I was just given the following situation from a broker:

An employer set up a SIMPLE-IRA in 2004. The plan utilizes the 3% match. This match was calculated each year by the company's accountant. Rather than computing the max match on 3% of compensation, he calculated it on 3% of the employee's salary deferrals. Therefore, he has undercontributed the match every year since inception. The only partially good news is that the only participants in the plan have been the owner, his wife and 1 employee.

What would you recommend to the client?

1. Determine the shortfall to the employee, adjusted for earnings, and just deposit it? - I don't like this solution

2. Determine the shortfall for employee and the owners, adjusted for earnings, and deposit it? - I don't like this either

3. Just forget about it and correct it going forward? - I don't like this solution either

4. Apply to one of the voluntary compliance programs for correction? - maybe a possibility, but, cost could be a consideration

Any other suggestions and/or comments on my possibilites above would be appreciated.

Thanks,

Rick

Assume a filer is a Cycle E filer that sponsors a 401(k) plan designed as a safe harbor 401(k) plan. If the document contains a provision that undercuts the safe harbor status - - - for example, a provision that provides a higher rate of match for HCEs than for NHCEs, or that only allows deferrals from an "unreasonable" definition of compensation - - - does that constitute a "disqualifying provision" under Code Section 401(b)? My assumption is that it does not, since the plan can still qualify by running and passing the ADP/ACP tests; its qualified status is not jeopardized per se.

Thanks.

Does anybody know - in California is the state disability calculated on total compenation or compensation less deferrals? In other words, when an employer has to calculate the payment to the state for disability for an employee, is that calculated after deferrals are withheld?

Thanks!

if the employer contributes the profit sharing contribution by the deadline for taking a a 2009 deduction (september 15) when must the contribution be allocated to participants. can it be allocated at a later date or should it be done immediately?

A plan's PBGC variable premium rate was determined using the "Standard Funding Target" for 2008 and 2009. May the plan adopt the "Alternate Funding Target" as it's variable premium determination basis starting in 2010 (for 2010-14)?

Am working with an independent sales person who worked primarily with one Company for over 30 years. Received commission income that was reported to him on Form 1099-Misc. Company established a NQDC for its independent sales force years ago. My client retired triggering the NQDC payments to him. Will be paid approx 250,000 a year for 5 years. He wants to establish a defined benefit plan to shelter most if not all of the income.

I think if he was an employee of the Company and retired this income would be not be considered 415 income. Because he is self employed anyone have an opinion on whether he could set up a db plan?

Thanks to all in advance.

Many of us senior citizens are well aware of the contention that Yogi Bear "was smarter than the average bear."

A number of questions arise: (1) How was the conclusion drawn? (2) Was a random sample of bears selected and tested? (3) How was Yogi able to break away from his heavy work schedule for meaningless testing? (4) Was his tester another bear? (5) Is the bear Catholic?

Does anyone find this entire exercise unbearable?

Can the "annuity starting date" ever change for purposes of 417(e) (e.g. if a participant changes the form of his benefits, or if a new benefit form is suddenly offered)? Thoughts? Thanks in advance!

Company is selling assets (only at one particular location) and contributes to a multiemployer plan. Seller is also subject to CBA with union. The seller will be subject to withdrawal liability as a result of the sale. What can we do to protect the purchaser from incurring any liability associated with the withdrawal? I understand that the seller is liable, but is there any extra steps that can be taken to protect the purchaser? Is there an argument of successor liability, and if so, what is the best way to protect against that type of claim?

Thank you.

Are participants assets in a SEP or SIMPLE shielded from claims from creditors? A participant in one of these plans (he's not sure which one he is in) has some major credit card problems and was told by the collection agency that they could go after his SEP/SIMPLE.

Thanks

We have a client that is an owner. He turned 70 1/2 in August 2010 - but requested an in-service withdrawal in April 2010 (before he was 70 1/2). He rolled over his entire account balance to an IRA. He is still contributing to the plan and also received a profit sharing contribution after the rollover. When we rolled the money to the IRA he was not 70 1/2 yet - should we had taken the RMD before the rollover to the IRA - or do you have to wait until they turn 70 1/2 to take it? He has enough money in his plan right now to take the RMD for 2010 (not delaying it until April 1, 2011).

The rollover company (IRA) is saying that when we e rolled over the money from his plan - we should have kept back the RMD amount

and that the money needs to be distributed before 12/15/2010 otherwise there will be penaltys. I dont think that is correct when he isnt in any violation - he is still taking his RMD before 12/31/2010 (based on 12/31/09 balance) - he is just using money after when the rollover happened. Does it matter what money he uses as long as he takes it before 12/31/2010? Thanks

Plan Sponsor is in Cycle C - as they have an individually designed plan. They filed Form 5300 by the 1/31/2009 deadline. They have not received a Determination Letter yet.

They just recently amended their plan for some minor revisions.

According to Rev. Proc. 2010-6, if they haven't rec'd a DL yet, they "must" send the discretionary amendment to the IRS and it may be included as part of the determination. Here is the wording:

In addition, the applicant must send the Service any amendments that are adopted and/or proposed after the date of the determination letter application and before the Service issues the determination letter. The applicant must submit a cover letter that references the date that the pending application was submitted, the identity of the employer and the plan, and any other helpful identifying information. The amendments must be attached to the letter. Send the cover letter and the attachments to: Internal Revenue Service, TE/GE Correspondence Unit, P.O. Box 2508, Room 4024, Cincinnati, Ohio 45201. Although all such amendments must be provided to the Service, it is possible that the determination letter may not provide reliance for all of these amendments. See, Rev. Proc. 2007-44 for the scope of the Service’s review with respect to a particular determination letter application.

