I have an ESOP client that in the 2/28/2011 pye give a person a contribution for the pye 2/28/2010 as a self correction. This person was a rehired in the 2010 pye who should have re-entered upon rehire and worked >1,000 hours. So they should have been given a pye 2010 contribution.

I have now found as we were estimating the pye 2012 contribution a person who was rehired in the 2011 pye who worked >1,000 hours. So this person should have been given a pye 2011 contribution.

So if one self corrects the same problem two years in a row that would seem to not work for self correction.

What is the risk? After all a VCP filing would demand the person be corrected exactly as we would self correct.

It seems like the risk is VCP might demand a fine be paid to avoid disqualification.

Any insight would be helpful.

Does anyone know where I can get a copy of this publication in english?

Hello all,

The 100% owner of company A owns 100% of company B (controlled group). He earns 100K from company A, and 80K from company B. There are no non-owner employees in company B.

Company A maintains a 401(k) plan. Company B is not a participating employer.

For the ADP/ACP testing purpose for the plan maintained by company A, what is the compensation do I use for the owner? Is it 180K or 100K?

The Plan -

- Corbel volume submitter

- Document defines 414(s) compensation to be used for non-discrimination testing

- The definition of compensation in the document is W-2, which I use for the allocation purpose (for profit sharing contribution)

My conclusion was to use the 180K as the definition of 414(s) compensation from my research was to include all the compensation from the related employers. But someone asked me, if the coverage is not an issue, and therefore you don't aggregate for the coverage, and therefore you don't aggregate them for non-discrimination testing, then why combine both compensation?

So, now I am questioning the relationship between the aggregation of coverage and non-discrimination testing, and if that affects my original question of the compensation that has to be used for the ADP testing. I am thinking whether you aggregate for the coverage or not, the 414(s) compensation that has to be used for the ADP/ACP testing, has to include the compensation from the related employer.

Would you please help?

Thank you.

ML

A client let an employee into the 401(k) plan in 2011, before their 1/1/2012 entry date. They don't want to change the plan provisions. They want the employee to take a distribution to correct the error. How would this appear on a Form 1099r?

Thanks for any input

I have calculated what I think to be the "optimum" amount of earned income that a 50+ self-employed business owner can make in 2012 in order to be able to receive the maximum annual addition (i.e., $55,500) in his/her solo 401(k) plan. I came up with $174,158.30.

Was wondering if anyone else has made (or will make) this determination and confirm my calculation.

Thanks!

May two qualified plans in the same controlled group be permissively aggregated (combined for testing purposes) if they both share the same plan year end but one of them has a different plan year beginning because it is a short plan year? For example, may one aggregate a plan with a 1/1/2011 - 12/31/2011 plan year with a plan with a 7/1/2011 - 12/31/2011 plan year?

It appears that even if one is performing ADP / ACP testing, through cross references one lands at Treas. Reg. 1.410(b)-7(d)(5) and the definition of plan year in 1.410(b)-9. The safe interpretation is that "same plan year" means both the beginning and end of the two plans' plan years are identical, not merely that they end on the same date, but I'm curious whether others have intepreted it differently or whether there is any other IRS or Treasury guidance on the issue.

A participant received a distribution of his entire $10,000 account balance on September 1, 2011 which was not rolled over. As such, the participant received a $8,000 check and $2,000 was withheld for federal income tax withholding purposes. The original reason for the distribution was on account of termination of employment. A 2011 Form 1099-R was properly prepared to report this distribution and the federal tax was withheld and remitted to the IRS.

However, in February, 2012, it was determined that the participant did not have a termination of employment in 2011 (just a change of divisions). Under Section 5.01(3)© of Revenue Procedure 2008-50, it appears that the correction method would be to take reasonable steps to have the amount returned by the participant to the Plan. My question is....what is the amount that the participant should repay to the plan? $8,000 or $10,000?

1) If the participant repays the full $10,000 to the plan, how is the $2,000 of federal tax withholding treated since that $2,000 has already been remitted to the Treasury - - is it just "extra" federal tax withholding that is considered/counted when the participant completes his 2011 Form 1040? Further, is it "fair" to ask the participant to repay more than what the participant received in hand?

