I looked through the IRS website this morning, and found the 2011 Form 5500-EZ with instructions. I contacted FTWilliam and they said the form should be available on their system by the end of next week.

In a balance forward profit sharing only plan, is there any guidance relating to whether earnings are allocated to the forfeiture account? How is everyone else treating this? Thank you.

First year for a Cash Balance Plan, using an end of year valuation date. The nature of the MRC calculations means that the minimum required contribution is actually lower than the sum of the credits for the first year. Vesting service is excluded prior to the effective date of the Plan so in Year 1 the FT = 0, which means the MRC is just equal to the TNC (again, which is less than the sum of the credits allocated on Year one).

Is it ok to consider the Plan "at-risk" for the first valuation so the maximum deductible contribution turns out higher than the minimum required? Or are you stuck with a maximum equal to the minimum for year one, and not being able to fund the sum of the credits.

Participant took a hardship. Presented a bill for college tuition for $2,500 for their child. The participant mistakenly received their entire account balance instead of $2,500. Needless to say they received more money than what they provided documentation for.

The participant used all of the money they received for reasons other than the hardship. In other words the participant's child never went to college.

If a participant takes a hardship but uses the money for "other" reasons, what are the ramifications if the participant cannot return the money? Would the employer be responsible for reimbursing the plan for the total distribution or just the amount in excess of the hardship request?

Plan missed top heavy contribution for several participants over several years. Sponsor will correct under VCP, but wants to use forfeitures

to correct (the missed contribution plus earnings). Plan document permits forfeitures to be used to reduce employer contribution.

Thanks in advance!

When calculating the earned income for a sole prop or partner in a partnership in a 401(k) plan I have been using a spreadsheet that includes a reduction for the employee's salary deferrals. (i.e. earned income minus 1/2 SE tax, minus employee deferrals and employee's employer contribution, minus the sole prop/partner employer contribution.

Argument is subtracting the employees deferrals. Our software company does not do that - has that changed?

Do you subtract the employees deferrals (not owners deferrals) to determine the comp for the sole prop or partnership?

This is for earned income only - not for deduction purposes.

Thanks

I have a new client who informed us that they failed to contribute the mandatory matching contributions on behalf of their employees who participated in a Simple IRA plan. The delinquent contributions cover the years 2003-2010. The client intends to fully correct by depositing the missed matching contributions + earnings and then to file under VCP. Is the client permitted to take a deduction in 2012 for the cumulative missed matching contributions + earnings?

Can anybody offer links to DOL/IRS guidance regarding the following scenario for a participant in a 401(k) Plan who returns from military leave?

The hypothetical cirumstances:

1. EE worked through March and had $10,000 in 401(k) eligible earnings up to leave (annual salary of $40,000)

2. EE was paid $3,000 in Military Differential Pay, which is considered 401(k) eligible earnings

3. EE defers 4% and therefore has total elective deferrals of $520 ($10,000 + $3,000 = $13,000 x 4%=$520)

4. Company match on 100% up to 4% of eligible earnings, total company match based on eligible earnings = $520

5. EE returns at end of payroll year (total leave of 8 months, total period eligible for make-up is 24 months)

Plan provision on deferrals

1. Elective deferrals: EE may defer up to the lesser of

a. 100% of eligible earnings; or

b. The 402(g) limit (unless eligible for EGTRAA catch-up contributions)

With all of the aforementioned stated, my question is:

1. In determining the missed contributions, would military differntial pay be considered? I.E. would the employee be considered to have missed $30,000 in earnings or would the person be considered to have missed $27,000 since the person received $3k in military differential pay?

a. From the standpoint of EE contributions, is the eligible make-up: $16,480 ($17,000-$520) or $16,600 ($17,000 - $400)

b. From the ER standpoint, is the company responsible to match, assuming the total the EE elects is at least 4% of the missed earnings: $1,200 ($30k x 4%)

or $1,080 ($27k x 4%)?

Finally, is it permissible or, in fact, required that the ER inquire about elective deferrals that the EE made to any type of plan maintained by the military in order to offset the amount the EE defers and the ER matches?

I am a small business owner in Washington State. We have two fulltime employees who receive medical insurance through either their spouse or parent. I have been told that I am required to reimburse them monthly in the same amount I pay for my other employee's premiums ($462). Is this true or could I reimburse the amount they pay toward their current insurance? Am I required to provide any reimbursement?

Thank you for any help with this.

I have a 401(k) plan sponsor that wants to permit participants to make a voluntary transfer of a portion of their account in the 401(k) plan to the ESOP. They have already done this once several years ago. What are the rules regarding such a transfer? The fiduciary issues are making my head spin.

There are special rules regarding when a participant can elect to defer commission payments. You can use different rules for different service providers so long as "similarly situated" service providers are treated the same. Has anyone seen any guidance regarding what constitutes "similarly situated"?

A small S-corp is establishing an ESOP and the question came up about the employees' new ownership in the company due to the ESOP making them ineligible to participate in the cafeteria plan. I hope there's an exception in cases where the ownership is due to the ESOP. Can someone point me in the right direction?

