I have a client whose CFO embezzled $1.5 million from him. He has a $200,000 balance in the company's 401(k) plan. Does anyone out in BenefitsLink land have any suggestions on how to "encourage" the felon to take a distribution and pay it over in partial satisfaction of the restitution order?

Thanks.

Employer A is a Dentist’s Office which acquired another dental practice, Employer B in 2011. They are being operated as two separate businesses. It is now 2013 and Employer A has learned that he needs to either cover Employer B or run the risk of failing coverage.

Now Employer A would like to add a safe harbor plan ASAP. Employer A currently has a calendar year 401k plan.

Are there any options to get a safe harbor plan sooner than 2014?

From my research, in the 2012 EOB, page 11.557 states that an employer might consider changing its plan year for the plan and start using safe harbor for the first 12-month plan year that starts after the amendment. Has anyone done this? What are the consequences/pitfalls of doing this?

Found a couple of these in our pooled funds this year (and noticed one that has been around for a while but didn't realize the values given weren't really "values"). I'm talking about the David Lerner Apple partnerships, non-traded "business development companies" (a type of closed-end mutual fund) and the like. And I'm talking about relatively small plans, all DC but it would be relevant for DBs as well.

They generally give a year-end "statement" that has the last public offering price or cost basis or something similarly irrelevant, but which gives the appearance of a current value.

Just wondering what other folks are doing as far as determining a value. In most cases, I will make it clear that we can't just take the number of off the statement, and will more-or-less get the trustee to give us a value (probably the number on the statement, but at least we've turned it around so the trustee is giving it to us and we are not just reading it off a statement). Then we'll use a 5500 instead of 5500-SF because we don't have a fair market value.

Any thoughts?

If a participating employer that leaves a controlled group in the middle of a plan year, is it necessary to file Form 5500 as a multiple employer plan for the year of the change? It clearly must in succeeding years, but what is the relevant date for determining whether a plan's status for purposes of 5500 reporting?

Thinking for in the future: Company A has a 401K psp. Eventually Co A will dissolve, but a different Company B (doing completely different kind of business) will be formed with 2 of the 5 shareholders from Co A.

Only 1 shareholder from Co A has ever had a W2/401k account and likely the same employee/owner will be the only 401k account holder in Co B.

What is the best or easiest way to keep the original 401K psp for Co B? Or is this not even possible? Can Co A's 401K psp also be sponsored by Co B at the same time. Then when

Co A decides to dissolve, just transfer the 1 employee's 401K accounts to Co B's 401k plan?

Hope this isn't confusing, but I know what I'm talking about

Hi folks, I had recently done some digging into my Roth IRA portfolio just to monitor fund performance and sector allocation, something I regretfully have ignored for the past 14 years I have been invested in a Roth. My portfolio is all mutual funds, mostly active large cap stock funds from a few different providers.

I had noticed that I accidentally double contributed for the tax year 2004. I contributed $3,000 (the max allowed for that year) in April 2004 for the 2004 tax year to one fund, but I had also contributed $3,000 the following year in another fund, also for the 2004 tax year.

I understand this could be considered an excess contribution, and I will be socked with a 6% penalty for each year the excess is left in the funds. Is there any way I could ask the fund custodian for one of the funds to change the tax year to say, 2003? I noticed that I had contributed to a Roth every year EXCEPT 2003, so it looks like that is the reason for my error.

Or, could I instead just ignore my mistake and pretend nothing happened? How would the IRS know about this, would they even pick up on the duplicate 2004 contributions when I take distributions when I finally retire?

I'm ok with paying the penalty, but I am hoping that I could just simply explain my error to the fund custodian, have them make a change to the tax year and be done with it.

A client recently mentioned that they received a 2012 1099-DIV for his qualified plan's account that incorrectly shows the earnings as being taxable. Although there is ample time for the investment firm to file a corrected form with the IRS, they are refusing to do so, claiming that they were never informed that the account was a non-taxable one, even though it has always been titled under the plan's name with the plan's trust ID number. The client even checked on the account's original application the box indicating that this will be a retirement plan account. The reasoning given by the firm is that years ago when the account's application was submitted, an additional box should have been checked indicating that the client believes the account is exempt from information reporting to the IRS (instructions for that box were very general and simplistic, with no details as to what type of reporting they were referring to). The client did not check the box because he knew he had to file 5500s every year and 1099Rs if distributions occur, and thus the account would not be exempt from information reporting. The investment firm is not acknowledging that the instructions for the box were vague and will only say they do not correct 1099 forms if it's the result of client error, as they deem this to be. Even if the client was "wrong" in not checking some box with poorly worded instructions on the application years ago, they will not accept that it may have been a misunderstanding and that they are now being given correct information that should result in a revised 1099 (they have been generating 1099s showing taxable earnings every year, but the client did not notice until now). The only help they can offer is that staring with the 2013 reporting, the earnings will be shown as nontaxable since the client sent them a W-9 showing the plan to be exempt the other day. Given that they now have accurate information and that the filing deadline has not passed yet, their reluctance to correct the 1099 seems to be a violation of the firm's responsibility - they are reporting a significant tax liability to the IRS that does not exist and will not do anything about it. What recourse does the client have? Is he forced to somehow file a corrected 1099 form himself (although finding one to fill out may be problematic)? Are there government agencies or watchdog groups that can be contacted for assistance and who can determine whether the firm is acting inappropriately?

