Have a client who's CPA is recommending they change from C-Corp to S-Corp and do it through some sort of "late filing" process. The question is how to handle the Cafeteria Plan in the current plan year.

My gut feeling is that more than 2% shareholders will have to terminate their elections immediately as they will be S-Corp ineligible for at least one day out of the plan year. But does this necessarily have to be the case? Via a "late filing" process, can they look like a C-Corp for the rest of the plan year and maintain their elections intact? Is immediate termination of elections for more than 2% shareholders the proper way to handle this?

Thanks

When doing a QDRO and the ex-spouse still has the balance in the plan, when the participant quits, can the ex-spouse still leave the balance in the plan?

HIPAA exempts from the Privacy Rule a plan with fewer than 50 participants that is self-administered by its employer-sponsor.

An employer with fewer than 50 employees self-administers its health FSA. It is looking at moving the health FSA records to an off-site warehouse location. Assume that all ERISA and Code record retention requirements are met. Will the use of the third-party warehouse cause the plan to cease to be "self-administered" for purposes of the Privacy Rule's exception?

Fortunately, I survived the EGTRRA restatement period last year and didn't have anyone miss the 4/30 deadline. However, a local CPA firm called me last week and said they had one client who last amended their plan at the end of 2002 with the GUST document and the EGTRRA good faith amendment. They have asked me to prepare the necessary amendments and EGTRRA restatement so that they can go to the IRS under the Late Filer program.

Not having done this before, I am wondering ... what should I use as the effective date for the EGTRRA restatement and PPA/HEART/WRERA, etc. amendments??? I am using the Corbel volume submitter document. I know that during the EGTRRA restatement period, we were advised to use the first day of the plan year in which the restatement was being adopted and the document itself contained the various regulatory effective dates. Just not sure what to do with the late amender situation.

Thanks for any input!!!

I know that if a plan fails the Top Heavy test in its first year of existence it will also fail the second years test as well due to the determination date being the same for both plan years. Does the same thing apply to a failed ADP test in a plans first year of existence? In other words if the plan fails ADP its first year does it automatically fail in its second year?

Given an overfunded plan - due to contribution = 150% of FT

The owner dies and the assets is rolled over to an inherited IRA of a child.

Is there an excise tax in this situation? Is there a "reversion of asset"?

Thanks for all responses.

I've been semi-retired for a few years, just now getting back in the game, and am a little rusty about the rules that apply when a present value basis is changed.

We've got a new client that is using the old (pre-1999 or something like that?) rule for calculating lump sums via 100% (up to $25,000) or 120% of the PBGC rate, together with UP84 mortality as the primary basis for determining lump sums. Once that amount is calculated, they then compare to the PPA segment rates with applicable mortality, and the highest amount wins.

They'd like to get rid of the old method and just go by the PPA present value. My question is -- assuming someone gets a higher PV from the old formula, to what extent must that be grandfathered? One consultant told me you had to grandfather the old basis for one year, but could not give me a cite. In my experience, I can't recall needing to GF present values. It would be surprising that, if it IS necessary to GF the PV, that there would only be a one year period.

Can anyone shed any light on this? Citations appreciated.

Hi folks,

I was sent here by the suggestion of some folks at the Bogleheads Investment Forum. They thought some here might be able to make suggestions w/ regard to our inquiry to follow...

My wife and I are real estate sale associates. We each get a 1099 from our employer. We file taxes jointly and I think we are considered sole proprietorship(s).

We get paid with commission checks. To balance social security we designate to which one of us the commission should be made out to based on prior commission checks and how the social security estimated benefits look.

We would like to open at least one Vanguard Individual/Solo 401K and make ROTH contributions only. No employer contributions.

I wanted to do it last year but got caught by the requirement that the account be open by Dec 31, 2010.

The difficulty is we do not know if either one of us will show a profit until our taxes are done which doesnt happen until after Dec 31.

For example, can I open a Vanguard Individual 401K in my name tomorrow and make a contribution even if I do not know if I will show a net positive profit for 2011?

I mean do you HAVE to show a profit in order to be able to open an account and make a contribution? My concern is I open an Individual 401K account now with a small contribution just to get it open. Then come April 2012 we/I show a loss for tax year 2011. Is that a no, no?

In 2010 I showed a profit of $53000.00 and hers was $36000.00. We could have most of the commission checks made out to one person so that that person would be more likely to show a profit but that would throw the social security out of whack.

