Client with a 401(k)/Safe Harbor Match/Integrated PS Plan - 7 participants in total. Eligibility is 6 months for 401(k)/Safe Harbor Match. Eligibility is 1 year for PS. Plan is Top Heavy. 4 HCEs and NHCE 1 are eligible for all sources. Two other NHCEs have entered plan for 401(k)/Safe Harbor Match, not eligible for Profit Sharing yet. Of these two employees, NHCE 2 contributes to 401(k) and will receive a Safe Harbor Match, satisfying the Top Heavy requirements for him. NHCE 3 does not contribute to the 401(k), will receive 0% Safe Harbor Match and needs a contribution to satisfy the Top Heavy minimums.

Here is a summary:

HCEs 1, 2, 3, 4 Safe Harbor Match =3%, PS >6%

NHCE 1 Safe Harbor Match =3%, PS =6%

NHCE 2 Safe Harbor Match =3%, PS =0% Not eligible for PS

NHCE 3 Safe Harbor Match =0%, PS =0% Not eligible for PS

My thoughts are that NHCE 3 could receive a 3% PS contribution to satisfy the Top Heavy requirements. Could this be the normal PS contribution or would it have to be a QNEC? If it is a PS contribution would it trigger NHCE 2 to be entitled to it as well? If one or both are entitled to the PS contribution does it have to be the same as NHCE 1 (6%). If it has to be a QNEC, are all 3 NHCEs entitled to it? The goal is to obviously satisfy the Top Heavy minimums with the smallest Employer contribution while also satisfying all legal obligations.

Please advise.

Thank You

Hi everyone,

I have a client who hasn't made their 2009 or 2010 minimum required contribution. We told them they could have their account fill this out for them or us, they chose their accountant both years. After the 2010 missed payment, they had a compliance check performed by the IRS stating that they should have paid an excise tax. If you can believe, the client never paid their excise tax. I know, knock me over with a feather.

On this form, do we have them pay 10% of line 39 from the schedule SB or line 40. Line 39 is the 'Unpaid minimum required contribution for currect year' and line 40 is 'Unpaid minimum required contribution for all years.' I have looked and looked and can't find anything. I asked around, get shrugs and guesses but know one knows for sure. And the instructions for the 5330 are the least helpful item yet.

Does anyone have a cite to how this is filled out?

Frizzyguy

The firm I work for has a TPA service and also a financial advisory division. Prior to moving to our services a few years ago, a client had permitted a group of owner-employees to establish self directed brokerage accounts. We have no knowldege of whether or not other employees were ever given this option. The current enrollment materials make no mention of this option, instead listing only the funds available on the platform where the other accounts are held.

As part of a self correction for one of the accounts that was set up incorrectly, and allowed an inappropriate distribution, we're establsihing policies and procedures for participants wishing to establish such accounts. (The money was repaid as soon as we saw the statement.) A couple of problems have come up in the process:

I know that both of those issues are a problem, but I need help finding a succinct reference to why they can't do what they want (especially the financial advisor who is considerably higher up the food chain here than me).

My client recently funded a QNEC for 3 participants covering a total of 46 pay periods. We are now at the point of calculating the earnings. If we were to calculate the earnings by participant and trade date, there are 111 total trade dates that need to be accounted for. I have two questions:

If the client uses the highest earnings rate in the plan, is it based on the entire plan's fund lineup, or since this plan has auto-enroll with a default into the Target funds, would it be based on the highest return within one of the default funds

Or, can we use the midpoint method to calculate the earnings and base it on the current allocations for the participants?

Here are the facts:

Participant rolled over her regular 401(k) (non Roth) balance to a Roth IRA

Participant may later this year want to recharacterize her Roth rollover to a regular IRA rollover

Is this allowed? Or is it necessary for the funds to go from the 401(k) to a regular IRA then convert to a Roth IRA and then recharacterize back to a regular IRA?

Thanks.