I *think* I have the correct answer to this one, but I thought I'd put it out there for others' input. I may bring in an ERISA attorney for a final determination, if I can talk the business owners into spending the money (they are a bit tight fisted).

We have two individuals, Frank and Joe. Frank and Joe are financial advisors.

Frank 100% owns Frank LLC.

Joe 100% owns Joe LLC.

Frank LLC and Joe LLC each own 50% of S-Corp financial advisory firm ABC. The bulk of Frank and Joe's business and income come from ABC. I have no doubt that this is an ASG.

Frank LLC also owns 100% of another S-corp firm XYZ. Frank LLC and XYZ are obviously a controlled group. However, ABC and XYZ have no real business relationship.

Joe LLC also owns 80% of another S-corp firm, LMNOP. Most of LMNOP's clients are also clients of Joe LLC/ABC. LMNOP performs a different type of busines service from ABC, but Joe LLC/ABC often tries to sell LMNOP's services to its clients. LMNOP and ABC do not perform services for each other or collect any revenue from each other.

The groups here are:

Joe LLC and LMNOP are a controlled group.

Frank LLC and XYZ are a controlled group.

Joe LLC, Frank LLC and ABC are an affiliated service group.

Thoughts?

I'm sure there is a penalty for not issuing a participant a 1099R, but I can not find it anywhere.

The only penalty for non-issuance of a 1099 mentions a flat $100 for non issuance of a 1099-MISC.

Does anyone know what the penalty for non issuance of a 1099R is?

I just took over a plan and a participant rolled over a distribution in 2011 and was not issued a 1099R.

I'd rather be safe and issue one now, but would like to warn the client that there will be a penalty.

Got a mess with this one. Going back 15+ years, the plan has allowed after-tax contributions but the plan document has not allowed for it. A mix of HCEs and NHCEs. Am I correct that the only way to resolve is to payout these amounts plus the earnings? The earnings are taxable but is there any penalty. Also, would this appear to be a VCP filing?

Wishful thinking, but there is no permissible retroactive amendment that can be used to allow the contributions to stay in the plan is there?

Thanks

A doctor's practice and his wife's business are determined to be an Affiliated Service Group.

The doctor's practice is considered a "professional services company" and his wife's business is not.

The group sponsors a pension plan with 10 participants (8 with physician, 2 with wife).

Are they exempt form PBGC coverage under the professional service exemption, or because the wife is not a professional service company they would not be able to meet the exemption?

What if we excluded the wife's company from participation?

A 73 year old (non-key) participant passed away. She was still employed at the time of her death and was not taking RMDs. Her surviving spouse does not want to take her 401(k) money out of the plan right now. What time frame do we have in regard to paying the money out? I am not sure yet as to the age of the spouse (who is the beneficiary).

Thanks

Does someone know if this is allowed or not? In my ASPPA books it only addresses the fact that deferrals can be recharacterized after failing the ADP Test. Not whether the individual is the HCE getting the refund.

Here is the scenario:

2 HCEs:

The top paid/ highest deferring HCE is not eligible for catch-up (under 50). He is the only HCE required to do a refund under the failed ADP test correction.

The other HCE is elegible for catch-up. He only deferred $7,500, so by using catch-up on him we could make his deferral rate go way down.

All in all, even by doing this they would still fail the ADP test. They would fail by a much lesser amount, which would significantly decrease the refund needed for the top HCE.

Does the HCE have to need a refund for the catch-up recharacterization after failing the ADP Test, or does the ADP test just need to fail and all HCEs' who are catch-up eligible can have their deferrals recharacterized if possible?

Thanks in advance!

I have a new start up plan that was profit sharing only for 2012 and added salary deferral with ACA effective 1/1/13. Document was signed 12/20/12.

