I am preparing Demos for a Schedule Q filing for an Age+Service based Profit Sharing Plan that counts prior service from affiliated employers to be counted for eligibility, vesting and allocation. I have not done many of these for DC plans, but i have not seen any Demo 7s done for any of our DC clients and was wondernig if the past service issue pertains to DC plans or not. Any help would be appreciated. Thanks.

We have an ERISA 403b plan that issued a second loan to a participant while only one loan is authorized under the terms of the plan. How do we correct this defect? I do not believe 403b plans are subject to the Code's prohibited transaction rules and excise tax penalties under 4975, but ERISA prohibited transaction rules apply. However, what does ERISA violation do, other than make plan vulnerable if there is a DOL audit? But there has been an unauthorized distribution under the terms of the plan which could cause plan disqualification and ERISA prohib. transaction violation too. So to correct you try to recoup money from participant, and if no success, can plan sponsor repay the amount to a forfeiture account to make the plan whole and undo the prohib. transaction? And then 1099 the participant for the distribution? Thanks for any comments you may have!

A tax exempt entity was a participating employer in a 403b plan, and now wishes to no longer participate and establish a new plan. Prior plan is funded with individual contracts. There has not been a termination of employment, only a termination of the employer's participation in a plan. How can participants move their prior contracts to the new plan - ie via a plan to plan transfer but only if permitted by both plans -what if prior plan will not allow? Can a rollover be done? There is technically no separation from service. Thanks

An individual has self-employment income, but also works as an employee for a separate, unrelated company. The individual has set up a SEP to make contributions out of earned income from the self-employment business and also participates in the separate, unrelated company's 401(k) plan. In this situation, does the section 415©(1) limit apply to the individual or to each of the defined contribution plans?

In other words, does the $49,000 annual addition limit for 2010 apply to the SEP and the 401(k) separately (for maximum potential across both plans of $98,000) or is the individual limited to $49,000 in total (for both the SEP and the 401(k))?

I understand that the elective deferral limit of $16,500 applies across all DC plans, but I'm not sure if the section 415©(1) annual addition limit applies to each DC plan (regardless of how many plans in which an individual participates).

Any guidance would be greatly appreciated.

Best regards,

Bob

I have a DB plan with a sole proprietor. He earned way over the max. comp. limits for the year. He contributed much of his income into the stock market this year and wants to take the money he contributed (paying taxes on any gains) and contribute it to his defined benefit plan. Any issues with this? I know if it was money contributed from prior years you would have issues, but this is money he earned duing the year and instead of putting hit into a bank account he invested the money. I have an actuary telling me it is ok....I'm not sure.

Don't know much about 401(a)'s but was wondering why a company would want to move from a 401a to a 401k? Any advantages?

Also, if they adopt a 401k plan, can they transfer the 401a money into the newly established 401k? Could that be done like a provider-to-provider transfer, or would the company have to cancel the 401a plan, establish the K plan, and then each participant would have the opportunity to roll their money into the new 401k plan or an IRA?

Thanks in advance!

On another note- If a company moves from a 403b to a 401k plan, can that work like a provider-to-provider transfer, or does the company have to cancel their B plan and establish a start-up K plan, with the participants having the option to roll their money into the K plan or an IRA?

I have a client that is part of a city sponsored 457b plan. He is a firefighter and part of the firefighter's union. My question is can the union break off and set up their own plan with another vendor? (assuming all of the firefighter's agree). Do they need to get approval from the city to do this?

It is my understanding that, for individuals who have attained age 70.5, the IRS will consider the first dollars that are paid from IRAs during a Distribution Year to be in satisfaction of their RMD for that year.

If an individual completes a Roth Conversion of one IRA, and later takes a distribution from another traditional IRA "to satisfy his RMD requirement for the year", am I correct in thinking the IRS would consider the first transaction (the Roth Conversion) to be an ineligible rollover up to the amount of the taxpayer's RMD for the year, and subject to an excise tax (treated as excess contribution to Roth)?

My reference point is Treasury Regulation 1.408(a)(4), Q- A 6 which states, in part..© If a required minimum distribution is contributed to a Roth IRA, it is treated as having been distributed, subject to the normal rules under section 408(d)(1) and (2), and then contributed as a regular contribution to a Roth IRA. The amount of the required minimum distribution is not a conversion contribution.

I am looking for cases, rulings, etc where this scenario is discussed - where the taxpayer converted an IRA to a Roth prior to having satisfied his/her annual RMD requirement. Thanks!!

I wasn't sure what board to post this in, so I am posting it here and in the IRA section.

I have a client (the participant) who received a lump sum payment in December 2007 of around $150,000 from a defined benefit plan, and she rolled that over to an IRA. Last month, the participant received a notice from her former employer that the plan overpaid her by about a thousand dollars, and that the overpayment may be treated as an excess contribution to her IRA, subjecting it to a 6% excise tax, imposed each year until the excess contribution is distributed.

Questions:

What is the best route for the client if she does not want to repay the overpayment?

Can this amount really be treated an an excess contribution?

And even if it can, wouldn't the best fix be for the client to take out the excess amount from IRA and keep it? I doubt the employer would sue over a thousand dollars.

Thanks for any adive you may be able to provide

Two consultants each have their own S-corps. Somehow each consultant also receives a w-2 from the other's S-corp. They each also receive a W-2 from their own S-corp.

To make it more interesting, the two consultants both provide consulting services to a common client (who happens to be each consultant's largest client).

There is no common ownership between the two S-corps, and the two consultants have no family relationship.

If they each set up a retirement plan, are they really considered separate employers and can therefore max out under each plan?

