ugust 27, 2009; the actual deposit was made on 9/15/2009. The interest of $3.00 will be paid August 15 2010. What should be entered as "amount involved in prohibited transaction" in schedule C? I'm thinkiing that only the $3 interest is the "amount involved..." which results in an "initial tax on prohibited transaction" of $0. If this is correct, should we file the 5330 anyhow? Because of client's fiscal year, the 56330 was due May 2010 so now it's late. Do I need to do anything extra about that?

I have a Profit Sharing Plan where each individual participant has an annuity contract , and each participant self direct the subaccounts within their annuity.

The owner is contemplating adopting a defined benefit plan for his business, and he would like to dump the DB contributions into the annuity for his benefit in the profit sharing plan.

I believe that it is possible to commingle DB and DC assets, as long as the recordkeeping is clear (contributions, expenses, earnings, etc can be properly allocated to the correct plan). But this just sounds wrong to me.

Is it at least a prohibited transaction? Self dealing, perhaps? If having by larger asset base in the annuity, the owner could have some kind of unfair advantage over the employees?

Anyone care to share their thoughts?

We took over administration of a plan in 2002. I recently found out that the plan has an insurance policy. The policy was taken out in 1991. There was no mention of the insurance policy when we took over the plan. History of the plan prior to 2002 is sketchy. The company would like to correct and file under the DFVC program. I'm just not sure how to help them without knowing at what point the insurance policy was not included in the assets. Any suggestions on how to help them or where to start?

An employee worked only 2.5 months out of the year and then terminated. She got paid for about 500 hours of actual services rendered, so normally would not be eligible for a profit sharing contribution. However, she also got paid out for approximately 510 hours of accumulated sick, leave, vacation, etc. time leaving her with slightly over 1,000 hours in the plan year. For purposes of the 1,000 hour allocation requirement should all of these 510 hours count in the year of termination? Do you count the hours for the time period in which you are paid for them? Or could you argue that most, if not all, of them were accrued in past years?

Hi,

Client is on 12/31 year. Two different opinions offered by TPA. Which is correct? Thanks for your help.

My client has TPA and the plan is a profit sharing plan that has a 401k component. The client has had no participating employees in the past and maxed out contributions in past years on the profit sharing contribution and has never contributed via 401k portion.

Client must now cover employees for 2010. Current TPA states the following:

We cannot amend to a safe harbor 401(k) plan for 2010 because Notices have to be given 30 days prior to beginning of plan year. So even if client could defer $16,500 in 2010, the ADP non-discrimination testing would fail and he would likely get most of it refunded. So for 2010, the best plan would be to amend to an integrated formula (which is what this allocation is) and amend to a safe harbor for 2011. Both amendments could be done together by 11/1/10.

A different TPA states the following:

If the client has not used the salary deferrals this year or in the past the plan can be safe harbored for 2010

1. Client and his wife who is employed would defer $16,500

2. All rank and file employees would receive an allocation of the 3% Safe Harbor; Client and his wife would not share in the 3% Safe Harbor Allocation (we need to keep Mrs. out of the 401(a)(4) test)

3. For the Employer Profit Sharing, client would receive the maximum allocation, 2% to rank and file employees and 3% to employees (due to their youth) who worked under 1,000 hours.

4. The amended Plan would say that anyone employed as of 1/1/10 would be eligible for all sources.

The instructions for the 5500 EZ for 2009 state the following:

One-participant plans that covered 100 or more

participants at the beginning of the plan year are not

eligible to file Form 5500-SF, and must file Form

5500-EZ.

hmmmmmm.

I guess this rule must apply to those plans which covered over 100 participants but who are only partners (and spouses).

guess there would be no audit either.

Just how many plans are out there like that?

Does a plan that was certified to be in critical status last year but which made a WRERA election considered to remain in critical status until the actuary certifies otherwise? Sec 432 indicates that plan emerges from critical status when actuary certifies (essentially) otherwise.

Hi Friends,

I was googling online to find a forum like this to meet retirement plan professionals like you guys and found this forum. I am looking for a used text book for DC-3 by Ilene Ferenczy. Does anyone have a book for sale? I am not sure if I am allowed to post a question like this. Thank you.

Under COBRA's definition of a qualifying event, what constitutes a "termination" for a plan participant who is self-employed, a sole proprietor, or simply an owner or employer who also participates in a plan as an individual?

In other words, I'm trying to determine how and when an owner or individual employer "terminates" themselves such that it constitutes a qualifying event. I realize it's something of an absurd situation -- i.e. an owner-operator could then have to issue him or herself a COBRA notice. But it occur, for instance, in a situation in which a small employer who is incorporated has to lay off all his or her employees, including themselves.

Thanks

I've obtained my EFAST2 credentials from the DOL website and have filed 2009 returns as "Filing Signer, Transmitter" at Company A. I will be leaving Company A within two weeks. Can I change my user information (email, company name & address) on the DOL website and take my EFAST2 credentials to Company B? Or will I have to file for new credentials?

I have a question on completing the IRS Form 5310 for a terminating DB plan that was previously frozen.