We learned today that there have been no enrollment meetings as the open platform alliance and advisor have dropped the ball. The client would like to change the document to have the ACA and deferral be effective 4/1/13. Can this be done?

If no change is made to the document, how does the 'brief period of exclusion provision' apply to this plan?

This might not be the right forum for this question but here goes.

Client is participating company in large multiple-ER 401k plan with 3% safe harbor.

They want to move away from the MEP mid-year and set up their own safe harbor 401k plan.

I realize the 3% SHNEC to the MEP plan cannot be stopped mid-year and they cannot amend and restate onto their own plan mid-year.

But it seems there would be some way to accomplish this since no one will lose out on anything by adoptiong new plan mid-year. I have read all the rules and my head hurts.

Would this work:

1. Freeze 401k contribtions to MEP 3/31/13 but make 3% SHNEC to the MEP for all 2013 pay at the end of 2013. Keep assets in MEP plan through 12/3/13.

2. Set up new 401k SH plan. Start making 401k to new plan 4/1/13 and also make 3% of pay SHNEC to new plan (so total of 6% of pay for year combined between both safe harbor plans)

3. Merge MEP 401k assets into new plan on 12/31/13

Would this work?

HELP!!

I am the treasurer of a small, independent church with 2 pastors. I am setting up a 403(b) retirement plan for the church. Currently each pastor uses a different financial advisor/investment company and I want to give them the flexibility to use their preferred company for the 403(b) contributions. Some of the contributions will be non-salary reductions with the option for each pastor to also elect salary reduction contributions. I believe each pastor wants to use a 403(b)(7) account (mutual funds). My question is what do I need to do to "approve" the vendor and what responsibilities does the church (meaning me as the plan administrator) have with respect to the vendors on an ongoing basis. I have been researching the topic and I find many references to information sharing agreements (ISA). It appears that these require that information be shared on a continual basis, which will present a real burden to me (I am a volunteer, not paid).

I have identified a company (Oppenheimer) to set up the plan with (the representative is my financial advisor as well as that of one of the pastors), but the other pastor uses a different company.

I also want to confirm that we do not have to offer participation in the plan to part-time employees (over 20 hours per week) for whom we do not pay benefits (e.g., no retirement contribution). This appears to be an exemption only applicable to churches.

We have a client that fails 414s testing for the compensation definition they use for the profit sharing allocation. For the 2011 plan year, the client opted to run the general test to prove the compensation(based on 415 comp) was non-discriminatory.

Since the ps compensation excludes large amounts of compensation, we are anticipating that the plan will fail again. (It was not remotely close in 2011).

The question is: Do they need to run the general test again-since it was being completed to prove the compensation was not discrimintory as opposed to the formula? Or would you be able to rely on the 3 year rule? I am saying you need to run a 2012 General Test to prove the 2012 compensation is not discriminatory. How can you rely on 2011 test results to prove the 2012 compensation is non-discriminatory--especially since the 414s test has an annual requirement?

Any thoughts or regulation references would be greatly appreciated!

a company (company A) has tax year from 11/1 to 10/31. On 11/1/12 they create shor tax year from 11/1/12 - 12/31/12 and then in 2013 they have calendar year tax year.

they adopt DB plan 12/15/12 effective 1/1/12 with calendar year plan year.

So 2012 minimum funding is for a 12 month plan year but only applies to short two month tax year.

min/max funding is 100k for first year.

can 100k be deducted for 2012 tax year?

In addition company B is in same controlled group as company A and also adopts plan and has a full calendar year tax year.

Could Company B contribute the 100k for company A and deduct full contribution as an alternative to company A making a contribution?

And last say they jointly adopt a PS plan. Say max contribution for full plan year for company A is also 100k. For short tax year it would only be 1/6th that amount. Could company B instead make contribution based on entire plan year comp for company A?

I've been asked to become more involved with out international benefits and I was wondering if anyone can point out some good resources for getting up to speed on the legal requirements and benchmarks in various countries?

TIA

I am having some trouble getting my thinking clear concerning rehires who have a 5-year break and vesting. Specifically, the difference between the Rule of Parity and the Defined Contribution plan exclusion rules.

The plan in question used the DC plan exclusion rules and elapsed time vesting. The participant was 20% vested when they left and was rehired 7 years later. My question is would the participant retain any prior years of vesting to calculate contributions made to the plan after rehire? Or would they be disregarded? I do understand that any future years earned to calculate vesting would not be used to "recalculate" the non-vested account balance earned before the 5-year breaks in service.

Hope this makes sense.