I have a client that has maintained a 401(k) plan with me for some time. From about 2007, part of the plan's assets, which were all commingled, were invested with a certain investment firm. When my client started the account, he indicated on a preference questionnaire that he wanted the monies to be invested conservatively. It appears that the investment firm ignored his wishes and invested the plan's assets fairly aggressively. Over the last couple of years, my client has been requestng different types of paperwork from me such as, historical brokerage statements, reconciliation worksheets for those assets held by the investment firm, etc. After doing alot of research, my client decided to sue this investment firm. I received a call today from his attorney asking me about the entry on the 5500 forms filed over the years that indicates that there has been no fraud or dishonesty. He wants to know when this box would actually be checked. The opposing side is suggesting that if this box was never checked, then the Plan Sponsor felt there was never any Fraud or Dishonesty, so why is he crying foul now?

Here are my questions:

1. My contention is that you don't check the box indicating fraud and dishonesty because of a "gut feeling" that your plan's assets are not doing as well as you had anticipated and you want to blame it on the investment firm. Correct?

2. Not having received any indication from the plan sponsor other than having me gather historical information and his suspicion that the investment firm might not have followed his instructions, I checked "no" for every 5500 I prepared. Do you agree the correct approach was taken?

3. What would need to occur for that Fraud and Dishonesty box to be checked? Does there have to be something definitive from the courts? A judgement against the injuring party? Is the IRS clear as to what constitutes Fraud and Dishonesty so that the box would be checked with a "yes"? If you know, please direct me to where the IRS says this.

Thanks for the help,

Rick

http://www.dol.gov/ebsa/pdf/2011-5500inst.pdf

http://www.plansponsor.com/Advance_Copies_...0_Released.aspx

if you scroll down you can print the sample forms from:

http://www.dol.gov/ebsa/5500main.html

My client has received reclaimed match in the amount of $1,825.66 from a participant that received $2,022.67 as part of their termination distribution that was processed 05/03/2011. The amount received is less because it had been invested as a direct rollover to an IRA by the participant and was not worth the original investment of $2,022.67.

The error was client caused and they handled the reclaim process, but they now want to know how to now make the plan whole.

I know that the client will have to make up the difference owed but would the amount received be considered "adjusted for loss"? Do we have to do a separate calculation of the gain/loss of the original $2,022.67 paid out and if so what calculation options are available?

An employer realized that he has consistently been using compensation from the prior year when calculating the annual SEP contribution. For example, when he made the contribution for 2010 in early 2011, he used 2009 compensation. This has been going on for many years -- using comp from one year earlier than he should have. In mulling this over, I thought that since the contribution is discretionary from year to year, and nothing has gone out to participants stating that "you will be receiving a 6% contribution this year," the compensation that was used might not be an issue. The employer says that typically, wages have increased slightly each year, so instead of getting a 6% contribution based on 2010 compensation, the employee probably got a 5.25% contribution. Any thoughts from my peers?

Does income inclusion at December 31, 2011 under 457(f) make 409A a non-issue for 2011? Or, must the actual payment of the income occur by March 15, 2012? I'm struggling with the short-term deferral regs. Specifically the first sentence in 1.409A-1(b)(4)(i) that seems to first require that the payment must not be a "deferred payment." Reading further at (i)(D) a payment is a "deferred payment" if the plan provides it will be made after March 15 for a calendar year service provider. So, is it correct to say that the short-term deferral exception will NOT be met if the income is recognized at December 31 under 457(f), but the plan provides that actual payment will be made the following June 15?

Thanks,

Ken Davis

Univ. of South Alabama

If and employer is contributing to an FSA and there are unused funds at the end of the plan year/grace period, do the forfeitures become plan assets or do they revert back to the employer's general assets? I have a sales team that insists on setting up employer funded only plans as FSAs as opposed to HRAs, so I keep trying to find reasons to dissuade them from doing this. As always, any help is appreciated.

I understand the deferral contribution deadline for C-corp is 12/31; for sole-proprietor and partners, deadline is due date of tax return.

When is the deadline for deferral "contribution" for S-corp?

What I'd like: not too difficult for an average user to figure out, can be installed on multiple computers (or a server) so each user can prepare their own exp stmt (web-based would be acceptible too), multi-currency would be nice but at least be able to designate a currency for each report, if it has "mgmt approval" features then those can be bypassed, and, not expensive (either onetime purchase or minimal per use fee).

I've looked online: most spreadsheets are too simplistic or too confusing for the average user and most software is too expensive per user or wants to charge for months even when you don't use it.

Please post or message me with any suggestions. Thanks!

- The plan is made up of two companies (A & B). Company A provides mostly financial and some administrative services to company B. Companies A & B are separate corporations.

- Owner 1 owns 100% of both companies. Owner 1 sold his "ownership" of Company B to Owners 2, 3, and 4. "The new stockholders are not controlling or voting stockholders. The "ownership" is purely for the receipt of Company B's income distributions and dividends. The only voting and controlling owner is Owner 1"

- When Owner 1 was the only key employee, the plan was not top heavy (just under 60%). If Owners 2-4 are considered key's the plan would be come top heavy (they contribute 401k)

- If they become Key, then additional contributions would have to be made (3% top heavy less match). Plan is audited plan, so the additional contribution, while small in terms of a percent, would still amount to a significant expense. They only want to contribute the match.

Question: Are the new "owners" considered to be actual owners of company B? Can it be considered that company A performs a management function over company B?

Ideally if only owner 1 is the key, then they should be in good shape. Owner 1 does not contribute 401k.

