Reviewing a case and ran across the following benefit formula by class:

Classes A-E: specific named doctors

Class F: All others

Benefit Formulas purport to be unit% * Years of Participation. Formulas are

Classes A-E: Various percentages (as tuned to each doctor)

Class F: Actuarial Equivalent of benefit provided by 401(k) Plan

with benefits offset by "actuarial equivalent of benefit provided by 401(k) Plan". So in essence benefit provided to Class F is "A" - "A", which if I remember algebra will always equal $0. 5 doctors, around 20-25 in class F. Have a hard time believing that this satisfies 401(a)(26). Any other opinions?

Hi All,

I received notice from the IRS stating that I had income from my 2009 Tax Returns improperly reported (not reported).

The income was from my Roth IRA early distribution (I am under 59yrs of age)

When I was withdrawing the funds, my account manager advised me that that since I had the account for over 5yrs it was likely that I wasn't going to be penalized for the withdrawal (which it appears I wasn't). Nothing was mentioned as to how it would be taxed.

Now, 2yrs later, I recieved notice from the IRS that I was to be taxed on the full amount of the withdrawal (account was closed).

My questions is, is this correct?

I thought that when I invested funds into the account it was "AFTER TAX" money (meaning I already paid taxed on it).

I am not understanding how I can be taxed 'again' on the amount that I invested. I can understand being taxed on any of the "gains" made over and above what I originally invested. Since this action has a ripple affect on other portions of my Tax Return (i.e., Child Tax Credit, etc) I am being told that my adjusted return shows me owing over $4,500, when the total amount of the withdrawal was only $7,850.

Can someone shed some light on the fully taxable question for me? Am I supposed to be taxed on the $7,850 or should I be taxed on the few hundred dollars of earnings that's included in that $7,850?

Thanks in advance.

Henry

The adoption agreement lists actuarial equivalence as "N/A - plan is fully insured." Once the plan fails to meet the 412(i) requirements, are there guidelines on how the plan should determine actuarial equivalence?

Relevant Facts:

1. Plan Document allows deferral changes only January 1 and July 1.

2. HCE Owners increased their deferral percentage in August.

3. The request was NOT made by July 1 - i.e. it was not a delayed implementation of an election effective July 1.

4. NHCE's were NOT given the opportunity to change their deferrals.

What is the correction?

a. VCP submission with retroactive amendment? - my problem with this is there's no way to know who if any NHCE's would have changed their deferral.

b. Disallow the election to increase the deferrals and refund the amount in excess of the original election as "excess contributions", including the related match and earnings.

50 life 403(b) plan with 2 HCEs. They failed the ACP test pretty badly and both HCEs will need to take distributions of the excess match contributions.

But the match is a 100% fully vested match. If this were a 401(k) plan, I could test the match together with 401(k) contributions in the ADP test and maybe get a combined passing result.

Is that option available with the 403(b)? Since there is no ADP test for a 403(b) test, I simply combine the 403(b) elective deferrals with the fully vested match. Now the match is not subject to testing and voila, no 401(m) test or problems.

I'm sure this won't fly but was hoping someone could confirm one way or the other.

I’m administering a DB plan where the owner has a “proper” 242(b) election in place.

The election states MRDs are to begin the later of (A) termination or (B) attainment of plan’s NRA (65) plus years of life expectancy of table (15).

Would terminating the Plan constitute a revocation of 242(b) and therefore owner must take RMD current age plus make up prior distributions from age 70.5 or can I take position that termination of the Plan is not a revocation of 242(b) election and therefore eligible to rollover to an IRA or new DC plan and begin MRD current age?

Treas. Reg. §1.403(b)-5(b)(4)(iii)(B)(2) indicates that an exclusion of employees who normally work fewer than 20 hours per week may not be used by an ERISA 403(b) plan due to section 202(a) of ERISA and IRC 410(a), which relate to disguised age and service conditions.

Does this mean that an ERISA 403(b) plan may never exclude employees who normally work fewer than 20 hours per week from making elective deferrals? Or does this mean that an ERISA 403(b) plan MAY exclude such employees, provided that some sort of fail-safe language is used to ensure that any employee excluded under this category who in fact completes a Year of Service is permitted to make elective deferrals?

I have an IRS agent from the bklyn NY office who is doing two audits with me. One is a pizzeria and the other business is a bigger company with 50 ees.

The audits are for the 2009 years.

The auditor asked to see the 2008 5500 for the pizzeria. The 5500 showed that they lost 30% on the money. She said that she is now going to open the 2008 year for the audit because she wants to make sure that the HCEs did not take any money from the plan and use it for their personal use.

I asked her if she even remembered 08 and that it was the worst financial downturn since the 30's. I told her that people lost more than 30%. She said that she just want to check.

The bigger company uses Ascensus. I printed out the 09 annual statement which does not have the Ascensus logo on it. Thus she is also going to open up 08 as she also stated that she wants to make sure this is not another Bernie Madoff situation. On the bigger plan she is also doing trust accounting to make sure that all contributions are timely deposited and nothing was stolen.

