Employer with a daily valued plan persuaded the recordkeeper to set up an account for unallocated funds to which they made deposits in anticipation of making a profit sharing contribution. The employer has now encountered some cash flow difficulties and wants to take the money back out of the plan and not allocate a profit sharing contribution. I know that, absent a mistake of fact, they can't do that, but the recordkeeper has told them they can. I need a succint resource to show the client explaining why they cannot simply withdraw the funds.

To further complicate matters, it is invested in mutual funds that have lost money.

Has anyone heard of the following:

If a plan begins mid year with greater than 100 participants, is there a transition rule which would allow them to defer the audit to the following year?

Then in the following year, the audit would include both years.

I appreciate any guidance.

Thank You

What are people entering for the hurricane Irene extension under special extensions box?

I am working on a quarterly valuation for a client and two people are coming up with this error message. One person is a reservist, so his overage is part of the make-up for the 3 months he was on leave last year. I am good with him. It's the other person that is causing my query.

She is 54 so is catch-up eligible. The plan offers traditional 401(k) and Roth 401(k). She has elected to defer into each. So far this year, she has deferred $11,264.10 into each source, taking her over the $22,500 limit by $528.20 (assuming that she did not make any deferrals for the 10/15 payroll).

She'll need a correction - am I taking it out of each source equally? They added Roth in 2006, and I am going to assume (for now) that she has made Roth deferrals since then.

edited to correct typo.

I have a publicly traded client that wants to contribute certain operating assets to a new joint venture (an LLC) in return for a 20% equity interest. These operating assets are subject to an obligation to contribute to a multiemployer pension fund. The other 80% member will be a private unrelated non-union company that will contribute assets for an 80% equity interest. The new joint venture will assume the obligation to continue making contributions to the pension fund at issue. Under Section 4218 of ERISA, a change in corporate structure does not trigger withdrawal liability (this exception covers a merger, consolidation or division of an employer). The Second Circuit in Bowers (27 F.3d 800) in 1994 held that two companies that formed a separate joint venture and transferred to it their unincorporated operations were subject to withdrawal liaiblity since there was no division or merger. Citing several PBGC Opinions, the Court viewed a division as requiring some kind of stock transaction where stock is divided away from a control group and acquired by a new owner. The asset transfer and contribution to the joint venture for an equity position thus did not qualify as a division exempt from liability. The Court also held that such a transaction was not a merger or consolidation. Any ideas on how my client can form a joint venture without triggering withdrawal liability? Since my client is publicly traded, I do not believe that the joint venture can be considered part of its control group (and thus exempt) even if it owns more than 50% of the new venture. Any thoughts are appreciated.

We missed an amendment for a welfare plan that amended the year end from 1/31 to a 12/31 year end effective 1/1/2010. However, the 2009 Form 5500 was filed for 2/1/209 - 1/31/2010 py. The extension was filed on July 28, however using the 1/31/11 year end so it is due date 11/15/11. Anyone run into this before, best options? Could I file under short year today (10/17/11) even though the extension has the incorrect plan year end of 1/31/2011? Thanks.

The client has hired a PT bookkeeper who will work only 650 or so hours each calendar year. To vest, 1000 hours is needed each calendar year. The 401k plan has a 6 yr graded vesting schedule (there is also a CB plan with a 3 year cliff). In order to help this participant vest are either of the two following options OK to use and which would you prefer..

1) Fully vest the participant right out the gate - make her 100% vested outright (obvious downside, the participant leaves in under 6 or 3 years with contributions she would not have been vested in

2) For this participant only define a year of service as 500 hours for vesting purpose - while perhaps a challenge to keep track of, it would still require 6 or 3 years for full vesting on contributions to the plans -

The participant is an NHCE and always will be an NHCE - My main question is can I choose to define a year of service for vesting for an NHCE differently than all other participants in the plan.

In an effort to assist clients and their participants with the participant loan process, our office would like to work with participants directly when they request loans. Plan Loan Programs in our documents indicate: "The Plan Administrator is authorized to administer the Participant loan program. All applications for loans shall be made by a Participant to the Plan Administrator on forms which the Plan Administrator will make available for such purpose."

This is boiler plate language across all of our Corbel / volume submitter plans. We'd like to allow the participant to initiate the loan with us directly to save time for the Plan Administrator and his / her personnel to avoid / limit back and forth with participants taking new loans.

Can our office assume the responsibility from the Plan Administrator? If yes, should our office request a sign off from the Plan Administrator indicating they authorize our office to work directly with participants on loans?

At the tail end of our process, we provide the Plan Administrator with the amortization schedule to set up the loan payments in their payroll system.

Any suggestions are welcome.

P.S. We work with Nationwide, but have found it difficult to convert to their online Loan Module system due to limitations regarding how participants are charged and how loan numbers are assigned by their system.

Hi,

I am reading through the IRS's EPCRS program. I want to make sure my conclusion on the correction method we use confirms with other's understanding. We've used the program many times now - but each situation can be unique.

