I have an integrated SAR SEP PLan.

THe owner and his employees do salary deferrals ( subject to the 1.25% test )

The owner then contributes 3% for himself and his employees. He is self employed and his income is capped at the $245,000.

( his actual Schedule C income is over $300,000 ).

Because the plan is integrated I am claculating his excess comp over the TWB at $138,200 ( 245,000 ,imus 106,800 ). If you multiply this by 2.7% you get an additional allocation for him of $3,631.

Does this make sense ?

Are there any on line calculators out there that can do this calculation ?

American Funds does not have one .

THank you,

Bob

My understanding is that assets need to be 110% or more of Funding Target after taking into account distribution in order to pass this test. Am I thinking about this right?

Total Plan FT = 3,597,271

Total Participant FT = 279,619

Total Plan FT After Payout = 3,317,652

Total Assets = 3,491,773

Total Lump Sum Payout Amount to Participant = 328,305

Total Assets After Payout = 3,163,468

So if the assets remained where they are the ratio after the payout would be 3,163,468/3,317,652 = 95%

In order to get this up to 110% there would need to be a contribution of approximately $486,000.

if a daughter in-law works for her husbands parents and they are 100 pct owners of a company...does that make her a key employee?

What "rules" govern the payment of plan expenses from governmental plan assets? Do governments use plan assets to pay expenses? If so, on what basis do they pay those expenses?

The "exclusive benefit" rule under the Code and Regs don't specifically address expenses. I'd like to think that this rule would work similar to ERISA's "exclusive purpose" rule, which obviously doesn't apply to governmental plans.

I'm not very familiar with gov't plans and don't want to assume anything. Any help would be appreciated. Thanks.

Employer has a educational assistance program that generally meets the requirements of Code Section 127. The only possible issue is that, although all employees are eligible to participate, full-timers are eligible for reimbursement for up to $5,000 in expenses, while part-timers are only eligible for half that amount.

Will this program fail the nondiscrimination tests because of this discrepancy? Or does the reference in the regulations to the 410(b)i)(B) tests only require that all employees be eligible regardless of the maximum benefit?

Thanks!

2 quick questions:

Am I correct that under Heinz, a frozen DB plan that currently has no suspension of benefits provisons cannot be amended to provide for suspension of benefits on those benefits already accrued?

Also, just soliciting opinions - if you were installing a new DB plan, would you normally recommend that they do have a suspension of benefits provision? They can always amend to remove it, so would there be any particular downside?

This is really just a matter of curiosity, so please don't waste your time if this requires a lot of research or time to offer an opinion. Thanks!

If an Employer neglects to stop the participant's contributions for 6 mos after a hardship withdrawal of deferrals is the proper correction to (1) return the contributions, plus earnings to the participant and also

(2) forfeit any associated matching contributions plus earnings to the plan forfeiture account?

The Plan Doc does utilize the safe harbor hardship rules.

Bueno?

As I much as I know the answer to my question, I thought I would throw it out there for any comments...

Small company has never deposited 401(k) late. In 2011, one check was lost in the mail and no one noticed it until reconciling year end accounts four months later (there were three payrolls that month so everything appeared normal on quick glance). So contributions were late and now must be reported on 5500, and lost earnings restored to trust. My question is - is the company's record of having written the first check enough to not treat it as a reportable late contribution?

Has anyone run across guidance regarding what happens when an employer sponsoring a 403(b) plan dissolves? I am aware of the myriad problems with terminating a 403(b) plan and that option appears to be out. Since we can't force distributions to terminating employees, what will happen to their accounts when there is no longer a plan sponsor to "maintain" the plan?

For a calendar year plan, say 12/31/11, we typically get the stock price in June and do the annual recordkeeping. The Distribution Policy states that the Plan will designate a distribution date and make distributions once per year following the annual valuation.

If a participant terminates employment subsequent to 12/31/11, and submits his distribution request at approximately the same time as the "distribution date", would that person be paid out on his 12/31/11 value or since he terminated in the new plan year, have to wait until the 12/31/12 valuation is done?

Is there ever a time period or deadline where someone is made to wait until the following year? Say if someone terminates 12/20/12. Can he get his distribution request in and get paid on the 12/31/11 value even though it's past the "distribution date". Or what about July, August or September?

Thanks

I have a SH 401k Plan. The formula for allocating any profit sharing contribution is integrated. Although there’s a last day requirement for sharing in the ps contribution, I can’t amend the formula to cross tested for 2012 because I can’t amend a SH plan during the year. I think (hope) that the sponsor could just adopt a 2nd profit sharing plan that would be cross tested for 2012. The 401k and SH contributions would be made in the existing plan, and they could make a ps contribution in the new plan. Am I missing anything that would prevent me from doing that?

