If a plan currently has an automatic contribution arrangement, and the sponsor doesn't want to deal with that anymore, can you turn it off, stop deferrals, and make it so that employees must turn in a deferral election in order to defer from that point forward?

That is if employees were deferring because they were defaulted into the plan under the ACA, can you stop their deferrals when you get rid of the ACA? or must they still continue to defer at whatever rate they were deferring when the ACA was last in effect?

Are there any issues with charging participant accounts for final Form 5500 preparation when a 401k plan terminating?

Thanks!

Husband owns 100% of a doctor's office.

Wife owns 100% of a gym.

Neither works for the other or is a member of either's board.

BUT, they have minor children - ages 13 - 11 - 9

Is there a control group due to the minor children?

This is a new (takeover plan) plan for us and prior TPA did not have the companies as controlled groups. I am not sure that is correct?

Please advise.

this is ASPPAs latest note (hopefully they are not offeneded by my posting of this message. I guess I could have simply said ASPPA has been talking with IRS officials and they have indicated they may withdraw their request for the PTIN requirement. Of course, as they indicate, nothing is guaranteed at this point in time)The ASPPA note did carry the following note: This email (including any attachments) is confidential and may contain privileged or proprietary information. It is meant solely for the use of the intended recipient. If you are not the intended recipient, any unauthorized disclosure, copying, distribution or use of the email (or any attachment) is prohibited. If you have received this email in error, please notify us immediately by replying to the sender and then delete this copy and the reply from your system. Thank you for your cooperation.Since I was the intended recipient and am passing it on for information purposes I assume I meet the criteria intended.

Happy Holidays everyone. As you know, the IRS has been indicating in public comments that the PTIN registration requirements will apply to preparers of the Form 5500. Consequently, we have been engaged in ongoing conversations with the IRS on exactly how that would work. In addition to testifying at a public hearing, we have had several private meetings with them to discuss the significant problems that could result from the over broad application of a preparer registration requirement to the Form 5500. In these meetings, we have been emphasizing the information return nature of the form and the relatively limited amount of information on the form that actually impacts a tax return. Most significantly, we have been pressing the point that if too many staff are required to register it will ultimately result in an unnecessary increase in administrative costs to the detriment of retirement plan participants.

As these conversations have continued, including some back and forth on the challenging issues involved, we are beginning to believe that senior IRS officials are starting to conclude that it would simply be easier to exempt the Form 5500 from the registration requirement. Because of this, we are no longer recommending that service providers register their staff in order to take advantage of the education grandfathering rule, because we believe, at this point, that it is more likely than not that the Form 5500 will be exempt.

Let me emphasize that we have not received anything official from the IRS, and it is certainly possible that they could change their mind again. If we sense anything different, we will let you know immediately. We also recognize that many of you incurred costs to register your staff and we are very mindful of that. We based that prior recommendation on what we were being told emphatically by the IRS at the time, namely that preparers of the Form 5500 would be subject to the registration requirements, and we wanted to make sure that people were in a position to take advantage of the grandfathering that applied to the educational requirements.

Can someone please clarify about the timing for filing Form 501 on plan termination?

Is it 30 days after the first lumpsum distribution or 30 days after the last asset distibution?

Thanks in advance.

My single-employee C-corp has established SEP-IRA and SARSEP plans. My understanding is the maximum corporate (employer) contribution to the SEP-IRA is 25% of compensation up to a maximum $49000, and the maximum deferred salary (employee) contribution to the SARSEP is $16500 plus an additional $5500 makeup contribution since I turned 50 this year. I have two questions (but reserve the right to followups ):

1) Are the limits between the two plans additive or in total?

2) Does the makeup contribution under the SARSEP plan count as deferred salary or simply an employee contribution to the retirement account?

Thank you for the assistance,

Steve

How are people making certain that all distributions of Roth are coded correctly?

I am starting to do 1099's and I do not see a good way of catching all of these?

Also, does anyone know where I can get a good explanation of how to do the 1099's for and ADP correction where all deferral that year was Roth?

Have a DB plan and a Profit-Sharing Plan with 401(k). Running the Average Benefit Percentage Test. Plans are mandatorily aggregated and will be cross-tested. Not sure if will do on an allocation or accrual basis. Under Treas. Reg. 1.401(a)(4)-9(b)(2)(iii), imputation of permitted disparity is only applied to determine the aggregate normal allocation rate or the aggregate normal accrual rate. Thus, as I understand, you would determine the aggregate rate for each employee and then impute the permitted disparity. However, the imputation of permitted disparity is not allowed for the 401(k) portion. Therefore, it seems that you determine the aggregate rate, then remove the 401(k) portion, then impute disparity to all but the 401(k) portion and then add the 401(k) portion back. Is this correct and exactly how is this done? Examples would be welcomed.