Reporting question for a reclaimed pension distribution. For example, if distributions were made the final three months of 2011, only to find out in 2012 that the pensioner was deceased in September of 2011, thus not entitled to the last three distributions in 2011.

In turn the 2011 distribution was reclaimed on February 3, 2012.

Must I revise the 2011 945 and issue a corrected 1099R?

Looking at 404(a)(7)©(iii)(II) , i.e. "if such contributions exceed 6% of such compensation, this paragraph shall be applied by only taking into account such contributions to the extent of such excess".

to me this says that ,in the case where DC contributions exceed 6% of comp , the combined limit of 404(a)(7)(A) only applies to the total DB contribution plus the excess DC contributions rather than the entire DC contribution ; another view that I'm aware of considers the entire DC in applying the combined limit of 404(a)(7)(A).

I feel that the implication here is that the DC contributions <= 6% fall under the individual DC limit of 25% of comp & hence are deductible separately under that limitation.

thanks in advance to those who respond .

Just wanted to get a quick verifying vote on an internal discussion -

A surviving spouse is receiving an ongoing monthly benefit for the remainder of her life (J&S annuity) provided by a deceased participant.

Is, or is not, her 1099-R distribution code "4" for essentially the duration of her lifetime (i.e., there is no "triggering event" that would change the code associated with this benefit after X months/years/payments)?

Thanks!

Doing a 5500 SF and 100% of plan assets are invested in a singe mutual fund, which is a qulifying plan asset. But the SF does not ask if more than 20% of assets are in a single security.

Is this just an oversight in the form? I obviously prefer the SF route and I can't find any reason that I'm not eligible... I just read through the eligiblity again, and thre is no requirement that there be multiple qualifiying plan assets; only that there be ONLY qualifying plan assets.

We have a frozen 401k plan. The sponsor chose not to go the route of applying for a final Determination letter since the Plan had recently been the victim of an IRS audit (prompting the freeze since it was so ridden with tainted assets, it was wiser to just forget it existed after it did all necessary corrections). It was voted to terminate the plan, effective 1/15/2011. As of 1/15/12, all assets were liquidated from the Plan....until, the Plan's service provider realized they made a mistake and in the prior year, placed QNEC monies in another qualified plan maintained by the sponsor, as opposed to the 401k Plan that it was intended for. This mistake, of course, came to light within the week.

So now, we are beyond the 12 month period due to an error made by the service provider. I read a similar post in another forum-looks as if we have to re-terminate the plan, and ensure the doc is up to par in terms of being in compliance for amendments, etc. Because the PYE is 6/30, the final 5500 has yet to be filed. I wouldn't think that we would have to do any sort of correction under EPCRS given that we are looking at 12 months + roughly 2 more months, and to my knowledge, we wouldn't be amending late on anything...thoughts are greatly appreciated.

The participant was deferring at 3% for the year. In December, the payroll company's system caused a change in his deferral from 3% to $3.00. This continued into January and also affected his match. Am I correct that for 2011, the company needs to make a QNEC of 50% of the missed deferral amount, plus earnings, plus applicable match and earnings? But for 2012, they can choose to do nothing since the participant can still recapture this missed deferral over the course of the remaining 11 months? Is the client limited to a QNEC of 50% for 2011 or can the QNEC equal the total amount missed? Thanks.

What withholding rules, if any, apply to distributions from designated Roth 401(k) and 403(b) accounts if the distribution is an eligible rollover distribution but is not a qualified Roth distribution?

Our firm was approached by a company who had not been filing their 5500's. They did not file plan years: 2000, 2002, 2003, 2004, 2005, 2006, 2007, or 2008. We had them correct via DFVC. For most of the years (not all), there were SSA also completed. It is our guess that these SSA's were never sent. What is the correction for old non-filed SSA? In addition what is the penalty?

