What happens if someone has already filed their 2009 tax return, then decides to make a nondeductible Traditional IRA contribution for 2009 before April 15? They need to document this contribution on Form 8606; I'm wondering how to accomplish this.

I searched this forum and the Fairmark.com forum. I am finding two different answers: File a Form 1040X with an 8606, or just send the 8606 in by itself.

The instructions for Form 8606 only mention submitting an 8606 by itself if the person is not otherwise required to file a tax return, but needs to file an 8606. I know doing a Form 1040X isn't that hard, but for clients who do their own taxes, submitting an 8606 by itself would be preferable to doing a 1040X.

Have a small take-over DB plan with a volume submitter document.

The plan has a provision that places a maximum on accrued benefits of $5,000 per month. The prior administrator limited accrued benefits of the two owner employees to $5,000. However, one of the owners is two years past NRA and it appears no actuarial adjustment was made. In this case the owner who is past NRA does not care. Is it permissible to limit accrued benefits and not provide an actuarial adjustment?

Rev. Proc. 2002-32 provides options when a seller sells some of its assets to a buyer and seller continues to maintain an FSA. COBRA does not apply to the FSA in such case, because the FSA elections and coverage continue.

What is the COBRA rule if the seller sells substantially all assets, terminates its FSA, and 2002-32 does not apply? It seems that buyer would be required to offer COBRA to the seller M&A qualified beneficiaries, in accordance with §54.4980B-9 (since the seller’s FSA is a group health plan).

However, perhaps the limits on COBRA for FSA participants protect the buyer? Specifically, §54.4980B-2 Q/A-8(d) states that an FSA “is not obligated to make COBRA continuation coverage available for any subsequent plan year to any qualified beneficiary who experiences a qualifying event during that plan year.”

If the seller terminates the FSA as of the date of the transaction, wouldn't that end the plan year (a short plan year), thereby cutting off the right to COBRA under the buyer’s plan?

If not, and if the M&A beneficiaries can elect COBRA under buyer’s plan, then they could elect COBRA under buyer’s plan, pay one month of premiums, submit claims and collect the maximum under the buyer’s plan (even if they had already collected under seller’s plan), then drop COBRA with buyer a month later. This seems to be what the quoted language above was designed to prevent – a second year’s worth of reimbursements at little cost, but we cannot find comfort that the “plan year” exception for FSAs would apply in a mid-year asset sale situation. It's only a subsequent plan year as to the seller.

Bottom line question is can a buyer avoid offering COBRA under its FSA in an asset purchase?

Thanks in advance for any thoughts.

I was always under the impression that the plan document in effect on the participant's last hour of covered service (usually when they terminate employment) is the version of the plan that governs the participant. Recently, I was challenged on this. Other party says its the document that was in effect when the employee started...and the more favorable one that was instituted while employee was working at company does not apply. I disagree, but can't find the statutory provision to justify my position...after citing that many many times. Anyone know?

One of my clients is a law firm. They have two plans set up, one for the partners and staff and another plan for the associate attorneys. The partners and staff plan receive an employer non-elective contribution, cross tested, every participant is in their own group. The associates do not receive an employer contribution. The plans pass coverage using the ABPT. I restated their plans for EGTRRA on a VS document, no change to the standard language.

My question, is 1) should I submit both their plans for a favorable determination letter? and 2) should I include a Schedule Q with the applicable demos? and 3) which demos should be included 5 and/or 6. I've never submitted a 5307 with a Sch. Q and I was wondering what everyone's experience is with the Sch. Q and demos. thank you

I read 4205(b)(1)(A) as applying to the employer and not each separate facility for which the employer makes contributions to the plan. Does anyone know otherwise?

We have a few clients that were late in filing, both health and welfare plans and one 401a plan. (Not our fault!)

In the past we could explain that the delay was due to ....whatever.... and have penaties waived. Dog ate the homework answer etc.

With EFAST it demands a penalty.

Any thoughts?

Thanks

I'm performing CT calcs for a plan that does not require last day employment or any minimum hours in order to receive a non-elective P/S alloc. Plan is top heavy and does not allow 401(k).

Long-standing EE had cancer and rendered zero services in 2009. ER kept him on payroll until death in April.

Does he get an alloc.?

More importantly, is he included in my c-t testing?

Thanks.

My understanding is that under the proposed cafeteria plan regulations which can be relied upon until made final provide that no retroactive amendments can be made. I do not believe the current final regulations say this, but once proposed are final they will replace and be effective 1/1/2009. Anyway, we have a situation where the TPA said our client needed to amend and restate their plan for changes that include Michelle's Law, etc. We just received an amended and restated document effective 4/1/2010. Nothing in the document references a separate effective date for Michelles. I thought Michelle's, etc. went into effect for plan years on or after October 2009? Therefore, shouldn't the restatement date say 1/1/2010? I know there are no retroactive amendments permitted under the proposed regs, but if client signs with restatement date of 4/1/2010, then late for Michelle's Law. If retroactive, in violation of proposed regs, even though final I believe permits retroactive to the beginning of the yar.

Any suggestions on what to do?

