My brain is fried from too many retirement plan calcs and tax returns. Can someone check my logic and see if I am missing something?

Schedule C net income for a 50 year-old = $24,000 (1/2 SE tax deduction is $1,696), so my starting point on SE earnings is $22,304.

If they declare a $2,902 PS contribution and make a $16,500 401(k) contribution, they have used up their 415 limit as the $2,902 would reduce the $22,304 to $19,402, so with the $16,500 and the $2,902, the total addition is $19,402.

Shouldn't they also be able to make a $5,500 catch-up contribution as that isn't taken into account for 415? That would result in a total contribution of $24,902 (which of course is more than income, but that doesn't matter because of the catch-up.

My tax software is limiting the overall contribution to $22,304 (which was my starting point of $24,000 less the SE tax deduction of $1,696).

Thanks for any input someone might have to clear up my confusion.

James

We have a defined benefit plan. The plan calls for payments to begin in the month after Late Retirement. We had an individual retire at Late Retirement date, but he did not make an election until 6 months later. We have yet to make a payment, 8 months after his Late Retirement date.

The Plan only provides for one benefit calculation, which is based on his age, service and other factors as of the Late Retirement date.

Should I start making payments now based on that calculation even though he missed out on several months worth of payments? Would this be a violation of the actuarial adjustments rule under Treasury reg 1.411©-1(e)?

Should I recalculate the benefit even though it's not provided for in the plan?

Should I pay the several months of missed payments in a lump sum and go forward from there?

The plan allows for a “retroactive annuity starting date” but my understanding is that this is only used where the QJSA is not provided before the actual annuity starting date (in this case, the Late Retirement date). This is not the case. Am I right that this option is not available to me?

Thank you all.

I need some help with in-service distributions and NRA.

Prior to 2003, the employer sponsored both a money purchase pension plan and a profit sharing plan. As part of the GUST II restatement, the money purchase pension plan was merged into the profit sharing plan. Both plans specified age 55 as the NRA before the merger and that in-service distributions may be made to an employee who has reached NRA. Since the merger, the profit sharing plan has continued age 55 NRA and in-service distributions once NRA reached.

As part of the Pension Protection Act of 2006, section 905 added IRC section 401(a)(36). Now, age 55 as an NRA that allows in-service distributions of money purchase pension benefits is not acceptable unless age 55 is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. This is determined based on all the relevant facts and circumstances. Treasury Regulation section 1.401(a)-1(b)(2)(i) and (iii). "Deference" is given to a good faith determination of the typical retirement age, if that determination is made by the plan. 72 F.R. @ 28605 (3rd column). The latest IRS informal pronouncements (2009) are that the employer needs to base that determination on solid empirical data to be entitled to the deference.

No determination was made for the plan in question, and it is feared that industry typical retirement age would be much higher than age 55.

No amendment was made to the resulting profit sharing plan during the time for an exception to the anti-cutback rule (Notice 2007-69).

A few months ago, one of the active HCEs with benefits under the plan and who is older than 55 years withdrew his funds and rolled them into an IRA, where they remain in tact (no withdrawals from the IRA have been made). This is consistent with the plan terms, as written.

Now, the TPA has raised a flag of concern that the plan has a document failure in having failed to raise the NRA to age 62 years and having made a distribution (albeit consistent with the plan documents) of money purchase pension benefits before active HCE was age 62.

We realize that the document failure will require VCP correction, as the EGTRRA remedial amendment cycle has come to an end.

Part A of Notice 2007-69 provided that if the employer had made a good faith determination for a NRA of 55-61 and applied for a determination letter before the EGTRRA remedial amendment cycle, if the IRS then determined that the NRA below age 62 did not comply with the employer's industry, the employer would be required within 90 days of being so notified by the IRS to adopt an amendment increasing the NRA, but that amendment would apply prospectively.

Do you know if the corrective amendment for VCP purposes will be required to apply retroactively to the last day of the first plan year beginning 6/30/2008, and thus effectively require the return of the money in the IRA to the plan?

I have a 501©(3) client with a small 403(b) plan (3 qualifying participants) that needs to file for the current year, plus the preceding 4 years (total of 5 years).

I've read through the 5500 instructions, the EFAST2 FAQs, the DFVCP FAQs, the DOL website and have browsed through this forum as well and haven't been able to find in a single location the exact steps to properly file under the DFVCP. This is what I have assembled through various sources and am looking for confirmation or correction:

1. Prepare all 5 years on the current-year 5500 form with the appropriate corresponding plan year in Part I.

2. Mark the box for "filing under DFVC program" on all 5 years' returns.

3. Electronically file all 5 years separately with EBSA through the EFAST2 system.

4. Separately mail all 5 years' returns to DFVCP with "501©(3)" clearly marked on the upper-right corner of each return to qualify for the $750 total fee limit. Include a brief cover sheet explaining the returns are being filed under the DFVCP and have already or will be filed with EBSA through the EFAST2 system. Include payment and mail the returns, payment and cover letter to:

DFVC Program - DOL

PO Box 70933

Charlotte, NC 28272-0933

Is this the correct process? Is there something I'm missing? Should I mail paper forms to DFVC first, then e-file with EBSA? or vice-versa?

Any help is greatly appreciated. Time is of the essence, as the current-year is due 4/15/11. Thanks in advance.

I think this is possible but wanted to make sure. Prospect would like matching contribution to be based on amount of salary deferral. Participants who defer less than 4% get no match, participants deferring 4 to less than 10 percent get 50% of deferral and 10% or more deferral gets 100% match. I know it must pass discrimination testing, but is it ok to provide match based on amount of deferral?? Thanks.

