I believe as long as they return deferrals and allocable income by APRIL 15, 2011 to the HCE's affected, they will be in compliance.

Questions:

1) Can excess contribuitons be treated as "Catch Up" if the HCE did not defer the max, therefore possibly eliminating or at least reducing the amount of the refund?

2) What options are there if the plan failed ADP in years prior to 2010? It is a very real possibility that this plan sponsor has failed its ADP test for several plan years and never addressed it. I know there are taxes the employer would have to pay. 10% of the amount of the excess contribuition I believe, for failing to timely notifiy affected HCE's. And if they fail to notify them following the end of the PY following the PY in which the excess contribution arose, they shall no longer maintain a plan which satisifies the reqquirements of sec. 408(k)(6). I have a feeling this plan has failed the ADP for several years. In that case, would VCP be the best/only option for them?

Thank You.

Just wanted to make sure someone agrees with me. If the 401k plan allows rollovers from 403b plans, does that mean that a spousal beneficiary can rollover their 403b into the 401k? I feel certain that they can, but just wanted to run this by the forum.

The ESOP is low on cash to meet obligations where they now have substantial payouts to make to terminated and retired participants. The ESOP is obligated to repurchase the shares. The ESOP was leveraged but the loan has been paid off and the company is making small contributions. The company itself does not have substantial cash outside of the ESOP to buy the shares.

Can the ESOP distribute the stock to a participant by rolling it in kind to an IRA and then immediately re-purchasing the stock with a Note intending to buy the shares over a 5 year time frame? Would the Note be required to be secured by an entity other than the company?

Thanks for your help!

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Let's say two TPA firms merge together and the resulting company is a new entity entirely, with a new name.

Does that affect either firms favorable opinion letter? Would the merged company still be considered the prototype sponsor of the legacy documents?

XYZ Co maintains a 401(k) plan covering all of its employees. Ownership is X=14%, Y=14% and Z=14% (the other 58% is owned by outside entities).

During 2010, two new companies are formed:

XY Co is owned 50% by X and 50% by Y.

Z Co is owned 100% by Z.

XYZ Co remains in existance to collect old receipts, after the completion of which it will presumably be shut down.

Z Co maintains its own 401(k) plan. XY Co employees are currently not covered under any plan. They are not a controlled group, and we do not believe an affiliated service group, since no "work" is being done by XYZ Co, just collection of outstanding receipts.

1. Can XYZ Co 401(k) Plan simply be amended to make XY Co the new plan sponsor?

2. Do we need to terminate the plan and begin a new one? Begin a new plan and merge?

3. Other suggestions I may be overlooking?

Is it permissible for plan to require 1000 hours for HCEs to accrue a benefit during a plan year, but less than 1,000 hours for the NHCEs?

We're looking at a prospect with high turnover, and 401(a)(26) could easily become an issue. A lower hours requirement would help, but they want to keep the large portion of the plan costs (the HCE accruals) at 1000 hours in case a formula change or a plan freeze is necessary.

I believe the EPRCS corrections program states if the contribution for a terminated participant who has already been paid out is less than _____ you do not need to make the corrective contribution......but I cannot find the reference.......is that a true statement and if so, where can it be found?

I have two jobs, and one of them has matching funds. This year I elected to put 80% of pay into the matching funds. Since I am 56, I have a 2011 cap of 22,000 dollars ( I think that is right). Will contributions stop automatically when it hits that number, or do I have to watch for them to continue with the extra 6K?

I converted my account balance in prior employer's 401(k) to a Roth IRA on January 4, 2010. My 401(k) account included both pre-tax and Roth contributions, and I received a distribution summary at the time of conversion. I downloaded the Forms 1099-R from Fidelity a few weeks ago.

The distribution summary tax information shows the following as of the conversion date:

Roth contributions, not adjusted for earnings - $42,205.00

Roth earnings - $2,689.83

Pre-tax contributions, adjusted for earnings - $14,782.99

Employer match on Roth and pre-tax, adjusted for earnings - $2,874.84

Form 1099-R #1

Box 1 - $44,894.83 ($42,205.00 + $2,689.83)

Box 2a - $0

Box 5 - $42,205.00

Box 7 - Code H

Form 1099-R #2

Box 1 - $17,657.83 ($14,782.99 + $2,874.84)

Box 2a - $17,657.83

Box 5 - $0

Box 7 - Code G

Should Fidelity have included the Roth earnings in box 2a of Form 1099-R #1? What are you seeing with your clients?

Given:

30 doctors are members of a PLLC.