We have a small money purchase plan (about 11 participants). The plan administrator has just realized that from 1996 to 2006 she missed two employees and did not treat these employees as eligible participants. So 2 participants out of 11 were missed for 10 years. This error was caused by an error she made - she misunderstood the eligility requirements. The client is new to us and when we discussed eligbility with her, this error was uncovered.

We have calculated the missed contribution plus earnings due to these two employees. Would you self correct this or file under VCP. I believe since it covered 10 years that we should file under VCP.

Thanks so much!

We use ProFx for our 5500s. We efiled a 5500 an hour and a half ago and it is still not on the EFAST2 website.

Anyone else having the same issue?

How to determine whether a phantom stock plan complies with or is exempt from 409A?

We are a TPA on Long Island (one of the areas covered under the Hurricane Irene extension). We have a client in Missouri, obviously not part of the Hurricane's affected area..

The extension page on the IRS site said the extension would apply if your business is in one of the affected counties, of if the records needed for the filing are in one of those counties.

Would that count here? Since we are preparing the 5500, could that be considered "where the records are kept"?

I need an answer to a Dependent care question. I was terminated by my employer on Sept 1st and received all relevant claims from my dependent care account until Sept 1st. My severance package includes continuance of pay until Dec 31,2011. However my employer will not deduct funds into the dependent care account effected Sept 1st. Here are my questions:

1. After logging into the account, I've seen that the employer is still depositing funds into the DCA (without coming off my paycheck). Why is this?

2. Can I claim those funds for Dependent Care although the deposits have not come from my paycheck?

3. Is this unlawful or just unethical?? Or both? Would IRS or Law get involved?

4. Is there repurcussions for putting in claims after a termination date although I'm still currently on payroll??

In general, whose money would I be claiming? The employer?

Help is appreciated..

I have an employer with an employee planning on terminating service so that he can default on his loan and potentially withdraw additional dollars from his 401(k) Plan. The company then plans on rehring the employee.

The employee is aware of the penalties and taxes associated with this type of withdrawal.

The company has an internal policy that states employees termed and rehired within 30 days are reinstated for all benefits and senority.

This just doesn't seem right. Any thoughts?

I appreciate any insight you may share!

The following provision (paraphrased) appears in a non-exempt severance plan adopted on March 1, 2011:

If I am not employed by June 1, 2012, I will notify former employer and will receive a payment of $5,000 per month until the earlier of June 1, 2013 or when I become employed.

It's not a short term deferral because payments can be made after the STD period. My question is whether the employee has apparent discretion over when payments begin. Obviously it's in his best interest to notify the ER as early as possible, so this doesn't seem offensive. Can we view the employee's giving of the notice to be the vesting event such that the payment schedule is valid?

If an employer pays a former key employee for the entire cost of health coverage under its self-funded ghp, is that taxable compensation to the employee that is potentially 409A income if such coverage is not available to non-key employees?

If so, how to comply wtih 409A? Simply include the factors in 1.409A-3(i)(1)(iv)?

Our TPA is switching from one prototype sponsor to another. With the prior sponsor, we have and EGTRRA D-letter and we timely adopted for 415, HEART, etc. The new prototype sponsor wants us to restate onto their document. I'm OK with using current date on the Adoption Agreement, but not on the 414, HEART and other amendments as it may appear that those amendments were adopted late. Is there any IRS guidance as to what date should appear on the re-amendments that are not incorporated into the Adoption Agreement?

I'm not sure if this is the correct forum but none of the others seems to be appropriate for this question, which may be an easy one:

Is a Medicare participant's Health Insurance Claim Number (HICN) the same as his or her social security number (SSN)?

Thanks.

New small plan client has finally sent in transactional accounting 'in time' for filing 5500. Here's what we've learned:

2009 delinquent contributions were deposited in 2010 with lost earnings of $65. No 5330 filed. No excise tax paid.

2010 delinquent contributions were deposited in 2010 and 2011 with lost earnings of $26 for 2010. No 5330 filed, no excise tax paid, no extension filed.

When calculating excise tax in 2010, does the 2009 portion applying 100% include the unpaid excise tax of 2009? ie 65*100%+65*.15*100% = 74.75?

I understand there is an option to pay excise tax to the trust and allocate to the participants affected. In this case, excise tax will be under $100 each year, and no contributions were deposited over 180 days late. Would this be sufficient, without filing a 5330 or VFCP? I also recall something about filling out 5330's for records, but not submitting.

Much appreciated!

Trying to get a feel for how other multiemployer plans determine whether a participant has terminated employment for purposes of mandatory cash-out distributions. Our work is seasonal, so if a participant doesn't apply for benefits, we really can't conclude that he/she has terminated employment until no contributions are received for several months.

To my knowledge, there is no guidance on this topic and multiemployer plans are free to devise their own procedures for making this determination. The "no contribution" range that I have seen is between six months and two years.

Any other methods to consider? Any guidance that you're aware of? Any thoughts on the appropriate "no contribution" range?