuity conversion assumptions described in the ANPRM:
A rate of interest equal to the 10-year constant maturity Treasury securities rate for the first business day of the last month of the period to which the statement relates (equal to 1.63% as of December 3, 2012 for statement periods ending December 31, 2012).
The applicable mortality table under section 417(e)(3)(B) of the Internal Revenue Code in effect on the first day of the last month of the period to which the statement relates. This is a unisex table (i.e., the annuity values are the same for males and females

ok, so the enclosed statement is hardcoded at ret age 65 (thus the income at ret is simply divided by 200, and joint/survivor 221.81, to keep things simple)

(By the way, the govt illustration adds 1/2 year to future years - this statement does not)

of course the govt is asking for comments

I suppose one possible comment would be: you take the contribution and project a 3% increase each year. so if the person received 50,000 this year, then the projection would be 51,500 for the following year, which of course would be over the 415 limit. so just how is a cap to be built into the formula?

statement with projection.rpt

A cash balance plan has made in-service distributions to participants in the past. They are now amending actuarial equivalence. In addition, they are amending the plan's hypothetical contribution credits to bring certain participants to their maximum benefits under 415.

When considering the distributions previously made, are we allowed to revalue the benefit based on the new actuarial equivalence?

Also, when adjusting the payment from the age that it was paid to the present, should the adjustment be made using the interest crediting rate or the post retirement interest rate?

How is the following situation corrected:

A controlled group between 2 companies. 2013 is the first year after the transition period and both companies need to be considered together. Company A has a safe harbor 3% nonelective plan with with SH going to all employees (not just NHCEs). Company B has a 401(k) only plan subject to ADP testing with no employer contributions. The plan's do not pass 410(b) separately.

Since they don't pass 410(b), I can't split them into 1 safe harbor group and 1 group that is tested.

How is this corrected?

Am I stuck providing the 3% SH contribution to all employees of Company A but still being subject to ADP testing?

We found out that a terminated participant in one of our plans rolled over his balance to an IRA in December, 2009. We didn't know about it until now, so of course no 1099-R was issued.

1) Since this is a non-taxable event, what are the ramifications?

2) What if we just skip reporting altogether?

3) Does anyone have any experience of IRS's position on this?

In a DB plan with mandatory employee contributions, the employer has not been withholding enough from employees' pay to cover the mandatory contributions required by the plan (due to improper exclusion of certain amounts from compensation). This has been going on for a while, so some of the affected participants are now retired. Any thoughts on how to correct this under EPCRS?

One option would be a retroactive plan amendment to exclude the amounts from compensation for purposes of mandatory contributions, but that would require a VCP filing.

Under SCP, it would seem that this would require some variation of requiring the participants to make a payment to the plan, but it seems like there would be a lot of practical issues with implementing this, especially in the case of retired participants.

Business owner over 50 has a SEP. He has contributed a few thousand to the SEP already for 2013. He wants to start a 401(k) for 2013 to get the additional catchup deduction.

Is the limit on the combined plans the same as if he only had the 401(k) profit sharing?

Hi. We are adopting a wrap plan, but I am a bit unsure of the logistics.

Here is my thinking on how to handle this:

1. Adopt a resolution for the new wrap plan. In that resolution, I was thinking of including a discussion of how the existing welfare benefits are being incorporated into the wrap. I don't want to adopt a separate termination resolution for those benefits as I worry about confusion in using the term "termination."

2. Select a three digit plan number for the new wrap. Is there some application to obtain this number? Or is it merely selecting a number available that starts with a "5" when looking at the employer's other welfare plans?

3. File final 5500s for the existing welfare benefits. Then going forward, the wrap will file a 5500.

Does this all sound reasonable? Am I forgetting anything?

Thanks.

Large Plan

Revenue Sharing accually gets deposited into the plan.

Fees are then paid out of the plan

1. Fees are more than the Revenue Sharing. Would I show the Revenue Sharing coming in under Other income and the Total Fees coming out.

Say Revunue Sharing is 5,000. Fees are 7,000. Would I show the entire 7,000 on the 5500 as fees and also on the Schedule C or just the Net amount?

2. Say the Revenue Sharing is more than the fees - say it was 10,000. How would that be reflected?

This is the first year we have a plan the actually deposited Revenue Sharing to offset Investment fees and/or Adm fees.

Any suggestions?

Pat

Suppose you have a 5 participant DB plan that was frozen three years ago. The plan is not top heavy.

The plan has a maximum benefit of $5,000 per month.

Only the company owner (and only HCE) has been limited by this maximum.

Could the maximum benefit be amended to $5,500 without unfreezing benefit accruals?

