I am not at all familiar with SEP's. I know enough to be dangerous.

However, a friend asked if I could help them (small company) with their SEP problem. They were given poor advice years ago and are just now realizing the mistake (pointed out by their broker). They thought they didn't have to give a contribution to anyone who didn't work at least 1,000 hours. I told them that hours cannot be required. After looking at their document (document is a prototype I believe, since it states "adoption agreement" and not 5305), they don't have the 3 out of 5 year requirement, minimum compensation requirement...the only requirement they have is age 21. What this tells me is that anyone who was 21 and employed by them at anytime is eligible. This goes back to 2000. So there are SEVERAL years that they will need to correct. (They were generous in giving a 15% contribution to those they THOUGHT were eligible each year.)

Now for the bombardment of questions:

Can this be corrected by calculating the 15% contribution for each year and then using the DOL calculator to calculate earnings (from 2000 - date of correction) and make the deposits asap?

Would there be a penalty (excise tax)?

Can they take the deduction if it doesn't exceed 25% of eligible compensation for 2010? What if it does?

What about 415 limits? (Most definitely will be over 100% of comp for several ee's, and some are long gone, so how can 415 apply?)

Does it have to be corrected all at once? (Could be as much as $100,000)

I wouldn't think, but is there a statute of limitation?

Would this be something they can correct themselves (using SCP)? Or will they have to go VCP route and pay the fee?

Anything else that you can think of that I may have not thought of, would be great too.

Thank you so much in advance!

The definition of compensation in a 401(k) plan I am working on is 3401(a) wages (subject to income tax withholding at the source), which excludes non-cash taxable income such as the value of excess life insurance. Is the excess life excludable only if it is imputed income? If the employer is including the amount of the premium as gross wages and then deducting the premium after-tax, is this regular cash compensation rather than excludable non-cash taxable income?

Relatively small employer sponsored a DB plan for a short period of time. The company had financial issues and decided to terminate the plan. Distributions were processed. No determination letter was sought on the termination. After termination it was discovered that the plan was a PBGC plan and should have gone through a standard termination. Of course premiums were never paid as the employer did not know it was a PBGC plan. Now what? What would happen if the DOL discovered this? What are the chances they discover it?

Is it necessary to issue a check to a plan member if they went over the 415 limit by 8 cents?

Think I'm seeing a trend here. Despite instructions on 5558 saying to list multiple plans of sponsor with same PYE, FYE on one 5558 rather than 5558 for each plan extended, now on my third separate sponsor where the second plan listed is being dunned for late filing (first plan in each did receive approval letter, and yes, forms were filed before 10/15/2010 with DOL acceptance). Anyone else running into this situation?

Are non-electing church plans subject to the 204(h) notice requirement?

A db plan w/ < 100 participants amends formula effective 1/1/07 on 3/5/2008.

When the plan does their 12/31/2010 valuation can they reflect the 3/5/08 amendment?

While 12/31/2010 is more than two years after adoption of amendment the 1/1/10 start of plan year is less than two years after 3/5/08.

In other words the plan may have to use plan provisions as of 12/31/2007 to determine cushion amount for 12/31/10 valuation.

Section 404(o) does not explicitly address this specific logistic from what I see, but it may be addressed somewhere.

An actual cite is of course appreciated.

I feel as if I have read something on this somewhere but did not see it when revisiting 404(o)

thanks.

I took over a plan: 401k is immediate. If you have at least 2 years of service, the match is $ for $ on 5% deferral. (if you defer 4.999% you get $0). Then, if you have 10 years of service you get 7% match on a 5% deferral (still only matching starting at 5% deferral - and stopping at 5% deferral).

How many rates of match are there? Is it 3 rates; 0%, 5% & 7%?

I am really confused by this. Thanks

For example, is it necessary to provide the specific section (e.g., VII.D) or is it adequate to refer to the general section (e.g., VII)?

Plan where the employee made $30,000 and did 16,500 of 401k and did another $20,000 of profit sharing. Solo 401k plan so they're all the owners additions.

In EPCRS it keeps saying "if the excess is attributed to elective deferrals" do this, and "if attributable to something else" do that.

How do I determine which it's related to? It's not any one dollar, but all of the dollars in total.

Client wants to know if they are allowed to leverage the quarterly statements by having their SAR placed on the financial statement as a message. Please not that this is a non-qualified plan. Is this permissible?

When calculating the Vested Balance for a participant using the 'special formula' when certain distributions are made from partially-vested account balance in a 401(k) plan or any defined contribution plan, what is meant by the term "amount distributed"? The formula that is provided (one of the 2 formulas) is:

X = P (AB + D) - D where: X is the employee's vested portion of any amount remaining in the plan, P is the employee's current vesting percentage, AB is the current value of the account balance remaining in the plan, D is the amount distributed. Is "D" the amount distributed to the participant, or both the distribution amount PLUS any forfeitures ('distributed' from the individual's account)? For example: Mary is 80% vested, terminates service and has a 5 yr break and defrred the receipt of her payout. The plan processes a forfeiture against her account (of 20,000 - 20%). She is still 80% based on her years of service - so the formula requires "Forfeitures" for "amount distributed" and her vested account balance is $80,000 9and she is 80% vested. If she takes a partial payout of $40,000 - then what is her vested balance? Don't you have to include the forfeiture amount in this formula? 80% (40,000 + ($-40,000 payout + $-20,000 forfeiture) - $60,000 = $40,000 (because 80% x ($40,000 + $60,000) - 40,000

