Do Puerto Rico Plans have to be amended for the HEART Act and WRERA?

I believe that they should be, but I just wanted to confirm this. If someone is not active on the last day of the Plan Year due to maternity leave, would they be eligible for a 3% Top Heavy Contribution?

Thanks in advance!

one approach that i have historically found to be reasonable w/r/t RMDs was as follows:

Say owner/employee reaches age 70 1/2 in 2011.

Say his AB at 12/31/10 was $10,000 per year.

An RMD for 2011 would be 10k.

Now to determine AB as of 12/31/11:

Say the gross AB is now 12k per year and

the actuarially increased AB is 11k and

the actuarial equivalent benefit of distribution is 500.

So the 12/31/11 AB would be max (11k, 12k) less 500 equal to 11,500 as the AB at 12/31/11. This amount could not be less than the 10k at end of prior year.

The above being one approach that seems reasonable and consistent with the proposed regs under 1.411-2(b).

I ran into a situation where such 12/31/11 AB was computed as the gross AB of 12k as described above (and not offset by value of distribution).

I am not personally opposed to the method in the sentence above per se; but is it reasonable? is it not overstating the AB? hmmmn

thoughts?

thanks

This is the first 5310 submission that I have done and have a few questions.

Included with the 5310 submission will be the restated Volume Submitter EGTRRA

defined benefit document that the client will be adopting in the next few days.

If we want a determination letter for the EGTRRA document, do we need to separately

submit a Form 5307, or will the 5310 submission include a DL on the document.

So my question basically is, do I submit both 5307 and 5310, or is the 5310 all that is needed?

Also, the 5310 asks for the plan termination date. Can that be a date after the Form 5310 is

submitted, such as 6 months from now?

Hello everyone! Here's a situation: a terminated money purchase plan has 13 participants with remaining account balances. The former sponsor of that plan also maintains a 401(k) plan. Only one participant in the terminated money purchase plan has a balance of over $1,000. The terminated plan had mandatory cash-out provisions if balances were less than $1,000, and automatic rollover provisions into IRAs in case no distribution election was secured. We have addresses for twelve of those thirteen participants, and we're going to cash out all of them but one.

One of those twelve has a balance over $1,000 ($1,029 or so), so he can't be cashed out. The thirteenth can't be located (balance of $24). Under Treas. Reg. 1.411(a)-11(e), in respect of a terminated DC plan, if a sponsor maintains another DC plan, then a participant's account balance can be transferred to that other DC plan. In support of that, FAB 2004-02 assumes in its guidance that a missing participant's account balance can't be transferred to another DC plan.

So, what would you do? Move the balance of the guy having over $1,000 and the guy who can't be located into an IRA per the terminated plan's terms, or move the funds into the 401(k) plan? It seems like we should move the funds into the 401(k) plan. Aside from the fact that the IRS and DOL support this construction, it lessens the burden on the sponsor, and we don't have to worry about finding IRAs for $24. Plus, we keep control of the assets, which is always preferable.

I would greatly appreciate the community's thoughts on this. Thank you!

Hello all!

I hope someone can help me. I have been asked to conduct a nondiscrimination testing for the health and dependent care spending accounts and I have no clue how to even start. My past experience was to work with a consulting firm who would conduct the testing for us once I provided the census information.

Can someone guide me throught the calculations or a reference that I could possibly review. The information online only mentions the type of testing but does not go into details as to how to go about calculating each testing section.

Any help will be appreciated!

Does PPA require lump sum calculations for 417(e) to use age as completed years and months at the date of distribution or is that just for 415 calculations?

A profit sharing plan is on a standardized prototype for 2011. The allocation formula is pro-rata based on compensation.

Is it feasible to make the allocation on a cross-tested basis instead of a pro-rata basis, deliberately failing 401(a)(4), and then do an 11(g) corrective amendment to shore it up on a cross tested basis? I understand why some might think this is possible, but it seems to me that there is an issue of not operating the plan in accordance with the terms of the plan document.

As a TPA we completed a form 5330 for 2010 late 401(k) deposits to the Plan.

We have elected not to charge the client for the completion of the tax forms for 2010, 2011 and 2012.

Do we still sign as the Paid Tax Preparer and show the PTIN number?

Do Puerto Rico Plans have to be amended for the HEART Act and WRERA?

Employer match of ~$250.00 in 2011 was posted to employee deferral source due to payroll processing error. Employee reached 402(g) limit with other deferrals, so the erroneous amount was reclassified as catch-up in recordkeeper's year-end testing software. Employee was catch-up eligible but did not make a catch-up contribution election.