If this is possible, the company owner would still have accrued considerably less per year of participation than any other participant. There were no former participants.

Also, all other participants have accrued much more than .5% of pay per year of participation so I would think 401(a)26 would not be a problem.

Thanks.

Client has inquired about the following article: Employer-Sponsored IRAs: A Retirement Plan with Unique Advantages

Can he have both an "employer-sponsored IRA" and a SEP-IRA?

I service an old SAR SEP plan with American Funds. The self employed owner and his employees do deferrals. I have done the ADP testing to make sure he stays within the limits. We have a 3 year wait to be eligible.

His wife now works for him. The document can allow employees to come into the plan for deferrals only without waiting the 3 years ( separate eligibility ). If we change this I presume the ADP test stays the same using just eligible employees for deferrals.

So if these employees including his wife come in immediately for deferrals only --- would they NOT get the top heavy munimum until their 3 year regular wait is up ??

How would the ADP test work for the husband ( owner) and his wife. Are they each limited to the 1.25% figure ? Are they aggregated somehow ?

Thanks,

Bob

The IRS' recent LRMs for 403(b)s indicated that you can have a 30-day waiting period before you let people start making elective deferrals. Is there any other IRS guidance interpreting the "effective opportunity" element of the Universal Availablity rule? Suppose a client has a standard 90-day probationary period for all new employees. Can it hold them out until the 90 days are up?

If a plan document for a DC profit sharing plan defines the annual allocation as simply "discretionary", the employer has the flexibility to provide whatever percentage it wants each year and (I believe) also has the flexibility to provide different amounts to different employee types (i.e. based on age, service, job classification, etc.) as long as the allocation satisfies all NDT rules. Is this correct? My specific example involves a client that wants to provide a serivce-based schedule this year that fits within the confines of the gateway rules for smoothly increasing allocation rates, and was wondering if it had the ability to do so based on the provisions of the plan (which again simply say the amount to be provided is discretionary, with nothing futher regarding different employee types receiving different amounts).

Is there any reason to think they can't do the service-based allocation?

Group A contributed to their 410k plan from 1/1-3/31/12, they had pretax, roth and match. As of 4/1/12, they contributed to Group B's plan, but no longer had Roth and started following Group B's match.

Group B has their own 401k plan, they had pretax and match (but a different formula)

For the 2012 plan year, we are testing all employees for the entire year. (Group A & B) together.

My question is: Do I need to complete a BRF test for the different match formulas and the fact that Group A had roth as an available option?

Any help would be greatly appreaciated!

I have a client that forgot to collect COBRA premiums for an employee for months, just realized it, then termed them as far back as they could go. The employer is in the hole around 5K now in non-paid COBRA premiums.

Can they send this to a collections agency? Is there any case law on this?

If I meet the requirements to exclude union employees when determining the top-paid group, how do I determine which union employees are HCE's (assuming they are over 115K)?

Participant took a $50,000 loan from her 401(k) account that uses a reputable recordkeeper. The primary residence loan is amortized over 30 years & the regular payment is $137.99 each pay period. About a year into the loan the participant starts making larger payments ($600 per pay period) so that the loan can be paid off much sooner. The new, higher payment amount is consistently the same and will continue through the duration of the loan until it is paid off. The recordkeeper has been applying all of the extra payments amounts to interest & has not reduced the principal balance. The recordkeeper claims that the interest on the 30-year loan is a fixed dollar amount and must be paid regardless of if the participant is making larger payments, & they claim they have no way of rebuilding or re-amortizing the loan unless the loan is physically paid off with cash.

Aside from the TPA tracking the loan and having the recordkeeper write off the "balance" at the end once the loan is truly paid off (if the recordkeeper will allow this), has anyone else come across this situation or have any thoughts on a workaround?

Thanks for any input.

We have a client selected for audit of 401k plan by the IRS.

Auditor asked for a number of items regarding plan in August 2012. Auditor visited client in september 2012 and was given all requested items.

Auditor asked for a couple of more items in september. Client asked auditor to provide put that request in writing.

There has been no communicatiion from auditor since september.

Since that is about eight months, I am curious. If you have clients who have been audited by Irs,is this typical timing for a plan audit? What has your experience been regarding how long it takes to get a closing letter?

Would appreciate any comments regarding your experiences with Irs audit timing.

A client has a both a SIMPLE and a 401(k) in the controlled group. The SIMPLE only covers "personal employees" of the company's owner. They had been advised in the past that because the "personal employees" were not revenue-generating employees, they could participate in a SIMPLE despite the fact that the controlled group has a 401(k) plan for all of the company's regular employees. Any idea where the advisor may have gotten support for this position?