Hello. We have a client who has asked if he can remove the 2011 Safe Harbor 3%. Has the IRS given approval that this can be done in 2011 like in prior years for financial hardship reasons? Any thoughts?

Thanks

The sponsor of an 8 partticipant (small employer) 401k plan ....signed, dated, and mailed its Heart Amendment forms to the Prototype plan vendor a few days late (after 12/31/10). Now the Prototype vendor is all upset and has the sponsor scared to death ...claiming that there are adverse tax consequences that may result. The Prototype vendor has also told the sponsor that that the Prototpe vendor can no longer issue the plan a customized summary plan description nor include the plan in future required amendments, because of the few days delay in signing the Heart forms.

Is there a cheap way to fix things? Or ... is there "any" way to fix things ?

Is it really the end of the world (as bad as the Prototype vendor makes it sound ?).

Is there some kind of "second chance" IRS/DOL program that the sponor can apply to for self-correction?

What would you suggest?

Thanks

If a plan sponsor adopts a new DB plan in 2010 that provides for 5 years past service credit and that the plan is being aggregated with a profit sharing plan for 401a4 using the annual accrual method, are the entire 6 years of DB accruals included in the first year's test or just the 2010 accrual? For example, would a participant benefiting under a 2% per year of credited service formula with 10+ years of service be included in the test with a 12% DB normal accrual rate?

If the previous 5 years are not included in the test, are they required to be tested in any other way?

Thanks in advance.

If a plan sponsor adopts a new DB plan in 2010 that provides for 5 years past service credit and that the plan is being aggregated with a profit sharing plan for 401a4 using the annual accrual method, are the entire 6 years of DB accruals included in the first year's test or just the 2010 accrual? For example, would a participant benefiting under a 2% per year of credited service formula with 10+ years of service be included in the test with a 12% DB normal accrual rate?

If the previous 5 years are not included in the test, are they required to be tested in any other way?

Thanks in advance.

I'm having a stress moment. Is a contribution considered to be deposited when received by the recordkeeper, or when postmarked?

Got a partnership (medical practice) where the Docs transfered to a hospital 12/31/09. In 2010 they collected receivables in the old company, but provided only very limited services related to closing down the practice, most of which was being done by third-parties, accountants, etc.

Can we do profit sharing for them? They will have box 14A comp.

Company A owned 50% each by husband and wife has had a SIMPLE IRA plan for several years.

THey set up another company in 2010 owned 25% each by husband and wife and another 25% each by 2 other non related businessmen.

Do they need to cover the new company in the plan ?

We've had a number of clients (all 5500-EZ filers so far) getting an IRS late notice proposed penalty of $1900 (all of them have been the same $1900 amount) which seems to equate to $25 per day for the 2.5 months from original due date to extended due date.

However, several of these people sent their 5500-EZ in months before the deadline.

Seems like a potential IRS glitch to me, anyone else seeing any of these late notices ??

We are the TPA for the plan in question. I have searched for corrections to this scenario below, but my search terms are poor or this questions hasn't been posed before. The distribution occurred in the 2010 plan year and was noticed by us in 2011.

The Plan Trustee authorized a direct distribution for an employee who was not eligible for In-Service Distribution (let's say, August 2010). This distribution was processed directly with the custodian and we were unaware of it. The participant terminated employment a few months after he took the distribution (termed in Nov 2010). When performing 2010 testing, we (the TPA) realized that the distribution was made prior to the distributable event and no taxes were withheld. According to the IRS correction method, the participant has to return the distribution back to the plan (even though he'd simply re-distribute the funds immediately). However, the participant is no longer with the company. Should the TPA just issue a 1099R showing a taxable distribution, or are there any penalties/excise taxes involved in this case. Would the 1099 be for the 2010 tax year even though it is issued well after the deadline?

Any advice on how to correctly account for this would be appreciated. Please let me know if any additional facts would be helpful.

Originally certified 2010 (calendar) AFTAP of 80% included a deemed waiver of credit balance. There was an additional voluntary waiver done after the AFTAP certification but before 2011 (for at-risk purposes). Now we are looking at changing the 2010 asset valuation method from average to market and that would result in a revised AFTAP. The new AFTAP of 80% would result in more of a deemed waived credit balance. The question is: Would the voluntary waiver count towards the revised AFTAP before an additional deemed waiver or would there be an additional deemed waiver come first and the voluntary waiver remain the same?? Any guidance is appreciated. Thanks.

I was discussing a message board situation, and referred to it as "Benefit Slink." Dave, I assure you it wasn't a Freudian slip, just too many thumbs.

Tom, I think you could choreograph a dance number to go with one of your songs. The Benefit Slink might be the next big viral internet hit!

Employee C has worked for 5 years.

The company puts in a new plan with an effective date of 1/1/2010 and signs the the document 12/20/2010

Employee C quits 11/30 after working 1000 hours.

Is the employee eligible for the plan because you can't exclude service for eligibility, or is he ineligible because he quit before the date the plan was signed?

