When the planbook is published without attachments, the planbook shows up on Webclient with a paperclip attachment. It has a description of "Explanation of Reasonable Cause". I have attached the report. We have a call into Relius but do now know when will get a response. We had this happen on the two 5500s published yesterday. Anyone have a clue?

EFAST_attachments.pdf

In my mediation agreement it was stated that my ex begin to recieve one half of my Gross pension (which I am collecting now). It also states that she is responsible for all her tax consequences.

Her attorney has drawn up the QDRO which has been submitted to my pension plan, third edit yet to be approved.

Thus QDRO is not yet in effect and my ex is recieving 1/2 my gross of which I am paying all the taxes on right now.

So according to the attorney,they state that when the QDRO is registered and approved and my pension plan makes the equal split and issues separate W2'S tha t I can issue my ex a 1099 form.

This would show that she did not pay taxes on money she recieved from me (which she will have to claim as income) and it will also show I paid too much!

Supposedly Im hoping to get back some taxes.

Is this a correct assumption? Any comments most welcome

Thank you

I have a plan under IRS audit where the agent is saying 72(p)(2)(A) was violated and we need to deem part of a loan.

The participant had a vested account balance of $103,000 in 2003 (all numbers are greatly rounded) when he took out a $50,000 principal residance loan. In 2007 his outstanding loan balance was $40,000, his vested account balance was $120,000 (including loan) when he took out a distribution for $64,000. The agent is arguing that $12,000 of the loan balance is a deemed distribution since the maximum loan amount under 72(p)(2)(A) would be $28,000.

I thought that the maximum loan amount was only determined at the time a loan was taken and was not affected by any subsequent distributions provided that the vested account balance was not less than the outstanding loan balance. Is this in fact true? Does anybody have any good cites to go back to the agent with?

Last week, the IRS issued its Summer 2010 Retirement News bulletin. It included the following section (irrelevant parts omitted):

Just looking for confirmation that this means that a nonstandardized prototype plan can be filed for a DL on Form 5307 by January 31, 2011 if the plan would qualify for Cycle E if filed as an individually designed plan. Do you agree? If the employer decides to use the 5307 option and gets a DL based on the 2004 Cumulative List, will that affect its timing in the next round of filings?

What position are actuaries taking? Assume plan provides voluntary lump sum distributions.

1. Do not certify AFTAP without PA requesting (No Exceptions)

2. Non-frozen professional plans (Certify Automatically)

3. Non-frozen plans where AFTAP>100% (Certify Automatically)

4. Non-frozen plans where AFTAP>=80% <100% (Upon Request)

5. Non-frozen plans where AFTAP>=80% <100% (Certify Automatically)

6. Plan frozen after 9/1/2005 and AFTAP>=80% <100% (Upon Request)

7. Plan frozen after 9/1/2005 and AFTAP>=80% <100% (Automatically)

While there are those who will disagree, my door seems to be swinging based upon my knowledge of the client. For example, small professionals are not interested in suspending accruals.

I tried this a poll but was unsuccessful at posting.

Is filing a legal condition for top hat status, or can a sponsor file one under DFVCP after the plan's exempt status is called into question?

We took over a 401(k) for a catholic high school associated with a local parish that has been filing a 5500 since 1998(?). They are going to need an audit for 2009. We don't believe that they ever filed a 401d election. Any way out of filing the 5500 for 2009?

Any experienced multiemployer practicioners out there?

Questions:

1. Plan goes from green to critical. When does the 5% surcharge start, 30 days after the employers are notified of the status, or at the start of the rehab period (which can be much later)?

2. How is the 5% computed, being 5% of "the amount otherwise required". What is "the amount otherwise required"?

3. Where does the 5% come from, the employer's pocket? Or can it be mandatorily passed along to the employees?

4. When is the 5% due, concurrently with regular remittances, or by the minimum funding deadline?

Thanks for any help.

