Client has a safe harbor non elective contribution and an integrated profit share contribution with a last day provision. There is 1 HCE and 2 NHCE's. All 3 received 3% non elective. One NHCE terminated and does not get a profit share contribution. She worked over 500 hours. When calculating the ratio test, are both NHCE's counted as benefiting since they received the safe harbor contribution? Is there further testing that needs to be done since the two NHCE's received different contribution rates?

I just had a cafeteria plan come into the office. It was adopted in 2004 and has a Medical Reimbursement Plan. The MRP permits reimbursements for over the counter medications without a prescription. It is past the June 30, 2011 retroactive amendment date. Is there a VCP program for Cafeteria Plans?

Thanks

Is surrogacy asssitance, provided by the employer, nontaxable?

We have a company, USA, that is based here. There is a parent company in Germany that has based a German national here for two years. He is really an employee of the German co., but is paid by the US co through what they are calling a shadow payroll - basically, he is added to the USA payroll and the USA co invoices the German co for the wages.

Since he's showing up on the USA payroll, the Q arises as to whether he is eligible for the USA plan. If I had to answer, I'd say "no" because they are just using the USA payroll as a convenience. (I think I've seen related companies that are not necessarily controlled groups using one company as a common paymaster and just because someone shows up on a payroll report doesn't make them an employee.)

Any thoughts?

P.S. He's not a nonresident alien who would be excluded under the plan terms; has too many days of residence.

Am I correct that there is no way to do a nonelective transfer between a 401k and a 403b? Trying to swoithc a 401k client over to a 403b and wanted to know if it was possible to do nonelective transfers from one plan to the other.

NOTE: We would not be terminating the 401(k) plan - the union employees would be remaining in the 401k Plan.

I'm at a loss here. The trustee of a self-directed IRA has been directed to sell a limited partnership interest held by the IRA to a third-party in exchange for cash. No big deal. HOWEVER, for whatever reason, the IRA owner is directing the trustee to make the effective date of the sale retroactive to LAST year (January 1, 2011). From what I can tell, this probably presents tax fraud issues for the partnership/partners BUT from the trustee's perspective as a directed trustee, should the trustee nonetheless agree to complete the transaction retroactively? It seems like it would be complicit in the fraud. What I'm not sure about is how this would impact the IRA itself (would it somehow be disqualified or would the cash received from the sale somehow be treated as a distribution/contribution)? The IRA trustee hasn't done any year-end reporting yet, so I think that's probably not at issue. I work only with qualified plans/health plans/exec comp and know NOTHING about IRAs (other than stuff related to rollovers and SEPs/SIMPLEs generally), so I just need some help with issue-spotting or a nudge in the right direction. This seems like more of a partnership tax (or even personal income tax) issue to me, which means I'm entirely out of my depth. I've ruled out a prohibited transaction, so no comments in that regard please. Any thoughts?

My boyfriend is currently going through a divorce. His ex has made it clear that she will want half of his 401K. Since we live in PA she will get what's fair and only 1/2 (if she gets that) of what was accrued through the marriage. It is HIS 401K, she did not contribute anything and opted to not have one even though she was a RN making great money during their marriage. What we want to know is, if his plan through his employer states that in the event of a divorce settlement, what she is awarded is to be moved and cannot be touched until he withdrawals - do the courts have to abide by that plan? Is that what is put into the QDRO or can she fight and say she wants a lump sum of cash?

Does the Notice/Statement that is required to be sent to participants listed on Form 8955-SSA have to be sent to individuals listed with Code D, as well as Code A? It seems that the D's dont need the notice because they already received notice that they had a deferred vested benefit. The IRS has not addressed this directly. The conservative approach is to send the Statement to both A's and D's, but would omitting the D's be reasonable in view of the lack of guidance?

I just picked a client that used a big payroll company. When they were with the payroll company they used the per payroll method for making safe harbor matching contributions.

The problem is that the owners made their max 401k contribution within the first 3 payroll periods. Thus they only recvd the safe harbor match for those 3 payroll periods.

The question is whether to do a true-up match?

Section 3.1.2 of the Plan document prepared by this payroll company says, “matching contributions will only be made if Elective deferrals are made.”

Thus it appears that no true-up is required.

However, Section 1.1.17 states that, “Compensation shall mean wages defined in Code 3401.” However the last sentence of Section 1.1.17 also states that, “If a contribution under the plan is made on a periodic basis, compensation used to calculate the contribution shall be the compensation for the period in question.”

I believe that the plan does not explicitly define compensation as on per payroll basis to match the terms of the contribution per payroll method. Thus one could argue that a true-up should be made, based on the reference to 3401.

Any thoughts???

We all know key employees are subject to a 6 month waiting period before any benefits can be made, but what happens to a key employee's bonus deferral election if he terminates after the bonus is earned but before it is paid?

Example, a key employee elects to defer 50% of his 2011 bonus (payable in 2012). He works for 11 months of 2011 before he terminates in November.

The company decides that they will pay him $20,000 in 2011 Bonus.

Does his elected portion have to be deferred into the plan, and thus, subject to the remainder of his 6 month waiting period?

Any help/thoughts would be great.

