A 401(k) plan with a pro-rata discretionary profit sharing allocation is written on a standardized prototype document. The document provides for an allocation if the participant is employed on the last day of the year, or earned 500 hours of service.

The employer would like to make a profit sharing contribution, but would like to use a tiered allocation rather than the pro-rata allocation.

I understand that the existing plan cannot be amended if a participant has earned 500 hours.

Is it permissible for the employer to adopt a second profit sharing plan that allows for a tiered allocation and a last day requirement?

If so, would the plans be allowed to merge at some point in the future? It seems to me that starting the second plan circumvents the contribution provisions that would be required under the first plan, especially if the plans were merged, say the next plan year.

Thanks.

Does anyone have any suggestions on what counts for Ethics CE for ASPPA? Better yet, does anyone have any suggestions for free Ethics CE?

Company A is owned 40% Father & 60% son#1, 0% son #2. Son #1 & son #21 both over age 21.

Company A sponsors a 401(k) plan

Company A is disloving.

The next day - 2 new companies are created

Company B owned 98% son #1 and 2% father

Company C owned 98% son #2 and 2 % father.

All the employees from Company A will be hired by either Company B or Company C in substanially the same jobs they had at Company A.

Are A & B a controlled group even though they technically do not exist at the same time?

Can B takeover sponsorship of the 401(k) and continue the plan or do they need a new one with plan A requiring termination?

Can C adopt the plan? If they do, assuming no change in plan provisions or coverage of the plan other than sponsorship change, can the group be tested together for coverage and discrimination until the end of the plan year following the transaction or because C is new company that is no controlled with A or B - even though 100% of their employees will be from A - do they need their own plan?

Why they are doing it this way I have no idea but their accountants/estate planners are structuring it like this and I haven't seen this particular set of facts before.

Employer wants to adopt a retirement plan but does not want the plan name to include the name of the sponsoring busines. He wants such inconspicous name as "RMZ Pension Plan"

As long as the employer EIN is correct in the filing, is there anything that forbids the plan sponsor to name the plan without including the sponor's business name?

Plan B will be merging into Plan A due to an acquisition. Plan B provides for in-service distributions at Age 59 ½ on all or any part of Vested Account Balances while Plan A provides for Age 59 ½ from 100% vested account balances, subject to administrative restrictions of at least a $1,000 minimum and only one withdrawal per year. For the Plan B balances the “all or any part of Vested Account Balances” won’t conflict because all of the participants will be 100% vested in all of their funds.

However, can the Plan A administrative restrictions of a $1,000 min. and one (1) withdrawal versus no administrative restrictions be applied to the Plan B balances? Or, must the less restrictive provisions of Plan B be grandfathered on these prior balances?

Thank you

Facts:

Three business entities:

Company A, LLC, : Ambulatory Surgical Center (owned 50% /50% by Companies A & B)

Company B, a C-Corp: Professional Medical Corporation (owned 100% by Dr. Smith)

Company C, an S-Corp: Management Corporation (owned 100% by John and Mary - h/w)

QUESTION: Can a qualified pension or profit sharing plan be adopted strictly for the company C (Management Corporation)?

I work with DC plans so I need advice on whether a DB plan could be an option for client. Owner with $700,000+ in comp for 2012. Age 57 and it is a sole prop. Only other employee is his son, age 32. Owner wants to put away as much as possible. Concerns are that compensation may be not be anywhere near this in years to come. Would he be locked in contributions for several years? how long would IRS expect him to keep plan?

Any thoughts?

Thanks!

My client went from an over million in assets to about $100,000 due to economy and had to laid off all employees in 2011. The owner also has an outstanding loan. When everyone was laid off, she stop receiving a paycheck from the company, thus has not made loan repayments since. I understand that she has defaulted on her loan as an active employee. Surely it was not her intent to not repay the loan, it's just that she was not receiving a paycheck. Does this count as a prohibited transaction and need to file the Form 5330 to pay the PT excise tax?

A quick and probably dense question: Let's say the hypothetical account balance (HAB) credits interest at (pick a number - say 5%).

If the plan earns 15%, can a lump sum distribution be made to a terminated participant based on the current, very high, HAB? Or is it simply based upon 5%?

Same question if it is a variable rate: I belive there is a floor requiring that the HAB payout can never be lower than the sum of all "principal credits" - but can the HAB amount be extremely high if investment returns go through the roof?

I'm sure there are limitations on this - 415 and/or others, but I just wanted to ask the basic question. Haven't paid any attention to CB plans for years. Thanks!