Has anyone had experience with this? Is it common for a plan sponsor to send amendments to the IRS in this manner? Are there any repercussions of not sending the amendment - since it says the applicant "must" send them to the Service? I would have assumed the plan sponsor would just wait until their next cycle is due to include any new discretionary amendments.

Suppose you have a retiree who retired from Company A and went to work at Company B. Company A offers Retiree Medical. The Retiree Medical Plan says that if you decline coverage (which the retiree did since the retiree had coverage from Company B) or you elect the Catastrophic coverage, you will not be able to enroll in A's Retiree Medical Plan unless you can show loss of coverage under another group medical plan. This is not defined, but the Retiree Medical Plan does say this includes loss of coverage as an active employee, coverage as a dependent of an active employee, coverage as a retiree under another employer's plan, coverage as a dependent of a retiree ,or coverage under an HMO.

Former employee is on COBRA from Company B. Now wants to come back to A's Retiree Medical Plan since she forgot that A has a plan. Should COBRA coverage be treated as a loss of coverage under another group medical plan?

here is a strange one:

Client had given us the wrong EIN number back in 2007 (new client & plan). I discovered this when I was trying to validate the 2009 5500 in RGF this year, it would not validate the number. I verifed with the client that the number was in fact incorrect and they gave me the correct number. 5500 and schedules will validate with the correct number.

Now...when I fill in form 5500, Part II, 4a, 4b & 4c (so that the EBSA and IRS will know that we updated the EIN number), the form will once again not validate. I even tried importing it to the EBSA website anyway but it won't accept the form for import.

When I spoke with Relius support the first time, they told me that the system isn't "smart" enough to know that the number was invalid. No one is sure why the number wouldn't validate before. I have a new incident in to try and fix this newest problem but since the wait is long I thought I'd see if anyone else has had a similar problem and/or any fixes??

ok - addendum to this...I found out that "28" is not an acceptable start for an EIN. You can't even enter it. This is why it won't validate.

The problem is that the 2008 form WAS filed with the EIN beginning with "28", so I've emailed the EFAST help area and hopefully will get an answer soon.

I'll update this post when I hear back....

We have a client that changed their plan year from fiscal to calendar in 2008. Of course there was a short plan year filing in 2008.

This year when we did the 5500 extension request back in July no one checked the dating in the RGF software and consequently the extension had the wrong plan year ending on it. (The old plan year end date which would have been 04/30/2010). The extension did, however, have the correct requested extended date of 10/15/2010.

The client received a notice from the IRS that the extension was denied. The notice stated that it was received after the filing deadline?? [i'm not sure why that is because if it truly was a 04/30/2010 plan year ending it is well within the timeframe, wrong dates and all - probably a standard form notice] The notice had a phone number (with a 30+ minute wait) and then an address if the client preferred to write. We had the client send a letter back with a copy of the corrected extension, explanation of the plan year change and asked them to please approve.

We have already filed the 2009 5500 online.

Has anyone else had this happen? Do you know what the odds are that the IRS will approve the extension? They did receive it timely and it had the correct extension request date, just an incorrect plan year ending date.

Thoughts?

If a plan allows for hardships to be taken from other sources in addition to salary deferral (eg, match), do deferrals still need to cease for 6 months?

My client has gone into Bankruptcy and terminated its plan as of July 2009. The company itself has been liquidated according to bankruptcy procedures. All plan assets were liquidated by December 31, 2009. The company no longer exists. VG is in the process of completing the 2009 Form 5500 that will show plan assets are $0. Since the company had over 100 EEs at the beginning of 2009, and in order to file the Form 5500, they need to have an external audit performed.

Since the company is bankrupt and no longer exists, thus there are no assets in order to pay an external auditor, is the External Audit still a requirement? Is it a shortened audit or normal fullsize audit? Are there alternatives to a regular audit?? (FYI: they pre-paid for the Financial institution to complete Form 5500)

I am only aware of two possible options..........either the company disengage VG from the duty of the Form 5500 (and they just not file it) or they find a former officer of the company who is willing to pay "out of pocket" for the external audit.

Questions 1: Are there any other options that you are aware of?

Question 2: What are the ramifications if they don't file a 5500?

Anyone have experience setting up a retirement plan for a professional athlete? Income will consist of endorsement $$$$. His salary is paid by the "league" and is subject to the league pension plan. Any insight, issues or links to articles on the subject is appreciated.

Background Information

-A calendar year plan suspends it's safe harbor match effective March 31. A partner's K1 is $50,000 and their salary deferral is $9,000.

Question

For the purpose of calculating the partner's contribution, what is the appropriate methodology for determining applicable compensation and deferrals subject to the safe harbor match? Should both amounts be prorated for the three-month period, or are both the compensation and deferral deemed to be earned/made on the last day of the year providing a zero match for the partner?

A participant in the plan rolled after-tax money into the plan back in 2005. At the time, the plan did not have an aftertax source but the plan recently added Roth 401(k). The participant is now requesting that we code the money as after-tax and distribute that along with the associated earnings out of the plan.

Question 1: Can after-tax money be re-classified as Roth 401(k) contributions?

Question 2: The participant wants the after tax-portion moved to a traditional IRA and the earnings moved to a qualified 401(k) plan. Is this possible?