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?

If an employee has w-2 comp of $15000, what is the max elective deferral to a Roth 401k Plan?

Can it be $15000 or must it be net of fed, state and soc sec payments?

Facts: plan allows one outstanding loan at a time; participant takes loan and defaults and loan is deemed distributed; months later the plan allows participant to take a subsequent loan.

I know the loan regs state that a loan that is deemed to be distributed ceases to be an outstanding loan for purposes of Section 72(p), except for purposes of determining max amount of subsequent loans.

Based on that reg, would you agree that for purposes of the plan's one outstanding loan rule, there is no operational failure since the defaulted loan would not be considered outstanding for that purpose. Understanding that there could be a violation if the amount of the 2nd loan exceeds the maximum loan amount when taking the defaulted loan into consideration.

Thank you in advance for any responses.

Plan is leaving an MEP Plan. Can the new plan include a provision that says "If you were deferring 5% in the old plan, that election will be honored in the new plan"?

Similarly, can you include a provision that says "you're balances in the old plan will be trasferred to the new plan and be mapped to like funds?

100% business owner sponsors a 401 (k) Plan. He then forms a new company with another owner (50-50) and the employees are scheduled to work for the new company starting on 1/1/13.

The new company would like to sponsor the existing 401 (k) Plan and I don't think there should be any issue with that under normal circumstances. There's no problems with the existing plan that I'm aware of.

Is there anything else that should be considered? For example, do I need to credit service prior to 1/1/13 for the employees that are covered under the existing plan because their employment will transition as of 1/1/13 to the new company? Or is the new company considered a successor employer?

Thanks.

What's the difference between a "lump sum" distribution and a "single sum" distribution?

Question 6 of IRS Form 5310 asks whether the employer/sponsor is part of a controlled group. The 401(k) plan was terminated immediately prior to buyer's stock purchase of sponsor. With respect to Question 6, if you answer that question as of the date of plan termination, the answer is "no," not part of a controlled group, but if you use the date of filing, the employer is part of a controlled group. Can we use the date of termination to determine controlled group status for purposes of Form 5310? Any guidance on this?