The owner of a 1-participant owner-only profit sharing plan wishes to terminate her plan (not making any further contributions) and roll over plan assets to an IRA.

Plan currenlty holds some precious metal and coins as investments, but not enough to warrant using one of the "self-directed IRA custodians" willing to hold such "non-traditional" items.

These assets could obviously be sold and cash proceeds rolled over. However, if the owner prefers to retain these items, would it be a "prohibited transaction" for her to sell the precious metals and coins from the plan to herself for (readily ascertainable) FMV?

The plan may end up simply distributing these assets next year as part of her RMD, but wanted to make sure we had considered all "viable" options.

Thanks!

With regard to "$1,000 or more" criterion under the 408(b)(2) service provider fee disclosure, is that $1,000 or more paid from plan assets/participant accounts - or does it also include fees billed directly to and paid by the employer?

If on the 2009 5500 SF there was an active participant count shown of 48 and 27 balances and was filed.

After a check, it's really 50 actives with 28 balances.

If the plan gets audited, how much trouble, in reality, will they get in? (Not how much trouble could they get in. I understand there are serious consequences for filing returns with wrong info.)

The error is clearly not enough to put the plan under/over the threshold for large/small plan filer.

Anyone have experience with being "caught" with this error?

The 401(k) plan document allows the timing for making deferral elections changes to be set by the employer under an administrative policy (outside the plan document).

The employer (a few hundred employees) would like to design a salary deferral procedure that has employees elect their deferral percent or amount from each paycheck (but such deferral election does not apply to any wages paid as a bonus).

For bonuses, the employer wants to apply something like a negative election, stating that the employee can only elect to defer from each bonus by making a special deferral election before each bonus is paid. Thus, an employee cannot make a standing election to say "please defer 3% from all future bonuses", instead they need to fill out an election each time.

They intend to announce the bonus amounts well ahead of their paydate to allow such special deferral elections to be made.

Although it seems like a lot of extra work for HR/payroll to plug these special elections in for each bonus, could this procedure be acceptable for a deferral policy?

Can anyone recommend how to report a fidelity bond that is set to fluctuate for 10% of the plan assets up to $500,000.

I asked the question here :

http://benefitslink.com/boards/index.php?showtopic=49527

Recordkeeper's failure to notify us that certain new hires were to be automatically enrolled.

We are in agreement on the correction method, but they are saying that they will fund it in the participants accounts. That doesn't seem right to me. Shouldn't the employer be the one to fund it and be reimbursed by the recordkeeper ?

Thanks !

Does anyone have a used copy of the study guides - or tests - for DC-1 and DC-2 that they would sell for a discounted price? I would like them to include the PPA information, as the guide in our office is older than that.

Thank you!

Elections to defer from bonuses were not implemented for almost 10 years. The employer is doing a VCP correction. After they calculate the missed deferral and re-run the ADP test, the ADP fails. The plan allows correction of the ADP by returning the excess to all HCE. My question is: what is the missed deferral opportunity? Is it 50% of the missed deferral or 50% of the missed deferral reduced by the excess contribution? EPCRS deals with situations where the 402(g) limit or other plan limit is exceeded. In those situations the missed deferral opportunity is 50% of the reduced missed deferral. Thanks for any clarifications.

I am running an ADP test for a short plan year (4-1-10 to 12-31-10) and there is someone who has ADP compensation of $233,000 during these 9 months. I'm trying to determine what compensation to use on the test. Do I need to prorate the 401(a)(17) and limit the compensation to $183,745 ((9/12)*245,000)? Or is the 401(a)(17) limit not prorated on a short plan year?

How is everyone treating a davis bacon plan, with a safe harbor match, that is top-heavy? Are you treating the TH exemption as invalidated because the plan no longer consists solely of SH and deferrals? Something about that conclusion doesn't feel right to me.

Does anyone have any thoughts about whether a plan sponsor that performs services to the plan and is properly reimbursed for it's direct costs (i.e., the salary of an employee whose sole responsibility is to perform administrative services to the company's plans) is considered a covered service provider requiring a written disclosure?

My first reaction is that it should not, because the administrator is the sponsor, and already knows the services to be performed and related charges. There is also no unknown conflict of interest that might be revealed by the disclosure. On the other hand, it's not the administrator but rather a fiduciary committee approves the actual charges to the plans. I'm not sure that it matters that the committee is comprised exclusively of plan sponsor executives and employees.

Has anyone considered this question or have any thoughts?

Hi there, I accidentally posted this to the Roth IRA and IRA forum instead of the 401(k) forum, maybe I will have better luck here:

So if you do rollover your loan from a prior plan to a new plan. Old plan allows transfer out and new plan will accept the loan note coming in.

How can you “catch-up” interest that you technically owed to the prior plan during the period where you couldn't make a payment to the old loan because you were terminated and they don't accept payments?

If there are three months that lapse between payments, and you are still within the original term cure period, wouldn’t you only be able to rollover your outstanding principal balance?

Example: 06/01/11 – Balance is $15,000. Interest rate is 1% monthly (for ease, $150).

