Some participants in a plan took final distributions who, as a result of termination of employment, defaulted their loans.

However, the office preparing the 1099-R's did not issue them for the loans, only the distributions. Evidently, this has gone on for some years.

How can we correct this? Can we issue 1099's currently?

Are the ones that happened the past couple years eligible for SCP and older ones VCP?

These aren't loan problems, but reporting problems as we see it.

As always, your thoughts are appreciated.

We have a P/S plan sponosred by a tax-exempt 501©(3) organization and the plan provides that vesting computation period for determining vesting years of service will be the plan year. However, the plan has been administering the plan with the computation period defined as the participant's employment year. Recognizing this as an operational error, what is the recommended correction to this error?

Company exceeded 100 employees in 2011. 2012 will require their welfare benefit plans to file 5500.

Now that it is 2013, can they proceed with filing as a wrap plan for 2012?

Do they need a corporate resolution to do so?

Control group with 2 401(k) plans. Both are contributing a safe harbor match- but different formulas. 1st company safe harbor match is 100% up to 5% and second company is a safe harbor match of 100% up to 3% and 50% up to 2%. Is this okay? What do I need to look at? As long as each plan passes coverage testing separately then this is okay? Thanks.

We have a plan that had spin-off in 2012. The effective date of the spin-off plan is 01/01/2012. The assets were all transferred in January, 2012. We are not involved with the now spinned off plan.

For our plan purposes, does our beginning of year participant count include the eligible employees of the plan that left? They were included in our end of year count for 2011, but as of 0101/2012, they were not eligible to participate in our plan.

Is it okay to have a beginning of year count that is less than last year's end of year?

Thank you.

We have a revenue credit program with our vendor. We have the standard list of what these monies can be used for. If you also have this program can I get examples of what you have actually used this for. One example of what I used it for was to pay for our annual audit. Thanks

I filed a Schedule SSA with the 5500 of a PS 401(k) back in the year 2000, for a missing participant with a balance of $217. Since then, back in the mid-2000's time frame, this plan closed. This girl's $217 was not a thought in my head, and guess what? She has filed for some sort of SS benefits, and they've given her notice that she has $217 in this old, closed plan.

What do I tell her?

Thank you!!!!!!

There is a participant who was terminated for using a false social security number. They have approximately $500 in their account. Are they entitled to receive the funds and if yes, does anyone have suggestions to go about determining the correct social security number? I suppose their name could be incorrect as well. What steps can be taken in this situation?

My client was recently audited by the DOL. The agent discovered various problems including chronic late deposit of salary deferrals and failure to suspend salary deferrals following a hardship distribution. My client made a contribution to the plan for lost earnings (calculated by the DOL agent at the greater of the IRS rate or the plan earnings for the year in question) and revised its policies to ensure the problems would not recur. The DOL issued a letter saying the investigation is concluded and due to the actions taken by my client, the DOL "will take no further action with respect to these matters."

The letter continues to state that because a prohibited transaction occurred, the matter will be referred to the IRS and if client agrees that a prohibited transaction occurred, client should file a Form 5330 with the IRS. Client's TPA is working on this filing.

When I spoke to the DOL agent handling the case I mentioned that I would be preparing a filing under EPCRS to address the operational failures of the Plan and the agent acted surprised that I would do this. Previously she had repeated several times that she would be sending the IRS information regarding these failures so it makes sense to me to file under EPCRS instead of waiting to see if the IRS will audit the plan.

Now I am second guessing myself. I don't want to waste the client's money on an EPCRS filing if it is overkill. The EPCRS fee is $2500 plus there are legal expenses.

Does anyone have any thoughts or advice?

If db plan was taken over by pbgc;and it had at the time unfunded Lx of about 1.7 mill.

Company is not in bankrupcy;but is making no money.

Q;

Is it 100% certain that money will be collected from plan sponsor if they dont go bankrupt?

when?

slipton@intpen.com

thanks

How does 415 handle back wages? Client had a settlement and to pay employees back wages from a couple of years ago. It seems like they should be eligible for the employer contribution (fixed % of pay), but it seems hard to justify based on what I know the final 415 regs.

As silly as it may seem, it appears to me that a literal reading of Reg. 54.4975-7(b)(5) leads to the conclusion that - absent substantial C corp dividends or S corp distributions - an ESOP is hamstrung and cannot prepay a loan even though: (i) the loan documents expressly permit prepayment, (ii) the ESOP has plenty of cash (assume that the cash has accumulated through employer contributions that were in excess of the ESOP's payment obligation and were not designated as being made to the ESOP to enable it to meet its loan obligation), and (iii) prepayment would be in the best interests of participants and beneficiaries of the ESOP.

