I have a Plan that is 90% owned by a LLC and 10% owned by another company. This would tell me it's a control group. However the client indicates that the company who owns 90% are investors of about 20 people who receive K1's and do not have any ownership in the 10% company? Can I think of this as a holding company? I asked that he send over the % for each of the 20 people. 3 of these 20 are employees of the Plan. Any thoughts or other suggestions.

A co-worker just came to me with this strange question/scenario. Potential client is an American co that apparently has a satalite office that is in Canada. The office is staffed by Canadians and paid in their country's money. The potential client is thinking of setting up a 401(k) plan.

Can they set up a plan that excludes this office?

Realizing this is a stretch to ask, but I have one source who talked about this legislation that he claimed led to the "gross indemnity" requirement in hold harmless agreements between k12 SD and 403b vendors, particulary in California, Texas and I believe Ohio.

Thanks in advance,

Steve

Not sure if I have this right. A top heavy 401k plan uses matching contributions to satisfy the SH requirements. A PS contribution will be made with the owner getting over a 15% allocation, so a 5% gateway applies to the NHCEs. The SH match can be used towards both the gateway amount for the NHCEs and the 3% top heavy contribution for the non-key HCEs. The matches and PS allocations are combined for each participant to calculate the EBARs/rate groups, and the deferrals are then added to those totals for the average benefit testing. Is this correct? Thanks in advance for all assistance.

I've come across a couple of large institution 401k providers that are handling the loan repayments in this way. The first re-payment on the loan is not due for 45 days after the loaned amount is paid to the employee. That is the day of the first of 60 monthly repayments. That actually calls for repayment 5 years and 15 days from when the loan proceeds are advanced to the employee.

I do not recall anything in the statute or regs that permits a 15 day grace period to the 5 year repayment rule.

Does anyone have any info or thoughts on this?

Employer (Administrator under the plan) places assets with TPA, who receives commissions on trades/assets. Employer is offered a reduction in the fees that it pays for plan administration when it refers another plan to the TPA (an advantage the employer would not have enjoyed but for the earlier placement of assets with TPA). is this a prohibited transaction: i.e., use of plan assets for the benefit of the fiduciary (employer)? (My thought is that this is a PT, even though the finder's fee is after-the-fact, the placement of assets is a pre-requisite to the finder's fee.)

What if the finder's fee were in the form of a reduction of administrative fees as allocated directly to participants--i.e., a reduction in fees charged to the plan? (I suspect that this is not a PT.)

Does anyone see trouble in an employer terminating its SIMPLE IRA plan for 2011 by notifying all employees before Nov 2nd 2010 that the SIMPLE IRA will be terminated effective Jan 1, 2011... and then this same employer establishes a SIMPLE IRA at some later point for the 2011 year?

It may be necessary to do this (if it's allowable) because the employer isn't sure it can offer the SIMPLE IRA in 2011 and the notification requirements to employees are fast approaching. It would be helpful to terminate now for 2011 and then if things improve, the employer could then establish a SIMPLE IRA in 2011. Just trying to gain some flexibility but not run afoul of any rules. Thank you.

I am reviewing prior plan documents for a new client. Officers are excluded from the Safe Harbor Non-elective contributions. I can't figure out why. The client doesn't know why - just said it was originally setup this way. The plan is Top Heavy, but the SHNEC satisifies the TH min. Any thoughts?

Thanks!

I received a call from a non spouse beneficiary. The non spouse beneficiary received these assets from his deceased grandfather. Plan has adopted the non-spouse rollover provision. His grandfather passed on 9/4/2002 but these assets were not transfered into the non spouse beneficiary's name/acct unitl 10/8/2010. The non spouse beneficiary received approx 108K on 10/8/2010. Participant did take a partial distribution on 10/12/2010 of 35K.

Since the assets were not received by the non spouse beneficiary until 8 years after his death, how does this effect the fact that the non spouse beneficiary didn't set up installment withdrawals based on life expectancy or was not paid out over a 5 year period?

Can this non spouse beneficiary rollover these assets into an inherited IRA?

Client maintains a terminating pension plan. Participants are interested in having lump sum distributions transferred to Roth portion of client's on-going 401(k) plan. Particpants, of course, would pay tax on entire amount of amount transferred to Roth portion of 401(k) plan. I do not think that is permitted under the provisions of the SBJA of 2010. Any thoughts would be greatly appreciated.

Suppose that a plan participant directs that all of his benefits, $120,000 in liquid assets, be invested in purchasing stock of a very small C corporation. Neither that participant nor anyone else connected with the plan has any involvement with the very small C corporation.

A few months later, very small C corporation is experiencing a cash-flow crunch, and approaches the plan participant about a loan. The plan participant makes an $80,000 loan to the very small corporation, out of personal (non-plan) funds of the plan participant. Has a prohibited transaction taken place?

Would your opinion be different if the loan was actually pre-arranged at the time that the plan participant directed that his $120,000 of benefits be invested in stock of very small C corporation?