Can some one tell me based on 2010 profit of $53000.00 what my max ROTH contribution amount to the Vanguard Individual 401K for 2010 could have been? Just to make me feel bad.

If I could open an Individual 401K this year could I make contributions to it with money from tax year 2010 profits which we have set aside?

If any one has any guidelines or strategies on how we might make this work I sure would appreciate your input I am confused.

Kind regards, Capt. Mike

Virtually every IRS rep reviewing Forms 5310 that I have submitted has taken the position that there can be no forfeitures in the year of plan termination.

However, I cannot find firm support for this position in either my plan document or in the code and regs.

Case at hand: The plan document allows immediate forfeiture upon cash-out distribution. Plan sponsor wants to pay out all terminees and THEN sign the plan termination corporate resolution and amendment, prior to the end of the current plan year.

Of course, we would look hard at whether a partial termination had occurred. But if we determine that no partial plan termination has occurred, could we take the position that cash-outs prior to the date of plan termination trigger forfeitures, that those forfeitures could then be used to pay plan administrative expenses (which the plan document allows), and ONLY those participants not cashed out after the date of plan termination become 100% vested?

Has any practitioner argued this during a Form 5310 review and won?

I recently got laid off and need to make a decision about my 401K. I have left the US and likely will not return (I am not a citizen and no longer have non-immigrant status). I’m hesitant to cash out due to the tax hit however I will only have been employed for 4 months in 2011 and lost a large amount in company shares (not sure if that helps with the tax). The company is in liquidation so leaving in company plan is not an option.

For my situation would a traditional IRA or a Roth IRA be my best option. I’m assuming I can’t make any contributions since I will no longer be employed in US. If I do a Roth IRA and lose the 30% upfront will I still be taxed when i take distributions on retirement since I will not be resident in the US.

If I rollover to a traditional IRA and avoid the tax upfront, will I be taxed at the normal rate for US citizen or will it just be viewed as a regular investment if I am not resident in US.

Thanks for any advice.

409A(a)(4)© lays out subsequent deferral rules for NQDC plans. 409(a)(4)©(iii) specifically seems to require that a subsequent deferral election be made 12 months BEFORE payment could otherwise be made under a separation from service plan that provides for payments to the participant over 7 years. Neither the code, regs, or examples talk about subsequent deferrals being made after payment otherwise would have been made (after separation from service).

For instance, if a participant retires and starts receiving payments under a 7 year plan, can he then elect to stretch out payments over a 10 year period as a subsequent deferral?

Can any subsequent deferral be made AFTER the first scheduled payments have begun?

I can't find any guidance on this issue, so any help would be appreciated.

Where do we indicate on Form 5500 SF/EZ that the plan is a 412(e)(3) and is exempt for Schedule SB?

Thanks for all responses.

I've decided to post this version of the report for now. Seem to be having real good success with it, and the wonderful Austin took the trouble to look at it and seems to have success as well. He actually modified the report slightly and I actually like his version of the report better, but I ran into one problem with the report if 2010 is the first year the plan is on the system even though it has existed in the past. Which is why I posted this version)

OK, I'm at level 16 and it appears to works fine, he is still at an earlier version, so the D people don't get pulled from the prior year (if the report is printed from 1/1/2009 - 12/31/2010)

another possible issue is the amount that shows - possibly may be different if there is an outstanding loan balance.

In Relius, run the report out of Custom, save as a File/ Excel (data only)

the items in columns A - J can be copied and pasted into the FT William file 8955Sample.csv

(when you open up the 5500 in FT William, you have to first click on form 8955-ssa

and then return - at that point you will now see an option to upload file.)

I've sort of added a counter to the spreadsheet, you can total up the number of D and A people on the excel sheet you create.

I had one person show up as an A that had a residual balance of 45 cents, so they showed as a 0, I guess its ok to delete folks like that.

had another that showed as a D. usually they show blank for the amount, this one showed as a negative amount, because I'm pulling the vested balance total. I think that was caused by the person being paid out and by the time the balance was forfeited there were some losses, so the system thought he was overpaid. (all account data was imported)

so I guess there are one or two items to watch out for.

This report can be run across the all plans as well, but of cousre the results only make sense if the plan has processed for the year.

people who would have been an A in 2009 and a D in 2010 do not show. working under the assumption that you do not have to report these folks.

of course, such report is 'use at your own risk', but as I've said, it looks to me like its doing the job.