All,

IRS Notice 2008-115 (attached) has a special rule for withholding income taxes on 409A income included in income on 12/31/12, but not paid until January 2013. If the withholding tax is withheld from the actual payment in January 2013 and is paid to the IRS by the December quarter 941's due date, then no failure to deposit taxes penalty will apply.

Our question is what do we do on the 941 to indicate that we've met the 2008-115 requirements. Without some indication, isn't the IRS going to see

on Sch B of 941 a liability on 12/31/12, one that for us would normally have to be deposited in the first week of January, but then see a deposit

actually made on January 20, 2013 when we cut the check to the employee and withheld the taxes? Or, are we just forced to sit back, receive a late

deposit penalty letter and deal with it then?

Thanks,

Ken Davis

Univ. of South Alabamafacopier_usouthal.edu_20121214_150243.pdf

A question has come up regarding service for eligibility. We use the Corbel Volume Submitter 401(k) Plan.

Assume eligibility for making deferrals is 90 days and for receiving employer contributions is one year.

Person is hired through an employment agency and works for 90 days. On the 91st day the person is hired by the Employer and is no longer employed throught the employment agency.

The question (of course) is the first 90 days of service through the employment agency counted towards the 90 days of service. I have always taken the position that it does, but now in reading the document again it appears that a leased employee is only treated as an employee of recepient organization after one year of continuous employment with the employer. As this person only has 90 days, do I exclude this service for eligibility purposes?

In the case of a "Multiple Employer" Plan, must the unrelated co-sponsors be identified on Form 5500 filings? I seem to recall that you needed to attach additional first pages of 5500 for each co-sponsors; however, I cannot find that requirement in the current 5500 instruction.

Am I correct in thinking the co-sponsor need not be identified? (Was there ever a requirement to do so?)

Thanks very much.

PS - This is a DC Plan, so there is no concern regarding Schedule SB.

401(k) Plan maintained by a controlled group - Employer A and Employer B. Plan year is calendar year. The was a change in ownership in October 1, 2012 to the extent A & B are no longer part of the same controlled group and they want to maintain the Plan as a multiple employer plan going forward.

Understand the transition rule for coverage but for ADP/ACP would the Plan run these tests with A & B together for 2012 plan year using contributions/compensation for B up to 10-1-12) and then do separate tests for Employer B based on comp. and contributions for October thru December 2012?

Have a client that would like to have their participants self-serve benefits - i.e. they will log onto a terminal to complete all benefits items including 401k - they can enter beneficiary info - but a hard copy form has always been required... hard copy forms, still required? What are others doing in this area... Thanks

How does one determine if a discount rate used by the actuary is reasonable? Is there a reference source for acceptable discount rates? Thanks for any feedback you can provide.

I have a plan where we are presenting options to an employer, and the best one is providing a discretionary match of 100% on 6% of salary. This passes the ACP test, but I'm being lead to believe that any match in a safe harbor plan must meet the ACP-Test safe harbor guidelines (no greater than 4% of comp; not matching over 6% of salary).

Can I have a completely discretionary match in a Safe Harbor Profit Sharing plan, as long as I pass ACP? Or must it abide by the ACP-Test SH Match rules?

Several plans that I'm in the process of taking over have this indicated in the electronic signature line of the 5500. Would this typically mean that the User ID and the name of the Filing Signer are not matching up? To the best of my knowledge the client has not received notice from the DOL/IRS. Does the filing need to be amended? I would think the that if the filing was done before the deadline passed, it's not considered late. Thanks.

We had a client who changed eligibility from 1 year of service (1000 hours) to 90 consecutive days of service effective 12/1/2012.

Entry dates stayed the same - quarterly entry dates 1/1, 4/1, 7/1 and 10/1.

For all the employees who never meet the year of service but clearly have worked 90 consecutive days, do they enter 12/1/12 or have to wait until the next entry date which is 1/1/13?

Can anyone provide guidance and documentation for such guidance? Thanks.

My study partner and I ran into another question that we are uncertain how to answer.... we need to determine the pay credit to a non-key employee in a cash balance plan that has always been top-heavy. We know that the years of service for the top-heavy benefit are 5 years. In addition to providing us with the account balance, the annuity factor, and the form of annuity, the question also provides us with the average final 5 years pay and the average final 3 years pay. I am taking the position that we do not need to consider the average final 3 years pay because the question states that the plan has always been top heavy and that the years of service for the top-heavy benefit is 5 years. Am I correct, or do we somewhere need to consider the final 3 year average??

is it permissible to include COLA or similar language that automatically increases the hypothetical allocation formula in the plan automatically every year without having to amend the plan?