Can anyone verify that I have the basics down about a 401(h) in a db plan?

Assets held in DB plan

Assets can't be used in valuation in DB plan

Formula for amount set aside in 401(h) is in the document.

Amount for each participant per year reduces amount available for DC plan

Formula can't be discriminatory, but are they able to be tested in a 401(a)(4) basis.

That's all i know now. What other main points am I missing?

Andrew

If an excess contribution was made to an IRA several years ago (e.g. 2007), and the excess contribution was quite large relative to the maximum allowable contribution (e.g. $50,000), and such excess contribution was not discovered until now, what would be the cheapest way to withdraw the excess contribution in the current year?

Also, if no deduction was ever taken on any portion of the excess contribution, could the excess contribution be treated as a nondeductible IRA contribution, and be withdrawn without including the amount in gross income, or subjecting the amount to the 10% early withdrawal penalty? Further, could the excess contribution be removed without removing any of the earnings on the excess contribution?

I know this is an unusual question, but I hope somebody may have some experience/knowledge regarding this type of situation.

I am hearing close to a year after filing for a letter on Termination for a DB. What have been your experiences?

I use IFILE with an XML feed from Relius. Generally, there has been no problem with EFAST2 accepting the feed. I just spent three hours locating an error. Hopefully, this discussion will spare others some pain.

Keep in mind that each time my uploads failed the only message EFAST2 produced was "The XML is not a valid file." This, of course, was not true as I even tested the XML for syntax with an XML tester.

(1) I reviewed the filing for suspected blanks and triple checked. Nope.

(2) I continued to edit XML file and dropped off the attachments and then the schedules one by one. Nope, until I got to Schedule C.

(3) I reviewed Schedule C but could not get EFAST2 to accept the XML no matter what I did to the Schedule C.

(4) I gave up and decided to upload the filing without the Schedule C. Worked fine.

(5) Then, I proceeded to enter the Schedule C manually on line and that worked fine until [drum roll] I entered an address. The address I attempted to enter was "7th & Washington." The entry field turned pink and it turns out EFAST2 didn't like the ampersand. So, when I changed "&" to "and," the XML uploaded just fine.

In short, EFAST2 gave no indication whatsoever what was unacceptable and through brute force I was able to determine the offending entry.

EFAST2 is very educational -- it teaches you how to cuss !!!

The attached court decision is about whether a child conveived after her biological father's death is his child.

Although that decision is about Social Security benefits, one wonders whether health plans face similar or related questions. If so, does a plan document provide a useful definition about who is or was a participant's child? If not (or if the definition is ambiguous or incomplete), what steps does a plan's administrator take in using its discretion to interpret the plan? If the plan provides its benefit through a health insurance contract, does the employer punt these questions to the insurer? If the plan is "self-insured", does the employer check whether the stop-loss insurer would agree with the administrator's interpretation?

Let's get the observations of the message board's readers and writers so that we can learn from one another.

Beeler8thCir.pdf

I feel as though this is a fairly straight forward question, but one for which I have found conflicting answers.

If an over 70.5 Active Participant (non-owner) takes an in-service distribution as a LS, should this LS amount contain a "non-rolloverable" portion due to the RMD rules. I realize that this person is not terminated, and therefore an RMD is not required until they terminate the plan, but it would seem that if they receive all or a portion of their benefit after the age 70.5 year, a portion of that benefit should be attributed to the RMD.

Thanks in advance for your help.

We have a new client with a two step Integration formula up to 100% of the Taxable Wage Base. As the client was describing their contribution formula to me, it was clear that they were calculating it wrong. They have been allocating 6% to everyone, with an additional 6.2% on amounts above the taxable wage base. Their bundled service provider apparently never checked the calculations or provided any guidance on how it was supposed to be done.

Looking at their allocations, I can verify that it has been done wrong for at least 3 years, so it's no longer eligible for SCP.

I don't see anything in EPCRS that addresses how to fix an allocation that does not follow the terms of the document, or that exceeds the maximum allowable Integration percentage. Do they get to choose whether to take away the excess, or deposit more for those below the Integration level? Is there some other option that I'm not thinking of?

We have a client that called yesterday. Their document uses the elapsed time method and a participant is eligible after working 6 months. They are a small client and have just realized that they missed two employees when determining elibility.

They have a signed form from one of the employees stating that the employee understands that they are not elibile for any benefits from the Employer. The form was not a form that was drafted with the plan document. This was a form that was drafted by the client and went with their company's employee handbook.

My question is - does this form have any bearing on the retirement plan? The form does not specifically menion the Plan. It simply states that as a part-time employee, the employee understands that as a term of employment they are not eligible for any of the employer's benefits. This employee works 1 day per week.

Thank you!

I haven't been able to find any reliable guidance on this question. If a plan uses prior year testing, and adopts a top paid group election in 2011 you end up with 3 groups of employees: HCEs in both 2010 and 2011, NHCEs in both years and those who were HCEs in 2010 but are not in 2011 due to the election. When the 2011 testing is done, you compare the 2011 HCE deferral rates to the 2010 NHCE deferral rates. Are the people who were HCEs in 2010, but now are not in 2011 ignored for the 2011 test because they were not in either group at the appropriate time? Or are the 2010 deferrals of those individuals added to the 2010 NHCE group?

