Is there a notice requirement for a one person plan (one owner, or owner + spouse) that has quarterlies missed? They intend to make full MRC, but just not practical for them to contribute quarterlies, and seems silly they would need to notify themselves.

Greetings,

I have searched previous board discussions and found very little information to my issue. I work for a non-profit and our bugdet is extremely tight.

My organization is exploring the option to allow the staff to apply vacation accruals to pay for their health insurance contribution (15% of the Health Premium).

My questions are:

1) Can we transfer the vacation accrual ($) to our fringes budget? Will this be consider part of wages? We would like to increase their take home pay but we only have a 52 week budget for wages.

2) If we decide to implement this option, Will this have to be done thru a Cafeteria Plan? Are they any other options?

We do have a FSA plan for Medical and Dependent Care reimbursement.

Your assistance and expertise to this matter is enormouly appreciated.

Thank you,

If the insurance company states in the Q&As that the contracts offered by them are NOT fully benefit-responsive, do we need to show both the contract value and the fair value on the statement of net assets available for benefits? For fully benefit-responsive contracts, I have been able to disclose the fair value and then the adjustment from fair to contract value to come up with net assets available for benefits at contract value. Where I have a hard time is when the contract is NOT fully benefit-responsive then what do you do? GAAP says to use fair value so do you only show fair value and NO contract value? The other caveat is that for limited-scope certifications, most of the times they certify the contract value and not necessarily the fair value. I want to see what are others doing in these situations. Thanks!

DBP (effective 1995) had a benefit formula of 10% Average Annual Comp times Years of Credited Service. (Average Annual Comp uses 3 highest years- from date of hire to date of employment termination.) The Plan was amended effective 1/1/03 to reduce the benefit to zero% of Average Annual Comp.

Question 1 - does this effectively freeze the Plan? No other language relative to freeze was used.

Question 2 - in determining the highest 3 years, do you look at comp earned in the years after the freeze? The Plan has not terminated, but soon will be.

Question 3 - 204(h) notice was not given for the reduction to 0%, but an SPD containing the change was provided approximately 7/1/03. Would failure to provide 204(h) notice render the change void, or would the reduction to zero% be effective with the issuance of the SPD?

This is a takeover plan. Thanks for all insights.

Hi everyone,

I am a small business owner and operate a SEP plan for myself and an employee. I recently switched accountants and my new accountant has discovered a problem with how my SEP has been operating for the past 8 years. The problems include:

• The previous accountant was using both my W-2 wages and my K-1 passthrough in determining my SEP contribution when he should have only been using W-2 wages. Thus my allowed SEP contributions have been computed much to high (a total of about $185K excess over 8 years).
  
• The previous accountant was not taking the deduction for the SEP contributions on the corp return - the deductions were being placed on my personal return line 28.
  

My new accountant is suggesting that we can self correct this problem by:

• Amending my tax returns (both corp and personal) for the past 8 years to take the deduction correctly on the corp return.
  
• Paying the 6% penalties for the past 8 years (compounded) on the execess contributions (and any investment income realized on those contributions).
  
• Not distributing the excess contributions from the plan - but continuing to pay the 6% penalty going forward until my allowed contributions "catch up" to the excess contributions that we previously made.
  

While this proposed remediation seems logical to me I am somewhat concerned after reading the EPCRS procedures. I am concerned that given the dollar amounts involved and the length of time this has been occurring that this is not something that can be self corrected and that going with the VCP is both necessary and prudent. I don't want to go through the lengthy process that the new accountant is proposing without some reasonable level of assurance that I will end up with a SEP plan that is in compliance.

Does anyone have thoughts on this? Thanks!

As a M&P prototype sponsor we received information from Relius regarding the DOL's recent enforcement and attention to a trustee's "duty to collect". Relius has made available language to amend at an individual plan level - after reviewing I am not sure that it is worth our time to implement this for all of our clients, but at the same time want to provide the best service. Just curious if anybody could share what their approach is/will be regarding implementing this type of amendment?

THX!!

Plan provides for payment to participants of a portion of the sales proceeds if (and only if) there is a change in control. (It is a 409A-compliant definition of change in control, if that's relevant). Payment is to be made at the same time as the sales proceeds are paid to the selling owners (if a stock sale) or to the corporation (if an asset sale). If part of the sales proceeds are in future installments or escrowed or subject to earn-out contingencies, participants get paid their respective shares only as those deferred or contingent payments are received, but in no event will participants have any right to a share of payments received later than 3 years after the change in control.

If this arrangement is a ST Deferral not subject to 409A, the corporation and one or more participants can agree to cancel their participation in exchange for a lump sum payment now (there is no change in control in sight). If the arrangement is subject to 409A, this would be a prohibited acceleration. (Can't use the voluntary termination exception here.)

Section 1.414(s)-1©(3) of the IRS regulations allows "reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses and welfare benefits" to be subtracted from 414(s) compensation.