Would your opinion be different if instead of a cash flow crunch, very small C corporation was doing well but wanted the $80,000 to fund a small expansion?

By way of background, my research shows that if the $80,000 loan was made at the time of or before the $120,000 stock purchase by the plan (at the participant's direction), such would likely be a prohibited transaction, because the plan assets would likely then be being used to enhance the non-plan investment (increase the likelihood that the very small corporation would be successful and be able to pay back the $80,000 loan to the participant personally). Prohibited transaction rules are to deter, among other things, fiduciaries exercising authority, responsibility or control over plan assets when they have interests that may conflict with those of the plan (Treas. Reg. § 54.4975-6(a)(5)(i)) and for the directing participant to be treated as a fiduciary for prohibited transaction purposes, see Flahertys Arden Bowl Inc v Commissioner, 115 TC 269, 115 TC No. 19 (9/25/2000). As for the fact that the very small C corporation gets the $120,000 from the plan's stock purchase, and not the participant himself, not preventing the possibility of a prohibited transaction, see Rollins v Commissioner, TC Memo 2005-260 (11/15/2004) and H. Conf. Rept. 93-1280 (1974) at 308, 1974-3 C.B. 415, 469.

My scenario does not however include the plan funds being used at the time or after the participant has already made an investment with his non-plan money. My scenario has the use of plan funds being before, and possibly unrelated, to the later loan of non-plan money to very small C corporation.

My understanding with the recent Small business act is that it allows an individual in a 401k plan to take an in service distribution and roll it over to a designated roth account within the plan (assuming plan has designated roth 401k feature).

So if I;m not mistaken, if a 401k plan has a roth feature and allows for in service distributions than an individual with a 401k account balance of say 100k can roll over (or convert) the balnce into a designated 401k roth accouont within the plan and e subject to 100k in taxable income that can be reflected as 50k in 2011 and 50k in 2012.

Have I interpreted this concept correctly?

thanks

If a Pension Fund accelerates interim withdrawal liability payments under the rationale of the recent Central States v. O'Neill Bros. Transfer & Storage 7th Circuit decision, the full amount of the assessed withdrawal liability amount becomes due. Is the amount due from the employer subject to the 20-year cap? Thanks for any input.

Who needs to receive the Summary Annual Report (SAR)?

My client is under the impression that anyone who had a balance during the plan year is supposed to receive a SAR. Can you clarify? If I am in the plan and terminate on 1/10/2009, do I need to receive a SAR for the 12/31/2009 plan year?

What is the required timing for funding (remitting to the Recordkeeper/Trustee) matching contributions; and the deadlines for funding annual profit sharing and annual match contributions? Can someone point me toward where I can find Regulations and/or guidance on this topic?

Participant in her own plan requested a loan in April 2009 for $25,000. We told her she could only take $20,000, due to the fact that she had had another loan in the previous 12 months. She already took the money anyway, so we gave her a deemed distribution of $5000. She received a 1099-R for this in January. I thought her loan should then be set up for the $20,000, with her taking the extra $5000 as a distribution when doing the 2009 annual valuation. Boss disagreed with me and had me set up the loan for $25,000. The participant was supposed to make 3 quarterly payments in 2009 and 1 in 2010 to pay the loan off. We FINALLY received all the data to complete this val last week (she's under $250k so no EZ) and she indicated that she only made a payment of $1500 (her quarterly payments were at least $6k each). She made this payment in the 3rd qtr of 2009.

The loan is now in default, but needs to wait for a distributable event to offset. It will continue to accrue interest. The problem is that now my boss thinks we should have the loan as $20,000, not $25,000, and apply the payment of $1500 to that lower number, since she received the deemed distribution of $5000.

What are your thoughts on which way is correct?

As an added bonus, the loan was taken out so that she could help her husband buy a car (he is not in the plan, not an employee of the company). He was supposed to be paying it back. Guess what - they are getting a divorce...

A calendar year plan with $700,000 of unfunded vested benefits for 2009 has an active participant reduction (from 1/1) of 21% in 2009 and again in 2010.

It appears that this plan would be exempt from a PBGC Form 10 Active Participant Reduction report for 2009 if the 2008 UVB as reported on Form 10 was less than $1 million, and similarly the 2010 criteria would be based on the 1/1/2009 UVB. Is this right?

(The plan is over 100 participants).

For Relius Gov't Forms was on Service pak 4 and just updated to the latest paks (I didn't do it earlier just in case it broke stuff before 10/15).

The forms are not printing. Any ideas? I know this question was asked earlier this year (and answered) but could not find it.

I am wondering if the IRS has taken a different stance on partial plan terminations because so many companies are having mass layoffs. It doesn't seem logical that all of these companies would be required to bump everyone up to 100% vesting in these horrible economic times. Or is the answer just, "too bad, so sad, that's the way it is regardless of what kind of economy we're in"?

We inherited a DB plan that has a 100% J&S Normal Form of Benefit for married participants and single life for unmarried.

For terminated participants, must we provide the Qualified Optional Survivor Annuity? I would think not since the normal form is 100% J &S.