We inherited a 403b plan that has had a written document since the plan's existence in July 2004. The client provided us with a new document dated 1/1/2008 and numerous amendments. Is this plan required to be restated for EGTRRA by 4/30/2010?

Please provide some guidance. Thanks.

What am I missing . . .?

Dr. with 6/30 pye adds a SH 401(k) to his straight PSP at the start of the plan year, 7/1/2010. For the rest of calendar year 2010, he defers $22,000 (he's over 50). Then, in the first half of 2011 he does the same. So, for the plan year, he has deferred $44,000, and only needs another $10,500 (using current numbers) to reach the 415 limitation--that's only 1.3% of compensation above the 3% safe harbor contribution (i.e., about 4.3% of his $245,000 compensation). So, he'll only have to contribute 4.3% of compensation for his staff for that plan year. A pretty cheap way to his 415 limitation. That's right, right?

And, if the PS side of the plan is integrated, he can get himself the 1.3% above the SH contribution by making less than a 1.3% integrated contribution (i.e., about 0.8% of total comp. + .8% of comp above the wage base, thus just .8% of staff compensation more than the 3% SH contribution). Right?

The next plan year, of course, he'll only be able to defer $22,000.

Have a small DB plan that will be terminating in the next few months.

Is there any problem amending act eqiv interest from 6.5% pre and post to 5.5%? There should not be any cut-back issues as everyone will be getting more not less. I know timing for the minimum present value cannot be utilized if changed within 12 months, but not aware of anything for actuarial equivalence.

i am new to the world of 457. lets say i put in a new plan today and an employee is 69 years old. can they take advantage of the catch up for the prior three years even when the plan wasn't in existence?

I have a 401(k) plan that has a $1000 cash out rule - i.e. no consent is required to cash out a person with less than $1000 in his account. The wording of this provision is mandatory - the plan is required to cash out such participants.

However, the plan has been following its own cash out rule and only cashing out participants with less than $200account balances. Is anyone aware of a correction method for this type of error? I guess it is an operational error since the document was not followed, but it seems like a rather benign one to me. Any ideas?

Can an individual contribute to a company SIMPLE-IRA while also contributing to a SEP-IRA for a separate line of business? The individual has Schedule F income and other earned income and wants to contribute to a SEP as well as contribute to the SIMPLE-IRA at the individual's main place of employment, where he receives a W-2.

I couldn't find anything quickly that allowed or prohibited. Any help is appreciated.

Calendar year defined benefit plan has been around for several years. It has 2 deferred Vested participants and two active participants (the active participants are married/owners and the owner has began receiving benefits in an annuity on 7/1/2009 and continues to be employed).

Two deferred vested participants are their children.

No compensation has been taken for the past 5 years. Plan has been overfunded since 2005.

We informed client in 2005 that the plan was overfunded and that the accrual of benefits would decrease the overfunding IF THEY TOOK COMPENSATION. Benefit formula is already 100% of avg. comp. We have informed them of these facts every year since 2005.

Finally in 2008 (the market downturn), the plan became more managable and was no longer overfunded as of 12/31/2008. We informed the client that although the assets dropped significantly, the plan was able to terminate now.

The client finally discusses termination with us in early 2010. Problem is the plan had a return for 2009 of over 100%. Statements show no contributions to the trust but do show a transaction to buy and sell securities that led to increasing assets to double what they were as of 12/31/2008.

BOY valuation shows a min. required contribution of 112,000. (using 1/1/2009 or 12/31/2008 assets). But now the plan is overfunded again!

We have contemplated changing the Valuation to EOY (with IRS approval). But, is there anything in the regs. that states a min. required contribution can be left unpaid if it would only overfund the plan even more?

Any one have any other creative solutions at this point. Yes the client failed to follow our recommendations for the past 5 years, but we are where we are and are looking for solutions going forward.

Owner who is currently receiving benefits is also receiving social security and has discussed with his accountant about the negative of claiming compensation while receiving social security and retirement benefits.

Is the reversion tax of 50% the only option? Or 20% if they start up a Defined Contribution Plan?

We discovered a client who has not been filing their 5500-EZ's. We're not eligible for the DFVCP because it's an EZ. What have others been recommending? Filing the back forms and seeing if you get a letter? When people have taken this course of action, have they gotten penalty letters?

I was thinking maybe attach to the filings a letter requesting forgiveness for the late filing as they were not aware of the requirement. It actually relates to the change in filing threshhold from 100K to 250K.

US Citizen is married to a Resident Alien. US Citizen has W-2 compensation and is not covered by an eligible retirement plan. US Citizen may make an IRA Contribution, but can an IRA be made on behalf of the spouse who is a Resident Alien? Publication 590 does not address this scenario.

Thanks for any replies.

