In a PEO multiple employer plan, we have an Adopter that started participation effective 11/1/12. They would like to make a profit sharing contribution for 2012. So, everyone's date of participation is 11/1/12.

How is the 25% deduction limit applied? I know it will apply only the Adopter (not unrelated employers), however, do you count compensation earned prior to 11/1/12? If it matters, this Adopter has had its payroll done by the PEO throughout all of 2012.

Thank you for any feedback!

Has anyone had an employer client have one plan audited, and then have the audit expanded to other plans of the same employer? I am wondering how long it might take for the IRS/IRS agent to place the other plans under audit now that he has found defects in the first plan?

Initially, our client indicated they were about to be acquired (transaction date TBD in the near future). The client had asked my firm to conduct a "force-out" distribution mailing to thin out the plan before merging it to the Acquirer, and also to give some large-balance terminees an early head's up changes were brewing and to consider moving their retirement assets more directly under their individual control.

Thus far into the force-out process, one partially-vested participant voluntarily took a rollover distribution of her net account balance. Now, the decision has been made to Terminate the plan prior to the corporate merger taking place. In my mind, this sort of nullifies the force-out process, and I'm sure the client would be okay, in effect, not forcing anyone out under the original force-out time frame (3/15/2013), and allowing the full vesting and plan termination distributions to occur somewhat later.

My question is:

Do we make whole the one participant that received a partiallly-vested distribution by reversing the forfeiture and distributing it to her IRA? That seems like the conservative thing to do, given 1. it coincides with the plan termination and would give the appearance of an ill-intended maneuvering of the plan sponsor (not their intent) and 2. people talk and so many other terminees that chose not to do anything will become fully vested it may lead to a complaint.

Or, in general, what is the guidance or regulation regarding forcing out partially-vested terminated participants with a pending plan termination?

Thanks!

We have a DB plan that has actuarial equivalence factors based on 1971 GAMT @ 6%. There are a number of participants beyond NRD. Benefits, which are frozen, may be paid as lump sums.

We would like to change the actuarial equivalence (AE) interest rate to a lower level.

We are considering the following:

A participant’s late retirement benefit will be equal to the greater of:

1. Late retirement benefit determined according to the AE factors in effect as of April 1, 2013 (date of amendment), or
2. Late retirement benefit determined according to the application of the new AE factors as of the actual date of late retirement (after April 1, 2013) applied to the participant’s NRB.

Benefit 2 will not be greater than Benefit 1 for several years which would require a notice to be distributed.

What is the lowest interest rate basis that would pass muster? First segment rates? Other? Could you increase a flat .25% per month for late retirement? .1%?

Hello,

You helped me once before Gary. I appreciate it.

Is there anyway curently that business owners can contribute to a SEP IRA as employees through their W2 compensation and then make a discretionary lump sum contribution as employers before they file their taxes? I have a business with 2 owners and no employees this would work great for, however I thought I read that that luxury went away with the termination of the SARSEP

Are safe harbor contributions available to be withdrawn for a in-service Disability Withdrawal?

Are safe harbor contributions available to be withdrawn for a Disability Withdrawal?

If a defined benefit plan has frozen the plan's benefit formula, does the 415 Maximum Lump Sum continue to increase after the freeze date? Specifically, does the 415 Maximum Lump Sum based on the 415 Compensation Limit continue to increase? For example, if a participant has 5 years of plan participation and 5 years of service on the freeze date - does the calculation of the 415 Compensation Limit increase for each additional year of service (up to 10) after the benefit freeze date? If yes, where is the citation in the regs?

This has importance if the frozen defined benefit plan becomes over funded and must allocate the excess assets (but not in excess of the 415 Max Lump Sum).

Thanks

Over the years I have encountered plan consultants who perform cross testing using very different methods, some directly contradicting how others do it, some not knowing what the numbers mean and just assuming the computer did it right. I learned some of the basic rules regarding cross testing long ago, but after seeing such inconsistency among professionals, I would like to not only go over the basics but also become familiar with more involved designs, including cross testing for 401k plans. I've looked for online instruction/classes without any success. I would also welcome written instruction, especially if it includes examples. What type of resources and training is available for this purpose?

Hi Benefits Link users:

Employer "A" started a SEP in 2009 at Wells Fargo bank and neither he nor the bank has a copy of the SEP document that was adopted. We don't know if it had a 0, 1, 2, or 3 year eligibility. Call this OLD SEP.

He hired employees for the first time in 2011.

Assume he adopts a new SEP in 2013 at another custodian, Schwab, and adopts it as a new SEP, not an amended and restated SEP, effective 1/1/2012. Assume he elects a 3 year eligibility. Call this NEW SEP.