We have a client who would like to know why plan years cannot be 6 months long instead of 12 months long. I'm not talking about a short plan year to sync up dates with insurance. I would like to give him more that "because the IRS says so." Anyone know the reasoning?

does anyone know the amount of central states' 12/31/2009 unfunded liability?

I have a doctor client in Texas that has maintained 401(k) and cash balance plans for the last 4 years. From the start of the plans, there has been a participant in the plan that the doctor (and the participant) thought was a citizen. Taxes, both income and Social Security, have been withheld and sent in with no problems. It is now found out, that this participant, who is now stuck in Mexico, was given a bill of goods by her mother regarding her citizenship. Whether it's believable or not, here are the issues I would like someone to comment on:

1. What happens to the monies in the pension/profit sharing plans? Does the participant have any rights to her vested account balance in the 401(k) plan, including her own accumulated salary deferrals? What happens to the vested accrued benefit in the cash balance plan? Are checks cut and sent to Mexico?

2. Are there implications for the medical practice by having her for an employee for the last 4 years?

3. I was curious if an individual can get a Social Security number without first being a citizen. I am sure she doesn't have a visa in as much as she thought she was a citizen. If you're not a citizen, what happens to the income taxes that have been withheld from your salary?

We administer a DB plan for a small husband and wife company.

The plan was active for 5 years then they froze the plan effective January 1, 2007 (hard freeze). Since then, they have hired two full time employees who would have entered the plan July 1, 2009.

They wish to now unfreeze the plan effective for 2010 and prospectively credit the same 5% of FAC per year of participation as they had in the past. We should be able to accomplish this with a fresh start. Under this scenario, the owners will not receive accruals for the three years the plan was frozen.

They would like to exclude the two NHCE's from receiving benefits under the DB and would instead cover them under a profit sharing plan and provide contributions of 15% every year for the NHCE's.

They would pass the general test.

Does anyone see problems with not covering NHCE's in the DB plan?

Comp 245,000

Date of hire was centuries ago.

I've got a participant in a frozen DB plan with an annual benefit of 100,000. The same participant is also in a New Multiple Employer plan (Same ER in both). The participant has an benefit of 95,000 in that plan.

The participant's combined 415 annual benefit is not violating anything... however, when I calculated the lump sum in the old plan and add it to the lump sum of the new plan, I'm above the 415 lump sum limit. Individually, i'm not.

Is the 415 lump sum limit plan specific? or combined like the dollar and comp limits?

A broker called because he thinks his client is getting bad advice regarding a plan termination, and I don't find an easy answer anywhere...

Client is a one-person plan, under $250K, and wants to terminate his plan. For whatever reason, the prior (well, technically, "current" since I'm just consulting at this point!) TPA didn't do the EGTRRA restatement, I think because the goal was to terminate the plan effective 1/1/10. Other TPA is only now getting their act together about the plan termination and saying that it's OK to sign the plan termination resolution with a current date, still effective 1/1/10. Broker has read about the 4/30 EGTRRA restatement deadline and is concerned that not having anything signed by 4/30 is a problem.

The broker's position sounds right to me, but I'm not seeing anything concrete to back it up. Is there something out there? Thanks.

How are the loan calculations done when the Participant's account balance is less than $50,000? Please see below, did we calculate the 3rd loan correctly?

$3,622.35 = Current Cash at ING (100% vested)

+ 780.08 = Current Balance on Loan #2 (Loan #1 paid off 07/29/2010)

$4,402.43

x 50%

$2,201.22

- 1,880.53 = Highest Outstanding Balance on any one day (09/01/09 = $1,000 New Loan #2 + $880.53 Loan #1 Balance)

$320.69 = New Loan (But, does not meet $1,000 minimum threshhold, so no new loan)

Thanx.

http://sungard.com/sitecore/content/campai...o403bplans.aspx

Very very relevant article on mandatory contributionsby Steve Forbes...