Lines 13 and 14 of the 5310 ask for information regarding coverage and nondiscrimination for the year of termination. Line 13 states that you need to complete only line 13p if the plan satisfied coverage using the requirement of 1.410(b)-2(b)(6) (no HCEs benefit). The 5310 also states that if line 13p is completed, skip line 14.

For this plan, no HCE is treated as benefiting under the plan for the year of termination due to the plan freeze. Is there any reason I can’t just complete line 13p of the 5310 on the basis that no HCEs benefit and skip the rest of line 13 and all of 14? It seems to me that I can complete the form this way, but others I’ve spoke to disagree.

All thoughts and/or comments are appreciated. Thanks.

You'll never believe this one. Just got a letter from the IRS stating that my Schedule B was not signed and dated therefore was rejected. This was on a plan submitted 3 WEEKS AGO. They already sent a letter. Here's the kicker, my Schedule B was signed and dated. So, don't know whether the warning we receive through Web Client (Relius), that we get everytime regarding signatures and dating are causing these letters to be generated, or, if this letter is actually referring to another issue and the letter is wrong.

Anybody seen this yet??

We have a small plan with 2 participants (dr and wife). Part of the assets are held in LLCs. These LLCs have not been recently appraised because doc didn't want to pay for appraisal. The Dr. has closed his practice and wants to terminate his plan. However, he can't find anyone to buy the LLC interests or any custodian who is willing to hold the property if he tries to transfer it to an IRA. Any suggestions on how to close out this plan? We have called the local IRS retirement plans specialist and even she didn't have any suggestions.

At the end of 2005, we didn't notice that a client's plan assets crept over $100k. They hit $100,620 in the last week of December. We noticed it while filing the 2006 Form 5500-EZ, when it was obvious that filing was required. We prepared a 2005 Form 5500-EZ and the taxpayer filed both in July 2007. The IRS has hit the taxpayer with a $5,000 penalty!! How can we get out of this? Is there any way?

Thanks!

Participant was working here with green card, then left the US and gave up green card back in 2004, so no longer living here. He received a distribution in 2009, the 1099 was issued with his ssn.

However, the investment company withheld the 20% but left in his account for some reason. Since he was not a US citizen I guess they weren't sure if they should pay the tax or what. I think they should have just paid the tax. Is there some special form that needs to be completed since he was a not a US citizen that I don't know about?

Thanks!

We use the 1-866-go-efast # to check the filing status of a potential client.

This number was always updated within a few weeeks of the filing. It seems that the old EFAST is not going to merged into the EFAST2 filings.

e.g. I have a few potential clients that have a plan year end 7/31/2009 and I am trying to check the 5500 status.

Also when I check some of my plans that I know were filed and have confirmations and are already on FREEERISA, the status check line states it has not been received in the EFAST2 system. But I am checking the EFAST1 system.

Any advice out there for an immediate status check that it was received? or where the old one resides?

Some people argue that dollars used to make 401(k) loan payments are taxed twice; once when the loan is repaid with after tax dollars and a second time when the account balance is distributed. But isn't there an argument on the other side, as well? A participant does not pay tax on the initial deferral, nor do they pay tax on the loan proceeds, so the deferral is maintained. If loan payments were tax deferred a person would in essence get a double deferral on the same money. Does anyone have something already prepared that argues that loan repayments are NOT taxed twic?

Thank you.

LL&P

As we all know, effective January 1, 2011 (for calendar year plans), plans that cover dependent children will be required to coverage adult children to age 26, regardless of dependency status.

Hypo:

Employer has a number of tiers of coverage, including Employee-only, Employee + Children. Both the employer and employee contribute to the coverage. Employee is estranged from his 25 year old son. The son comes to plan and says "I am entitled to coverage. Put me on the plan." Employee says "I don't want to pay more for his coverage."

Three questions:

1-Does the plan have to cover the child?

2-If the plan does have to cover the child, can the plan require the employee pay for the employee share (presumably pre-tax through a cafeteria plan) or must the employer have the child pay separately?

3-If the child pays separately, does he pay the Employee-only rate or does he pay the difference between the Employee + Children rate and the Employee-only rate?

Any help is appreciated.

Hi,

We are a private 9-12 high school in Massachusetts and are re-writing our handbook this year. I am interested in revising our vacation policy and would love to know what other independent schools do for their faculty and administration. This is what we currently do:

Faculty: school breaks and summer off; 10 sick days; personal time at the discretion of the Head of School

Administrators (director level): 20 vacation days per fiscal year; 10 sick days; personal time (only after all vacation time has been used) at the discretion of the Head of School

Administrative Staff (support level): 10 vacation days per fiscal yr; sick and personal same as Administrators

Currently, vacation days roll over from year to year and do not expire, with no cap. Also, vacation time does not increase after a certain number of years...you always just get 10 or 20 days depending on your classification.

I don't like our current policy and would like to change it -- any sample policies or comments would be greatly appreciated.

Many thanks!

~R

If an amended 5500 requires a Schedule P, the schedule that applied to the filing year must be scanned into pdf and then filed as an attachment. My question is, must the actual signature be included on the scanned document? If yes, then it seems odd as it would be viewable on the site.