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?

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!