If a lump-sum settlement of the account is taken, may the taxable portion (earnings) be rolled over to a Traditional IRA?

I'm starting to pick up a little more information on ESOP's, and the more I see, the less I like them!

I just wanted to make sure I've got this right. If you have a non-allocation year, even if there actually isn't any contribution/allocation for that year, the client is still screwed because a prohibited allocation includes both an allocation AND an "impermissible accrual." And the inpermissible accrual potentially includes accumulated contributions, and not just current year allocations. In turn, this puts you under the prohibited allocations consequences, etc., etc...

Have I got that right? I realize the IRS has thankfully provided some "fail-safe" language, but wow!

Hello everyone

Hopefully an easier question, if anyone is familiar with the new EPCRS for 403(b) plans.

We had an employer adopt a written prototype 403(b) plan in December 2008. Various affiliated entities were participating employers in the plan since the very beginning, and a few others tacked on until about the end of 2011. These employers participated in the 403(b) plan, but never formally adopted the plan and their participation in it until the end of 2011/beginning of 2012.

Does this constitute a VCP-able error? It looks like it's under 10.08(2)(b) of the new EPCRS (failure to adopt 403(b) plan timely), but I'm not sure, since a 403(b) plan was in effect and only certain participating employers didn't adopt it. Perhaps for them, it's a failure to timely adopt a 403(b) plan? Or am I getting lost in semantics?

Alternatively, is it just an operational failure under 5.02(1)(b) of the new EPCRS (failure to follow plan provisions, ostensibly requiring adoption of the plan by participating employer prior to participation)? Again though, I'm not sure if this is accurate, since I don't see any strict language in the prototype doc requiring adoption of the plan by additional participating emploeyrs. That seems to be more a question on the corporate side, not the plan side?

Any thoughts would be greatly appreciated. Thank you.

Participant is >1% owner (<5%).

2009 comp $190,000, so key employee in 2009.

2010 comp $130,000, 2011 comp $110,000, so "former key employee" in 2010 and 2011. In this case, I understand that this participant is excluded from top heavy determination (both numerator and denominator)

2012 comp $170,000. Is this participant now a "key employee" again and included in the top heavy determination? Or are "former key employees" forever excluded from top heavy determination.

Thanks...

1. May a defined benefit plan require the participant/alternate payee to pay QDRO related expenses? If so, what method have you found to be the best way to accomplish this (i.e. subtract from distribution; prepayment by the individual; other)?

2. I have not found any direct guidance regarding DB plans and QDRO expenses. Is there any DOL guidance relating to QDRO expenses and DB plans?

What directions are the prevailing winds blowing in with regards to using the MAP-21 interest rates for the HCE lump sum restrictions (110% funded test). I attended the ASPPA conference in LA in January and it was mentioned that "some" practioners felt it may not be unreasonable to use these rates. I know we have no guidance but what are the opinions on how aggressive this would be to use them for this purpose ? A. Go directly to Jail. B. Go to Jail but only after a good meal. C. Probably no prison time just probation D. No harm no foul. E. Other - name it ________

In all seriousness I would appreciate some opinions as I have a client who might be considering the pros and cons of this "potential" option.

QDRO Alternate Payee was paid too much from ex-Spouse's 401(k) Plan. What if anything can be done to disgorge the funds from her IRA and pay back to the Plan? What about the loss of investment opportunity?

Any assistance would be greatly appreciated.

a small PSP has eligibility requirements of age 20.5 and 6 months of service. They would like to amend to exclude employees who do not work full time. I do not think this is an option. They could bump up to year of service age 21, perhaps even 2 years of service since the plan vesting is already 100%, but if employees work appx 20 hours a week, they will be eligible to be in the plan, correct?

I have a takeover plan with an odd matching formula. I can't find the rationale that would disallow the formula, but I have some concerns and certainly can't replicate it on my document system. Any specific reasons why this formula is not permitted?

1% of compensation for each 3% of deferrals. Capped at 6%. Operation: A participant who defers 3%, 4%, or 5% will get a 1% match. Those deferring 6% and above get a 2% match.

