I am using Derrin's book to help me through a situation and am wondering if I am interpreting it correctly. Any input would be most welcome.

I have a client who adopted a safe harbor cross-tested 401(k) plan. It is a husband and wife physician practice. They may have traditional employees at some point, but for now, they have 4 individuals they are leasing from another organization. The doctors have virtually NO control over these individuals. The leasing organization trains and sends out these individuals to practices with a similar specialty. They hire them, fire them, control their hours, manage them, train them. I truly believe they are the common law employees of the leasing organization. That organization has also adopted a safe harbor 401(k) plan and is allowing them to defer and is making 3% SHNEC's on their behalf. My client pays a fee to them to cover their payroll, related taxes and benefits.

The way I am reading Derrin's book, my client's plan will consider these leased employees as participants for coverage, top-heavy, nondiscrimination testing, 415 limit, etc. purposes. My client will make a safe harbor contribution for them in the practice's plan based on their compensation paid by the leasing company. For 401(a)(4) purposes, I can use the safe harbor contribution made to the leasing org's plan in my figures for employer contributions in the practice's plan. So, in my case, they will be treated as receiving a 6% employer contribution (3% to one plan and 3% to the other plan). We won't have ADP/ACP testing because the safe harbor is being met. Top heavy isn't a problem (unless we have mid-year entry) and the 3% in both plans doesn't cover 3% of their annual pay.

Any problems with my comments and/or any other warnings I should be thinking of???

Thanks.

James

Plan definition of comp does not exclude bonuses. Employer missed deferring on bonuses for a recent payroll. Rev. Proc. 2008-50 does not appear to directly address this situation, unless I somehow missed it.

It seems that one method of correction would be to have the Employer make a QNEC for 1/2 of the missed deferral , then make the SH Match based on this amount? Am I missing anything? Plan Document does not address this issue. Perhaps just taking the missed deferral from the next payroll?

I appreciate any suggestions.

Is it possible for an S-corporation with a single owner-employee to establish sec.129 plan to cover dependent care expenses? Technically, it would fail 129(d)(4) concentration test and 129(d)(8) 55% test, however, here it is stated

that these non-discrimination tests do not apply since there are no NHCEs to discriminate against. Can anyone comment on this?

Thank you

I am trying to determine whether my employers are part of a control group.

Both organization A and B are 501c3s. We share office space. The 4 directors(officers) work for both organizations. Organization A has a 5 member board and B has an 8 member board. Only 1 person serves on both boards.

If I look at board membership as ownership, they are not a control group. If I look at the day to day operations, they are. How do I determine the issue for the purposes of our Health Insurance tax credit?

A participant received a lump sum distribution from a pooled profit sharing account in July 2010. Federal withholding was sent to the IRS. He received a 2010 1099-R Form reflecting the distribution and the withholding. The participant never cashed his check, so 6 months later (January 2011) the investment company staledated it and put the money back in the pooled account. The employer just brought this to my attention. I need to issue a corrected 1099-R for 2010. Do I enter the gross distribution and taxable amount as zero, then show the withholding? This is going to look really strange, but I don't know any other way to do it. Also, do I enter a distribution code?

Thanks,

Susan

Do employees have a distribution event with regards to benefits in 'old plan' where:

1-they were employed by old company which sponsored old plan,

2-old company no longer does business and they are not actively working for old company,

3-old company continues to exist as a business entity simply to wrap up its dealings, including continuing to sponsor old plan which is not yet in the process of being terminating,

4-new company was formed and immediately began operating the same business as old company when old company stopped operating that business, and

5-the employees are working for new company which is owned by more than 70% of the owners of old company (and do not have in-service distribution events--e.g., are not yet normal retirement age).

New company has set up new plan, which accepts rollovers into new plan.

Must there be a termination of old plan for there to be a separation from service for a distributable event, or merger of old plan into new plan, for the rollovers of these benefits?

Hi,

I am putting together this disclosure. I have a few plans that I receive revenue sharing lunch money. It's almost not worth doing the disclosure, since it will about cost me as much to produce it as I get in revenue sharing. Anyway, for the 5/31/12 disclosure to calendar year plans, is it acceptable to report 2011 plan year revenue sharing? We are a non-producing TPA whose expenses are paid from the plan sponsor, not the plan. Also, if the RS I get is less than $1000 per plan, it is my understanding the disclosure is not required.

Thanks

This year seems to be my problem year with clients.

I handle the 401(k) PSP for this client. They also have a DB plan which has terminated. In fact, my co-worker sent the distribution instructions out earlier this week to find that the funds were already issued out.