Client missed auto enrollment of several participants. The plan is cross tested, each participant is their own group and makes profit sharing contributions (2.5% to each participant). Provided that the non-discrimination testing is still satisfied, can the PS be 'shifted' to cover the QNEC and missed match (Formula is 25% up to 6%)? (All dollars in PS source would be shifted to avoid issues with cross test) Corrective allocation would be 1.5% QNEC + .75% match = 2.25%. Can a sponsor allocate a QNEC that is slightly greater than the amount required to make the correction? Would this be allowable? Any thoughts anyone?

I apologize for the basic questions and the lateness of the request. We have a 403(b) and are new to the audit and 5500 processes. We have just been informed by the auditors that we need to file the 8955-SSA. Since we need to gather all of the info for the auditors anyway, we decided to try to tackle the 8955-SSA ourselves.

Please clarify the following:

1. In Part III, line 9 are we to add (code A) only those participants with balances but haven't started to receive benefits? Or are they omitted only if they have been paid out entirely?

2. If those reported have yet to draw anything, how do we report on 9(d) and 9(f)? (Our providers provide many payments options.)

Thank you, everyone, for any advice you can offer!

I am interested in determining a reasonable expectation of an attainable net (pre tax) profit margin for a non producing third party administration firm with fewer than 500 clients. The firm is in Ohio with clients primarily in Ohio and neighboring states. For example, on revenue of $500,000, is it reasonable to expect 10%, 15% or 25% after all expenses including salaries (EBITDA) ?

Am I reading this right? Is the new IRS User Fee for Form 5300 Application for Determination Letter now $2,500? We are getting ready to submit some Cycle A individually designed plans (e.g., ESOPs). I am shocked the fee is so high. I am hoping against hope that I am misreading this. Thanks.

Once the Safe Harbor Notice goes out for 2012 then the plan provisions as stated must remain in place or you lose the safe harbor pass on ADP/ACP and top heavy, right? I have an advisor who wants to look at amending a safe harbor plan document in February and "re-disclosing" the new provisions but I'm telling him that this will blow up the safe harbor and make the plan subject to testing. Where can I find documentation on this? Whitepaper?

My company as had several people on a temporay layoff that were not able to pay their insurance premiums. Now that they are back we need to deduct for the premiums owed. We do have a Section 125 plan so the premiums would be deducted pre-tax however some employees will not be caught up on the amount owed by the final payroll of 2011. Can the missed premiums be deducted in 2012 as pre-tax along with the 2012 premiums?

IRC 408(g) states that "This section [408] shall be applied without regard to any community property laws." I'm trying to determine the proper application of that provision in the following situation.

Owner of IRA lives in a community property state and names spouse as sole primary beneficiary and adult child as sole contingent beneficiary of his traditional IRA. Owner dies and spouse timely executes a disclaimer of owner's interest in the IRA. Disclaimer goes on to recognize that the effect will be that the disclaimed property will pass as though spouse had predeceased the owner.

The result intended by the parties was that the spouse would retain a 50% intererst in the IRA, as the primary beneficiary [she disclaimed the community property portion] and that the remaining 50% would go to the adult child as contingent beneficiary.

Applying 408(g) to this situation, it would seem that there is no community property interest in the IRA. If that is the case, wouldn't the owner's interest in the IRA be 100%, rather than 50%, with the effect being that the spouse is waiving her entire interest in the IRA? The entire IRA would then pass to the contingent beneficiary, as though the primary benficiary [spouse] had predeceased the owner.

I'd welcome any thoughts on whether my read of 408(g) is accurate.

Two partners have a DB and 401k Plan. Let's say each have $150,000 in self employment income before any deduction for the DB contribution. They make a $200,000 contribution to the DB plan, which they split the deduction for.

They both alos make the full 401k deferral contribution to the 401k PSP. What is their limit for a profit sharing contribution. Is it 6% of compensation after deducting the DB contribution and 1/2 self employment income tax? Ie 6% of $150,000-$100,000-1/2 SE tax? Or is it 6% of SE income before any deductions?

Company X has 10 employees. 2 are owners. 8 are leased employees. What are the problems with Company X having a 401(k) Safe Harbor Plan? Can leased employees defer to this plan or must they defer to a plan of the leasing organization? If they defer to a plan of the leasing organization can Company X contribute a Safe Harbor Match to this Plan using deferrals contributed under the leasing organization plan, or can they contribute the Safe Harbor Match to the leasing organization firm and get "credit" under the Company X Plan? I suspect that the best route would be the 3% Nonelective from the Company X Plan deposited to the leasing organization firm's plan. Any and all thoughts are appreciated. Thanks!

I have a plan with an active career average benefit formula. (annual accumulation plan) There are two participants receiving $0 compensation for the plan year, so they do not receive a benefit accrual for the plan year. However, they're accrued benefit is actuarially increased because they are both post NRA, and the plan takes the greater of the two.

I would think that for 1.401(a)(26) purposes they would not be considered benefit, however under 401(a)(26)-5, it states that in general "an employee is treated as benefiting under a plan for a plan year if and only if, for that plan year, the employee would be treated as benefiting under the provisions of §1.410(b)–3(a)".

Under 1.410(b)-3(a), it states that an employee is considered benefit in a defined benefit plan if "the employee has an increase in a benefit accrued or treated as an accrued benefit under section 411(d)(6)."

Technically, the participants do have an increase in their benefits accrued. Would you consider them benefiting for 401(a)(26) purposes?

Thanks for any feedback on this,

Jeff

is there any relief for illiquid assets with a difficult to determine FMV?