Thanks.

Running the Top Heavy test in a 401k plan. A participant rolled money into the plan during the year. This always confuses me....

1. If the rollover comes from an unrelated employer plan, I know that something shouldn't be included in my test. Is it just the rollover contribution? or is it the entire rollover balance on the determination date? For example, the rollover contribution was $1000 on July 1st, on December 31st, the rollover balance was $1100. Do I exclude $1000 or $1100?

2. Is the rollover excluded forever, or just in the year of the rollover contribution? I think just in the year of the rollover contribution, but am not sure.

3. I think the whole point of this is so that the rollover is not double counted. Does this apply to an IRA rollover into the qualified plan?

Thanks!

IRS guidance on how to price coverage provided to domestic partners, for imputed income purposes, has been doled out piecemeal over the years via private letter rulings.

Among other options the PLRs provide that amount includible in the employee’s gross income may be calculated as equal to the difference between the amount the employer would contribute for the employee alone, and the amount the employer would contribute for coverage of an employee and a spouse or family, as applicable (i.e., excluding employee contributions). This is a calculation method that will be quite a bit lower than using COBRA premiums as a standard.

More recently there has been guidance in Notice 2011-28 and now 2012-9 on how to value coverage for purposes of reporting the value of group health coverage only, not taxing it, on Form W-2. It is not clear to me whether or not the W-2 guidance for reporting only supplants the prior PLR guidance on imputed income calculations of what is actually taxed. In general the PLR guidance on what is taxed, is narrower than the W-2 guidance on what is reported “for information purposes only.” For instance the PLR guidance allows exclusion of the employee’s portion of contributions whereas the new guidance on W-2 reporting specifically provides that employer and employee contributions towards coverage must be included in the value for reporting purposes.

Technically of course the PLRs are only citable authorities for the taxpayers who obtained them but I am wondering the degree to which payroll departments that have been relying on PLR-sanctioned methods of calculating imputed income, are switching over to one of the valuation methods cited in Notices 2011-28 and 2012-09.

A participant's distribution was processed by closing her FBO brokerage account and having checks issued to the participant (70.5%) and one to the company (20% Fed w/h, 9.5% State w/h).

Company wrote two checks and remitted with vouchers to US Treasury and FTB under the Participant's SS#.

Don't I have to prepare a 1099-R? If I do, would I put SS#s in where the Plan's EIN would normally go (Fed & State Payers ID #)? Otherwise, something isn't going to match up somewhere. I have to report a gross distribution and withholding somehow.

Cafeteria Plan with HSA - only participants are two key employees; three non-keys do not need health insurance and, therefore, do not participate. Is nondiscrimination testing required?

Any suggestions on were to look for TPA firms for sale? If you know of any TPA firms for sale, can you please suggest them to us.

We are currently looking to expand our operation thru acquistion. Any help, ideas or suggestions you can provide will greatly be appreciated.

Wow, what a brain cramp I'm having on a basic question. Maybe I should just go home and not think until tomorrow.

Corporation A has a plan, that is already terminated. Corporation B has a plan. the owners of Corporation A and Corporation B have formed a new Corporation C, which they own 50% each. All the employees of Corporations A and B are now on the payroll of Corporation C.

Is there any problem with Corporation C installing a plan and having the Corporation B plan merge into it, rather than terminating and offeringthe employees the right to distributions, etc?

Duh - it's a controlled group. So there certainly is no problem. I need a nap. Any observations that anyone wants to make re this situation, since my brain ceased to function earlier this afternoon?

A traditional defined benefit plan [not 412(i)] was frozen in 2003. There is an insured death benefit equal to 100 times the anticipated monthly retirement benefit less the cash surrender value of the insurance contracts. For several years the client has been advised to reduce the face amount of the insurance in the plan, but they have not done so. I believe that this constitutes a listed transaction which is reportable on Form 8886 and which is subject to an excise tax. I have two questions: 1) Is there an exemption for amounts up to $100,000 in excess such as there is with a 412(i) plan?; and 2) Is each policy in a given year counted as a separate listed transaction, or would it be considered one listed transaction for the plan for the plan year? With respect to the the first question, if anyone can supply a cite, it would be great.

have a plan that incorrectly allowed hardships to come from incorrect sources in the plan.

THe amount that came from the incorrect source is less than $30, in total. With each participant in most cases having less than $1 come from the qnec source

Most of the hardship came from the deferral source.

How do we correct it? Is the fact that the amount from the incorrect source is small a factor ?

A prohibited transaction, no? The immediate issue is whether or not to file 1099s - we're leaning towards not doing them since it wasn't the plan that paid the terminated participants. Luckily it was for a small amount ($300 between 2 participants, both under $200 apiece in a plan with about 40 lives). Technically, I suppose a 5330 s/b filed (perhaps guaranteeing an audit) and an IRS correction program should be used (is self-correction permissible for this?), but as a practical matter I can't imagine plans go through all this for the amount in question. What's the best way to handle this, especially the 1099 situation?

If a participant is currently receiving annual RMDs, and their account balance is at or below the plan's cash out limit, can distribute the remaining account balance or do you have to continue calculating RMDs until account is zero?