Can a participant in a US company designate a foreign beneficiary on their 401(k) account? the foreign beneficiary is a relative, the participant has no relatives in the US.

If a Plan allows participants to direct their investments on their deferrals, but the Plan trustee retains the power to direct the employer contributions (which are valued annually), is there any authority that states the quarterly statement should include the portion of the participant's account balance that is not directed by the participant?

I was hoping to get some thoughts under "plan corrections," but nobody responded, so I'm giving it a shot here. We know the property has to come out of the plan. The HCE participant is over 70, so we're thinking that perhaps he can take a distribution of the property and pay tax on the market value. But, we'd like some thoughts on whether taking the distribution would be a prohibited transaction.

Normally, for a short plan year the HCEs are determined by their compensation for the 12 month period prior to the short plan year.

However, I’ve heard that in a partnership, the partner’s pay is deemed to all occur on the last day of the FY. In that case, how would we determine HCEs based on compensation in a situation where the plan was amended to create a short plan year from 10/1/12 - 12/31/12?

Owner of a small business has run into some major legal trouble. Company is going to go through bankruptcy, likely will be dissolved. Owner is likely to be sued as well. He has already taken steps to terminate the companies 401(k) Plan and many employees have already been let go.

(1) The plan expenses are paid from the plan assets. Knowing the condition that the company is in, the accountant and the TPA want paid immediately for 2012 and 2013 work before anyone is paid out. The owner (who is close to age 70) has the largest account balance and wants to roll his money out of the plan. However, the brokerage firm where his (and all participants) assets are held is not willing to release all of his money for the rollover because of the fees that the CPA/TPA want up front. They want to prohibit him from rollover over $20,000 of his balance in order to cover these fees.

Can they do that? Isn't that the trustees decision? Is there a cut and dry answer to this? I believe they have an institutional trustee, not individual trustees.

(2) Same owner has some rental income, separate from the above business. In order to have some income sheltered from creditors, he wants to be able to defer some of that rental income into a new retirement plan, that would cover just him and maybe his wife. Right now he has been declaring that rental income on his personal tax return via schedule C. Could he set up a new business entity based solely on his rental income, and in turn establish a profit sharing plan in which he can deposit up to 25% of this income?Seems OK to me.

(3) If #2 above is OK, could he roll his account balance from the plan in #1 above into this plan, allowing that to be sheltered from creditors as well?

(4) If he could establish a plan like in #2 above, and if he could somehow have his wife eligible to be in this plan, could she roll any unrelated IRAs she has into this plan? Her goal would be to shelter some of her IRA money from creditors as well?

Thanks for any comments. They obviously will have legal help on this but I wanted to see if any of the above are possible solutions.

Have had two different proposals run across my desk for newly established entities that are looking at DB plans.

Facts are:

Fiscal and plan years both will be maintained on calendar year basis; will be short year say of 10/1/2012-12/31/2012 respectively.

No past service so Shortfall Amortization bases not an issue (see in regs where prorate amortization payments for short plan year).

In old pre PPA days when we were dealing with say Individual Aggregate, would prorate Normal Cost for months of year. A little confused in the PPA world how to treat Target Normal Cost.

Looking at definition of Plan Years of Service in our document (which is a year of participation with 1000 hours of service), short plan year is dealt with by pro-rating hours requirement by month. So for funding purposes, would imply that our 3 month plan year would credit as 1 Year of Participation. So if salaries are such that dealing with 415 limit, could one use a Target Normal Cost equal to 1/10th of dollar limit? Seems like a much higher result than I would anticipate given a short plan year.

Any guidance?

Background:

For first half of 2011 entity was sole-proprietorship. Incorporated for last half of 2011.

Question: Is there any reason why the sole-proprietorship can't adopt a SEP for the 2011

year, based on the earned income of the Sole- proprietor for the first half of 2011?

Adoption to take place between now and 10/15/12.

Once the company incorporated in last half of 2011, no further income was generated or services

rendered to the sole-proprietorship. Did the sole-proprietorship cease to exist when the company was

incorporated in 2011, therefore is unable to adopt in 2012?

If it makes any difference, once incorporated, no further services were performed for the sole-proprietorship,

neither in 2011, nor in 2012.

When does a sole-proprietorship cease to exist?

I have a Volume Submitter 401(k) Plan that does not allow for profit sharing contributions. Can someone confirm that I DO NOT include code 2E on the 5500?

Thanks!