90% of the 401(k) Plan is the owner and his wife, other 10% belongs to two employees.

It is trustee directed Plan, presently.

Owner is in the financial industry and a very knowledgeable investor. He wants to invest $200,000 in a private placement. (Broker dealer has approved him.)

He says he will be able to get a proper valuation every year.

Do you see any problems with him buying it for the Plan as a whole?

Should we make this Participant directed and have him buy it for himself only?

in 2010, assets transferred from Principal to ADP. ADP established a new plan, filed 2011 5500 with new plan number 002, marked first return, zero beginning assets and showing a transfer to the plan on Sch H line 2l. The Adoption Agreement has an original effective date of 01/01/2010. There were no other changes to the company or the plan. Is there any reason that a new plan should have been started? btw, this is a large plan with an audit required.

The problem now is that a final form 5500 for the original plan 001 was not filed. Client has received an IRS notice inquiring about 2010 return. I don't know if the Principal plan was actually terminated (doubt it). I don't think there are any successor plan issues because there were no distributions to participants.

If I file a final 5500 for the original plan 001, we will have to go through DFVCP and it would cost $2000.

any thoughts on how to fix this?

Thanks!

I'm not sure if this is a rant or a question...let's see where it goes.

I have a number ("too many") of clients who use managed brokerage accounts in self-directed plans - that is, they hire an investment manager, or otherwise charge an asset-based fee, for managing money. This is a separate charge that shows up as a deduction on the participant statements.

I've tried, pretty much unsuccessfully, to bail out on the disclosure - I spit out a basic notice from Ft. William and say "your broker should provide a separate schedule of fees" and ask the broker to provide a fee schedule. (Chuckling now at my own naivete that this could possibly work...)

Of course, the brokers proudly send me their 408b2 disclosure. I say "no, no, that's not it, I want you to tell them what they will pay in their account." So they send me something that tells what the fees were last year. I say "no, no, that's not it, I want you to tell them what they will pay in their account - you know, a $100 fee or whatever, and the percentage for management." Then more long and agonizing discussions follow, and (usually), they eventually send me a 111 page mess that might or might not contain what we want, but no way am I wading through it to pull out a fee schedule. We're at an impasse right now on most of these. (I suppose my barely concealed contempt for them is affecting my relationships.)

Anyway...now I have a Merrill (why is it always them...) guy telling me that his home office "expert" says they really don't have to provide a schedule of management fees. Mmm. I guess that's the question...could you consider a managed account an "option" that doesn't require advance disclosure of the management fees? They are being deducted at the brokerage level, so it's not like a mutual fund with an expense ratio. I pasted most of Q&A 13 below; it doesn't discuss such fees directly but in my mind that doesn't mean they shouldn't be there. It doesn't make sense to me that they would have to disclose commissions on trades but not an overall management fee. Thoughts?

Does anyone know/have a life insurance that allows the occasional celebratory Cigar? I don't smoke cigarettes, but hate to have to pay the HIGH premium prices for an occasional cigar that leaves a little nicotine. I am curious since I am about to have to renew my life insurance policy soon. Thoughts... Thanks!

I think a corporation can have a Sep 15 deadline for filing its tax return (showing a deduction for profit sharing), yet the profit sharing contribution may be deposited as late as Oct 15 without jeopardizing the deduction. Can anyone verify this?

In 2011, a distribution is made and reported on the 2011 5500-SF under line 8d - Benefits Paid. Turns out the participant received the wrong amount (too much) and in 2012 actually returned the excess portion to the Plan. Any thoughts on how the return of the mistaken distribution should be reported on the 5500-SF for 2012? Not sure if there is a right answer, but the following seem to be the options:

8a(3) Other Contributions

8b Other Income

8d Add back to Benefits Paid

8j Transfer to the plan

Thanks.

When an overpayment is made from a plan, the EPCRS rev. proc. says that the employer must make reasonable efforts to collect the overpayment and, to the extent it cannot be recovered, then the employer or another person must contribute the difference to the plan. In the defined benefit multiemployer context, who makes the payment to make the plan whole when the recipient does not repay the entire amount? Any thoughts would be appreciated!

When an overpayment is made from a plan, the EPCRS rev. proc. says that the employer must make reasonable efforts to collect the overpayment and, to the extent it cannot be recovered, then the employer or another person must contribute the difference to the plan. In the defined benefit multiemployer context, who makes the payment to make the plan whole? Any thoughts would be appreciated!

A.T.A question to IRS: "Were there changes to the orginal Notice other than the addition of the footnotes?"

IRS Response: "No, the only changes in the Revised Notice 2012 - 61 was the addition of the footnotes."

An employer adopted a pre-approved EGTRRA prototype document by the deadline. However, it later materially modified that document to the extent it would be considered to be individually designed. Since the employer was technically an adopter of a pre-approved plan, it submitted that indivudally designed document for an EGTRAA letter by April 30, 2010 (the 6 year cycle deadline). Now that the EGTRRA deadline has passed, is the plan on the 6 year pre-approved cycle or 5 year individual cycle?

