Here goes: 10 years ago a broker convinced a corproration and an executive to this. The corp bought a $600,000 life ins. policy on the executive and paid the premium by deducting it from the executives bonus pay. The corp. is the policy owner, and the executives wife is the beneficiary. No deferred comp agreement was ever written. No split-dollar agreement was ever written. The executive dies and his wife gets the $600,000 from the ins. co.

How is this to be taxed is the question.

Thanks,

Rene

Can you use paper form and mail in to file a fiscal plan begin 12/1/08 and fiscal plan end 11/30/09?

Or do have to use EFAST2 (i-file) to file it? Is it capable to do 2008 fiscal plan ending in 2009?

Thanks

I have a business owner who owes the IRS some money. He started by asking about a hardship, which the plan doesn't permit at the moment but of course could be amended to allow, and I threw out the idea of using the anti-alienation exception for a tax levy. So he met with the IRS agent and responds:

He is aware of cases where the ten percent penalty can be dropped, he believes this is one of them. He suggested that the plan not withhold the ten percent.

I find that a little scary because, well, it's not like someone has discretion over the penalty. Frankly, I don't even know if a levy is subject to tax, let alone penalties; if they just take your money is it the same as a distribution?

And he goes on to say:

The amendment can include situations involving taxes owed, or payments on mortgage to prevent foreclosure.

That makes me think he's talking about a hardship distribution, not a tax levy; it's almost like the agent is fishing around to see what he can get the owner to do voluntarily without squeezing him to the point of trying to negotiate a more favorable settlement (maybe that's a leap on my part).

If anyone has been through this or otherwise knows how to handle it, please comment. It seems like the agent should be the one imposing the levy first, not just hinting about how they can raise the money, if they're going to do it that way.

Sole prop files his 2009 1040 in February 2010, taking qualified plan deduction for 2009, planning to make contribution by April 15. On March 24, he decides he wants more time to make the contribution. Can he file for an extension before April 15 even though the 1040 is already filed?

a plan rescinded their Safe Harbor in 2009 after amending to incorporate safe harbor effective 1.1.09. prior to 2009, they utilized "Prior Year" testing method. It is my understanding upon rescinding that they default to "Current Year" testing method. They can not go back to "Prior Year" can they for lets say 2010 plan year?

A new plan starts 4/1/2009 - 3/31/2010. HCE defers $20,500 during the period 4/1/2009 through 12/31/2009. HCE defers $15,000 between 1/1/2010 and 3/31/2010. Is it possible to allocate a profit sharing contribution of $24,500 such that the employees' total allocation would be $60,000 of which $5500 was catchup for 2009 and $5500 was catchup for 2010?

Can someone expound a bit on what, if anything, makes it necessary to file a 5500 for a welfare benefit plan for a company with less than 100 participants? Specifically regarding the instructions on page four of the 5500 instructions under the heading "Do Not File A Form 5500 For A Welfare Benefit Plan That Is Any of the Following:"

Is it really just as simple as there is a Cafeteria Plan, there are fewer than 100 participants, therefore we don't need to file a 5500? I see some potentional pitfalls in the instructions regarding the regulations, code, and a technical release that I don't fully understand.

Thanks

Hi,

In the past, I seem to recall that the IRS allowed an employer could use the IRS model form only if it did not maitain any other retirement plan and had not maintained a defined benefit plan at any time in the past. I cannot find this last requirement regarding defined benefit plans in the 5305-SEP instructions or elsewhere. Is it still true? If so, where would I find it.

Thanks for your help.

Does Schwab offer participant record-keeping services? If not, what are options for TPAs that don't do daily record-keeping? Thanks.

A person terminated in 2007 and had an outstanding loan. The participant never took a distribution. 90 days later we defaulted the loan in our system but never requested the 1099 at the trust company for the defaulted amount. We just discovered this! What is the proper procedure to fix this? Can we issue it now for 2007 and the participant has to file 3 years of amended tax returns or do we issue it as of 2010??? Any guidance would be greatly appreciated. Thanks

Age weighted plan has 3 NHCEs (age 56, 60 and 52) and 1 HCE (age 70). NRA is age 65. 401a4 testing is bombing.

What options are there to pass the nondiscrimination testing?

Thanks!

I understand that some states require that if a participant's beneficiary is his/her spouse, that designation is automatically revoked upon divorce.

