I found out, a couple days ago, that an employee received a hardship withdrawal last year and the HR department failed to suspend the deferrals. The plan administrator inisists that I refund the ineligible prior year deferrals. I asked the plan administrator to refund the employee directly and issue him a 1099R. The administrator said that for this type error, where the deferrals were ineligible, the employer should process the refund. Should I just process the refund, which would mean issuing the employee a corrected W2(I haven't file them with the SSA), filing Form 941X, filing an amended Form 940, or continue to insist the plan administrator process the refund and 1099R?

New company formed and first payroll period commenced 7/1/2012.

Company adopted 401k PS plan effective 7/1/2012.

Are these correct:

415 limit not-prorated (still $50,000 + catch up)?

401(a)(17) comp limit is prorated ($125,000)?

Thanks

Has anyone ever seen a multiple employer plan change into (convert - however one describes it) a multiemployer plan (with all the accompanying requirements - joint board, etc.)? Is this even possible?

I understand that regulatories have denied that a multiemployer plan who is down to one employer can convert itself into a single-employer plan. Reasoning being (I understand) - you are what you are. (Help, right?!)

Anyhow, I'd appreciate hearing about whether the change from a multiple to a multi is possible, and if so, whether anything special is needed to effectuate such a change.

Plan is switching new recordkeepers. Plan has existing loans. The new service provider is telling plan sponsor that they can reamortize the loans unilaterally rather than just continuing existing loans as is. I've never seen this before and can't find a basis for it. The new recordkeeper can't really provide me a basis for that conclusion except that it can be done. Can anyone provide me a basis for allowing a reamortization?

Part III of Schedule H requires attachment of the auditor's "opinion"

The opinion is just the signed first page of the auditor's "report" which goes on to include the statement of net assets, statement of changes, footnotes, etc.

I've seen instances where the 5500 preparer/filer only attached the opinion and not the entire report.

Is this legal/permissable?

Thanks

A participant age 63 wants to get an in-service distribution and roll it over to an IRA in 2013.

The plan document allows for in-service distribution after age 62.

Question:

Can the participant take the entire "Lump-Sum" value of the vested accrued benefit?

Or is the in-service distribution restricted to the amount of the (annual) vested accrued benefit?

Single employer plan; affiliated employer transfers into plan 01/01/2012... then decides early 2013 to disassociate from the plan.

Affiliate came into plan with 6 yr graded vesting, changed those coming into plan 1-1-12 to 3 year cliff.... Then the disassociation of this affiliate employer is not a partial plan termination Would the forfeitures from the terminated affiliated employer employees stay in the plan trust or move out with the affiliated employer?

Plan does not allow for loans anymore (it used to). Can the plan allow for refinancings of existing loans?

I received a question from one of my clients and was wondering if someone could assist me in providing a response back to the client. The heart of the question is, can the client continue to make the profit sharing contribution for 2012 earnings and the 2012 plan year and still deduct the contribution from their 2013 tax return instead of 2012?

Below is additional information that the client forwarded to me.

As a follow up to our phone call, we wanted to pass along some information regarding the potential deferment of the 2012 accrued profit sharing deduction to 2013. In order to defer the payment of the 2012 accrued balance at 12/31/2012 to a 2013 deduction, the company should designate in writing to the plan trustee that the contribution is on account of the 2013 taxable year of the employer. Doing this, would push the deduction from 2012 to 2013. This would mean that on the 2013 return, there will be the 12/31/2012 accrued balance deducted in 2013 and the accrued balance at 12/31/2013 paid in 2014 will be deducted on the 2013 tax return.

There is a limitation out there for 2013, that being the 2013 “double deduction” (the 2012 non-deducted portion and 2013 accrued deduction). The total of these cannot exceed 25% of W-2 compensation of the participants for 2013. I am assuming this will not be an issue for the company, but wanted to inform you of this limitation.

Is it permitted for a full time life insurance agent who is classified as a statutory employee of the life insurance company that employs him & receives a W2 as a statutory employee consider this as earned income for a SEP plan he wants to establish as a sole-proprietor? My initial response is yes because of the exception for life insurance agents that treats their income as self-employment income. Normally, W2 income is not considered earned income for self-employment.

A small C-corp bank maintains an ESOP. They have been considering changing to a S-Corp and are interested in knowing what affect this could have on their plan. Outside greater scrutiny by the IRS and/or DOL due to pass through issues, what other pitfalls could they face? Would the benefits of changing to an S outweigh their current structure as far as their plan is concerned?

When the DOL turned open MEPs into separate plans for 5500 and audit purposes last May they didn't say "when" their position became effective (retroactive, starting with 2011 or 2012 or other?)

Does anybody know what any of the big open MEPs are doing?

Thanks

I have a 401(k) profit sharing plan that uses an age weighted formula. Plan has deferrals and Profit Sharing.

If I understand it correctly, I do not have to pass the gateway test because of the age-based allocation rates.

The profit sharing requires 1,000 and LDR, I am passing coverage at 103%, so is it correct that I do not need to do the average benefits test?

Under 401a4, the plan is passing under rate group testing.

Is the plan passing non-discrimination testing as long as it passes the rate group testing under 401a4?

When I run the average benefit test in Relius it is failing becasue of including the deferrals.

Just would like confirmation that I am thinking correctly, or totally missing the boat!

Thank you

We are tpa for Co. A 401(k) plan.

A health insurance company incorrectly told Co. A's employees that the insurance co. that they could reduce 2013 deductibles by medical expenses paid in 2012. In an attempt to make things right the health insurance company is going to pay the employees the amount of their unused deductible in 2012. They cannot pay the employees directly. Thye pay the employer who in turns pays the employees. The employer has determined that this will be run through payroll (similar to a bonus) and included on the W-2. (That doesn't seem correct to me, but it is not really somehting that we can advise them about.)

Given that the employer is treating this as W-2 wages should the employees be allowed to defer to the 401(k) plan? Just given the way the employer has decided to treat this it seems to me like this will be treated the same a s a bonus payroll.

Thanks in advance for any guidance.

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?