Would the fact that the employees hired in 2011 met the eligibility in 2012 under OLD SEP, prevent the employer from being permitted to exclude these same employees by contributing to NEW SEP with the longer eligilibility? I don't think the SEP rules address this.

Assume one step further that Owner A had been hired in 2008 and he had started with a SEP with a 1 year eligibility. (I am working with and advisor so don't know at this point when the business started). Since Owner A met the eligibility in OLD SEP in 1 year, is it discriminatory to now amend to NEW SEP to a 3 year eligibility? Qualified plans are governed by 401(a)(4) which addresses a series of amendments being looked at together. I don't think that concept applies to a SEP but don't know.

Thanks,

Craig Schiller, CPC

Does anyone have a good payroll stuffer on the Saver's Credit?

After reviewing for the umpteenth time the letter to BenefitsLink regular poster, Kirk Maldonado, from Elliot I. Daniel dated March 2, 1987, and after reveiwing DOL Advisory Opinion 97-03A, Advisory Opinion 2001-01A, and other DOL guidance, it appears that generally speaking the costs of administering an ESOP (other than those costs relating to the settlor functions of designing, drafting, or terminating the plan) may be paid with plan assets (assuming the plan so provides).

Given the requirements of ERISA Section 407(d)(6) and IRC Section 4975(e)(7) that an ESOP be designed to invest primarily in company stock (and I know that the two definitions are somewhat different - but we have just one class of stock in the situation I'm looking into), it seems to me that the expenses of negotiating a stock purchase agreement with a major shareholder to permit the ESOP to acquire sufficient stock so that it was "invested primarily in company stock" would be an expense related to the implementation of the ESOP and therefore payable by the ESOP. Advisory Opinion 2001-01A seems to be broad enough to include this under the umbrella of expenses of the "implementation of the plan."

I would be most appreciative of any thoughts.

Not for Profit (501c3) nursing home may be taken over by a for profit provider.

CEO of Not for Profit corp may receive a large severance package.

Would this fall within scope of irc sections 280G and 4999 or, would employer's status as a non-profit 501c3 exclude this from scope of those sections?

This is an ongoing plan for which we have always satisfied the gateway test with a 6% DC contribution. This year, the owner's compensation went from 250k down to 35k.

The DB benefit is based on a historical high 3 compensation. Our system is throwing a 197% combined benefit rate as it's compariing the current year additional accrued benefit (based on 246K average) to the current year $35k compensation.

I understand the gateway test has to be run using 415©(3) compenstion, but does it really have to compare a high 3 average benefit to a single year's compensation?

DB Plan with over 1MM in assets wants to purchase an investment property. The plan will pay the entire cost with no financing.

The 2 owners' PVAB, combined, exceeds 90% of the total PVAB of the plan.

Assuming the purchase is a bona fide investment , that every year an accurate appraisal is provided , etc., and that the plan will always have enough cash to provide termination benefits for the other participants: is there anything that would forbid the plan to invest about 75% of assets in such property? I know that we have to report on the annual 5500 if more than 25% of plan assets is invested in a single asset. However I wonder if there is any "legal" limitation as long as the non owner employee benefits are not in Jeopardy.

Thanks for help.i

A participant reached NRA in 2012 and retired. The Plan offers one lump sum payment after the next valuation and written request by the participant. Is there an issue with amending that today to a five year payment schedule? Would they have to give the participant the option for the one lump sum payment, since they already retired?

We just inherited a plan with an outstanding loan by the officer of the company.

The participant made one payment in 2011 and has not made a payment since; the prior TPA has not issued a 1099R.

We asked around at a few pension meetings and someone mentioned the possibility that the transaction could be handled as follows:

participant taxable in 2011 on the missed payments due in 2011

participant taxable in 2012 on the missed payments due in 2012

participant taxable in 2013 on the missed payments due in 2013.

Therefore, there would be 1099Rs in 2011-2013 only for the missed payments and these would be a code "1".

The participant has every intention of starting to repay the loan with the next quarterly installment.

This is a most interesting take on the situation and would appreciate any comments.

Does anyone know what is allowed in the way of transfers from 401(k) to HSA?

How about HSA to 401(k)?

Does anyone know where I can find, or how to derive, the factors to convert a balance to a 50% J&S annuity based on the UP-1984 tables?

We have plan the is part of a large controlled group. They acquired another company through an asset acquistion in 9/2012. They use the top 20% rule to determine HCEs. For 2012 HCE determination, do we need to consider this group? They acquired group did have a 401(k) plan and it is not merging into our plan at this point. It will remain separate.