I am seeing two different requirements regarding Who Should Not Use Model 5305.

One resource says employers can use the model form as long as "the employer does not maintain any other retirement plan and has not maintained a defined benefit plan at any time in the past"

Other material, including the 5305 Form (2004) and Publication 560, seem to have dropped the language restricting employers who held DB plans in the past.

I am trying to determine whether a prototype document will be required in these two situations:

1 - Employer maintains PS plan in 2010 but wants to set up a SEP in 2010. Can employer adopt the SEP before the effective date of termination of the PS plan? Let's say it's October and employees have met the requirements for an allocation for 2010. What is the best procedure for moving to SEP-IRA? do we have a problem if the PS plan termination date occurs after the establishment of the SEP?

2. Can an employer use the Model form if he ever maintained a DB plan?

Thanks for any help on this one!!

Hello.

One of your clients just contacted us that they would like to change the safe harbor match language to allow 'true-up' at the end of the year. This would be for 2010. Apparently one of the employees in 2009 (not an owner, but an HCE) made most of his salary deferral payments to the plan in the early part of the year and had his match capped. The safe harbor match is currently deposited on a pay period basis per the document specifications. The employee would have received more match if there was 'true-up' at the end of the year. The current plan document does not 'true-up' the safe harbor match. The plan is a calendar year plan.

Is this something that can be done for a safe harbor plan during the year in question? The client did provide a safe harbor match notice to the employees on a timely basis.

Perhaps because it's late in the day, or I'm having a senior moment, I'm doubting my memory.

Plan has allowed in-service distribution of amounts rolled into the plan from other plans. They would now like to amend to remove that provision. Isn't that a protected benefit as to the rollover balances in the plan prior to the date of the amendment?

Does anyone know what the penalty is or what happens when an employer doesn’t get the notice to interested parties to their employees within 10 days of when they file for a Form 5300 qualification?

How long should copies of old plan documents, carrier contracts, correspondence to employees about plan/premium changes, FSA enrollment forms be kept?

I really need to clean out my office and I hope I can get rid of some of this old stuff.

Doctor group 401(k) allows for self-directed accounts. 2 docs want to invest a portion of their account in a venture capital fund. (One of the docs is one of two plan trustees) Investment would be in the form of limited partnership interests. I have read the limited partnership agreement and private placement memorandum and am trying to come up with the reasons this is not a good idea.

So far my list includes:

-potential prohibited transactions (depending on who the other limited partners are)

-severe illiquidity of investment

-possible UBTI

Can anyone add to my list?

In determining net periodic pension cost as of the measurement date: 1/1/2010

What expected distribution is used - actual distribution for the period 1/1/2009 - 12/31/2009 or expected distribution for 2010 which is usually produced by the valuation run

Secondly is the expected contribution(weighted) measured between 1/1/2010 - 12/31/2010

thanks

If a plan (for a chiropractor) was established in 2005 and has a nra of 55, didn't the nra need to be amended to at least 62?

Hello:

Need some help please.

Client has a minimum loan amount in its loan policy of $3000. Although I find nothing in the way of a regulatory/statutory guidance for a "maximum" minimum loan threshold, I have actually never seen a plan impose minimum in excess of $1000.

I am concerned this client is violating a rule, or in the very least an auditor would find that this discriminates in favor of HCEs, but would like to get others' thoughts on how to support my concern, if others believe it is founded.

andmik

I have a participant who elected to participate in the Dependent Care Account ($5,000) for the 1/1/09 - 12/31/09 plan year; however upon review of the census data the client provided, no monies were withheld from this individual and he has been reimbursed the entire elected amount. What are their options...1099? Thanks.

I've seen some discussion of this type of thing in an ADP testing context, but not in the basic 70% testing. I tried a search and didn't find it.

5 HC's who have satisfied age and service, and are participants in the plan. One is the owners wife. The wife for 2009 received zero compensation and had zero hours, but has not "terminated" employment.

A strict interpretation of 410(b) would probably lead me to include her, but she clearly isn't "benefitting." Under this thoery, only 80% of HC are benefitting, so only have to cover 56% of the NHC.

This seems very wrong to me, and allows for some rather gross manipulation in family situations. I think a much more reasonable result is to exclude her from the testing altogether, have 100% coverage for HC, and therefore require 70% of the NHC.

Last I knew, there was no official guidance on this. Has that changed? Opinions? Thanks!

Safe harbor DB plan with 6/30/09 year end fails ratio/percentage coverage test and is intended to be aggregated with a calendar PS/K plan. Together they would pass the Average Benefits Test. The Plan Sponsor has a calendar fiscal year end and files an extension.

