A prototype 401(k) exists with a mutual fund company as plan document provider. Are there any potential compliance issues when switching plan documents (basically a restatement of the solo 401(k) plan effectuated by adopting the new provider's prototype plan)?

I understand the new plan (or technically, restated same old plan) is effective the first of the year retraoactively, and contributions can be made under the new plan documents up to the limits (minus any contributions already made to the old plan) of 17,500 deferral and 33,500 employer contribution (for 2012).

Old provider is a mutual fund company. The new plan documents allow for self-directed investment of any kind legally allowable. Existing funds would be transfered to a new brokerage account under the 401(k) plan's name.

Any potential pitfalls or formalities to consider?

Here's a puzzler for BenefitsLink mavens:

A participant died about five years ago. A regular report designed to catch accounts that need a minimum distribution flagged this deceased participant's account as one that should be in the upcoming batch of required distributions. The problem? The participant's beneficiary is her daughter, who recently turned eight (if the birthdate in the recordkeeping system is to be believed). Worse, the plan's administrator already has done some fact-digging and has found the following. The apartment that the participant gave as her address now has as its occupant a person who is unrelated to the participant or her daughter. A search has not found any address for the beneficiary. Searches of court dockets on both the participant's name, her daughter's name, and their common surname did not find any proceeding.

Even if a further investigation finds an address for the beneficiary, is it prudent to make the plan's single-sum distribution check payable to a beneficiary that the plan's administrator believes to be an 8-year-old?

If that's not prudent, do you think that the Internal Revenue Service (on examination) would accept your decision to disobey the plan's terms?

If you elect in the Adoption Agreement to define Eligible employees as all employees EXCEPT for part-time/seasonal employees, where part-time or seasonal employee is defined as an employee whos regularly scheduled service is less than 1000 hours of service in the relevant eligilbity computation period.

Can you then go on and chose the conditions of eligiblity as 21 and 90 days of service?

In order of heirarchy, does the definiton of eligible employee supercede the eligibility requirements?

Thanks.

Has anyone else had the Cinninati office call Plan Sponsors regarding late contributions reported on the 5500, and then send out a letter to "facilitate informal resolution of this matter" requesting 36 months of contribution deposits and payroll records? Had 2 within the last week.

A 403(b) plan of a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization is exempt from all 403(b) discrimination rules. Is the exemption from the rules listed in Treas. Reg. section 1.403(b)-5(a)(1) -- borrowed from the qualfied plan rules -- also conditioned on being a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization or is there room for exemption from the -5(a)(1) rules based on the section 414(e) church plan standards?

For exemple, a non-electing church plan under section 414(e) that is not the plan of a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization would not be subject to by the current provisions of section 410(b) if the plan were a qualified plan. If the same organization had a section 403(b) plan, would it be subject to the post-ERISA section 410(b) standards?

I've heard that if a new plan grandfathers all employees hired as of the effective date, then the normal coverage testing - that sometimes causes problems when grandfathering is used - is not required. In other words, a plan can grandfather everyone employed on the effective date without worrying about coverage.

Can anyone confirm this (or shoot it down)?

I have moved to a new employer and was given a plan that has 4 possible loan defaults. One of the participants who was terminated, has taken a distribution this year and should be receiving a 1099-R for his defaulted loan.

One participant is terminated and did NOT take a distribution from American Funds, where the assets are held.

Two other participants have loans that have not had repayments made in 2012. I do not know if these participants are terminated or not, as we receive the census annually. It is possible that the employer has stopped sending in loan repayments (whether or not they are being withheld from the paycheck). No deferrals were made in 2011, not sure about 2012 (this is for the plan as a whole).

Should these three participants be receiving a 1099-R from American Funds for their outstanding loans in January?

a small PS plan with age 20.5/6 months of service have left off Part Time employees(no more than 49 of them) off their census request for AT LEAST one plan year. Problem is their plan doc does not exclude PT employees from the definition of eligible employees. Only leased, union and alien are excluded, therefore if they work 6 continuous months and are age 20.5 they enter the next plan year. Worst case scenario????

A prospective client came to me with the following recommendation from a consultant.....

Client owns 100% of S corp (X). X will set up nonqualifed plan (N). Client will also set up a management company (Y) organized as a C corp. Y will employ client. X will pay Y a management fee. X will also pay and deduct amounts contributed to Y as nonqualified plan contributions each year. Y will include this as taxable income. Y will transmit the contributions to a trustee to hold for the benefit of client. Y will also receive a plan admin fee each year, which it will include in income. Y will pay payroll taxes when the amounts vest with the client. Y will deduct the contributions in the year in which client includes amounts in income pursuant to 404(a)(5).

At first glance it seems that each step in this plan is okay, but together it almost seems too good to be true. Y can manage it's taxable income to get the benefit of the 15% corporate rate vs. the shareholders higher personal rate. Further, the S corp gets the benefit of an immediate deduction with the inclusion of income not occuring until some future date.

What am I missing here?

Client currently has profit sharing plan. He wants to terminate the profit sharing and start a SEP. One of the assets in his profit sharing plan is an annuity.

Can her rollover his annuity to his SEP?

Thank you.

Plan administrator and plan sponsor are not the same entity or controlled by same group. EFAST won't take the 5500 filing without both the plan sponsor and plan administrator signing. However, plan sponsor is in process of dissolving and is refusing to sign 5500. Any ideas how to submit the filing without the plan sponsor's signature?

Could there be any implications as to erroneously reporting what type of entity the plan is on the adoption agreement? There are no HCE's in the plan.

I have a plan that is mostly invested with Schwab. Schwab Trust Co. is trustee. However, there are a few physicians who have chosen instead to invest in outside brokerage accounts with other firms. Of course, Schwab does not trustee those accounts. Is it possible for each of the docs to be named as trustee just over their own accounts? None of the docs wants to be the trustee over the other docs who are using outside brokerage accounts. Any other suggestions?

Facts: A small plan has 1,500,000 in total assets. The plan has a non-qualifying real estate investment of 300,000, thus the plan consists of 20% non-qualifying assets.

What is the appropriate bonding amount for this plan for both the small plan audit waiver and the general 412 bonding requirements?

Would it be just a single bond covering $300,000? (Just the bond requirement for the small plan wavier, ignoring the 10% 412 requirement since the $300,000 is in excess of the 10% 412 amount)

Would it be $450,000 = $300,000 + $150,000 (The bond requirement for the small plan waiver, plus the 10% 412 bond requirement)?

Would it be $420,000 = $300,000 + $120,000 (The bond requirement for the small plan waiver, plus 10% on plan assets that are qualifying plan assets)?

Am I over-thinking this? My gut says the $300,000 would be the appropriate bonding amount.

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)?