Times are bad and the IRS is trying to catch those HCEs who might be taking money from the 401k. In order to do so it appears that everyone is guilty until proven innocent!!!!!!!!!!!!!!!

Employer makes a 20% contribution to himself in Jan 2011 for 2010. Then discovers the EE contribution is more than he can afford.

Can he withdraw part of the contribution from the SEP (note it is not an excess contribution) to a level he can afford for the employees?

He does not want to apply some to 2011 as he is adopting a PS/401k Plan.

(I guess he could lie to the IRA company and tell them it is an excess contribution and get it back, not sure even about that. Trying to be honest as a first option.)

Thanks for any ideas or information.

A five year employee was stopped for speeding. The police determined that the name and SSN belonged to a man in the penitentiary. The employee turned out to be an undocumented immigrant who was using the convict's name and SSN. Employee is being held in custody. The Feds are prosecuting many of these persons now for illegal entry before deporting them. I doubt if there will be any way this person can apply for a SSN (I think one has to apply in person at a Social Security Office) or a TIN. When the employer originally checked the name and SSN, they turned up as valid.

I have advised the employer that the 1099 for the 401(k) distribution should have the employee's CORRECT name and that it should leave the SSN/TIN block blank if the employee does not have one. It should attach an explanation when it files the 1099 with the government and then send the explanation again when the Service sends a proposed penalty letter for an incomplete 1099. Withholding would be at the normal rate.

Does anyone have any different ideas.

it's Friday and it's been a while since I 'ruined' someone's day.

I posted these a few years ago - time to do it again.

Identify the 100 college football helmets. 50 on one spreadsheet, 50 on another

An employee's covered child has turned 18, moved out, and isn't taking his meds, so she wants to drop his coverage (why pay for it, if he won't use it?) Prior to PPACA, I don't think this would be an issue since he would no longer be a dependent, but now with the expanded rules for dependents, I am thinking she cannot drop his coverage until open enrollment because despite it all, he remains eligible. Am I missing something?

We have a non-profit organization (Employer A), sponsor of a 401(k) plan and 403(b) plan. The entity acquired a non-profit organization (Employer B) in 2007. Employer B had a 403(b) plan, but contributions ceased to the plan as of the takeover date, and former employees of Employer B then became eligible to participate in Employer A's plans. Is there any reason why Employer B's 403(b) plan cannot be terminated?

Hi-I am working on a plan that is in the process of setting up franchises. My question: are franchises considered Affiliated Service Groups for coverage purposes? If yes, is there every a time that they would not be? They are trying to determine the impact of the NDT testing. Can they exclude those employees from the plan?

Audited plan has brokerage accounts for some of its employees (the rest are at a daily val platform). I assume there is some level of revenue sharing going on between the funds and brokerages. What are other people doing about this?

Are there a law or regulation in regards to when an employee's pretax HSA deduction should be deposited into their account? This is employee contribution only, no employer contribution. A friend of mine is paid weekly but their HSA hasn't been deposited in over a month.

Thank you!

Company is a one member LLC who receives a K-1 each year. It is a Beginning of Year Valuation. For 2011, he deductibl contribution is lmited to 2011 Schedule K-1 less 1/2 SE tax, correct? So let's say the Minimum Required Contribution is calculated at 1/1/2011 to be $100,000. But the 2011 Schedule K-1 ends up being $50,000. The full $100k has to be contributed to meet the minimum funding requirements. What impact does this have on the contribution amount and/or deduction, penalty for nondeductible contributions, etc?

One of our clients, a bank, attended a seminar put on by the ABA (American Bankers Association).

According to one of the speakers at the seminar, if a Mortgage Loan Originator (MLO) receives any salary/comp based on any bank profit, they would not be able to participate in the bank's retirement plan.

Has anyone heard of this?

We are auditing a 401k plan. Plan document says Match is 100% up on first 5% for the month, and 50% up to 7% for the month. Notwithstanding preceeding sentence, a participant shall not be entitled to Match with respect to a month unless he is an Eligible Employee on the last day of the month. Just to clarify this not discretionary.

For 2010, Match was calculated on annual basis. This benefits some participants and others were shorted. And some participants received match even though they were not eligible on the last day of the month. We advised client and TPA of error and recommended they revise calculation to comply with plan doc. They said "eh, we don't think it's big deal".

So obviously, failure to comply with written terms of the plan document. This is an operational defect, right? And they are risking disqualification?

For 2011, Match is being calculated on per payroll basis. argh!

I posted this question elsewhere but received no response. Looking for some opinions:

There seem to be no instructions for Schedule A Part III. I'm guessing this is to be filled out on a cash basis but was looking for other thoughts. Specifically premiums for a prior year that get paid after the policy year is over - I'm assuming these should be included with the current year's premiums.