We discovered that a participant went over the 5 year term on her loan and kept paying the loan

We will issue a 1099-R on the loan amount that was outstanding at the time the 5 years was up.

The question is, can the participant receive back the excess payment that should not be counted towards her loan because she went over the 5 year limit

Thank you

We have a 403(b) plan sponsored by a governmental entity, claiming to be a 501©(3) tax exempt entity but exempt from ERISA, that provides participants receiving an employer matching contribution are not eligible for the employer nonelective contributions and participants receiving employer nonelective contributions are not eligible for employer matching contributions. Recognizing that governmental plans are not subject to §401(a)(4) nondiscrimination rules, I believe this plan design is permissible.

Do you agree?

We have a prospect (fewer than 100 participants) with a 401(k) plan. The owner and 1 other participant have purchased shares of a non-publically traded franchise using some of their plan assets that were in mutual funds. All participants were given that option at the time but only 2 chose to invest. These funds currently account for about one third of the plan assets. My understanding is that they need to be properly bonded to avoid an annual audit. Appraisal of those funds is not needed annually (I assume an appraisal would be needed if either one of the participants wants to liquidate the shares). They will need to find a buyer when that time comes. We would need to account for these assets to be reported on the 5500 and a more detailed SAR would be in order.

Any other thoughts to be concerned about?

I have a potential client that did not file a 5500-EZ for 2009. He has not received any IRS correspondence yet on this missing filing. He is also late on his 2010 filing now too.

Does anyone know if the IRS has gotten around to sending out late notices/penalties on 2009 Form 5500-EZ clients yet ? He's closing down the plan so I think he's trying to gauge if he might have slipped through unnoticed or whether to file late given the 5500-EZs don't have a deliqeunt filer program yet, at least I haven't heard of any for 5500-EZ filers.

Thanks for any input/opinions.

Currently testing whether the benefits, rights, and features of several plans are discriminatory. The compensation definitions all pass 414(s) but are slightly different. Does anyone know if the definitions need to be uniform or if we can just test the definition itself for discrimination issues (410(b) tests).

Thanks for any input!

if an employee becomes a greater than 2% owner of an S-corp during the year, are we required to terminate the section 125 plan deductions/participation at the point the employee becomes an owner of the s-corp, or is eligibility for the employee determined at the start of the year and extend until the next year begins?

I am working for a new company that has the following rules in place for new hire benefit elections:

Benefits are effective 1st of the month following hire date and employees are able to make changes for 30 days after eligibility date. Under these rules, it is possible that an employee could start Sept. 2 and have until Oct. 30 to make election changes that would be retroactively effective back to Oct. 1....in this situation, the employee has almost 60 days from date of hire to make an election

I am wondering if this violates what is permissible under section 125? I thought in order to be qualified under Section 125 elections, had to be done before an effective date unless we are dealing with the birth of a child/adoption or a new employee who has a 30 day window from hire date to have the benefit be retroactively effective.

Can someone please point me to the language in section 125 (or other legislation) that states that the election must be prior to effective date (that the election cant be retroactive) and the section that specifically permits new employees a 30 day window from hire date to go retroactive. I am able to find the proposed IRS rules from Aug of 2007, but not able to find what was finalizeed

Thanks.

ira owner born March 1941 dies 7/2011. spouse gets the inherited IRA in 2011. does she need to take an rmd in 2011 or can she wait until April 2012 if she isn't born in 1941 or later and base it on his rmd age 70 1/2.

no rmd taken by 2011 prior to his death in July.

does she even need to take an rmd?

I am at a loss as to how to deal with this situation.

Our client has a bundled 401(k) plan with a well known insurance company. The Corbel Nonstandardized document clearly specifies that match forfeitures must be reallocated as an additional match contribution. The match forfeitures were reallocated to the match money type, but the allocation was done on a pro-rata basis to eligible participants without regard to deferrals. When I questioned the provider about this I was told that if the client wanted the match forfeitures to only go to participants who deferred, they needed to specify that in the allocation conditions in the document.

The base plan document clearly defines match as a contribution made on account of deferrals, which is exactly what I've always understood. But this provider disagrees.

Don't do much with DB plans; I'm trying to understand this floor offset arrangement. I understand the concept; I don't understand how the following passes muster:

HCE 1 is 47 earns $225,000 and gets DB deposits of $198,249

HCE 2 is 44 earns $40,000 and gets DB deposits of $180,561

All NHCE's get a 5% profit sharing contribution and no benefit under the DB plan because the DC supposedly offsets.

NHCE 1 age 55 earns $25,000

NHCE 2 age 41 earns $30,000

NHCE 3 age 29 earns $55,000

NHCE 4 age 38 earns $78,000

NHCE 5 age 60 earns $35,000

NHCE 6 age 34 earns $30,000

I can't get a ross-tested plan to work all that well with this group; just curious why the floor offset works so well here.

Thanks in advance for any guidance.

