It is my understanding that in a situation where an independent contractor (legitimately classified as such) is converting to an employee (not a reclassification situation), the employer does not give eligibility or vesting credit to the employee for the period of time that the employee was validly classified as an independent contrator (i.e., first day of credited service is first day as employee). But, I am having some trouble finding specific authority on this point.

I was determining eligibility for a discretionary match this week and came across an interesting note in our plan.

Generally if you are not employed on the last day of the year you do not qualify for the DM. However there are several waivers; death; disability; early or normal retirement. No problem there. Normal retirement age is defined as "date of participant's 65th birthday (not to exceed 65th).

Does this mean if the participant is 66 he does not receive the DM?

Reference a participant who retired 12/14/2012 and had his 66th birthday on October 22, 2012, (born in 1946). Does this mean he does not receive the DM since he has exceeded his 65th?

A couple of years ago I stopped applying for a Trust EIN on new plans. I did this for a couple of reasons. First, it wasn't reported anywhere ever since the schedule P went away. Second, it was upsetting to client's when they would get letters from the IRS saying their trust EIN was no longer valid. Finally, it was upsetting to clients to get letters from the IRS saying that they failed to file a 945.

So, now I see the IRS is look for a Trust EIN and name beginning with the 2012 filing.

Is there a way to look up my old EIN's and see if they're still valid?

Should I go back and get EIN's for the plans that don't have them?

Should I just leave this blank? (It's optional).

Thanks!

Hello all,

I've run into my first 401(k) plan sponsored by a non profit entity. I know that all of my compliance testing should be done as normal, but my question is...who are the owners? Would there just not be any owners to consider for things like HCE and Key Employee determinations? Same with officers. In most cases, the officers on non profits are from outside the orginzation. So...no officers?

This is the logical conclusion for me, but that seems to easy to be true. Is it?

Thanks!

Considering a cross tested 401k/CB plan th at is Top-Heavy.

A participant works 1000 hours but isn't employed on the last day of the plan year. Let's say the participant is getting 5% in the PS due to gateway plus the cash balance credit.

Since the participant doesn't satisfy the PS TH conditions, I'd assume he isn't eligible for the combined plan gateway edit: Top heavy and has to get the 2% accrual in the CB plan, even though he is getting a PS allocation sufficient to cover the combined plan TH in the PS.

So questions:

1) Any opinions/references if that's the right way to do it?

2) Is it possible for a plan to remove the last day requirement for TH in the PS plan? I see the last day language in the document but nowhere in the "checklist."

401k plan ha a new comp design. But the testing doesnt really work out well. So instead they want to do a pro-rata allocation. There are 5 keys and 2 NHCEs. One of the NHCEs terminated part of the way through the year and has not met the allocation requirements (1,000 hour and last day).

Assume all 5 keys and the 1 NHCE who is still active receive 15% of compensation as a PS contiribution. The terminated NHCE receives 3% SH nonelective. Must he also receive a 2% PS contribution to get him to the Gateway? Or because they are foregoing using the new comp testing, do they not need to worry about the Gateway test and the 1 terminated NHCE can jsut receive the 3% SH?

After much searching, I have a question regarding a terminated employee with an outstanding loan.

The loan policy does not require loan payments to be made via payroll. It is my understanding that in most cases loans go into default due to the loan policy requiring payment via payroll deduction, not necessarily because of termination alone. Since payments are not required to made via payroll, can a terminated employee continue making loan payments to avoid default? Are there any regs that would allow the sponsor to not accept a personal check for loan payments? I understand this is inconvenient, a hassel, not ideal, etc.

Thank you

We have a terminated participant who turned 70.5 in 2012 and made a decision to defer their first RMD until April 1 2013. However, the participant died a few weeks ago. The sole beneficiary is the spouse who will turn 70.5 during 2013.

My questions are; is this participant considered to have died before their RBD? Does the RMD scheduled to be paid out before April 1, 2013 still need to be paid and if yes, would the RMD be paid to the deceased participant or would it paid to the spouse beneficiary?

Had a participant pass away and his wife came up from Columbia. She is not a US citizen and does not have a SSN. He had two grown sons who do have SSNs. Does this have to be resolved in probates since there is no beneficiary form or will? Thanks for the response.