There has to be something wrong here, I just can't put my finger on it.

Do rate of pay assumptions work under PPA? For example, if I'm running a beginning of year val for a 1 man plan where the only participant enters the plan on January 1 and takes his first paycheck during the plan year. What comp do you have to use? or must you run an end of year val in this case? I had thought that prior to PPA, you could use a rate of pay assumption for that first year.

Any thoughts?

I' ve got HEART on the brain today. Just to see if you agree: If someone who is on qualified military duty of more than 30 days receives differential wage payments from the employer, then deferrals can still be currently made from these payments, under the effects of 414(u)(12)(A)(i). If, however, the employee took an in-service distribution of deferrals under 414(u), then deferrals must be suspended for the normal 6-month period.

Agree/disagree?

But this same treatment wouldn't require a current employer profit sharing contribution unless the employee actually had the requisite hours for the year in question, right? This would be covered under the make-up provisions of USERRA.

A couple of our clients are asking about the relative advantages of rolling DB distributions into Roth versus regular IRAs. Is there a good resource on that topic?

I have a client (the participant) who received a lump sum payment in December 2007 of around $150,000 from a defined benefit plan, and she rolled that over to an IRA. Last month, the participant received a notice from her former employer that the plan overpaid her by about a thousand dollars, and that the overpayment may be treated as an excess contribution to her IRA, subjecting it to a 6% excise tax, imposed each year until the excess contribution is distributed.

Questions:

What is the best route for the client if she does not want to repay the overpayment?

Can this amount really be treated an an excess contribution?

And even if it can, wouldn't the best fix be for the client to take out the excess amount from IRA and keep it? I doubt the employer would sue over a thousand dollars.

Thanks for any adive you may be able to provide

Company A & B are brother sister controlled group (each has identical shareholders) with all A & B employees covered by one health plan.

Shareholders of Company A sell all assets to Purchaser. Purchaser hires all former A employees and covers them under its plan.

Shareholders of Company A & B drop their health plan as a result of the asset sale.

Company B employees remain employed by Company B but they have now lost their insurance.

Are Company B employees entitled to COBRA?

My thought is no, because they have not had a qualifying event.

Does anyone agree/disagree?

DB plan with top 25 restriction provided large accrued benefit to owner, who then retired and also got divorced.

Full benefit (at 415 limit when owner retired) assigned by QDRO to former wife, who started collecting in as a life annuity with the intent to convert to lump sum when plan is sufficiently funded.

Now the plan sponsor (company is now run by the son) wants to terminate and fully fund the plan. Mom has been receiving a large pension monthly for several years now.

How is the amount payable as a lump sum to be determined considering the payments received since the 415 regulations have this section "reserved"? Must the old 415 limit be used and the lump sum reduced by the pv of the monthly payments?

Any suggestions to avoid a cutback to Mom other than to have the plan buy Mom an annuity of select a reduced lump sum?

Can we put Mom on the payroll for 1 hour and then take advantage of the current 415 limit? Or can we use the current 415 limit regardless?

I have a dental practice with a calendar year PS/401k with a 3% non-elective SH contribution. On 12/1/09 a Safe Harbor notice was given to the employees stating a 3% non-elective contribution would be made for them in 2010.

The doctors now say they don't have the money to fund a 3% SH for 2010 due to their economic situation. I prepared an amendment to cease their SH non-elective contribution on 1/6/10. The SH non-elective will be funded through 2/5/10 and we'll use ADP testing for the 2010 plan year.

This plan is also top heavy and there is not much 401k participation with the staff. This severely limits the doctors to what they can contribute to the 401k.

Now the doctors are talking about starting a SIMPLE IRA for their company. Since the PS/401k will be funded through 2/5/10 with a SH contribution, doesn't this prevent them from starting a SIMPLE IRA during 2010?

Also they are asking if they can retroactively terminate their plan as of 12/31/09 to avoid making contributions for the 2010 plan year. I don't think this would work either.

Any other suggestions of what can be done?

A 401(k)/PS plan is still on a GUST document. They intend to terminate the plan in March 2010, so they have no intention to restate the document.

If they restated to an EGTRRA document, they can submit their 5310 after April 30, 2010 and ask for a D letter on the termination - no problem.

But, if they do not restate for EGTRRA (they adopt interim amendments only), and they want their Form 5310 accepted, must the 5310 be submitted by April 30, 2010?

Currently we have our software set to sixty month maximum loan duration. We have a concern that we are setting up the loan to exceed the five year limit from the start. We are considering changin the maximum to 59 months. Is anyone doing this?

401(a)(37) as amended by the HEART act seems innocuous enough. But the devil is in the details.

It's clear enough that someone who dies while performing qualified military service would become 100% vested if the plan provides for 100% vesting at death.

What happens when you have a Profit Sharing plan that provides for life insurance? While the Code itself says nothing about this, the JCT explanation includes the term "ancillary life insurance" benefits. So, must an employer continue to pay premiums for any person who is in qualified military service?

Let's assume the answer is yes. Is the premium deductible as a contribution under 404? And if the participant never returns to qualified reemployment, is the increase in value then treated as a forfeiture?

The same basic issue could apply to a DB plan as well, I suppose, modified due to the differences in benefits vs. account balances.

And another thing - I have an impression that perhaps not all life policies pay the full face amount for death due to war/military service? If so, then this could require some pretty fancy plan language to make sure the plan itself doesn't incur a huge liability for which it doesn't receive the requisite face amount from the insurance company.

I've seen a big fat nothing in terms of IRS discussion/guidance. Does anyone with "contacts" there know if they are considering this issue?