Good afternoon all. I love a thicket of crazy. Not really but here we go again.

Client terminated a profit sharing plan in 2006 and distributed all the assets. Unsigned form in our file indicates FINAL box was checked on the 5500. FreeERISA shows no final box being marked. No forms filed after PY 2006. It was PN 001.

Client has a 401(k) and DB plan, both if which received extension letters for this cycle's 5500. Timley filed 5558s and so on.

The profit sharing plan ALSO got an extension letter, even though a request for one was not filed by our office. So now PN 001 is back in play, sort of, with the IRS.

I am thinking we need to file under voluntary compliance with DOL to correct the final filing to show FINAL back in the mists of time for the profit sharing plan, and do it before the extended due date for the current 5500. And then pray that the IRS does not go looking for the 001 filing for 2010 (and perhaps backwards).

Any better idea? I suspect a processing glitch (no, really?) but an IRS glitch as we all know can lead to a TPA's worst nightmare. Thanks in advance for your good ideas.

Good Morning,

I'm a lot over my head with this topic...I tried to read the code sections regarding earned income; self employed individuals and my eyeballs just glazed over. So, I've come to those who can help me with little words and clear meaning for a simple mind like mine.

This LLC has a pay arrangement with one of the partners that is getting me tripped up. The partner receive a K-1 but they also receive a 1099 for commissions. Can the K-1 and the 1099 be combined together to get to their eligible compensation for deferrals?

I appreciate all the help and any comments offered.

Plan terminated in 2010. Partners do not want to make SH contributions for 2010 for themselves. They did not defer and did not realize that they still were required to deposit the SHNEC for themselves. Plan has two partners/HCEs and two non-HCEs. SHNEC was contributed for NHCEs.

Other than advise them that this a violation of the terms of the written plan document and that they are risking disqualification, what is my responsibility?

They seem willing to take this chance. Must I report this failure to contribute?

Thanks!

Small C Corp is owned by a son and his wife, another son and his wife, and mother (her husband is deceased). Only one employee (one of the sons) works and draws W2 pay. Can the C Corp establish a Solo/Individual 401k with the working son being the only participant in the 401k....or must all owners participate in the 401k even though they don't draw any pay?

Has anyone seen or heard anything on the status of the 2011 Form 5500 release? Thanks...

PEO decides to change providers. Some of the employers using the PEO are relatively new to the relationship, and the change of provider causes the employee accounts of those employers to bear a deferred sales charge. As it turns out, the new provider will not cover those deferred sales charges. If the PEO also decides not to pay those deferred sales charges, would it be appropriate to spread those sales charges among all accounts (including even those whose employers will not suffer the sales charge) as an administrative cost resulting from the change in providers (under the theory that a few specific employers should not bear the brunt of a PEO's administrative decision to change providers)? Are there other solutions to this issue?

We found out today that there was a 401(k) deferral deposit that was not made at all from 2009.

After the amounts are paid to the plan and the interest allocated, we need to file Form 5330 for the late amount.

From what I understand, I will have to file THREE forms, one for each tax year.

But, the form says that the form is due "by the last day of the 7th month after the end of the tax year of the employer (or other person who must file the form).

So, are the 2009 & 2010 forms LATE?

The instructions say there is a penalty on the unpaid tax. But you might not have to if "you can show that the failure to pay on time was due to reasonable cause."

Is "we didn't know about this until today" a "reasonable cause"?

During the IRS Phone Forum today Sep 21 2011, Andrew Zuckerman, Director of Employee Plans Rulings and Agreements, said the following (my transcript):

I think the small businesses of America, and plan service providers, owe attorney Alex Brucker a debt of gratitude, as I presume his well drafted 2008 letter to the IRS started the ball rolling on this. This was a glaring inequity against small businesses.

I wish Andy Zuckerman had provided more info, such as what years will be eligible and other details, but I guess we will have to wait.

all the db plans i work with generally have 10 or fewer participants.

And when the plans are terminated they generally all take lump sums.

i have a first now; a situation where a participant wants to continue receiving his annuity.

so they will have to purchase an annuity

with that said; any recommendations as to how to choose an insurance company for this?

not sure if the plan sponsor will want my firm to investigate which company or if they will want to do it.

comments from anyone with recent practical experience is appreciated.

thanks

Hi,

We have an ERISA 403(b) plan which uses 415 comp for calculating the employer contribution. The client would like to exclude Vacation pay, sick pay and back pay from the definition of compensation. Is this allowable if we test the compensation to ensure that it is not discriminatory?