Beginning of excerpt

Some 403(b) plans provide for mandatory contributions. In this situation, making the contribution is a condition of employment. Such a condition may arise from a statute or contract, or may simply be the employer’s policy.

Both of these types of contributions reduce the employee’s wages for tax purposes. The FICA rules count these contributions as wages. However, neither type of contribution is an elective deferral for purposes of a 403(b) plan under Treas. Reg. §31.3121(a)(5)-2, which the Treasury finalized in November 2007. Accordingly, these contributions are nonelective employer contributions as far as the plan is concerned. Except for church plans and governmental plans, these contributions are subject to nondiscrimination testing under Code §401(a)(4). They are not subject to the universal availability rule (and cannot be used to satisfy that rule) or the 402(g) limit. Unlike conventional elective deferrals, these contributions are not included in gross compensation for purposes of 415 or other Code provisions which reference the 415 definition of compensation.

End of excerpt

I have a plan where the employer mandates a 5% employee contribution. If you make said 5% contribution, you get an 8% contribtion. Question is, 8% of what? This article seems to suggest that it is 8% of comp EXCLUDING mandatory contributions unless unique language adding back the mandatory contriubtions is included.

From researching the 415 rules applicable to 403b's, I've looked at the regs and the IRS Pub 571. The regs seem to make it clear that the employer cannot provide a benefit in excess of the 415 limits (i.e., the test is an employer level test, based on the plan year).

But in pub 571, it seems to indicate that in addition to a "plan year" review by the employer, the employee also needs to run their own test based on their own taxable year. Am I understanding this correctly? Woluld this mean that as a TPA we should be reviewing calendar year data (even for fiscal year plans) to ensure compliance?

The test is actually quite complicated as I'm learning. It's complicated because of the definition of includible compensation, which could include comp from up to several years ago. It would seem to allow someone to go well over a qualified plan's normal 100% of comp limit, unless I'm missing something. Does everyone agree?

Has anyone seen a practical user friendly write up of these rules?

I do not see why this will not work. Please reply with any cites or rulings that would disallow this idea!

Step #1

LLC is formed to run a trade or business where the annual gains of the business are not subject to self-employment earnings. i.e. a "hedge fund."

LLC retains a managing member (via a 1099-MISC arrangement) to provide management or consulting services needed to operate the hedge fund.

Result, LLC has gains not subject to self-employment and the LLC has management fee expense that is used in computing self-employment earnings. Therefore the K-1 has negative self-employment earnings. Let's use $300,000 of such expense in this example.

Step #2

Now over to the form 1040. The taxpayer has $300,000 management fee income reported on his Schedule C, subject to SECA tax. The member also has a K-1 following $300,000 of negative self-employment earnings,

Result: based on this Schedule C trade or business of management services, the taxpayer establishes a plan and funds it with $49,000. Then when the taxpayer completes his Schedule SE, the Sch C earnings are offset with the K-1 negative earnings and he nets out with zero self-employment earnings and therefore zero SECA tax.

Conclusion:

Bottom line result: taxpayer has justified a $49,000 deductible plan contribution and yet he incurs zero SECA tax.

Please throw some stones at this, with support for your conclusions!

Possible problem:

Using a 1099-MISC when GPP Guaranteed Payments to Partners might be required, and if done that way then the K-1 would show NET zero self-employment earnings and therefore perhaps that would jinx any deduction for a $49,000 plan contribution? [Thoughts?]

IF SO - then I propose forming a single member LLC and that SMLLC is not a member of the LLC, but is hired to provide management and consulting.

The SMLLC not being a member in the LLC, would legitimately not be paid GPP. but a SMLLC, being a disregarded entity with regards to the form 1040, would still net out the self-employment earnings.

My thinking is that either method would be legitimate, but method two would be bulletproof.

Any, comments will be appreciated...

A 403(b) plan is established by a county hospital, which is a dual status entity because it is a 501©(3) entity and also a governmental entity. The question is can they impose a 5 year eligibility requirement on the employer contributions? At first I thought not, but per the regs below, it appears that the minimum participation standards of the Code do not apply to governmental entities?