This is not a safe harbor match. Can the match formula be a percentage of pay instead of a percentage of deferral? For example, the employer is contributing a match to only people who defer equal to 3% of salary instead of a % of deferral. This resulted in a formula of 700% of deferral not to exceed 3% of pay. Would this raise any red flags with IRS or DOL? There are no highly compensated people in this plan.

This is not a safe harbor match. Can the match formula be a percentage of pay instead of a percentage of deferral? For example, the employer is contributing a match to only people who defer equal to 3% of salary instead of a % of deferral. This resulted in a formula of 700% of deferral not to exceed 3% of pay. Would this raise any red flags with IRS or DOL? There are no highly compensated people in this plan.

I know this has been asked and answered, but I can't find it...

Safe Harbor Nonelective Plan

Plan Allows Discretionary Matching Contributions

2 Entry Dates

Comp Excludes Pay Before Entry In the Plan

The Plan is Allocating the Nonelective Safe Harbor 3% and a Discretionary Match (50% of 5%)

For the employees who entered mid-year, would they get 3% of their pay from the entry date? Or is the plan required to allocate 3% of whole year pay to satisfy Top Heavy?

It seems to me that the only contributions being made are Safe Harbor and a discretionary match that satisfies the safe harbor, which should (if I'm not mistaken) give them a pass on the top heavy contribution, but our software is forcing a 3% top heavy on whole year pay for those who entered mid year.

Any help?

Plan sponsor has a DB and a 401(k) PSP. The combined plans were top heavy for 2009. The DB Plan was frozen in 2009 before anyone accrued a benefit. In order to test for top heavy status for 2010, do both plans need to be combined? Or since the DB plan is frozen, is the 401(k) PSP tested on its own?

Partner made contributions to the safe harbor source during the year in the amount of 20,800. Obviously, some of this needed to be moved to profit sharing. However, his income was far less than expected and we have about 7500 that he is not going to use for 2009. Can this be refunded to him by 4/15/10 or should it be forfeited?

Employee incurred an expense that was first submitted to insurance. Insurance paid part. Claim for the rest was then submitted to HRA and the remainder to MFSA (about $500 to the MFSA) and both reimbursed. Only just now is the insurance company saying that the entire amount should have been covered by them and has notified the employee that a check will be sent. The original claim was occured and reimbursed in their 2009 plan year which ended 12/31/2009.

What should or can be done in this case? I'm assuming the HRA portion needs to be refunded back to the account. But what about the Flex? The employee, not unreasonably, claims that there were other incurred expenses that she could have had reimbursed via the MFSA. Perhaps just use the insurance check to refund the HRA and the ee keeps the remaining $500 and Flex is therefore appropriately used up?

I want to get a few 5307s filed before the April 30, 2010 deadline. These are not new plans. Some have prior determination letters and some never applied for a determination letter. I'm thinking that all of these clients need to pay the user fee because their plans existed prior to 2005. This is in reference to the part of the instructions that says "within the first five plan years." Only new plans that started out on an EGTRRA document would be exempt from the filing fee. But then, the IRS says that "a plan that was first effective on or after January 2, 1997 will automatically meet this requirement." I'm so confused!

Per a member's/distributee's request, a plan prepared a direct rollover check made payable to the eligible retirement plan, gave check to the distributee/plan member for delivery to the payee. The plan member somehow managed to cash the check, even though was not made out to him.

Plan, of course, did not withhold mandatory 20% because it was a direct rollover. Distributee now comes back to plan and asks for a "corrected 1099" showing distribution as ? not sure what, but something other than a direct rollover.

Questions: (1) should the plan correct the 1099R, since the one it issued was presumably correct base on available information? It had no control over the member's ability to improperly cash the check made out to the rollover plan.

(2) if no corrected 1099R should be issued, does the plan have other reporting reuqirements relating to this set of facts, or is this solely a problem now for the member/distributee?

(3) I do not believe the plan should be liable for failing to withhold, under 3405 regs, but can anyone offer additional comfort (cases, PLRs) for me/my client? Q7 of 31.3405©-1 does not contemplate this bizarre set of facts.

What is the deadline for a Cycle E filer to adopt a pre approved plan if they are currently on an individually designed plan? If they sign an 8905 do they have until Jan 31, 2011 the cycle E deadline or do they have to adopt the plan by April 31, 2010?

Thanks!!

A 401 (k) Plan is now being terminated. One participant has life insurance with cash value. The advisor for the plan wants to strip out the life insurance, place these proceeds into the cash portion of participant's account and distribute the contact without taxation. Is this still possible?

In 2008, a calendar year plan sponsor elected to use the transitional segment rates for the preceding September (2008). In 2009, the plan sponsor elected to use the non-transitional segment rates for January (2009). With final regs effective 1/1/2010, may the plan sponsor elect to use another basis for 2010 such reverting to a prior September determination month. Or, did the Plan sponsor use up his "freebee" change?