We have a 3/31/10 plan year end which terminated, and all assets will probably be distributed in April or May 2010. We'll file the 2009 Form 5500-SF (4/1/09-3/31/10) normally. Any ideas on how to file the final 2010 Form 5500-SF (4/1/10 to whenever assets zero out). Any thoughts on if we can use the 2009 Form 5500-SF and change the dates, similar to what we would do for prior year filings?

The employer terminated their 401(k) as of 12/31/09 and implemented a Simple beginning 1/1/10. Do they need to restate the 401(k)?

Thanks,

Rene

Company A has a cafeteria plan. Company B is being formed and there is some common ownership to Company A, but does not meet the definition of a controlled group and is not an affiliated employer. Company B wants to be added as a participating employer of the Company A cafeteria plan (Company A approves). I know the proposed regulations asked for comments on multiple employers in cafeteria plans. At this point are you permitted to have a multiple employer cafeteria plan? If so, any thought on the future in this area?

Thank you!

Hi Everyone,

Here is the situation, we received a distribution form for a terminated employee in April 2009. This employee was also a trustee of the plan. We did liquidate his assets and now we found out, this employee (Trustee) was really never terminated and now wanting to just terminate their plan. So..this Trustee did lie on the form and gave us erroneous termination date.

Question 1: Would this really be a "Prohibited Transaction", or just a operational failure? I'm having a hard time finding this situation in Correction Programs. The trustee did take it in cash, so the 20% was withheld. I'm thinking before terminating the plan, he should put the money back into his account. Then at the time of termination liquidate again. Any corrective lost earning?

Question 2: I know if this was a "Prohibited Transaction" it must be reported on the 5500. Do optional failure are reported the same way?

Thanks...

Hi all,

I would appreciate a bone on this one...my memory is vague.

Say you have a 2008 contribution due and only a portion is paid by the time the 2008 5500 is filed, thus creating a deficiency. The remainder due as of 1/1/2008 will not be paid until mid 2010.

If I wished to adjust the remaining 1/1/2008 contribution due with interest to a payment date of 7/1/2010, would I hypothetically adjust it using the 2008 effective rate?

i.e. (remaining contribution at 1/1/2008) x (1+effective rate for 2008)^2.5 = amount due at 7/1/2010.

Thank you in advance.

I've read all the discussions I can find and saw several threads dealing w/ the subject but not this specific question. For a 401k plan are those employees who are eligible but choose not to defer so they have no account balance counted as participating employees for determining the turnover ratio?

My client received a favorable Determination Letter for a DB plan that is conditioned on a change in the testing method, which requires a small corrective contribution to the DC plan (aggregated for testing purposes) for the 2007 Plan Year. I have been trying to find guidance as to whether we are required to make this correction through the VCP or EPCRS since this correction is the basis for reliance on the Determination Letter, or whether the fact that the Determination Letter is conditioned on this corrective contribution takes care of any additional filing requirements, and have not found anything useful. Any suggestions or guidance would be appreciated.

When submitting a pre-approved plan document to the IRS using a form 5307 do we have to include the form 8905.? We have not been doing this because we were under the impression that 8905 only had to be submitted if the prior plan document was an IDP. All of our GUST docs were pre-approved Accudraft VS. We are now using the Corbel Pre-approved VS plan documents for EGTRRA ( i guess for that reason alone we should be submitting them !!).

For some reason we were under the impression that since we have never used IDPs that it was a waste of time for us to have the 8905s signed back in 2006, and you can only use the 8905 if you had a IDP and then were adopting a pre-approved plan. To switch from a 5 year to 6 year cycle. That is why we haven't been sending them in with our 5307 submissions.

We have submitted a hand full of docs so far, how much of a problem would this cause. Will they just come back and ask for a copy of it?

We will be sure to send them in with our submissions going forward

Third year of CB plan, takeover of course! When computing the maximum contribution with cushion we get $210,000. The hypothetical balances are $216,000.

Now we get to the fun part - client contributed $80,000 before we got the plan. So now we compute the maximum as cushion amount less assets (and remember 2009 was a very good year for assets) and we have assets (not counting contributions and all the other adjustments) of $146,000.

So max contribution is $64,000 and client put in $80,000 before the end of the year - a $16,000 overage. If we were to use the hypothetical as maximum we reduce the overage to $10,000.

Can we use the hptothetical balance as the maximum?

A company sponsors a one participant/owner pension plan.

The sponsor wants to contribute $0 for 2009.

If a valuation were performed a $0 minimum funding requirement is certain to be achieved.

However, plan sponsor does not want to pay for val or schedule sb.

The plan has less than 250k so no 5500EZ required.

A valuation and schedule sb is required to be furnished to sponsor, but of course sponsor does not want to spend money for it.

What are the consequences? It's not a funding deficiency excise tax because if a funding were computed it would be $0.

Is this grounds for IRS plan disqualification? What else?

Thanks.

We took over a cash balance plan and the valuations had not been done for 2007 and 2008. As I worked through them, I discovered that they did not pass 401(a)(4) for either year. Therefore, I need to prepare an amendment and go through VCP. My question is - for purposes of the 2007 and 2008 Schedules B and SB, should this amendment be reflected ? I'm thinking that since the amendment was not adopted within 2 1/2 months after pye, I should not reflect on the Schedule B. If that's the case, it's actually also too late for 2009. Will these amendments be reflected in the 2010 funding target?