As I understand it, the DB plan 7/1/2008-6/30/2009 would be aggregated with PS/K plan year calendar 2009.

By when must profit sharing allocations, which are necessary to pass the Average Benefits Test, be contributed?

If the answer is other than 4/15/10, can someone offer a cite?

Q 40 of the DOL's FAQ's about the 2009 Form 5500 Schedule C indicates that a plan administrator need NOT report a service provider as "failing to provide information necessary to complete the Schedule C" (line 4 of Sch C), if the plan administrator receives a statement from the service provider indicating that a good faith effort was made to make timely changes and despite such efforts, the service provider was unable to complete the changes for the 2009 plan year.

My question is - how many service providers are planning on providing such a statement to their clients? If you've made changes to your system(s) that you feel cover most or all of the required Schedule C reporting, are you also planning on providing such a statement? Thanks in advance!!

A participant terminated employment, he is NOT yet age 59 1/2, and has NOT met the 5 year requirement on his Roth Contributions - he is going to have a Non-Qualified Roth distribution.

This participant would like to roll his Roth 401(k) to a Roth IRA.

1) Would his earnings still be taxed because it is a non-qualified distribution?

2) Is the plan be responsible for 20% mandatory withholding on those earnings?

Any guidance you can provide would be greatly appreciated!

Should a plan report a qualified plan distributed annuity (QPDA) as a non-taxable distribution in Box 8 of 1099-R, leaving box 1 and 2a blank?

In the following articles, Bob Toth indicates that 1099-R reporting is required because the distribution of a QPDA is a in-kind lump-sum distribution:

http://www.businessofbenefits.com/uploads/...m%20401k(1).pdf

http://www.bakerdstreamingvid.com/blogdocs...t_Annuities.pdf

But, isn't the distribution of a QPDA exempt from reporting since it is reasonable to believe the QPDA distribution is not includable in gross income under IRC § 6047(d)(1) and IRC § 3405(e)(1)(B)(ii)?

I was discussing an amortization extension with a fairly high up IRS representative and they reminded me that the Trustees are not allowed to increase benefits to ANY plan during the extension period.

In other words, if during the period of the extension the union negotiates a higher contribution rate for the defined contribution plan, they have violated the terms of the extension. I knew they couldn't increase benefits in the db plan, but I didn't know it applied to ANY plan.

Just thought I would throw this out there for the group’s consideration.

I am working with a Profit Sharing Plan that the IRS is auditing for 2007. This plan, which was administered by the ADA (American Dental Association), was terminated and paid out in 2008. During the audit the agent found where a participant was not paid the correct vesting percentage due to the plan termination. The participant has elected to take a taxable distribution of the amount due her.

The plan sponsor closed his corporation back in 2003, and the Federal and State Tax ID's were also closed. The former president of the company is writing distribution checks for this participant from his personal bank account.

Will I have to apply for new Federal and State EIN's in order to process the taxes withheld on this distribution? Or is there another way to deposit and report these taxes? The ADA is not involved in making this distribution.

Thanks.

Does anyone have any recent experience with what kind of issues found during an examination that the IRS will consider a true "qualification issue"? Would a failure to make RMDs where the participant was notified of the need to do so but did not take action to receive a distribution constitute a serious qualification issue? The plan document provides that RMDs will be made and they have been made except for these few instances where the participant took no action. Apparently the plan did not proactively and unilaterally process RMDs. Even if the missed distributions are low, I am not sure whether this can/will be used to extract large sanctions from the plan sponsor. Any thoughts?

As long as a participant's aggregate 401(k) election does not "take into account" more than $245,000 in compensation, does it matter if a participant first elects to participate in a 401(k) plan at some point in the year after which he has already earned $245,000? In this case, the deferrals would technically be made out of compensation beyond the first $245,000. Perhaps it's all fungible, however.

It is clear from the 2008 FOrm 5500 instructions that a corporate extension (assuming all conditions are met) can automatically extend the 5500 due date until the due date of the corporate tax return.

There is a principal at my office (he is a CPA) who is not satisfied that the Form 5500 instructions are sufficient proof to support the availablility of using a corporate extension as an automatic extension.

He wants to know of the "law" supporting such an option. Does anyone know of a code section or regulation that provides for the use of a corporate extension as an automatic extension?

Thanks.

In 2520.104a-5 (a)(2) it states the due date as 7 months after plan year, unless extended. See "when to file" instructions of appropriate annual Return/Report Form. So that may be the extent of info in the law and regulations.