Would appreciate your sharing how you handle this operationally.

Thanks.

A quick question. The only contribs made to a Plan are Catch-Up contribs made by a Key Employee. No contribs are made by Non-Key's during the year. More than 60% of assets in the Plan are in the Key EE account. Does the Catch-Up contrib trigger a Top Heavy allocation to be made to the Non-Key EE's?

A friend told me he would pick us up at 6:43PM to go to dinner. He pulled this number out of the air because I commonly state weird pick-up times ("I'm a round number iconoclast"). 643 has somewhat interesting properties, I observed.

643 is a prime number.

13 = 6 + 4 +3 is a prime number

7 = 6 + 4 -3 is a prime number

5 = 6 - 4 + 3 is a prime number

67 = 64 + 3 is a prime number

61 = 64 - 3 is a prime number

37 = -6 + 43 is a prime number

There may be other prime numbers that can be formed by the digits 6, 4, and 3 while respecting the order but 6:43 was approaching so I had to put my pencil down.

Our company is a TPA and I am the trustee of TPA 401(k) PS Trust. Along with two other plan clients, we invested in a Multi-Lender first trust deed transaction. The property went into foreclosure and the three unrelated retirement trusts now own the real estate. We plan to rent it for 5-7 years, then sell the property. In the meantime, there are lots of costs associated with managing real estate. Repairs, taxes, insurance, on-site property manager, etc. I told the other two plans' trustees that I would be willing to serve as an unpaid property agent, receiving rent from the on-site property manager, and paying bills, and making distributions to the 3 owners. To do this, I need to set up a bank account.

Question: am I allowed to set up the bank account in the name of the TPA 401(k) PS Trust? I would then make distributions to the other two trusts as positive cash flow allows. Or does this violate the standard trust document found in most plans, which requires that the trust hold assets only for the beneficiaries of the TPA 401(k) PS Trust? On the one hand, my duty as trustee is to safeguard the asset partially held by my trust, and safeguarding includes facilitating careful management. On the other hand, the only explicit language I can find permitting commingled trusts is when a single employer sponsors more than one plan.

Any thoughts?

I know you can "borrow" from your IRA for 60 days and as long as the money is returned BEFORE the 60 day period it's not a taxable distribution. What if the person did not return it to the IRA but instead deposited it into a Qualified Retirement plan before the 60 day period was up?

Would that still be OK?

Doug

Participant retires in 2010, the year in which she also attains age 70 1/2. She is requesting a direct rollover of her PS Plan balance to an IRA.

Must she receive her 2010 RMD from the Plan before her rollover is processed? Or, since she could defer her initial RMD until 04/01/2011, could she, instead, opt to have her 2010 RMD paid from her rollover IRA?

A client terminated their PBGC covered cash balance plan effective 7-1-09. The client informed us that all distributions occured prior to 12-31-09 and provided copies of the checks. Forms 1099R were prepared for the distributions for 2009. While completing Form 501, the client informed us that the last check was actually cashed on 2-4-2010. The owner had held onto his distribution check, made a deposit to the plan in 2010 to fully fund his benefit and cashed his check at that time. We certified on Form 501 that the last distribution date was 2-4-10.

1- I am preparing the 2009 PBGC filing. For my participant count at 12-31-2009, do I need to determine the number of participants whose checks hadn't cleared and use that as my count or can I say that there were no participants who whom the plan had a liability on that date because the checks written were an accrued distribution?

2- Would this be the PBGC final filing for the plan? The form asks for the date of the event that ceases the filing obligation. I would either have to enter 2-4-10, which is after the filing year, or the date the last check was written, which wouldn't coincide with the date certified on the Form 501.

3- Can I file a final 5500 for 2009 or will I have to file a 2010?

If we are a "nonamender" and have an operational failure are we to submit an Appendix D and an Appendix F? Doesn't seem very streamlined. Also, would the nonamender fee cover the operational failure?

I have a plan that someone wants me to take over. The prior actuary has a monthly pension and accrued benefit at age 70 of $22,431 as of 12/31/08. The compensation was always been at the max allowed ($230,000, $225,000, $200,0000, $210,000 etc). Since the plan uses a 3 yr avg. the monthly pension EXCEEDS the salary 3 yr avg of $18,194 as of 12/31/08.