Say a company has a 401k plan and that company is being merged into another company. For it to be an “distributable event” the IRS regulations require "That the plan terminates and no successor defined contribution plan is established" - does that merger a "distributable event" make? Even if the new company has a 401k plan (is that the successor defined contribution plan?) - since in essence the company being taken over is terminating their plan would the participants still have the option of rolling over their funds into an IRA versus having to move the funds into the new plan? The new plan supposedly has only 10 options versus the brokerage window we have now? Thanks for any insight!

I found some older threads, and I don't think there is a reason to think anything has changed but...

1) I have never seen an election form for a plan that allows one to take a lump sum distribution out of the plan talking about rolling the amount over to another qualified plan vs just an IRS if the person is terminated. I know it is rare for a terminated person to even have a diversification, but in this case they have the 55 and 10 yop before the plan allows them to take their money out as a terminated person. But there is no reason it can't be rolled to another unrelated qualified plan if so desired is there?

2) Can you write the ESOP diversification provisions so only employeed people can transfer the money to the employer's 401(k) plan? Or put another way can you force the terminated employee to take a distribution as their diversification? Once again I suspect they will want their money, but if they have been paid from the 401(k) plan it would be a pain if you were obligated to set up a new account.

3) Related to #2, it would be the ESOP's provisions that are change to make that restriction correct? Is where you can send your money a protected benefit?

Thanks.

Hi, I'm new here, just registered here to post a question. Here is the background. We are a privately owned small manufacturing business in the Midwest.

We have had a 401(k) plan dating back to the early 90's. I'm a volunteer 401(k) committee member. We are just now learning about the

recent rule changes raising the bar on fiduciary responsibility. We (the 401(k) committee) have actually done what I believe is the right thing in response, by ditching our

current annuity based expensive bundled plan and going with an open architecture plan with a fee-only adviser, which should minimize expenses as

the assets of the plan continue to grow. My background, I have no accounting or government form filling experience. I do however, have and will insist on doing

my own State and Federal taxes (for free) as long as the law will allow it. Back on track, in all prior years, we have been under the audit waiver provision

as provided for by DOL, EBSA ??. We conscientiously do our best to be compliant, while keeping expenses to the plan sponsor and plan participants

as low as possible. We have been hit with widely different estimates of the amount a plan audit would cost. That is a minor side question here too.

If the regs say we need to be audited, or will need to be in an upcoming year, so be it, but it seems to hinge on the number and hence, the definition of participant.

Incidentally this might have been a better fit in the 5500 Form section. Moderator, whatever you think.

Here is the question you've all waited for so patiently. My own search lead me to page 11 of the 2010 Instructions for Form 5500-SF. There, it states for

pension benefit plans (I think this is what a 401(k) falls under):

a participant is any of the 4 listed types, active, two kinds of retired, and deceased. The later ones are not where the issue lies. It all seems to boil down

to the active participant definition. Our plan has a safe harbor MATCH. But we do not have an automatic enrollment, or involuntary sponsor contribution of any kind.

The plan is strictly voluntary. If you don't sign up to contribute, you are out as far as any accruing of any benefit. So, are the non-participating eligible employees

included in the participant count?

Thanks for viewing. Looking forward to your replies.

Husband and wife own the business and both are participants in the 401k plan. Husband dies before his RBD and wife elects the 5 year rule for distributions. Is it possible for her to "rollover" the assets from his account into her account in this same plan to satisfy the 5 year distribution rule?

Got a new comp plan where everyone is in their own group, and the plan is a prototype and therefore bound by reasonable classification for the NHCE's.

I find it to be reasonable that everyone who is over the wage base gets their stepped up contribution. And because of the size of the company, I'm below the maximum number of allowed allocation rates. What I'm getting at, is may I run an integrated allocation, as long as the number of allocation rates does not exceed the maximum allowed.

Could the application of the integration rules be deemed a reasonable classification?

457(f) plan provides for 10 year cliff vesting schedule; executive director continues working through 10th year and full amount of contributions made to (f) plan are included in her taxable compensation in year 10.

We know that rolling risk of forfeiture is no longer permitted under 409A.

Is there any reason why the employer could not start a NEW 457(f) plan with a new 3- or 5- or more-year vesting schedule, in Year 11?

409A contains language preventing an employer from starting up a new deferred compensation plan within 3 years of affirmatively terminating and liquidating a plan but I don’t think that completion of a vesting schedule = plan termination for this purpose. Treas. Reg. 1.409A-3(j)(4)(ix)©. Particularly if plan is not limited to Exec. Dir. but also includes other top hat group members. Would welcome any comments pro or con.

457(f) plan provides for 10 year cliff vesting schedule; executive director continues working through 10th year and full amount of contributions made to (f) plan are included in her taxable compensation in year 10.

We know that rolling risk of forfeiture is no longer permitted under 409A.

Is there any reason why the employer could not start a NEW 457(f) plan with a new 3- or 5- or more-year vesting schedule, in Year 11?

409A contains language preventing an employer from starting up a new deferred compensation plan within 3 years of affirmatively terminating a pre-existing plan but I don’t think that completion of a vesting schedule = plan termination for this purpose. Treas. Reg. 1.409A-3(j)(4)(ix)©. Would welcome any comments pro or con.