A 401k PS Plan will be terminating effective 12/31/2010. A Notice of Plan Termination was distributed to participants with distribution election forms & tax notices November 30, 2010. The Plan has the following sources of monies:

Elective Deferrals

Safe Harbor Non-Elective

Employer Match

The Plan is undergoing an IRS audit (and that's why it is being terminated by the Plan Sponsor).

When informed of the Plan Termination Notice gonig out on 11/30, the auditor stated that the Ntoice must be given out 60 days in advance of the Plan Termination.

?????????

Am I missing something here? Why would the Plan need a 60 day notice for a DC plan with these sources of monies?

Does anyone have any good insight on determining if an operational error is insignificant? I have a client whose ADP and top heavy testing was performed incorrectly from 2007 until the present. I'm pretty sure they will owe top heavy minimums for each year. There are only 11 participants. They would like to self correct, but if these errors are significant then we can't use SCP for the years where the correction period for SCP has ended. I've looked at the list of factors prescribed by the IRS but am still not sure.

Do the plan participants have a claim for recovery of benefits? Please reply with your expert opinions on this complex scenario.

INTRODUCTION

- Company XYZ has a 401(k)/Profit Sharing Plan that has been in place since January 1, 2000.

- The plan is valued annually as of December 31st.

- As of December 31, 2009 the plan had combined net assets of approximately $4.5M.

- The plan's original trustees were also the owners of XYZ (until sale of company -- see below).

- The plan's administrator is "Jenny" who is also the CFO of XYZ and a plan participant.

- The 401(k) funds are managed through a third-party administrator and investments are self-directed.

- The Profit Sharing funds are managed through a third-party securities broker who invests on behalf of participants.

- Company XYZ was sold to Company ABC on January 1, 2010.

- Company ABC appointed two new trustees on January 1, 2010.

- Company ABC appointed a new plan administrator on January 1, 2010.

- Company ABC replaced previous CFO "Jenny" with new CFO "Emma".

- Company XYZ adopted an Plan Advisory Committee on January 2, 2010.

SCENARIO

The newly-formed Plan Advisory Committee informed executives at Company ABC of possible illegal transactions perpetrated by Jenny, the former plan administrator and CFO. Upon review of plan records during years 2000 to 2008, it was discovered that in each year, Jenny took out large loans against her personal Profit Sharing account balance during years when investment losses were high, and subsequently repaid those loans in full during years when investment gains were high. Each year similar transactions occurred, and it appeared that Jenny was using her advance knowledge of investment performance (because only Jenny received the monthly Profit Sharing investment statements from the third-party securities broker) to maximize her gains and minimize her losses. It appeared Jenny was taking advantage of the plan's provisions and features in order to receive a personal gain. Further, it appeared that the benefits Jenny was receiving as a result of these questionable loan transactions were being achieved at the detriment of the other plan participants.

ADDITIONAL INFORMATION

Here I will explain the math behind the above scenario.

Year 1

In the beginning of year 2000 the aggregate account balances of the Profit Sharing pariticipants were $2.0M, of which $200,000 was Jenny's.

Jenny saw the Janary 2000 statement and the November 2000 statement and saw that there were $1.0M of losses so far during the year.

Jenny figured that the losses would not reverse during December 2000.

On December 30, 2000 Jenny took out a loan of $200,000 against her account balance, making her account balance $0 before allocation of current year losses.

The remaining participants' aggregate account balances before allocation of current year losses are now equal to $1.80M.

The $1.0M current year loss is allocated to the $1.80M beginning balance proportionately to the participants based on their individual account balance as a percentage of the total aggregate account balances, resulting in ending aggregate account balances equal to $0.80M.

Note that Jenny's account balance was allocated 0% of the current year losses.

Year 2

In the beginning of year 2001 the aggregate account balances of the Profit Sharing pariticipants were $0.80M, of which $0 was Jenny's.

Jenny saw the Janary 2001 statement and the November 2001 statement and saw that there were $1.0M of gains so far during the year.

Jenny figured that the gains would not reverse during December 2000.

On December 30, 2000 Jenny repaid in full the $200,000 loan, making her account balance $200,000 before allocation of current year gains.