Doctors own about equal share (no one owns more than 80%) of the corporation.

Each doctor is a separate profit center (own client's income and expenses).

PLLC has a centralized billing department (where all doctors share expenses in the billing department).

Question:

Is it possible to establish a DB/DC combo plan for a single doctor but taking into account only his employees in the nondiscrimination testing and disregarding employees of the other doctors?

Thanks for all responses.

A client held onto their 401k contributions from January through June 2010 and did not deposit the contributions until December 2010. The year ends June 30 and the Form 5330 was due January 31st, 2011, but will be late now. I am preparing two 5330's. On the first one, should I show interest up to June 30, 2010, and on the second return, show interest as on the first return, with another ltransaction for interest until the final correction?

Thanks for any help.

Can a change in control definition be more restrictive (with respect to factors other than the change in ownership/effective control percentage threshold) than under the regulations? For example, can a plan sponsored by a closely-held corporation require that a change in control be made to non-family members in order to qualify as a change in control?

I believe that this is permissible, and the 318 attribution applies so the rules would, in most cases, require such a change in order to qualify as a CIC.

Plan sponsor of a 401(k) profit sharing plan is a partnership. The partnership employes a dozen or so employees. One of the partners is an individual (A) with K-1 income prior to deduction for plan contributions and 1/2 SE tax that is approx 200K. The other partner is a corporation The corporation is owned by individual (B) and both he and his wife receive w-2 income from the corporation. The partners share expenses 50/50.

When calculating the earned income for individual A, I need to adjust his income for his share of the contributions to the plan for the employees. The question is, do I include the contributions to the plan for individual B and his wife before I divide the plan contributions by 2 to determine individual A's share of the expenses?

It would seem to me that I do not include their contributions but I get really confused with these odd structures.

DB plan covers 3 HCEs

DC plan covers these same 3 HCEs plus 3 NHCEs. No other employees.

401(a)(26) passes (3/6 > 40%)

410(b) passes - combined plan coverage passed the ABPT.

Assuming the ebars are over 35% for the HCEs, is the 7.5% DB/DC gateway allocation required for the NHCEs even though they are only in the DC plan?

CPA is asking if the lost interest on late deposit of 401k contributions is deductible. Any citations I can point him too?

Employer with more than 20 employees wants to establish a health reimbursement arrangement that is limited to reimbursement of expenses for smoking cessation programs.

Would a limited purpose HRA of this nature still be subject to Medicare Secondary Payer Act reporting to CMS? Medicare does cover smoking cessation treatment, from what I could gather online, but surely this can be distinguished from a general-purpose "Group Health Plan" for reporting purposes?

That is my wishful thinking, however. Any comments or thoughts are appreciated.

Large plan just completed the ADP test for 2010. Test fails and they have done corrective distributions to all but one HCE. This particular HCE recently took out a loan and hardship withdrawal that zeroed out his account balance, so there are no current funds available to make the corrective distribution. I know they would have until the end of 2011 to make the distribution. Loan payments for the rest of this year may not be enough to cover the full distribution amount.

I'm not finding any regs on how to handle this - anyone else have this situation? Any IRS Q&A that would be similar?

Thanks!

Following corporate merger, ER froze DB plan. ER paid an after-tax "bonus" intended to make-up the benefit difference between the old DB plan and the new 401(k) plan. (There is no union involved.) The bonus was automatically deposited in employee's accounts and taxes withheld. On the same day as the deposit, ER sends letter to employees requiring them to sign a statement saying that if the employee leaves within 5 years, employee will have to pay a portion of the bonus back. Alternatively, the employee can decline the bonus, pay it back and the ER will not report the bonus on employee's W-2.

Employee knows that he plans to retire in 2 years. There is no exception to repayment for retirement. Therefore, he will have to pay 60% back. He is concerned because he has already paid taxes on 100% of the bonus and the bonus puts him in a higher tax bracket.

While the receipt of bonus money seems like nothing to complain about......this seems like a very sloppy way of doing things. Any thoughts on how this employee can protect himself or if the repayment requirement is valid?

Client has an existing 401(k) plan with an Enhanced Safe Harbor Match up to 4% of pay. They are about to begin a job that will require meeting the state's prevailing wage laws. "Someone" has told them they can apply the 4% match to that requirement.

The document has an option (not marked) for a prevailing wage contribution in the profit sharing section, that says it can be used to offset the Safe Harbor contribution. Reading that section, it sounds to me as if it could be amended to accomplish what the client wants. My question is if such an amendment mid-year would jeopardize the plan's safe harbor status for the year.