2) If the participant only repays $8,000 to the plan, would the IRS consider the error to be corrected even though the participant's account has not been put in the same position as if the error hadn't occurred?

I am assuming under either scenario that the 2011 Form 1099-R would need to be amended to reflect a lesser taxable distribution.

Hello. I have a plan the has always had an audit done b/c they had over 100 participants. For the 2011 plan year their headcount for the beginning of the year has dipped below 100. So they would not need an audit for 2011 correct? We can file as 5500-sf? Also, does this mean that they have to go over 120 again in future years to require an audit be performed again? Based on anything I read this seems correct, just want to be sure I am not missing something. Thanks.

A company maintains a defined benefit pension plan which was closed to new participants in 2007. An employee who once participated in the plan left work prior to 2007. He was rehired in 2009 and was allowed to participate in the plan once again because of his prior years of service. Does this raise any compliance/legal issues? Any authority covering this situation?

I have a small PS/401k plan getting ready to undergo an IRS audit. The plan document was prepared by Morgan Stanley Smith Barney (MSSB) and our TPA firm does the recordkeeping.

The local MSSB broker who handled the EGTRRA restatement recently switched brokerage firms, and another branch office of MSSB took over. No one in the takeover MSSB office can find the EGTRRA document or any amendments. I know that the EGTRRA restatement was done since I have a draft copy of the restatement with changes marked on it.

Any ideas on how the IRS will react to the client not having the current documents?

We have a plan with an 11/30 year end that, in December we were notified they were moving the plan recordkeeping, administration and compliance to Payroll Company. The assets moved at the end of December. The client is now looking to us to provide the 11/30 valuation and annual returns -- no problem. The problem is that they also need a short plan year 12/1/2012 - 12/31/2012 valuation and return completed since Payroll Company has amended their plan to be a calendar year end. I asked for a copy of the document indicating the short plan year but they cannot provide this to us.

1. Can we retroactively amend the plan to 12/31 year end just to incorporate the short plan year language? This makes little sense to me since they have already "amended" the plan using the payroll company's prototype.

2. I have tried to explain that this was missed when the payroll company took over. The payroll company contends that the payroll company "does not need to amend our document to reflect the change since the plan started with us 1/1/12 and the plan year will be 1/1/12-12/31/12 . (Payroll Company person), the Document Analyst advised that there was discussion during the technical review of the plan with (plan sponsor) and (advisor) on the plan, that you should have made your prior provider aware that they would need a short plan year from 12/1 to 12/31 for the prior plan. Therefore, the (Payroll Company) plan is in compliant."

3. So the client wants us to:

(1) prepare the 11/30 year end reports,

(2) amend the document to accommodate the 12/31 year end change,

(3) prepare the 12/31 short year end reports.

Any thoughts on this? We are a "non-fiduciary" TPA with no ties to the assets. This may be as "compliant" as it gets for the client -- uh, former client.

The DOL regs require a that a participant be furnished a notice of a description of a change at least 30 but no more than 90 days before the effective date of the change. Does anyone know exactly what that notice must include? I don't see that the regs require you to include all of the annual disclosure information. Can a plan just say we are replacing Fund A with Fund B or do they actually have to include all of the required information just like the annual notice?

A small non profit currently has a 403b plan and would like to change investment providers. The preferred provider will only allow a plan for this size on their 401-k platform. Is there a provision that would allow the 403b to be amended to a 401k prior to changing providers or does the 403b have to be terminated and a new 401k plan started and what are the steps? Any help is appreciated.

Can a company have a 401k plan AND a SEP IRA plan at the same time?

The searches only yielded "multiple employer plans" so pardon if this is a rehash of old topics. Anyway...