Long story shorter...after 23 yrs my wife snapped and left almost 2 years ago. She took all the money, cashed in a community propery IRA and got a lawyer and rented a house and filed for divorce, considering no other constructive option. She hasn't moved forward on the divorce probably because she is getting free helth insurance through me. She has moved 3 times, and the last time, moved my 3 daughters in with her 2nd boyfriend (since she left) who she won't let me meet. I have tried to move forward with her filing by bringing her to a mediator to conserve money for the kids etc. because I believe she's sending the wrong message....but I still wear her ring as I'm trying to send the right message to our kids that you don't give up on people or your vows without at least trying once....I'm hoping my 3 pensions stopped on the day she filed....I've watched her throw thousands of our kids money away so many times, that the disadvantages to my kids have reached a point where I may have to throw more of my kids money at my own lawyer to stop the bleeding.

Although she's dumped the older girls stuff in my driveway, and told me she was done with them several times, and that I could have them (which I have most of the time), she filed her taxes as abandoned spouse, head of household and claimed all 3 kids. She took this big refund and hired another lawyer that everyone here uses to go after union pensions.

I didn't know what a QDRO was until yesterday...I got a "Suggested Model Provisions for a QDRO" from one of my pensions online where I have to choose options (ie shared interest approach or separate interest approach) and make a choice (cease/continue) payment if she remarries etc. under "shared" if I choose that option. The other 2 pensions are sending QDROs/proceedures to me that I have to send back to them for their approval also.

I don't want to make any mistakes. Is this a QDRO that's already drafted and simple, that I can ask simple questions about to conserve my childrens money, or is it time to get a lawyer?

All responses or ideas would be greatly appreciated.

A few years back there was a case reported where IRS had disallowed a plan contribution deduction where the employer had filed their tax return prior to March 15, then realized they needed more time to make their contribution, so filed a 7004 by March 15 requesting an extension. IRS denied, saying extension was invalid because the return had already been filed. I've tried but been unable to find a cite for this which would be handy to have. Does anybody recall this and have a cite?

My client's situation is different. Client's CPA filed the 7004 two weeks ago as the client needs more time to fund the plan for 2010. CPA then finished up the tax return and sent it to client. Client, not thinking about the plan contribution went ahead and filed the 1120 return on 3/11. Question - does the client have until 3/15 or 9/15 to fund the plan contribution and qualify for a deduction for 2010?

It seems to me, unlike the first situation, my client's extension should be valid, it was filed timely prior to the due date of the return, and the return had not yet been filed. Merely filing the return by 3/15 should not invalidate the extension. I'd like to get the cite to that other situation as I recall the specific reason IRS gave for disallowing was that the extension was filed after the return was filed.

Client has a participant who took a hardship deferral in late January 2010. All 401(k) deposits for the participant were made between February and July, so there is an excellent chance that all of the deferrals are tainted. The client calculates match on a payroll basis, so the "ineligible" deferrals generated match as well. The participant terminated employment and has taken distribution of the entire account balance. The failure to suspend deferrals wasn't discovered until 2011.

I have a pretty good handle on the typical correction of deferrals and match when deferrals aren't suspended - distribute the deferrals and related earnings under EPCRS and forfeit the related match - but I cannot find any documentation concerning the treatment for purposes of testing. I have an ERISA attorney telling me that both the 401(k) and match must be included in ADP/ACP testing and are considered annual additions for 415 purposes. This doesn't seem appropriate to me, but I cannot find anything that specifically addresses the matter.

Does anyone know if this has been addressed anywhere in the regs?

When calculating the 404(a)(7) deduction limit for a DB/DC combination plan, assuming a small plan not subject to PBGC, what compensation must and must not be counted regarding "eligible compensation" for the 25% and 6% calculations?

1) A key employee (not terminated) who could defer, but does not, who receives no employer allocation in the DC plan and is excluded from the DB plan - does their pay count when calculating the 6% and the 25% amounts?

2) A key employee who does defer in the 401(k) but gets no employer allocation and is excluded from the DB plan?

3) An employee who gets an accrual in the DB plan, but is excluded from the DC plan

4) An employee who gets an accrual in the DB plan and only has 401(k) deferrals in the DC plan

Can someone please direct me to where in the IRS regs it talks about the timing of sole proprietor 401k deposits?

I've found several posts regarding this, but none showing where the information was found.

I found a post that said that both partnerships and sole proprietors must ELECT to defer before the end of the plan year, but what about actually making the 401(k) deposits? I've read that deposits must be made by the due date of their personal tax returns. Is this right?

I need the reference to this.

Can anyone help me?

Thank you!

Is it acceptable for a tax exempt employer with a frozen 403b plan with multiple prior vendors to limit loans and hardships to only a few vendors, so in essence turn off loans and hardships from some vendors, esp in order to save on cost and prevent compliance problems?

It appears FAB 2010-01 does allow a sponsor to do so and still maintain non ERISA status.

Any thoughts would be very welcome!

Can you tell me if rollovers are allowed from a health and welfare plan to a 401(k) Plan? I can't seem to find anything that says it is allowed. If it is, can you direct me to a site that specifically states that it is permissible?

Does anybody know for sure if the 15th deadline is based on when the actual check is cut or when funds are sold in the participant's account. In other words, if the funds are sold prior to the 15th but the check is issued with a date of 3/17, would that meet the 3/15 requirement? If so, can you give me a cite that supports that? Thanks.