My plan is valued annually at year end. it allows for deferrals and has a safe harbor match. These monies are placed into individual accounts held by the broker at Schwab. The plan has a pooled acocunt for the profit shairng allocation. While waiting for the client to confirm the contributions for 2011, I was working on reconcilation of the plan. I had previously ask for an explanation as to why one of the participants took $1000 out of her individaul acocunt right before Christmas, but never got an answer (which didn't surprise me, this client is .....and the broker/CPA is no better). The client has asked to terminate the plan in 2012 and we have not started that yet, as we were trying to finish up the 2011 year first. I did some recon for 2012 and see that on 3/1/12 the client allowed the same woman to take an additional $2312 out of her individual account. I emailed the brokers & CPA about this and the response I finally got was there was a letter of instruction from the client/trustee authorizing that the distribuitons be made. Not the broker/CPA has confirmed that no 1099-r was issued by them for her $1000 distribution done in 2011.

The plan allows for hardships only - no loans and no in-service w/d. She continues to make deferrals of $69 per pay it looks like (there are deposits going into her individual account, and the SHM is paid annually). The disbursements total about $200 more than the deferrals she put in for 2010 and 2011 (she became eligible for the plan in 2010). It is possible that she put enough deferrals into the plan in January & February 2012 to make that difference up (we only receive the census data on an annual basis).

What are your thoughts on handling this situation? If it is 2 hardships, she has violated the requirement of stopping the deferrals. I am making an assumption that the money was for one of the 6 h/s reasons, but knowing this client, it could be for any reason, she just asked! Or do you think these are prohibited transactions and need a 5330 for each?

Edit to add that the plan allows for you to take a h/s on the non-elective but only if you are 100% vested, which she is not. She doesn't have any r/o money in the plan from which to take a h/s from either.

Were you as stupid as me to pay the high price for appointments from 401kexchange that were garbage? Appointments that could have been easliy been disqualified.

It seems they are only interested in charging high fees for junk appointments (my opinion of course).

If you have had similar experience, email me.

Thanks,

Rick

Our TPA is saying that an employee is causing the plan to fail, but I don't agree with how the TPA is interpreting things. I think that the employee should not be included in any testing because EE was only employed for 3.5 months (and I think there is a 6 month waiting period). Unfortunately, TPA says that the plan sponsor needs to make an ER contribution to the terminated EE.

The relevant language and selections from the adoption agreement:

"Eligibility for all purposes of the plan (except as elected in … [sections below] for employer contributions)

- No age or service required"

However, just below there:

"However, different eligibility conditions will apply

- For purposes of all ER contributions (other than elective deferrals and matching contributions)

- For purposes of ER matching contributions"

The specified condition for those ER contributions is: "Completion of the following service requriement…

- 1/2 Year of Service

TPA says that the employee, even though only employed for 3.5 months, is "brought into" the test and counts for all testing because EE entered the plan with deferrals. FYI there is no match, only a 3% S/H nonelective contribution and an additional Profit Sharing contribution. There has never been a problem/failure before, and I've recently run into other mistakes with the TPA.

What do you think? Is it right that the employee is causing the plan to fail because there was no ER contribution made to the employee?

Thank you!

We recently took over the administration on a one person DB and DC Plan from another administrator. Almost immediately we realized the DB Plan was broken. In late 2010 the participant took a $50,000 loan from the 401k Plan. No problem with that. But then in May 2011 the administrator allowed him to amend his DB Plan to allow for loans, and he subsequently took out another $50,000 loan, this time from his DB Plan. We are discussing going through the VCP to correct this. The options seem to be repay the loan or deem a taxable distribution. Let's assume he would like to take the $50,000 as a taxable distribution. Two questions come to mind: One, the 1099-R would have been due earlier this year if it is to be considered a 2011 distribution. So is that just filed late? Secondly, he has made loan repayments per the amortization schedule, so the current outstanding balance of the loan is about $36,000. At this point, does he take the full $50,000 as the distribution, and then consider the $900 loan repayments he has been making as contributions to the Plan?

Hi. We are a health system that recently acquired a small hospital. The hospital still maintains its own retirement plans (403(b) and 401(a)) for its employees separate from the retirement plans of the health system (this will eventually change). Since the acquisition, we have a few employees that are working part-time for the health system and part-time for the small hospital, but are working enough hours for each entity to qualify for each entity's retirement plans.

How should this be handled? Is each employee simply given a choice of which entity's plans he/she wants to enroll in?