Reg. 54.4975-7(b)(5) reads as follows (in italics) - -

BEGIN QUOTE:

"(5) Liability and collateral of ESOP for loan.-- An exempt loan must be without recourse against the ESOP. Furthermore, the only assets of the ESOP that may be given as collateral on an exempt loan are qualifying employer securities of two classes: those acquired with the proceeds of the loan and those that were used as collateral on a prior exempt loan repaid with the proceeds of the current exempt loan. No person entitled to payment under the exempt loan shall have any right to assets of the ESOP other than:

(i) Collateral given for the loan,

(ii) Contributions (other than contributions of employer securities) that are made under the ESOP to meet its obligations under the loan, and [emphasis added]

(iii) Earnings attributable to such collateral and the investment of such contributions.

The payments made with respect to an exempt loan by the ESOP during a plan year must not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less payments in prior years. Such contributions and earnings must be accounted for separately in the books of account of the ESOP until the loan is repaid." [emphasis added]

END OF QUOTE

Beginning with the next-to-last sentence, we see that "payments made with respect to an exempt loan by the ESOP during a plan year must not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less payments in prior years." If there are no signficant dividends or S corporation distributions, doesn't the language effectively mean that payments cannot exceed "such contributions" (i.e., contributions shown in bold above; in other words, contributions "made under the ESOP to meet its obligations under the loan")? And doesn't this effectively foreclose any possibility of prepayment by the ESOP in the situation described?

Please set me straight on this.

May a participant who is currently on military leave request a loan from the plan? The document states that a loan can be given to a "party-in-interest", which would include an employee, but I am not sure if someone on leave is still considered an employee for this purpose. Thanks!

We just took over a profit sharing plan (no deferrals). The last plan document they have was signed in 1994. However they did send me an EGTRRA amendment signed in 2001 and a determination letter in the name of the plan dated May 2002.

We need some guidance on how to get this plan in compliance. It's my understanding we can submit to VCP - I found a kit on the IRS website but wasn't sure exactly what to send to them.

Am I correct in assuming since the plan has a determination letter dated May 2002 in the plans name I wouldn't have to submit any plan documents before this date?

The documents we would send in to the VCP would include (note: we use sungard vs pre-approved plans):

1. The 2002 Determination letter

2. Automatic Rollover Amend (adopted currently)

3. The 415 Amendment (adopted currently)

4. PPA Amendment (adopted currently)

5. The EGTRRA Plan Document (adopted currently)

6. HEART/WRERA Amendment (adopted currently)

The company has less than 20 EEs so I believe the VCP fee is $750 but we are trying to figure out if that includes the missing amendments?

Any responses are appreciated!

apologize if this has been asked but i did not seeing it looking

through past posts..my question is what is the definition of self-employed

for characteristic code 3b..better yet what does a plan covering self employed mean

exactly? are we talking about sole proprietors/partners/llc members or

is a one person c corp included in this description? what about a two person

c corp with a 100% owner and a secretary..it still covers an individual who surely would

claim to be self employed...

all responses appreciated.

Underfunded amount is more than $50 million on "regular" basis, but less than $50 million on MAP-21 basis. Is this over the $50 million threshhold for providing a copy of the AFN to the PBGC or not?

We have 401k plan where each participant has their own account. Rather than everyone being invested at one company, each can pick whoever they want. There was a participant who terminated and wanted to cash out. He conacted his investment company, obtained their withdrawal form, had the trustee sign, and he was distributed. We were unaware of the distribution.

For our plans we have our own "plan distribution election form" which has a Speicial Tax Notice. We have them complete this form which serves to not only keep us in the loop but ensures the participant receives the proper notices, and the proper distribution amount. The participant in quesiton was 100% vested, so no issues with the amount.

What is the "correction" here, if any? Does the entire distribution need to be reversed? Do we merely need to send the Tax Notice and have him acknowledge? Should we have him complete our dist form for the files?

An excluded person(excluded by class) in a ps plan is brought in to pass 410b testing because he is nhce.

He gets top heavy contribution.

the following year he is hce;and doesnt have to be "brought in" to pass 410b

Q: must he be considered participant for top heavy?

ty

Slipton@intpen.com

Employer desires to merge two 403(b) plans and transfer all assets from one to the other. After the transfer, there will be no assets in the transferring plan. Must this plan continue to be maintained, languishing in the file with no activity?

How do you actually get it to go away?

Thanks for any thoughts.

This is one of those basic questions that seems too good to be true when you see it in action.

2 companies owned by the same individual, 1 has a 401k plan with cross tested profit sharing, other company has no plan

So long as the company with the plan can pass the ratio percentage test taking into account the employees of the controlled group we're good to go with no further combined testing (once we get past coverage we can test the 1 plan as if the controlled group doesn't exist)?

Thanks