I work with 401k plans, but I have a client who also has an ESOP. He has a participant who has requested a lump sum distribuion and has inquired about how to remit the 20% required federal income taxes. I thought I read somewhere that the 20% withholding was not required for ESOP distributions. Or was that just for dividends?

Can HCE's be excluded from SEP participation? What about excluding HCE's that are not there on the last day of the plan year from receiving an allocation?

feel like this is a dead horse but it periodically

rears its ugly head with my clients...client

wants to tap retirement plans(db and dc with h&w only participants) for purchase

of second home without incurring distribution taxes.

although i have had clients own real estate in plans

it has never been in personal use real estate. so

in a nutshell, i am of the opinion that even if the plan invests

in a business or businesses that subsequently have ownership in

a property which is for the personal use of a

disqualified person then it would still be a prohibited

transaction because it indirectly benefits the disqualified person.

Company A owns 60% of Company C. Company B is a single owner LLC which owns 20% of Company C. Company C is a participating employer in Company A's 401(k) plan.

Company C provides IT consulting services focusing mainly on integration services. The owner of Company B works 100% of his time for Company C providing IT consulting services and management services.

1. Does an A-Org group relationship exist between Company B and Company C?

2. If so, is there an affiliated service group relationship between Company A and Company B?

3. If so, can Company B adopt Company A's 401(k) plan as a participating employer?

4. If so, regarding compensation for the owner of Company B, then compensation for testing and contribution purposes would be taken from K-1?

Plan established in 1984. We have good documents back to GUST, and evidence (Resolutions and such) further back. Heaven knows if they ever had an LOD, and certainly not since the 80's if at all.

Sponsor is submitting to the IRS on termination. The question is - will the IRS demand documents prior to GUST? The client might find something in storange, or maybe not.

I thought I heard we could keep the IRS at GUST, but I have not found anything official.

THank you all for you thoughts (and maybe prayers!).

Does a plan have to provide a top heavy minimum benefit even if it exceeds the participant's maximum 415 benefit, or is the benefit limited to the 415 max? What overrides what? Thanks.

I took over a plan last summer with assets in self-directed brokerage accounts. This week, the broker confirmed that his firm does the 1099-R... and they also did the tax withholding. I expected that meant they did it like a mutual fund product and used their own TIN, but no, they deposited it (presmably electronically) by using the participant's SSN. So that already sounds... odd. I asked them to confirm, and they admitted that the 1099-R they will prepare will have the SSN as both the payer and the payee. They are saying that they do it that way for a bunch of plans and think it's OK so they insist on not issuing it, even over my objections.

I pushed further and asked him to confirm that they are doing the 945. "Nope." So besides the dropped ball problem, does this mean that someone (read: me) has to prepare a 945 for the employee? Doesn't that seem strange?

Has anyone else seen this kind of thing?

A 401(k) plan considers plan compensation to be gross W-2 salary + section 125 contributions.

I dont believe HSA premiums should be added.

Does anyone agree / disagree?

Thanks

We have a participant who died at age 72 and had already been taking RMD from the plan. The designated beneficiary is his spouse. Is this correct as to the options available for distribution of his remaining account:

1. The spouse beneficiary must take RMD in year of death.

2. In years after the year of death, the spouse may roll the account balance into her own IRA.

3. In years after the year of death, the spouse may leave the account balance in the plan (provided plan allows) and continue taking RMD each year.

4. If the spouse chooses to roll to her own IRA, the RMD could be delayed until the spouse reaches 70 1/2?

Am I missing something with this?

We have a nonqualified deferred compensation ("NQDC") plan. A retiree is due to start receiving payments this year. We currently have the funds invested in a third party service provider who will be making the payments to the reitree. I understand we, as the former employer, are supposed to report this on a Form W-2 because the NQDC was earned as an employee. But how do we handle withholding since it will not be paid from our payroll?

Should the third party withhold and report on a 1099?

Should we ask the third party to pay us so we can process through payroll (this is NOT what we want to do if we don't have to)?

Here is a strange one...

Plan year is 7/1/11-6/30/12:

Client provides compensation and contributions for the period 1/1/11-12/31/11. So, basically, we are testing the plan as if it were a calendar year plan. Is this ok?

HCE determination: the client is determining HCEs for the same plan year based on compenation from 1/1/11-12/31/11. Is this ok?

Any thoughts...if this is ok...where would I find it in the regs?

Thanks!