Any thoughts??

410© APPLICATION OF PARTICIPATION STANDARDS TO CERTAIN PLANS. --

410©(1) The provisions of this section (other than paragraph (2) of this subsection) shall not apply to --

410©(1)(A) a governmental plan (within the meaning of section 414(d)),

I want to know if partial distributions are protected benefits? It appears Examples 4 and 5 could be interpreted as being the case.

Any thoughts??

§ 1.411(d)-4 Section 411(d)(6) protected benefits.

Q–1: What are “section 411(d)(6) protected benefits”?

A–1: (a) In general. The term “section 411(d)(6) protected benefit” includes any benefit that is described in one or more of the following categories—

(1) Benefits described in section 411(d)(6)(A),

(2) Early retirement benefits (as defined in §1.411(d)–3(g)(6)(i)) and retirement-type subsidies (as defined in §1.411(d)–3(g)(6)(iv)), and

(3) Optional forms of benefit described in section 411(d)(6)(B)(ii).

Such benefits, to the extent they have accrued, are subject to the protection of section 411(d)(6) and, where applicable, the definitely determinable requirement of section 401(a) (including section 401(a)(25)) and cannot, therefore, be reduced, eliminated, or made subject to employer discretion except to the extent permitted by regulations.

(b) Optional forms of benefit—(1) In general. The term optional form of benefit has the same meaning as in §1.411(d)–3(g)(6)(ii). Under this definition, different optional forms of benefit exist if a distribution alternative is not payable on substantially the same terms as another distribution alternative. Thus, for example, different optional forms of benefit may result from differences in terms relating to the payment schedule, timing, commencement, medium of distribution (e.g., in cash or in kind), election rights, differences in eligibility requirements, or the portion of the benefit to which the distribution alternative applies.

(2) Examples. The following examples illustrate the meaning of the term “optional form of benefit.” Other issues, such as the requirement that the optional forms satisfy section 401(a)(4), are not addressed in these examples and no inferences are intended with respect to such requirements. Assume that the distribution forms, including those not described in these examples, provided under the plan in each of the following examples are identical in all respects not described.

Example 1. A plan permits each participant to receive his benefit under the plan as a single sum distribution; a level monthly distribution schedule over 15 years; a single life annuity; a joint and 50 percent survivor annuity; a joint and 75 percent survivor annuity; a joint and 50 percent survivor annuity with a benefit increase for the participant if the beneficiary dies before a specified date; and joint and 50 percent survivor annuity with a 10 year certain feature. Each of these benefit distribution options is an optional form of benefit (without regard to whether the values of these options are actuarially equivalent).

Example 2. A plan permits each participant who is employed by division A to receive his benefit in a single sum distribution payable upon termination from employment and each participant who is employed by division B in a single sum distribution payable upon termination from employment on or after the attainment of age 50. This plan provides two single sum optional forms of benefit.

Example 3. A plan permits each participant to receive his benefit in a single life annuity that commences in the month after the participant's termination from employment or in a single life annuity that commences upon the completion of five consecutive one year breaks in service. These are two optional forms of benefit.

Example 4. A profit-sharing plan permits each participant who is employed by division A to receive an in-service distribution upon the satisfaction of objective criteria set forth in the plan designed to determine whether the participant has a heavy and immediate financial need, and each participant who is employed by division B to receive an in-service distribution upon the satisfaction of objective criteria set forth in the plan designed to determine whether the participant has a heavy and immediate financial need attributable to extraordinary medical expenses. These in-service distribution options are two optional forms of benefits.

Example 5. A profit-sharing plan permits each participant who is employed by division A to receive an in-service distribution up to $5,000 and each participant who is employed by division B to receive an in-service distribution of up to his total benefit. These in-service distribution options differ as to the portion of the accrued benefit that may be distributed in a particular form and are, therefore, two optional forms of benefit.