Company has a 401k, wishes to get rid of it. Can they stop allowing contributions into the 401k, and instead establish a SEP IRA which will accept all the new contributions moving forward. There doesn't seem to be a lot of literature out there about this. Any help / references / code would be appreciated. Thanks

Suppose you have two 401(k) plans sponsored by one company (no QSLOB exists). Assume the plans are not top heavy and they have nondiscriminatory classifications.

As far as Employer Contributions:

Plan 1

- Covers all employees hired before xxxx date

- Provides 15% to owners, 5% to all others

Plan 2

- Covers all employees hired after xxxx date

- Provides 2% to all participants

- There are no Key or HCE's in this plan

It is our understanding that the 5% gateway would not have to be provided under plan 2 as long as each plan passes 401(a)(4) and 401(b) independently.

Plan 2 passes both independently. Plan I will pass 401(a)(4) independently but requires the average benefit percentage test to pass coverage. Per 1.410(b)-7(e) all plans that could be permissively aggregated under paragraph (d) must be aggregated for this purpose. Paragraph (d) last paragraph indicates "if an employer treats two or more separate plans as a single plan under this paragraph, the plans must be treated as a single plan for all purposes under section 401(a)(4) and 410(b)".

Does this mean that you must treat both plans as one for 401(a)(4) and 410(b) just because one plan needed the average benefits percentage test to pass coverage?

Thanks.

Has anyone dealt with the issue of a fiduciary liable for breach of fiduciary duty waiving his share of benefits from restorative payments to the plan? The result would be a smaller restorative payment, but would still restore participant accounts properly. A DOL agent commented that he had seen guidance disallowing this type of waiver, but I have not been able to find anything. I'm sure he would like to disallow it because it would also reduce the amount of any penalty. I did find some PLRs that approved restorative payments with this structure but nothing from the DOL. Any thoughts or citations?

Has anyone dealt with the issue of a fiduciary liable for breach of fiduciary duty waiving his share of benefits from restorative payments to the plan? The result would be a smaller restorative payment, but would still restore participant accounts properly. A DOL agent commented that he had seen guidance disallowing this type of waiver, but I have not been able to find anything. I'm sure he would like to disallow it because it would also reduce the amount of any penalty. I did find some PLRs that approved restorative payments with this structure but nothing from the DOL. Any thoughts or citations?

Has anyone dealt with the issue of a fiduciary liable for breach of fiduciary duty waiving his share of benefits from restorative payments to the plan? The result would be a smaller restorative payment, but would still restore participant accounts properly. A DOL agent commented that he had seen guidance disallowing this type of waiver, but I have not been able to find anything. I'm sure he would like to disallow it because it would also reduce the amount of any penalty. I did find some PLRs that approved restorative payments with this structure but nothing from the DOL. Any thoughts or citations?

Referring a potential client where to invest their funds is not my area of expertise so I'm hoping to get some thoughts. Small nonprofit with no HCE's would like to set up a new 401(k) plan (no current existing plan), no employer monies currently intended to be contributed, just 401(k). Setup cost is not just a concern, like for everyone, but a major concern. is there a recordkeeper out there who will also set them up on a plan document with an adoption agreement that i can point them to?

The plan document reads as follows:

"Highest Average Monthly Compensation: The highest average monthly compensation paid to you during a 60-consecutive-month period during your entire employment history. 'Compensation,' for purposes of this Plan, includes regular base salary, overtime, incentive and performance bonuses, paid sales incentives and tax-deferred contributions, up to the amount eligible under current IRS guidelines."

The amount eligible is limited by the annual compensation limit established by the IRS. Does the IRS spell out what to do for partial years and how the limits apply or is this up to each plan as to what to do? How does the limit apply for an individual who leaves the company September 30th who every single year prior to that point always reached the limit? If we take calendar years 2005 forward with the last date of employment being September 30th 2010, does the fact that the 2010 annual limit is $35K larger than the 2005 limit impact the calculation of the highest average monthly compensation? The highest average monthly compensation has a maximum of $18,833.33 for calendar years 2005-2009 and $19,416.67 for CYs 2006-2010. Is there a pro-ration done so that the average used in the example would be $19,270.83?

Thank you for any assistance you can provide on this.