We took over a plan midyear (2011) and at that time did a plan restatement that made it so that interns could not participate in the plan. The question is; are interns who contributed for part of the year eligible for the annual match? Match eligibility reads that it is allocated for anyone who had compensation during the year and is employed on 12/31/2011. It does not specifically exclude anyone (except anyone who is not there on 12/31). Since they became ineligible in the middle of the year are they still eligible for the match?

I have stock options from a previous employer that will expire on 3/31/12. I was not an officer, VP, or other high ranking employee. I clearly have no inside information on the compny, yet I am being required to have a phone conversation with the company attorney to get approval of my excercise? The attorney is in switzerland and I will have to wait for him to get back to have my call?

My fear is that during my wait, the stock will pull back and I will lose out (it is risen quite a bit over the last few days). What are the comapny's obligations in this situation? How long can they make me wait? I understand the need to make sure there is no action based on inside info, but in my case it's a bit silly. Additionally, they are looking for an exact date in which I will excercise....I don't know, Im probably going to put in a limit order.

Thanks in advance for the info.

I'm new to working with Cafeteria plans -

My understanding of a POP (Premium only plan, premium payment plan) is that it is a plan that offers only group insurance coverages.

Is a plan still a POP if it offers, in addition to group health insurance coverage, individual polices such as AFLAC products, individual supplemental insurance policies, where the employer is deducting premiums and forwarding them to the provider (though it may not make a difference)? My concern is regarding nondiscrimination testing, whether the inclusion of individual policies means a plan is not a POP, and therefore not eligible for the safe harbor eligibility test available only to POP's.

What about the inclusion of PRA's (Premium Reimbursement Accounts) offering reimbursement of individual major medical health insurance premiums upon receipt of proof of payment? I realize there is debate whether this type of benefit should even be included in a cafe plan, but my question is in regard to the POP definition. Does including a PRA make a POP plan no longer a POP?

Thank you for your assistance.

Corporation A buys the assets and goodwill of Company B. Company B still exists, but Company A controls it, so a parent/subsidiary controlled group now exists. Company B has a deferral only plan that I think should be terminated. Since a controlled group was created, Company B should be an adopting ER under Company A's Safe Harbor 401(k) plan (by when should they do that?). I understand that there is a transition period for coverage testing, but I'm confusing myself with all the other things that are involved and my brain is going circles. Maybe I'm making it more complicated than it needs to be. For example, when a company's assets are purchased, the EEs of that company can be considered as brand new EEs and not be included in the purchaser's plan until they meet eligibility. So, company B becomes an adopting ER of Company A's plan, but Company B's EEs will not receive a benefit for X number of months (unless Company A decides to be generous and include them immediately). Am I on the right track?

Can someone point me in the direction of where I may find commentary regarding a participant (HCE) that has service, but no compensation in 2011.

I feel as though I should not include that participant in the ADP/ACP test, but I can't remember where I read or heard that.

Thanks !

I have a SH plan that allocates a 3% QNEC and a fixed matching contribution of 100% of the first 6% deferred. The plan year is calendar. The plan wants to eliminate the fixed match, but will continue to contribute the 3% SH QNEC.

My question is will the plan still be SH with regard to the ADP test due to the fact the 3% SH QNEC will continue to be contributed. Or will the plan be subject to both the ADP/ACP test because the the plan was amended mid-year?

I haven't had this happen to me since the late 90's, and I can't remember if this is allowable, and the 401(k) answer book didn't address the issue:

Informed client that their 401(k) Plan become top-heavy for 2011 and that no deferrals should be made in order to avoid the 3% required non-key employer contribution. Received the payroll files yesterday and all of the owners deferred $16,500 during 2011 (plan passes ADP testing, so this is not an issue). Owner does not have the cash to make the 3% top-heavy contribution. In addition, the plan was amended 1/1/2011 to allow collectively bargained employees to participate in the plan.

Two questions: (1) May the owners remove the deferrals from the plan (as a mistake of fact) to avoid the top-heavy minimum? And (2) must the collectively bargained employees share in the top-heavy allocation, if the owners decide to fund the minimum?

Thanks for any replies!