I think that's everything

I have an annual plan (12/31 pye) that was valued in April 2010 (special valuation) in order to pay out a few terminated participants. One person was paid out his safe harbor (100%) and psp (40%). He was then rehired in August 2010 and terminated again in November 2010, during which time he worked enough hours to accrue another year of vesting. He received more safe harbor and a psp contribution. Now he wants a payout again. His safe harbor is 100% vested but what should he be paid of his psp? Should he only receive 60% of the current balance in the psp source or does his previous payout and forfeiture come into play? We use Relius and it appears on his statement that Relius is trying to pay him almost 80% of his current psp amount - I assume due to the previous forfeitures. I'm battling myself on what is correct. He did not lose any vesting, he was paid appropriately the first time 40% of his current balance. Is that a done deal then and we then move on to the new balance or do we have to factor in that previous distribution as if it never happened? It's not like he repaid the distribution so his forfeitures would be reinstated.

any insight?

This may be a dumb question but I haven't been able to find a specific answer. If a particpant is coded A, and I prepare (as TPA) the necessary notice, when the same participant is coded D after distribution - do I have to give that participant another notice? EG is the notice required anytime a participant is SSA-reported, even if that means a participant may receive more than one notice? I don't see what purpose it serves to give a second notice after the Code D (that doesn't matter however; my goal is to do what the law requires). Thanks for any input.

In the past, I understood that if a participant who otherwise would have been reportable as an A on the year's 8955 (Sch SSA in the past) - but was distributed prior to the filing of the 5500 and Sch SSA - did not actually have to be reported. I learned at a seminar this week that supposedly the cut off is now the prior year end. So if I'm analyzing the 2010 calendar plan year, and I have a Code A - but that person was fully distributed April 23, 2011 - in the past I would not have reported that person if the SSA was filed after April 23, 2011. The way I interpreted the comments from the seminar was that is no longer permissible - in my example, the person would be reported for 2010, as a code A, and then on the 2011 reporting, as a Code D. This seems like unnecessary work for IRS, SSA, and the plan sponsor and practitioner. My concern is doing it right though (not the amount of work it requires). I'm curious if anyone else has heard what I heard (about the 12/31/ cut off) and / or what approach other practitioners plan to take regarding this issue. Thank you.

First time poster here.

I am curious if anyone knows where to find any information about best practices for QDRO procedures related to placing hold on the participant's account. Specifically, how long should a participant's account be frozen once the administrator receives notice that a QDRO is forthcoming but has not yet received a DRO.

The statute is no help in this area (there's only legislative history indicating that the time should be "reasonable"), there are no court cases on ths point (only one that I found that discusses it in dicta), and I can't seem to find any administrative guidance.

I'm new to the ERISA/Benefits Law area, are there any suggestions for where I should look for guidance? Did I miss something (i.e., a DOL advisory opinion)?

I'm looking over a plan that intends to termiante and distribute benefits.

4 partiicpants.

facts:

this plan was frozen 12/31/2004.

plan chose to apply pre EGTRRA limits (140k limit in 2002)

fresh start says when plan amended (presumably freeze established fresh start date on 12/31/2004) benefts at that time are fresh start benefits where it is defined as a "frozen accrued benefit" as if employee terminated and such benefit shall be increased in accordance with 415(d) increases if the benefit were subject to 415b limits.

Below is what has been done by tpa:

1. they used 415 $ limit of 140k in 2004 when computing 12/31/04 benefit. Question: should it have been increased by then for COLA to 145k since it was 140k in 2002?

2. benefits that were limited by 415 $ limit did not increase after 2004 for COLAs. Question: should the 415 $ limit have been increased here thus increasing the benefit payable at plan distributionin 2011?

3. benefit that was limited by comp limit was not increased for COLA increases after 2004. Questions: should that limit have been increased for COLA after 2004?

thanks

Suppose a DB plan is 3 years old now and has used end of year valuations each year. A new actuary is assigned and wants to change the 2011 valuation date to BOY, 1-1-2011. Is this allowable without seeking IRS approval, or do you have to file and pay the $4,000 user fee to get the change approved starting in 2011?

What do I do??? Does withholding apply? There;'s really no elections, because the truist can't roill it over??

Never had this happen before...