When determining the value for calendar year 2010, is it correct that values used are as of 12/31/2010 (plan year end)? Also, when determining this value, instructions say "any other one life plan". I assume that this does include IRA values; but what about monies from an old SEP of the firm? I assume NO, since that type of Plan was not under 5500 reporting requirements.

As stated in a recent post, a plan may suspend the safe harbor 3% during the middle of a plan year, but the IRS requires the 401(a)(17) compensation limit be prorated for the period beginning with the first of the plan year through the suspension date. The plan may be suspended without terminating the plan.

Suppose the plan is not terminated and the plan only offers safe harbor 3% non-elective contributions as the only employer contribution (prior to suspension). Why doesn't the plan have to comply with 401(a)(4) on an annual basis by recognizing all of the allocations as a % of total plan year compensation?

Testing needs to be run on a plan year basis or a short plan year basis. But, is this really a short plan year?

Can an employer sponsor both a non-ERISA 403(b) plan and an ERISA 403(b) plan? Or would that render the non-ERISA 403(b) plan subject to ERISA?

A tax client has a safe-harbor 401(k) plan that includes prevailing wage contributions. Is there any reason that an owner's son would not be allowed to defer or receive the PW contribution, assuming the plan document allows for PW contributions to all eligible employees and the son has met the plan's eligibility rules?

Is the safe harbor provision limited to non-profit entities or may a small business with limited employees try to qualify for exempt status?

Guy owns 100% of a business. Marries an employee, so employee becomes KEY and HCE.

EE-new spouse has a daughter who is also an employee. He does not adopt her.

Does daughter become Key and/or HCE?

Thanks

I have a deceased participant whose beneficiary is not a US citizen, nor does she (the beneficiary) have a US taxpayer id.

How do I go about paying her out?

Do we have her fill out a W-8BEN along with the regular plan paperwork and that's it?

Do I have to do some research on the tax treaty between US & Poland?

I have a client offering a health plan through a calendar year cafeteria plan. This client has two employees who are husband and wife and are both covered by the same family policy, which also covers their kids. They just found out they are eligible to have their kids join New York's Child Health Plus program as of April 1st, 2011.

I'm fairly certain that the kids eligibility to enter the government program will trigger a qualified event to remove the kids from the Employer plan. However, we are then left with the husband and wife, who are both employees of the same company, still paying for full family coverage. There is no reason to put the kids on child health plus, if the parents still would have to pay for full family coverage. If this were open enrollment, they would have had the opportunity to join as two single policies, at a much reduced premium cost to them.

Is there any way they can change to two single policies mid-year (not changing health plans, just changing rating tier)? Does the qualified event triggered by the kids eligibility into a government program give them the ability to do this? I can't find a reference that definitively says they can or says they can't. Seems like a rare situation. It seems like this change would be inline with the intent of the law, but .... ???

knowledge, experience and information appreciated!

A non-participant received a death benefit from a VEBA.

Despite alot of research, the following questions remain:

1. Death benefits from VEBAs are non-taxable to the recipient/beneficiary, is that correct?

2. Should the beneficiary receive a 1099-Misc in the amount of the benefits? Or, would some other variation of 1099 be more appropriate?

3. Should the IRS receive any Form disclosing the distribution of the death benefits (Form 1096)? And, if so, what IRS Form should the distribution be reported to the IRS?

Any and all guidance from VEBA experts would be greatly appreciated, and gratefully applied.

QACA plan with a per pay period match of 100% of the first 1% and 50% of the next 5% of pay. Someone miscalculates and deposits too much match for a handful of participants (including 1 HCE). Most of the match percentages are insignificant (3.63% or 3.72%) of annual comp., but a few are in the 5-10% range for the year.

I would expect to correct the excess because it is caused by a failure to follow the terms of the document. I'm being told that because the plan does not provide for a true up, no correction is made when the deposits exceed the expected percentage either.

Thoughts?

I had a client file 10/13/10 - 2 days before the 10/15 deadline.

For some reason I had started saving the pdfs from the DOL website last October. The pdf shows the same name on the left and right and the date 10/13/10. As you know (or as I understand it) EBSA populates the date field and converts the UserID to the actual name on the left. Everything looked good and I moved on.

Now the client gets a letter from the IRS saying late filing and a fine.

I go to the DOL web site now and the name has been cleared and replaced with "Filed with incorrect/unrecognized electronic signature." The 10/13 date is still there.

I can't believe it but I will be certain to download and save the 5500s upon submission going forward.

We are working with a plan that is employer-only money, profit sharing. When the profit sharing contribution for 2010 was made, it was allocated to the incorrect source, QNEC (vendor error). Consequently, there were participants who were paid out at 100% vesting due to the source, who were not 100% vested....to the tune of $8,000 to 17 participants. What is the correct way to go about making the plan whole again? Who's responsibility is it to try to notify participants and re-capture the funds? The vendor or the client or us as TPA? Any suggestions would be greatly appreciated!

Hi - employer has a 401k plan and has Davis Bacon contractors. Employer wants these workers to be subject to 1 Year of Service and age 18 eligibility requirements for the prevailing wage contribution. Is this possible? Are some state laws able to override federal? Can the employer pay them prevailing wage outside the plan for the year they are holding them out?

What are the ramifications of a governmental entity not adopting an EGTRRA compliant 401(a) document by January 31, 2011? Would they be considered a nonamender and remedy the plan defect by submitting an EPCRS filing?

Ok - did I read correctly on the Draft that while we are STILL in Draft format - the 2009 return is Due 3/31/11????

How can it be due if they have not got around to issuing the form yet.

Also if you have a participant that should have been listed as an A on a 2009 form, but has since been paid (would have been a D on the 2010 form) Can you just leave them off of both forms. I could not find anyting in the instructions - of course by the time I read all the stuff that didn't apply - like Missing Children - I am sure that I missed some stuff.

Thanks

Pat