They are operating with a 3% deferral minimum, which puts the minimum matching rate at 1% and maximum matching rate at 2%. Under that fact pattern, it isn't classified as a disproportionate matching rate.

The current plan document is actually written wrong, but has one of those fancy 'Other' catch-all boxes for the matching formula. So, if the formula is appropriate, I can change the document for future years. How to deal with the past years is a horse of a different color.

OK - so this isn't a 401(k) plan question, but I didn't see a separate forum for MPPs - if this question should be in a different forum let me know - do the minimum funding requirements apply to a sole-participant MPP? There are other requirements that don't apply because a sole-participant MPP isn't subject to Title I, but the minimum funding requirements still apply, right?

We have an issue with a particpant who is due a 401(k) refund for the 2012 plan year (nondiscrimination failure). He retired in 2012 and rolled his money over to an IRA during 2012. So, the refund is being issued from the IRA in 2013 before April 15th. Is this taxable as a 2012 distribution becuase post circumstance have made it ineligible for rollover? Or is it taxable in 2013 becasue is is now deemed ineleigble for a rollover and must be a distributed by April 15th to avoid penalty taxes?

It make sense to see it one way as the 2012 situation. However, it seems unfair and impractical to come to that solution. Since, a participant who still has money in the plan would get to declare it as 2013 income in this situation it should be the same for the seperated participant who rolled over his money. This solution makes the situation a lot easier to deal with administratively, tax wise, and a level playing feild with others whom must recieve corrective distributions.

Which one is right?

Can the employees of a bargaining unit fund it themselves via payroll deduction if the employer writes the check to the VEBA fund?

Participant has money in 401(k), Safe Harbor, Profit Sharing and funds transferred from a money purchase plan.

Trying to figure out maximum hardship availability.

Can the MP Transfer money be taken?

I know MP transfers retain the J&S provisions.

But can they be taken for hardships?

I have a client that recently received a letter from the IRS asking about a 5500 from a prior year which it claims was not filed. I know that the DFVC program ceases to remain available after the "date on which the administrator is notified in writing by the Department [of Labor] of a failure to file a timely annual report under Title I of ERISA." Does the fact that the IRS and not the DOL is sending the letter mean that the sponsor can still avail itself of DFVC?

A DB plan has been using the full yield curve.

I beleive we have a one-time ability to switch to segment rates (not MAP-21 rates) starting in 2012. I think we have until the filing due date of the 5500 to make the election.

Does anyone know of any sample election language?

Thanks.

403b prototype document from Corbel, use of forfeitures question:

"Plan Expenses. Pay reasonable Plan expenses first (See Section 7.04©), then allocate in the manner described above."

If this option is selected for match and nonelective, then must forfeitures be used first to pay recordkeeping expenses? In the plan in question, the recordkeeping expenses are paid by selling shares in mutual funds (i.e., not by plan sponsor and not by revenue sharing).

Corbel 401k prototype document.

"Plan Expenses. May Forfeitures first be used to pay any administrative expenses?"

If the answer is yes, must forfeitures be used to first pay recordkeeping expenses, asssuming the expenses are paid by selling shares (i.e., not revenue sharing, not paid by the plan sponosr)?

I have a 415© failure due to employee deferrals. The employer contributed a $50,000 profit sharing for the participant. So I need to refund the employee deferrals over the catch-up contribution of $5,500 since the participant has attained age 50. My question is, what year is the refund taxed?

Looking to see if anyone knows of any IRS guidance out there that could help me out with the following.

Company A & B cover their employees in a multple employer safe harbor 401(k) plan that has fulfilled all proper notice requirements. Halfway through the year (effective 5/1), however, Company B is going to shift its employees into a single employer SH 401(k) plan by amending the plan to simply say it is no longer a multiple employer play, it is a single employer plan, and establishing a separate trust. It will have all the same features as previously in place, contributions, protected benefits, etc.

I think the argument is that it is the same plan, not the creation of a new one. It is a simple conversion; not the creation of a new plan. I cannot seem to find any IRS guidance on the issue. Any input/opinion would be appreciated.

TH ratio on system report is 60%, but it is actually 60.04. All the numbers including inservice distributions have been reviewed. Is the plan top heavy?