Transfer to new company and set-up new loan

Principal balance as of 09/01 is $15,000 still. There has been missed interest for June, July and August.

You establish your loan and reamortize into new company 401(k) for a payment in September. Can the new company accept payments for missed interest that you owed to the prior plan? Or can they only establish $15,000 and charge 1% monthly going forward not to exceed original loan term length?

So technically, you missed $150 in interest to the prior company for June, July and August because you weren’t able to pay the prior company since you were terminated. Can that missed interest get incorporated into the new company payments? Or would they only be able to establish the $15,000 in principal as of 06/01/11 (the balance as of the last payment you made).

That 3 months of missed interest is a taxable distribution to you, you owed it to the prior company, but had no way to pay it to them because they won’t accept after termination partial loan repayments, only all or nothing payments were accepted there and the new company should only establish the principal?

Anyone know IRS regulations that talk about this? I have looked at Publication 575 and that doesn’t quite do it for me.

Thanks!

I was wondering if anyone could tell me or point in the right direction to find out what exactly must be included in a defined benefit plan's "pension benefit statement" to active participants?

Thanks!

Our client is part of a group of employees residing in various US states who'd like a 401(k) setup. There is no central office per se, just folks working from their homes.

Their employer does not have a US tax number and is headquartered in Montreal, Canada. It also has employees in Hong Kong, Canada, etc. This company is part of a holding company which owns a few other global companies as well.

We're just trying to figure out if a qualified plan can be setup, does it simply exclude non-US employees, is a tax ID needed, are there treaty considerations that make for expensive administration, etc?

Any clues would be greately appreciated! Thanks!!

This seems to be coming up a lot with the current credit debacle. A loan is being requested for the acquisition of a principal residence (term > 5 years). This principal residence will in fact be the participant's primary residence, but the ownership will be in someone else's name (a sibling in my current instance).

Do you think it still qualifies as a principal residence loan? Is there a requirement that the borrower is intended to hold title to the property? The sales contract to be submitted as supporting documentation will not mention the participant at all.

I know this is the "ESOP" board, but this seemed to be the most appropriate place for this question.

The regulations under 1.423 state that an ESPP must provide that options can be granted to employees of the corporation or to employees of a related corporation. This seems to suggest that offerings to employees of related corporations is optional, but it is not perfectly clear to me. Can you exclude the employees of related corporations, and if so, where can I find that authority?

It appears the DOL is not yet accepting filings for the 2011 plan year. Looks like I would have to put a short plan year (terminated plan) on extension?

Hi there.

So if you do rollover your loan from a prior plan to a new plan. Old plan allows transfer out and new plan will accept the loan note coming in.

How can you “catch-up” interest that you technically owed to the prior plan during the period where you couldn't make a payment to the old loan because you were terminated and they don't accept payments?

If there are three months that lapse between payments, and you are still within the original term cure period, wouldn’t you only be able to rollover your outstanding principal balance?

Example: 06/01/11 – Balance is $15,000. Interest rate is 1% monthly (for ease, $150).

Transfer to new company and set-up new loan

Principal balance as of 09/01 is $15,000 still. There has been missed interest for June, July and August.

You establish your loan and reamortize into new company 401(k) for a payment in September. Can the new company accept payments for missed interest that you owed to the prior plan? Or can they only establish $15,000 and charge 1% monthly going forward not to exceed original loan term length?

So technically, you missed $150 in interest to the prior company for June, July and August because you weren’t able to pay the prior company since you were terminated. Can that missed interest get incorporated into the new company payments? Or would they only be able to establish the $15,000 in principal as of 06/01/11 (the balance as of the last payment you made).

That 3 months of missed interest is a taxable distribution to you, you owed it to the prior company, but had no way to pay it to them because they won’t accept after termination partial loan repayments, only all or nothing payments were accepted there and the new company should only establish the principal?

Anyone know IRS regulations that talk about this? I have looked at Publication 575 and that doesn’t quite do it for me.

Thanks!

I have a plan that is considering using the QSLOB rule. However, I am struggling with the gateway test which requires coverage testing on an employer wide basis. With this test being necessary, how will QSLOB testing help my plan pass coverage, if I still have to pass this gateway? My plan fails ratio % and average benefits test - both parts.

Thanks!

Have a defined benefit plan (owner and wife) with excess assets. The owner is still working and beyond NRD. This is what we propose to do to use up some of the excess assets:

- amend plan to allow for distribution at or beyond NRD and allow for Retroactive Annuity Starting Date (RASD);

- owner will make election to receive RASD (only 12 months so do not effect 415 benefit);

- terminate plan (and file with the IRS)

- owner and wife elect to roll over benefit to IRA

- any remaining excess asset will have 50% excise tax or may be transferred to existing 401(k) plan (qualified replacement plan) and reduce the excise tax to 20%.

Question: what would be the RASD? If the owner was making his election today is the RASD 9/1/2010? Then the calculation date for the optional forms of benefit would also be 9/1/2010?

Anyone see any problems?