The remaining participants' aggregate account balances before allocation of current year gains are now equal to $1.0M.

The $1.0M current year gain is allocated to the $1.0M beginning balance proportionately to the participants based on their individual account balance as a percentage of total aggregate account balances, resulting in ending aggregate account balances equal to $2.0M.

Note that Jenny's account balance was allocated 20% of the current year gains, or $200,000.

CONCLUSION

At a minimum, it appears Jenny was breaching her fiduciary duties by engaging in questionable transactions. Does Jenny have a liability to the participants? Do the former trustees (who were former owners) have a liability to the participants? Do the new owners of XYZ company have a laibility to the participants? Is there a specific law that was violated? Please give you opinion regarding what the plan participants can do, if anything, to obtain relief for the benefits they lost out on due to the actions of the former plan administrator.

THANK YOU FOR READING THIS AND REPLYING WITH YOUR OPINIONS.

Sincerely,

3.14159265358979323..... and so on

This DOL FAB suggests that before you can transfer anyone's account to an IRA in a terminating plan, you must use the IRS letter forwarding program. Are people actually doing this, or am I the only one? Or are people assuming that non-responders are simply that - nonresponsive and defaulting them out to an IRA within X number of days.

http://www.dol.gov/ebsa/regs/fab_2004-2.html

Plan sponsor wanst to adopt a qualified plan. Plan sponsor currently has a SIMPLE IRA & failed to give notice of termination prior to the 60 day election period. It is my understanding that if plan sponsor adopts a qualified plan during 2011 that it invalidates the SIMPLE IRA and that contributions made during 2011 would be considered excess cotnributions. Is there anything that prevents the plan sponsor from informing employees today that he is going to adopt a qualified plan during 2011 and that if that they continue contributions to the SIMPLE IRA they will be excess contributions?

Thanks in advance for any guidance.

I have a client with a SEP Plan, husband and wife will defer max and want a PS to get to $49000.00, not over age 50. They also own another company 100% and want to offer a plan to their employees so they are setting up a 401k with the Basic Match. The owners will not participate in this plan. Do I have a coverage problem with theSEP Plan if they are not giving employees PS?

Company has short-term disability policy where there are 10 regular employees and a number of independent contractors and they only offer the policy to certain classes of employees, but not others....and of course not the ICs. What are the eligibility requirements with short-term disability? Is there any nondiscrimination testing requirements?

Thanks in advance!

Client required to take a RMD this year. However he rolled his account to a ROTH IRA early in the year and he was told it would cover his RMD since it was taxable.

I never heard of this and since it went into an IRA (ROTH) I don't think it works. DOes it? any cites?

Thank you.

For the first 10 years of plan participation, we are accruing and deducting 1/10 of the 415 $ limit (ignoring the 150% limit). This generate the large deeuctible contribution.

However, assuming no COLA increase in the 415$ limit, after 10 years of participation, we will see a significant reduction in accrual since we are at the 100% 415$ limit.

Is this correct? Of couse, future COLA increase in the $195,000 limit will help.

Thanks for any response.

A sole proprietor maintains a one participant defined benefit plan with a plan year ending December 31st. The plan was terminated effective December 31, 2009. The owner-employee is entitled to a single lump sum of $1,050,000 and intends to cash out the plan before December 31, 2010. The plan's market value of assets is currently $1,000,000. The sole proprietor would like to make a $50,000 contribution to the plan prior to the distribution of assets in order to fully fund the plan.

Can the employer (sole proprietor) contribute $50,000 to the plan and take a 2010 deduction against his 2010 net schedule c income although the plan terminated in 2009? Thanks in advance.

How are people making certain that all distributions of Roth are coded correctly?

I am starting to do 1099's and I do not see a good way of catching all of these?

Also, does anyone know where I can get a good explanation of how to do the 1099's for and ADP correction where all deferral that year was Roth?

New plan - one lifer - yet to be written.

Optimum formula to match client's cash flow is a unit benefit of 6% of Pay x YOP in the first year, with this changed to 10% of pay thereafter. I don't really care if the 10% formula is retroactive or starts in year 2.

I think I have an accrual (133% violation). But I also believe that instead of writing these formulas into the document I could start with the first one, and amend it in year two, removing the accrual violation. I think that is an exception.

This seems like form over substance and an unneccessary waste of paper and time.

Comments?

Oh, and, yes, this is a regular DB plan. The problem could be solved with a cash balance plan but that is not on the table. I could also probably solve it with an annual accrual design. But these options are beside the point - what about the unit accrual design?