Does this include the taxable portion of section 129 dependent care benefits, which would be included in W-2 compensation if in excess of $5,000? Would these be a "fringe benefit" or a "welfare benefit"?

I am looking for comments on when FICA taxes are payable if a bonus is earned in the current year but paid in the following year with the 2 1/2 month window.

Example: 100 dollar bonus vests (no risk of forfeiture) on 12/31 but is not paid by the company until March 3rd of the following year. A participant elects to defer $50 of the bonus into the nonqualified deferred compensation plan and receive the remaining $50 dollars in cash. Are FICA taxes on the $50 deferred in the plan payable on 12/31 versus March 3rd?

401k Plan is under audit for late contributions ( we think). DOL has requested 2007 information as part of the examination. The 2007 form 5500 was filed 08/01/2008 and the audit is not scheduled until late Sept.

Does 3 year SOL apply here or can the DOL request whatever they want?. Any input appreciated

A plan has normal retirement age of 65 and an early retirement age of 55. Participant has 10+ YOP. To determine the age 55 maximum 415 $ limit, will the calculation be (a) or (b) below.

(a) 195,000 * age 65 a.p.r. / age 55 a.p.r. * (1+i)^-10

(b) 195,000 * age 62 a.p.r. / age 55 a.p.r. * (1+i)^-7

In the past I have had plans with normal retirement age 55 and the adjustment is from age 62, but the confusion in this case comes from the fact that the normal retirement age is 65.

All plan assets in a VS DB plan have been paid out prior to the end of the last plan year. There is a Form 5310, Application for Determination for Terminating Plan, that is pending with the IRS. Can the plan administrator check the final return/report box in Part I, line B at the top of the Form 5500 while the 5310 application is pending? Or must another 5500 be filed for the plan year in which the IRS completes the review of the 5310 application?

A DB plans has a minimum required contribution, but plan sponsor has no income (Sch C).

This is a owner only (1 person) with no employee.

What are the options?

If the SB shows funding deficiency, is there an excise tax?

The way I read the definition of Electronic Data Interchange, those standards apply to computer-to-computer interactions - no human intervention is required to process the message... so, if we email an excel eligibility file to a vendor who then has to upload the information to its system, a human interaction has occured and the EDI standards do not apply? Am I on the right track here?

For 280G valuation purposes, let's assume restricted shares vest on the closing date of change in control, but participants are entitled to elect cash, stock or cash/stock combination of merger consideration for their vesting restricted shares.

Shares of Company ABC vest at value $X, but are then automatically exchanged for merger consideration valued at higher value $Y.

Which value do you use for (i) W-2 reporting, and (ii) purposes of Q/A 24© calculations? $X? $Y?

It seems reasonable to use value $X for W-2 reporting but if the participant is guaranteed a higher economic value of $Y for the shares, then for 280G purposes it seems reasonable and conservative to use the higher value of $Y.

Thoughts?

For 280G valuation purposes, let's assume restricted shares vest on the closing date of change in control, but participants are entitled to elect cash, stock or cash/stock combination of merger consideration for their vesting restricted shares.

Shares of Company ABC vest at value $X, but are then automatically exchanged for merger consideration valued at higher value $Y.

Which value do you use for (i) W-2 reporting, and (ii) purposes of Q/A 24© calculations? $X? $Y?

It seems reasonable to use value $X for W-2 reporting but if the participant is guaranteed a higher economic value of $Y for the shares, then for 280G purposes it seems reasonable and conservative to use the higher value of $Y.

Thoughts?

When you open an IRA account you have to complete a Roth/Traditional plan agreement, right?

What if you don't ever return it to the financial institution? On the institutions side, what due diligence do they have to make sure it is returned? Can they return your funds if say after a year you never return the plan agreement? Is there any reporting for that since they have held your funds for so long?

We are submitting a DB for a letter of determination upon termination. The plan was established in 1967 and they have used volume submitter plans as far back as I can tell. Line 3c of Form 5310 asks "has the plan ever received a letter of determination". The plan has the letters for the volume submitter plans but not a specific letter for the plan. In this context will the IRS accept the volume submitter letter as a letter of determination for the plan? Otherwise Line 3c instructions say you have to go all the way back to either the original document or the last time the plan ever received a letter of determination and submit all subsequent amendments and restatements which may not be available. Would a VCP filing be the appropriate course of action in this case? I know our records only go back about 10 years or so on this plan.

Aside from contractual and HIPAA , what legal obligations do TPA's have to protect confidential employee information, such as financial information .

I'm confused, which is not unusual. A company with a safe harbor plan has been acquired and the safe harbor plan will merge into the acquiring company's plan in September. For the period from January 1 through August 31, the plan operated as a safe harbor plan and all contributions were made. The plan will terminated effective August 31st. Do they need an ADP/ACP test for the short plan year? Or is their safe harbor status effective through plan termination?