Thanks.

A plan only permits safe harbor hardship distributions. Participant is leasing a unit or apartment in a duplex. The duplex is for sale, participant wishes to buy it and remain in residence in the unit. We think in this situation a plan administrator could approve the harddhip distribution (although there is a small segment who say NO), even thought there is a second rental unit.

New twist: the property being sold actually has two buildings on one piece of land, thus two duplexes and four units. We think the parcel cannot be partitioned. Participant wants to buy the entire parcel and remain in the unit as his or her primary residence. Now we think perhaps this is not within the safe harbor because of the income-producing aspect of three units.

Any thoughts? Thanks in advance.

Hi. We are a health system that recently acquired a small hospital. The hospital still maintains its own employer sponsored health insurance for its employees separate from the employer-sponsored coverage of the health system (this will eventually change). Since the acquisition, we have a few employees that are working part-time for the health system and part-time for the small hospital, but are working enough hours for each entity to qualify for each entity's health and welfare benefits.

How should this be handled? Is each employee simply given a choice of which entity's plans he/she wants to enroll in?

Thanks.

I have a group with a 6/1- 5/31 plan year for their 125 plan. A couple of FSA participants were on FMLA and will return in June. Can they make their catch up FSA contributions in June for contributions that were missed in May. I don't think that they can do this since its crossing plan years, but I'm not positive. I've searched the EBIA manual but can't find anything specific to this. Thanks.

I recently had a client e file the final 5500 SF for a terminated 401k plan. This was a 2011 short plan year filing (on 2011 forms).

Part I, line B "the final report..." was properly checked. EOY partic / assets = zero. Part VII Plan Terminations questions properly completed.

The DOL rejected the filing on the basis that "criteria for termination have not been met" error code P 215 SF. The notice of rejection advisement was provided to me, by the software vendor.

I called the EFAST toll free help desk and confirmed that the filing status is "filing received" which I understand to be the highest level of acceptance in the EFAST II system. I checked the public disclosure website and the filing looks fine as well.

I contacted my software vendor and they informed me they have had this happen several times. EG a terminated filing that appears in all respects proper, is notified to the software vendor as "rejected." But - the DOL web posting and "filing received" status is what appears to be in the DOL's systems.

The software vendor has recommended not taking any further action and to just assume the rejection notification by DOL to software vendor was an unexplainable error.

I hesitantly-tend to agree, because the public disclosure website and "filing received" status seem to indicate everything is fine. However - I am a little leery of the software vendor's recommendation to "do nothing."

I realize checking the amended box and having the client re-e-file is probably not a good thing to do (eg amend it and see if the DOL actually will issue an acceptance to the software vendor).

Has anyone else been faced w/ this and if so what action did you take (if you are willing to share). Thank you for any thoughts.

I have a participant who has requested a 401k hardship distribution for repairs to their home. He has a hand-written statement that he has no insurance. He has verbally stated that the damage was due to a tornado in Stone Mountain, GA. He has provided an invoice from a contrator for repairs (window purchase, sheetrock, paint, masonry, dryer fans for water removal, carpet, & labor) but it doesn't state that it was for storm damage. What type of documentation do we need to require from him in order to process his request? This is a safe harbor plan and loans are not permitted.

I use words "withdrawal" and "distribution" interchangeably; as if they mean the same thing. But sometimes, I hear people use them as if they have very different meanings. Can anyone explain the difference to me?

Suppose you have a 1 participant DB plan for a small profitable employer with a 6/30 plan year end and 1,000 hour requirement for benefit accrual.

The plan existed for 4 years until benefits were frozen a year ago. Upon restating his plan on April 1, 2012 we unfroze the plan per his instruction effective for the plan year 7/1/2011-6/30/12. Now apparently he lost his largest client and wants to terminate the plan.

If the plan were terminated effective 6/30/12, could he accrue a full year of participation for 415 dollar limit purposes for the year 7/1/11-6/30/12?

Thanks.

We are a TPA. Client has their plan set up so that each participant pays the distribution fee related to his own distribution. So far, so good. The platform allows for that. The issue is that the platform wires the fee amount to our bank, who upon receipt deducts a $15 wire transfer fee. It has been proposed that we gross up the distribution fee charged to the participant by the $15 wire transfer fee. I am less than comfortable with that, since it doesn't directly relate to the processing of the distribution itself - at least in my mind.

Any thoughts? It would seem to me that we either eat that fee, or it can be charged to the client or plan, but not to the participant.