Employer match is made in company stock. Participant is eligible to diversify out of company stock. Participant directs investment of employee deferrals into various mutual funds. Company stock performed better than mutual funds.

How to fix this? Should the amount be transferred from catch-up source to employer match source in 2012? Earnings/make-whole issues?

Just curious to see what anyone's opinion on this would be for the from 5500-SF:

If a deposit is made to a trust account by the employer, TPA or investment advisor to make up for a trading error, would you report this as Contributions\Others (line 8a(3)) or Other Income (line 8b)?

I guess it depends upon whether the we are reporting for the 5500 the actual trust earnings on the Other Income line or not. If we use actual trust earnings, then I think we would report the trade error as Contributions\Others.

Is it just me, or does anyone else think the BenefitsLink newsletter is starting to creep a little into the realm of a political bias?

A defined benefit plan once had 5 participants and all but the owner were paid their vested benefits 4 years ago.

We have been filing a 5500 just reporting one participant.

Is it possible to switch to a 5500-EZ now as the plan only covers the owner?

Thanks.

Does anyone have a quick "reference guide" as to how to derive gross comp from W2's?

For example, for NJ W2's it is Box 16 (state wages) plus Box 12, code D (401(k)).

Anyone have a shortcut for the other states?

Example: I have an amortization schedule that call for $100 on the first of every month. (Participant gets paid on the first of every month)

If the money comes out of his paycheck for the 1st, but does not get deposited in the the trust until the 5th, does the loan have 5 days of extra accrued interest?

Company is an LLC - all employees are being laid off prior to the end of the plan year but LLC will remain open with partners until 12.31. This will cause a partial plan termination and all current employees will become 100% vested.

Current plan is a Discretionary New Comp Profit Sharing and Plan is Top Heavy. Allocation requirements for New Comp profit sharing are 1000 hours and last day.

If the plan is not officially being terminated until 12.31 does the top heavy contribution need to be given to the employees since they terminated prior to 12.31?

What if they decide to terminate prior to 12.31 (Let say 9/30) but all employees are already gone - does the plan termination date become the last day of the plan year?

We already know it will cause problems with testing, but what about the NC Contribution? If all the employees are gone prior to the last day of the plan year are they required to get a NC contribution.

Partners are trying to maximize themselves before they close the doors but don't want to provide a contribution to the employees that will be leaving!!!

Help! I can't find an answer to this at all. I have a company that will be terminating its plan and then shuttering its doors. In fact the two remaining employees (one age 56) have already separated from service. So my question is, can the 56 year old separated participant avoid the 10% penalty if he receives his distribution as a plan termination distribution or does he have to receive it as a "separation from service" distribution.

I am trying to minimize the administration expense for the employer (ie one distribution for a participant as opposed to two) but also don't want to limit the opportunity for a participant who is now umemployes at the age of 56.

Any insights will be very helpful.

Thank you,

Jeanne :angry:

Can an owner (max comp) receive a $49,000 profit sharing contribution and then make a $5,500 deferral, classified as catch-up? Or is a deferral not classified as catch-up until you hit the $17,000 limit.

Facts – Sponsor adopted an individually designed plan in 2006. Sponsor’s EIN ends in 7 so the plan is a Cycle B Plan. Sponsor has timely adopted all interim amendments but failed to amend and restate the plan under Cycle B prior to January 31, 2008. We are currently in the second remedial amendment cycle for Cycle B. Based on my interpretation of Rev. Proc. 2008-50 and the instructions to Appendix F – Streamlined VCP Submission, Sponsor would need to restate the plan under the current cycle (2011 Cumulative List) and submit the Appendix F, Schedule 2, and the VCP Fee under 12.02 of Rev. Proc, 2008-50. Sponsor would also need to submit a determination letter application (Form 5300) with the VCP and include the 2006 plan, the interim amendments, and the 2012 plan.

Questions

1. Is the above correct?

2. On Appendix F, Schedule 2 does the sponsor check the box “The changes required by the 2006 Cumulative List” because that was the Cumulative List that was used for the missed Cycle B restatement or does the sponsor check the box “Other” and state that it failed to restate under the first Cycle B restatement period?

3. Will the sponsor receive a current Cycle B determination letter that is good until the next Cycle B restatement period?

4. Will the IRS require sponsor to provide the first Cycle B document?

Thanks