Also, is the Distribtuion amount an absolute value, or is the amount a negative number: For example, let's say that John is in a Profit Sharing plan and has a Profit Sharing balance of $ 100,000 and he is 80% vested. He takes a hardship withdrawal of $5,000. Is his vested balance = $77,000 (80% x (95,000+ $-5,000) - $5,000) or $75,000 (80% x (95,000+5,000)-5,000)

My head hurts

the thrills, the chills, the spills....

this is probably the most important stuff regarding form 8955-SSA

from Announcement 2011-21 (because I can't type, its 2011-21 not -11) The Internal Revenue Service (IRS), in coordination with the Social

Security Administration, has developed Form 8955-SSA, a stand-alone form to

be filed with the IRS, as the successor to the Schedule SSA (Form 5500). For

plan years beginning on or after January 1, 2009, the Form 8955-SSA should be

used to comply with the reporting requirements of § 6057(a). Form 8955-SSA for

the 2009 plan year is expected to be available for filing by plan administrators

shortly. Form 8955-SSA for the 2010 plan year is being developed and is

expected to be available for filing later this year. Plan administrators are

permitted to report information that would otherwise be required to be reported on the 2010 Form 8955-SSA using a 2009 Form 8955-SSA. The IRS has also

developed a voluntary electronic filing system for filing Form 8955-SSA for the

2009 plan year and subsequent plan years. This system is ready to accept

filings of Form 8955-SSA when the form becomes available for filing.

In general, as with Schedule SSA (Form 5500), if a Form 8955-SSA must

be filed for a plan year, it must be filed by the last day of the seventh month

following the last day of that plan year (plus extensions). Thus, for example, for

plans on a calendar year, any 2011 Form 8955-SSA that is required to be filed

under § 6057(a) must be filed with the IRS by July 31, 2012. However, in order

to provide plan administrators with additional time to complete and file the new

Form 8955-SSA, this announcement provides that the due date for filing the

Form 8955-SSA for the 2009 and the 2010 plan years is the later of (1) the due

date that generally applies for filing the Form 8955-SSA for the 2010 plan year,

and (2) August 1, 2011. For example, in the case of a 2009 plan year or a short

2010 plan year, the Form 8955-SSA is not required to be filed before August 1,

2011.

We have a client who has a POP plan in which the premiums are $4500 (single). The employer pays $3000 of the premium for NCHEs and $3750 for HCEs (officers). Thus, NHCEs can elect to pay $1500 pretax and HCEs can elect to pay $750 pretax. Does anyone know how this would pass Code 125 nondiscrimination testing?

I have a plan that allows for installment payments as a form of distribution. It says so right there in the SPD, too.

However, the plan is "not priced to allow for installment distributions" at the asset carrier. Therefore, the carrier does not honor such requests.

What recourse does the participant or employer have with the carrier? A benefit is offered in the plan, however, the asset carrier say, nuh-uh. Is it incumbent on the Employer to either change carriers or change pricing tiers with the current one to accommodate these types of distributions? Or amend the plan (going forward) to remove installments?

Can anyone confirm whether a sole proprietor who is a statutory employee and reports his W2 income on Schedule C is eligible to sponsor a SEP plan on his behalf? I'm assuming no since W2 income would not be considered earned income.

Corbel 403b prototype document says profit sharing contriubtions will be discretionary, but ALSO has an option for a "One time Irrevocable Election. An amount elecrted by the Participant pursuant to a one time irrevocable eellection upon initial eligiblity. The elected amount will be allocated to the Particpants Nonelective account."

What in the world is this? How often does the participant make this contribution? Is it "one time" as might be gathered from the name, or is it on going deferral type of thing (I get the irrevocable makes it not be a CODA).

And then I assume it is subject to a4 testing, which could be problematic say if the only person doing it is the executive director making $200K?

Is it permissible to recognize past service for benefit accrual purposes in a cash balance plan?

My instict is to say no since upon choosing the cash balance addendum in the IDP DB document the entire benefit accrual section, which contains the provisions for crediting past service, is greyed out.

If my insticts are correct, I'd appreciate someone explaining WHY???

Thanks for any help!

Client wants to know if they are allowed to leverage the quarterly statements by having their SAR placed on the financial statement as a message. Please not that this is a non-qualified plan. Is this permissible?

Hello All,

I have a 2 part question.

1) Can a client have a 5% Safe Harbor NEC formula, or would this be viewed as a 3% NEC with the remaining 2% discretionary?

2) Can a client have a 3% Safe Harbor NEC, and decide to increase the safe harbor to 5% during the plan year?

I understand that you cannot change a match formula mid-year, as that directly affects some NHCEs that may have stopped deferring or have decreased their deferrals.

I am not clear on the NEC, which is directly related to compensation, and everyone would get the same increase across the board.