On Jan. 1, 2012, we're adding the Roth 401(k) feature to our 401(k) plan. I'm a little confused on how to calculate the company match if a participant contributes to both pre-tax and Roth. Our plan matches up to the first 6% -- 100% on the first 1% and 50% on the next 5. If a participant contributes, for example, 3% to pre-tax and 3% to Roth, how is the match calculated?

I received a call this week from an employer. They have elected to terminate their 401k plan and the resolution to terminate has already been adopted and the distribution forms have been sent to the employees. They did this with the intent to start a "new 401k" plan. Obviously, that's not going to work, since that would be a successor plan. After further discussions with their recordkeeper, the intent wasn't to do a new 401k, but to do a new plan that did not allow elective deferrals, and, after one year, to add elective deferrals back into the plan. I'm pretty sure that still doesn't work, since the successor plan rules apply to almost all DC plans (exceptions for ESOPs, etc.).

So, the train has already left the station and they can't unwind the termination of the old plan for some political reasons within the company. However, the owner wants to go somewhere with her money and would like to still make contributions (I know, I know...this would have been a lot easier to address on the front end...unfortunately, I'm being brought in now).

Does anyone have any ideas what they can do now? I know they could establish a SIMPLE IRA, but I'm pretty sure they couldn't roll the 401k money into that SIMPLE and they would have to participate 2 years in the SIMPLE before they could roll the SIMPLE money into a new qualified plan. They are looking for something they can do for this year only. I'm pretty much out of ideas, so I thought I would throw it out to the experts here.

Thanks!

Plan has adopted safe harbor hardship withdrawal rules (including prohibition on making new employee contributions during the 6 months after taking a hardship withdrawal). Plan also provides for employer matching contributions - $ for $, up to 5% of Compensation.

Definition of Compensation does not exclude compensation earned by a participant during the 6-month suspension period after hardship withdrawal (i.e., Compensation would include compensation earned during the entire plan year -- even compensation earned (but prohibited from being contributed) during the 6-month suspension period). Thus, a participant who took a hardship distribution (and was barred from contributing for 6 months), but who contributed 10% during the remaining 6 months, could effectively receive a 10% matching contribution for the 6-month period during which employee contributions were permitted.

Assuming the employer is okay with this result, is there any problem here? Can/should Compensation exclude compensation earned during periods when a participant is prohibited from making employee contributions on account of a hardship withdrawal?

I just read the ASPPA ASAP notice on the delayed effective date of fina/proposed cash-balance regs. I think I understand it but what about optional use of such regs before the new effective date, is that still allowed ?

I believe previously that even though 2012 was the effective date we were allowed to optionally rely upon the proposed regs before then. Is that still an option ?

Thanks for any opinions.

Just twiddling thumbs until tonight's World Series game and was wondering if anyone has witnessed a participant electing an optional Joint & 75% payment form that was added to protect him? I have not.

Can the Trust of a qualified plan be an Employer and hire employees?

In general, can owner 401k be treated differently from employees.

S-Corp deposited 401k contributions late in 2009. In 2010, he paid lost earnings on the late contributions, including his own. Did he need to pay lost earnings on his own amounts? Furthermore, does his amount need to be reported on the 5500? It would be a difference of $10,000, reducing the amount reported for 2010 from $13,000 to $3,000. If that is possible, would that be worth amending?

OK, I have a plan that we found out when they were audited earlier this year that the person we thought owned 100% of all 11 companies really doesn't (he does hold at least 33% ownership in each, mostly 50% or more). So he wants 3 of the 11 companies to be excluded from the plan. We are going to move him to Datair's non-standardized prototype, as this will accomidate his request.

My actual question is shouldn't he be reporting the census for these three companies who are not participating in the plan? Shouldn't they be tested under 410(b)? In 20 years, I have a couple of weird ones, and this one is right up there....thanks for your thoughts.

Sungard's write-up:

http://www.relius.net/News/TechnicalUpdates.aspx?ID=588

"This week, the IRS released its List of Required Modifications for 401(k) plans. The LRM dealing with this issue includes the following note to reviewers: “Forfeitures may not be used as ADP Test Safe Harbor Contributions, and if used as anything other than ACP Test Safe Harbor Contributions, the Plan will not be exempt from Code §416."

To me this almost suggests that a plan using the 3% SHNEC (which is satisfying the THM anyway) COULD use forfeitures towards the SHNEC. Corbel doesn't seem to mention this though? Anyone have any thoughts on that?

Is it possible to change from a PPO to a HDHP with HSA and maintain grandfathered status (for example, if employer increased its contributions to the extent necessary to ensure that employer contribution percentage is greater under HDHP than under PPO)? Or, as I think is more likely the case, is it impossible for an employer that offered only a PPO on March 23, 2010, to offer a HDHP and have that HDHP be a grandfathered plan because the HDHP "benefit package" was not offered on March 23, 2010?