Since most of them are deferring at a high rate, I'd like to be able to add them to the NHCE group, but I wasn't sure if that was too aggressive.

A government entity has three plans, a DB, 401(a) DC pick up, and 457(b). My understanding is the contributions "picked up" in the 401(a) DC plan must be tested under 415(b). Would the employer contributions in the DB and 401(a) DC plan be aggregated for for 415 testing? I believe the plans would be combined for this purpose, but I cannot locate any resources that specifically state this is the case.

On takeover we have a plan that was amended for TRA 86 using a prototype document for which an opinion letter is available, but the base document and FDL (client believes they applied for it, but are unable to retrieve a copy) are not available.

My question is: does the lack of a FDL open the door for the IRS to request documents prior to the TRA 86 document restatement?

Also I believe an application for FDL is not required with the VCP submission since we are restating to GUST and EGTRRA volume submitter documents. Is that correct? In case we decide to apply for a FDL should we apply for FDL only for the EGTRRA document?

Thanks for any help!

When can a contribution be deducted under EPCRS? Correction is to make up missed deferralks due to not implementing an employee's election. Ideally, we could deduct in 2010, because a) the missed deferrals relate to 2010, and b) they will be funded by the due date of the employer's return.

Any help appreciated.

Can an ERISA 401k plan that is not subject to QJSA requirements require spousal consent on normal distributions when a married participant terminates employment? I have seen spousal consent for plan loans and hardships, but do not see how it can work for distributions on termination of employment. Essentially the spouse could prohibit any distribution until RMD's become payable.

Thanks!

Is there any prohibited transaction issue with the distribution to a disqualified person of real property that is mortgaged? It's not considered a loan between the plan and disqualified person as long as both the real property and its mortgage are distributed, correct?

I know this has been discussed previously, but I cannot find a thread exactly on point. Here's the situation:

Small Company with owner and spouse on payroll.

RMD for both for 2011 is due by 12/31/2011.

Plan allows for in-service distributions after 59 1/2.

Owner is transitioning the business to his son so he and the spouse rolled the majority of their accounts out of the Plan and into IRA accounts last month.

It seems to me that the RMDs for 2011 should have been made from the accounts before the rollover was done. I know that if they retired then the RMDs should have been made before the rollover, but what about these 2 owners who are still on payroll and will still be making contributions to their plan accounts? I think the broker planned on making the RMDs from the IRA accounts.

At this time there is not enough in the plan accounts to process the minimums and I'm not sure if they will have enough by the end of the year.

Thoughts?

It was discovered during a favorable determination request that the existing plan number is 001, while 5500s have been filed (probably since about 2002) using 002. We want the numbers to be consistent going forward, but I am concerned that if the CPA files the next Form 5500 as 001 that it will take years to get the IRS to rescind the proposed penalties generated by a letter asking where Form 5500 is for Plan 002.

I'm looking for suggestions as to the best way to go about changing the Plan # on the 5500. Should we amend 5500s going back X years, include a cover letter with the next Form 5500, or what? Any thoughts, suggestions, war stories?

An accountant called about a plan (no tpa) that got audited. The latest plan document the client has is 2003 ( a GUST prototype). The voluntary program for nonamenders is not available if the plan is under audit.

Any idea how steep the penalties run for a one participant plan that has missed GUST and EGTRRA?

I have a participant with a deemed loan of (was deemed 2 years ago) in a plan that only allows for one loan. He would like to take another loan. The loan was deemed with (and the 1099-R showed) a balance of around $5,000. For simplicity, let’s say that the outstanding loan amount is now $5,050 due to interest that has accrued since the loan was deemed. I know that interest continues to accrue for purposes of determining the maximum loan amount, but I am having trouble determining if he will have to repay the $5,000 that was the original deemed distribution to clean the loan off the books and take a new one, or $5,050 which would include the interest that has accrued for the time the loan was deemed.

Plan fees were paid from forfeitures, although the plan provides that fees are to be paid from participant balances. This was done last year.

Forfeitures are to be used for making additional nonelective discretionary contributions or discretionary match contributions.

It is possible to "reverse" the expense so that the fees are paid by the participants, and the forfeiture account is restored (with interest).

If this is done, could the restored forfeitures be used for additional employer contributions?

Is this an acceptable self correction? It would appear to be, but what are consequences to watch out for?

Thank you

A 403(b) plan showed under 100 participants on its 2009 Form 5500-SF, but should have showed 145 eligible participants (the employer did not report everyone to their recordkeeper).

For the 2009 Form 5500:

a) Should they wait to file an amended 2009 Form 5500 when the 2009 accountant's opinion is ready? or

b) Should they file an amended full 5500 now with an attachment stating that the audit is being prepared and will be provided when it is complete (and explaining what happened)? or

c) Wait for the audit to get done and file under DFVC and pay the $1,500 fee to possibly avoid penalties that a complete return was not filed timely for 2009?

For the 2010 Form 5500:

a) Should they file on October 17, 2011 using the full participant count but with a short attachment explaining what happened and explaining the audit will be sent as soon as it's available? or

b) not file the 5500 until the audit is ready and perhaps file using DFVC (if cheaper than the regular late filing penalty)?

Any recommendations?