CPA called to ask a question.....

An individual is receiving payments from his former employer as part of severance package. The CPA is interested in running these payments through a corporation and having the corporation pay the individual a salary so that it can adopt a plan. His concern is that this employer doesn't really have a purpose, and therefore may not be considered an employer for qualified plan purposes.

The definition of Employer in the ERISA Outline Book talks about an being an employer under common law principles.

Can anyone give me some details on what "common law principles" refers to, and how this relates to 401(a) and ERISA?

Company A is purchasing Company B. Company B employs a 5-mo. pregnant woman on ST disabilty. Company A offers no ST disability policy and LT disability benefits require a 30-day wait period. Has anyone run into this issue and if so, how have you addressed it? TY in advance for any suggestions.

I have a 401(k) plan where the Plan Administrator got divorced and paid $50,000 to her spouse as part of a divorce settlement. There were all sorts of divorce documentation, but, no QDRO. I brought this up to the client who referred me to her attorney (a rather nasty individual). I mentioned that it was necessary to have a QDRO for the plan to avoid potential problems in the future. A tentative Retroactive QDRO has been sent to me for my review and I have the following comments:

1. The only verbiage in the document making it retroactive is:

"This Order is entered pursuant to the authority granted in the applicable domestic relations laws and the marital property laws of the State of Texas and IT IS ORDERED that this order is retroactive to December 28, 2009."

Question: I am not that familiar with these things and I am wondering if this simple reference is sufficient to make this attempt at a retroactive QDRO, in fact, a retroactive QDRO?

2. Remembering that this payment has already been made and rolled into an IRA, I question the following section:

"Commencement Date and Form of Benefit

Alternate Payee shall be paid Alternate Payee's benefits as soon as administratively feasible or, if the Alternate Payee so elects, at the earliest date permitted under the terms of the Plan."

Question: Given the fact that the Alternate Payee was already paid out and rolled the proceeds into an IRA, this section makes no sence. In fact, it appears to me, that this probably was a boilerplate section inserted into the document on the assumption that when this DRO is approved, a payment will be made subsequently. It just seems inconsistent with what has actually happened. Do you agree with my opinion on this or am I being too picky?

3. Finally, with regard to the tax treatment on this distribution, the document indicates that the "...Alternate Payee under the terms of this Order...will be required to pay the appropriate federal income taxes on this distribution." Again, it appears to me that this wording would be more appropriate if the distribution was to be made in the future and not already rolled into a tax sheltered environment.

Question: Again, am I being too picky with this wording?

Thanks for the help,

Rick

The combined limit 404(a)(70 limit does not apply if NO employee is a beneficiary in both DB and DC plans.

I have a DB plan and a 401(k)/Profit Sharing plan -- all HCEs (i.e. no NHCE in plan).

Does the combined limit apply if I have one employee in the DB and the 401(k) deferral, but NOT the PSP and Match?

Does the combined limit apply if I have one employee in the DB and the 401(k) Deferral and Match, but NOT the PSP?

Thanks for any advice.

I have a 403b plan and am failing the ACP test. Can they refunds to my HCE be rolled to a 457 plan?

Can the 401(k) match exceed the deferral? What is the maximum?

For example: Deferral = $22,500 Can the match be $25,000? What is the maximum?

Thanks.

Suppose an employer sponsors a safe harbor 401(k) plan with a safe harbor match. Also, suppose the sponsor a cross-tested profit sharing plan.

The profit sharing plan must be tested for 401(a)4. Must all components of the safe harbor 401(k) be aggregated for testing purposes? Or does the safe harbor 401(k) stand on its own?

Thanks.

Does anyone have or know where I might find an excel spreadsheet to calculate income, penalties and interest under the proposed income inclusion reg?

Plan does not allow for loans, however, participant (HCE) took one anyway, was not discovered until the yearly valuation completed. I would consider this an ineligible distribution rather than a deemed distribution, since loans not allowed, so what corrective steps would be needed, that is which correction program would I use to right the ship.

Thanks

I'm not having much luck getting answers to my 403(b) questions, but here's another one just in case somebody takes pity on me.

The plan document says that the ER can contribute any amount necessary to correct a violation under EPCRS or the VFCP. But I don't see a reference in either the document or the VFCP material that says how the earnings should be allocated. I'm talking about earnings over several months, so the only method that makes sense to me is to allocate the amount pro-rata based on the participant account balances. But I would be interested in hearing the thoughts of others who are far more familiar with these matters than I am.

one of my clients has an insurance policy as part of the plan assets. Back in 1998 when the plan changed recordkeepers, the insurance policy was dropped off of the books. It has now resurfaced and they want to amend the returns to properly reflect it in the assets . The 1998 to 2010 5500's have to be amended.

Would filing through the DFVCP be the correct way to fix this?

Does anyone know if there are any problems with an owner of a small business setting up a DB plan just for himself? If it is possible, would it have to be unqualified?

What are the distribution options for a 401(k) Plan that terminates 12/1/2010 and establishes a SIMPLE IRA effective 1/1/2011?

Dilema: I understand that when there is a successor plan (the SIMPLE IRA in this case), the 401(k) funds must be transferred into the successor plan. But what are the options when the SIMPLE IRA (successor plan) does not accept a direct transfer of assets from a 401(k) Plan?

Has anyone heard anything from "contacts" at either ASPPA or the IRS as to whether the IRS is going to return to sanity on this issue, and not have it apply to 5500 preparers?

Notice 2010-84, Q&A 3 & 7 discusses the allowance for loans to be included in a in-plan Roth conversion.

Does anyone know whether the loan account is subject to the age 59 1/2 requirement?

Has the IRS announced anything about when regulations will be issued? I know it's probably a silly questions, but if a plan sponsor wants to reflect it in Jan. 15 quarterly it could be important. In particular about how to deal with controlled group situations and allocating excess compensation and extraordinary dividends?

How do I complete schedule c, in particular, Section 2 of Part I?

I knoiw there was transitional relief for a good faith effort, which applies in this situaiton.

(I posted this first in the 5500 "Department" but no one replied )

i have a pulmonary doctor who earns directors fees from a local hospital. He receives a 1099 for these services and he is not employed there. He also owns his own medical llc and has elected entity status as a corp. Doctor wants to max fund a SEP for his director fees but TPA says no since he owns 100% of his entity and has employees and receives a W-2 for income paid by his entity for professional services. Is this correct?

I seem to recollect that contributions may no longer be made to an IRA after an individual has attainted age 70.5. Correct - or no?

What about SAR SEPs and SEP IRAs?

Also, I am fairly sure that's NOT the case with qualified plans.

Thanks!

I have a client with a discretionary employer match. Is there a sample letter available that I can give them to send to the participants if they elect to not exercise the match next year? Please PM me if you would prefer not to post in the forum...

Thanks in advance