Since 9/15/12 is a Saturday. Does a DB plan get until 9/17/12 to make a contribution for the 2011 plan year?

In your experience, what is a typical charge to a participant's account for the determination and processing of a QDRO?

$200?

$400?

More?

Thanks.

Client currently allows excess diversification but would like to stop that and ony have the required diversification. I'm trying to determine if doing so would violate the protected benefit rules under 411(d)(6). Excess diversification is not an early retirement benefit, but arguably is an optional form. If excess is a protected benefit, it seems like the only cut back available would be for amounts accrued after the effective date of the change. That would be no fun to administer. Seems like another reason not to offer excess diversification. Thoughts are always appreciated.

Strange but true - I have an overfunded plan, all participants at 100% benefit and are terminating. I recall that some people brokered the sale of the company sponsoring such a plan to a company with underfunded plan(s). Does anyone still do this? If so, how can I contact them?

Hello everyone! Hopefully a question someone has already run across. We have a frozen defined benefit plan, 300 participants, amended via VCP to fully comply with PPA 2006, GUST, EGTRRA, PFEA 2004, HART 2008, WREA 2008, etc. The IRS released a model section 436 amendment in the case of underfunded plans at the end of 2011. Our plan is already frozen, and contains benefit restriction provisions applicable to plan years beginning as of January 1, 2008. However, they precede the 2011 Notice with the model provision.

Does this model language apply to frozen plans? If so, does all of it?

The Notice contains this language: The limitations on prohibited payments set forth in Sections 1(a), 2(a), and 3 do not apply for a plan year if the terms of the plan, as in effect for the period beginning on September 1, 2005, and continuing through the end of the plan year, provide for no benefit accruals with respect to any participants. This Section 7(b)(iii) shall cease to apply as of the date any benefits accrue under the plan or the date on which a plan amendment that increases benefits takes effect.

Does the language mean the model language does not apply? Should it be inserted anyway? Any thoughts or comments would be greatly appreciated. Thanks so much!

Not sure where best to post this question but wanted to try here first. 401(k) Plan document expressly limits plan loan terms to a maximum of 5 years. Plan Administrator and TPA permitted a participant to take out a principal residence loan for 10 years. That period is generally reasonable, in keeping with how TPA handles other principal residence loans under other plans without a five-year limit, and would otherwise comply with applicable plan loan rules, etc. except for the plan's express 5-year term limit. Plan has since been amended to permit longer terms for principal residence loans.

Is this an error that can be corrected by adoption of a retroactive plan amendment to permit longer plan loans per Section 2.07(2)(a) of Appendix B of Rev. Proc. 2008-50 and filing under VCP? If so, is there any easier way to correct the error given that the Plan now already permits longer plan loans, etc.? Thanks.

just wanted to say hello and that I am glad to be a part of this forum. thanks!

A hospital client contacted me with a question. Several years ago, the hospital had several 403(b) vendors on an approved list. An employee could select one of the vendors to place their 403(b) money with. The hospital was not involved in any way, other than to process the payroll deduction. Years ago, one employee requested to move their 403(b) account balance from their current vendor to another 403(b) vendor that was not on the hospitals list of approved vendors. The employee was permitted to do this (I was not involved with the client at that time). Now a broker involved with this employee has called the hospital's HR staff and asked them to approve the transfer of the 403(b) account balance to yet a different 403(b) vendor.

The multiple 403(b) vendors concept is somewhat foreign to me. My gut reaction is that the hospital doesn't have the authority to grant such a transfer. The 403(b) contract is between the vendor and the employee. The hospital isn't a party.

Any thoughts on this?

Thank you.

I'm not entirely certain exactly where this falls - I couldn't necessarily find where this is specifically addressed.

Plan excludes certain compensation in the form of a fringe benefit or two. However, the employer didn't monitor this, and allowed deferrals on this compensation.

Clearly this should be correctable under RP 2008-50. However, I'm not certain if it is specifically addressed. 5.01(3)(a)(i) might cover it, but I'm not sure if this counts as a deferral in excess of the "maximum" allowed in the plan. Alternatively, I suppose it could be considered an "excess allocation" under 5.01(3)(b), but that doesn't see to quite "fit."

How would you correct this? Let's assume that ADP/ACP testing still passes if these amounts are refunded. Should they just be refunded with interest, or is the a better or more correct method? We are talking about trivial amounts, so I'd certainly think SCP is allowable, rather then using VCP.

A single participant defined contribution plan wishes to make an investment in a rental property. The Plan would hold about a 10% interest in the property. The other 90 % would be held by an LLC or LLP in which the sponsor (and participant) is the sole member. Is this a Prohibited Transaction under IRC 72(t)? Or is it exempt?

Could the Plan make the down payment and hold the mortgage in the Plan?