I was hoping someone might have some insight on this. Under ERISA, trustees of a plan have the right to audit an employer that they suspect of shaving contributions owed to the Fund. Unfortunately, the company (employer) has gone into receivership (bankruptcy proceedings). Does the plan (fund) still have the right to demand an audit of their books while the receivership is pending? Also, if the employer has been cheating on hours, is there any way to contest the receivership or seek personal liability? Any information would be appreciated!

For the calendar year 2010, an Employer elected to contribute a 3% profit sharing contribution to all eligible participants. The contribution has not been deposited. However, the Corporation's tax return (not sure if extension applied for) and Form 5500 have been filed - both reporting the 3% allocation to all. Now, the Employer states he cannot afford the 3% allocation and only wants to contribute the 3% top heavy.

Can both returns be amended for the lesser contribution? I am not certain that Rev. Rul. 76-28 applies here.

Anyone have the factors out there? I have it for male and female, but not unisex.

Good morning,

I am currently working with a Dr plan that is a 401a PSP with a New Comp feature. I get that, in general, a 401(k) is a feature of a 401(a) plan. The "k" feature is merely the particular provision that permits employee contributions on a pre-tax basis, but it is already included in an "a" plan.

Question is: Any reason they would or wouldn't want to add the K feature to the plan? Would it effect the amount they could put away? Thanks

We have a frozen DB plan and we are trying to shift excess contributions from one year to a later year. Does any know of any guidance out there that would indicate whether an amended Schedule B/SB to Form 5500 can be filed to shift contributions from an earlier year to a later year?

We're looking for a service where we can punch in the SS# and find out their last known address. We want to be able to do unlimited searches for a fixed annual fee. I've seen versions that are out there, but I am curious what others are doing to find these lost participants.

At the present, there is a big hurdle for us in terms of doing these searches - who will pay the $10 fee. I want our staff to be able to do it whenever needed without a care in the world. Any thoights? I know there are some programs out there that are hundreds of dollars a month (background checkers, etc) which is way out of our price range for this!

The rules for imputing disparity for employees with more than 35 years of service are a little confusing to me. It appears that an adjustment is required to the PDF if a participant's service is more than 35 years, but only if such participant benefitted under a DB plan in the measurement period. However I believe it's also true that DC participants (with no DB benefit) are limited by the 35 year rule when tested on a benefits basis.

Below is a quick summary of how I think the service adjustments are applied to the PDF under various testing methods. Can someone please confirm if my understanding is correct for each one? For simplicity I am assuming that the "base" PDF for Benefits testing is .0075 (i.e. for purposes of my question on the 35 year stuff, I am temporarily ignoring other adjustments for SSRA, etc.). Also, I am assuming that participants only have a DC plan benefit (no DB benefit).

-Benefits Basis, Annual Method: PDF is .0075 if Total Service as of testing date is <= 35; PDF is zero if Total Service as of testing date is > 35

-Benefits Basis, Accrued To Date Method: PDF is .0075 if Total Service as of testing date is <=35; PDF is .0075 x (35/Total Service) if Total Service as of testing date is > 35

-Benefits Basis, Projected Method: PDF is .0075 if Total Service as of NRD is <=35; PDF is .0075 x (35/Total Service at NRD) if Total Service at NRD is > 35

-Contributions Basis, all methods: PDF is .057, regardless of Total Service today or at NRD

Are my above interpretations correct?

Does anyone know of a website that publishes the daily rates of the PPA monthly LS segment rates? Thanks.

A potential client has an existing S-Corp that they claim they set up about 2 years ago, but have never run any business through and have never taken wages through. This year the S-Corp has commenced business operations and they Owner and wife are taking wages.

Let's assume the S-Corp commenced 1-1-10 and the wages for 2011 will be $100,000. For 415 % of pay limit, should the 415 % of pay limit be:

a) 2*10%*($0+$0+$100,000) = $6;667 or

b) 1*10%*($100,000) = $10,000

The plan won't be recognizing any past service. I would think that the previous years of the S-Corp in which there were no wages would not be included in the determination of the high 3 average pay because there was no service.

A small church would like a self-employed minister to participate in its 403(b)(7) plan. The self-employed minister would be able to make salary reduction contributions to the plan as well as receive employer contributions. Everything that I have read seems to say that a self-employed minister is only eligible to participate in a section 403(b) plan of his or her denomination, and that the 403(b) plan has to be a retirement income account. Is that correct? Or can a self-employed minister participate in a 403(b)(9) or a 403(b)(7) plan established by his church and not by his denomination? I am mostly relying on 414(e)(5), so any other citations would be greatly appreciated.

For purposes of making contributions, does compensation for SIMPLE IRAs, SEPs and SARSEPs include differential pay under the HEART Act? If so, is it elective or mandatory? Is differential pay included in Compensation for purposes of determining the limits such as 25% of Compensation?

A client is adopting a new defined benefit plan, owner and spouse are the only employees. We don't necessarilly want to provide benefits for past service, but do want to create a funding target in the first year in order to provide a range of contributions rather than just having the target normal cost.

What is the best way to draft the benefit formula to provide for this, but avoid potential issues? Specifically, we want to avoid having a benefit at the end of year 1 that is greater than it would be if we weren't trying to create a BOY FT, but also would like to avoid having a minimum benefit for future entrants if possible.

Is there any issue with something like: "4.5% of High 3 AMC x Years of Participation. . . Notwithstanding the above, each Participant who was a Participant as of the Plan's Effective Date shall be provide with a monthly benefit not less than the following: Owner - $X, Spouse $Y"? In this case, X and Y represent what would be the end of year monthly benefits based on the benefit formula and comp history as of the end of the year. X and Y are less than the BOY 415 limits.

Any other suggestions/better ways to accomplish this?

We have a client that established a sole 401(k) plan but do to controlled group rules was ineligible to establish. The plan was thus terminated. What is the correct method for correction regarding the return of employee, and employer contributions (i.e. 1099-R preparation) and the deductibility of the employer contribution on the tax return.

Thank you.

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?