I thought that you could not exclude compensation that was paid on a consistent basis and so all of the 3 mentioned above cannot be excluded. However, I'm having a hard time finding support for this.

Thank you!

A client received a 'random' audit letter. In the letter one of the items requested was a Form 56 and a 2848 for the trustee.

Form 56 for a qualified plan? First time for everything I guess. Auditor says that it is a new requirement for audits of plans. The IRS wants to make sure the trustee is 'qualified' and that the trust is a qualified trust.

Although we disagree based on IRC 6903 and 6036 that this applies to qualified plan trusts which are exempt under 501(a) of t he code, the auditor INSISTS on getting the form.

Anyone else run into this yet?

Employer with several DB and DC plans. The last coverage test was done and passed as of 12/31/08. Will need to do another one as of 12/31/11. Data is collected as of 12/31. There is concern that the 12/31/11 test won't pass coverage. If the ratio percentage test at 12/31/11 fails and the average benefits test at 12/31/11 fails as well, what corrective action could be taken, and when? I'm confused since we won't know the testing result until after the end of the plan year. Could an amendment be made after 12/31/11?

Thanks

Can a discretionary amendment be implemented before it is adopted? For example, can a plan that does not currently permit lump sum distributions be amended to allow them before the plan is amended, so long as the amendment is adopted by the end of the plan year and made retroactively effective? (Assume no 436 issues).

I'm working with a new 403(B) plan. Employees who work 1,000 or more hours per calendar year are eligible to join.

In addition to our regular staff, we have several hundred seasonal employees who work at our summer camps. They are paid in full and half day increments plus room and board. For the "normal" employees like archery instructors, cooks, etc, it's easy to convert the daily rate to hours. They don't come close to 1,000 hours. However, I'm not sure how to count the hours for the Unit Counselors. They sleep in the same cabins with the kids and are technically on call in case of emergency even when asleep (nightmares, wet beds, etc). Do I have to count that as 24 hours for each day worked? If so, they would hit 1,000 hours with about 7 weeks of work.

Plan is terminating effective 10/31/2011. Assets will not be distributed until after the end of the year. For testing purposes (compensation limitation, 415 limit, etc.) is this considered a short plan year. My thought is no becuase the 5500 will not be a short plan year.

a small law firm (3 partners) has a 401(k) plan with appx 20 participants. one of their partners will retire in a few years and they are looking to set aside about $250K over the next 3 years for this partner only. Would a non-qualified plan be a good option? The firm was wanting to write off/deduct any contributions it made to benefit this partner.

Hi all,

I'm trying to get an idea how other health plans handle Medicare Secondary Payer reimbursement demands. Do you / your clients generally pay all the demands upfront and then attempt to obtain a refund from CMS after actual coverage is determined? Or do you dispute the claims without paying anything (and thus accrue interest on any claims that are ultimately owed)?

Also, anyone else find themselves expending an enormously disproportionate amount of resources to responding to these MSP claims?

Thanks for your feedback.

I am doing a 401(a)(4) nondiscrimination test for a 401(k) profit sharing plan. The plan sponsor also has a cash balance plan. The cash balance plan was not aggregated with the profit sharing portion of my plan for coverage or nondiscrimination. Both the profit sharing portion of my plan and the cash balance plan satisfied coverage using the ratio percentage test, so I am only computing the average benefit percentage test for purposes of determining if a rate-group satisfies the 401(a)(4) testing requriements.

Since the plans were not aggregated, both satisfied the ratio percentage test and did not rely on the average benefit test, when I compute my average benefit percentage test for the 401(a)(4) nondiscrimination test on the profit sharing plan, can I rely on the rule that allows me to treat the profit sharing plan and the cash balance plan as seperate testing groups if I compute the test using allocation rates and not accrual rates?

We don't administer the cash balance plan so we don't have the accrual numbers for the defined benefit plan and don't want to request it if we can get by without it.

Two small companies have merged. The new merged company will offer group life insurance coverage, similar to the coverage one of the small companies had. But the other company had individual life insurance policies. The new merged company would like to grandfather those employees, allowing them to keep their individual policies if they would rather not switch to the group life coverage. Can they do that -- or is there a discrimination issue?

Are people aware that there was 5500 filing relief until 10/31 for 5500's? This is the ASPPA ASAP, if you have access to it. More of a public service announcement.

http://www.asppa.org/document-vault/pdfs/asaps/open/11-28.aspx