A Plan erronously deposited 401(k) employee deferrals into a few particicpants accounts and shorted other participants.

The over contributions will be removed from the affected participants accounts with earnings, but what is the correct way to handle the participants who were shorted?

Here is my question...

I have several clients that are "one man" DB plans. Some are over 250K in assets and need to file an EZ form. Some are way under 250K and do not need to file an EZ for 2008.

Well, if I'm not preparing a 2008 EZ form, do I still need to prepare and "send" the client the Sch B for their records?

Thanks !

Can employees defer to a money purchase plan or are the contributions strictly limited to the amount the employer provides to the Plan?

I have a plan with an age 65 normal retirement age with a benefit formula of 2.4% x YOS (max 10) x High 3. There is an active participant in the plan who is fully accrued (was by age 65), is age 70 and has yet to begin receiving benefits. Up to this point, his benefit has been actuarially increased due to his late retirement. The plan provides that the late retirement benefit is the greater of the actuarially increased benefit or the NRB taking into account any accruals after attainment of retirement age.

The plan is amending the benefit formula from 2.4% per year to 5% per year.

Would the increase in benefit formula be considered an accrual after retirement age, i.e. would his benefit at age 70 be 5% x 10 x High 3 or would it be 5% x 10 x High 3 adjusted from age 65 to 70?

at 12/31/2008, the plan was 90% funded.

The owner passed this week. In terms of pvab, his lump sum payment would have left the plan with zero in the plan. The plan allows lump sums to the spouse. He was at NRA. Can his spouse take the qjsa until there is enough money to pay out a lump sum? or must she continue the qjsa until her death or plan termination? Also, she is also a participant in the plan not at NRA.

Side question, assume the same thing as above, but the owner was taking RMDs. How would that be handled?

A company is 5 days late in depositing elective deferrals. Participants' accounts were down during the period, thus the actual deposit made was worth more than what the "earnings" would have been.

Is there a 5330 to file in this case? The "amount involved" when considering elective deferrals is the lost earnings due. Since there were no lost earnings, there would be no amount involved and thus no excise tax?

I know this has been discussed before, but how aggressive do you feel it is on say a 1 person plan (new plan) to use an NRA of 62, and a ERA of 55 with the ERB fully subsidized at 55 with a 99.99% funding assumption that the owner will take the ERB at 55. Does this sucessfully weave through the concerns of the IRS on post-NRA distributions being done on a reasonable NRA (in this case 62) but still allow us to use 55 for funding ?

I'd appreciate a few votes. On a scale of 1-10 with 10 being VERY aggressive where do you put this strategy ? I "think" the IRS has verbally offered some support for this strategy, or at least not kaboshed it outright, but correct me if I'm wrong.

I am working on a multiple employer plan. It consists of a number of controlled groups. In the past we have tested (ADP, ACP and 410(b) each controlled group separately. Is it okay to test them together? I've read a lot about aggregating multiple plans of one employer or controlled group, but I can't seem to find anything in which I have multiple employers and one plan.

Thanks in advance.

We are in the process of converting a plan that used to be with a large insurance company, invested exclusively in annuities. I've never encountered anything like this, and I'm wondering if anyone can fill me in on what I'm missing.

According to the insurance company, participant loans cannot be transferred to another provider, and they intend to retain sufficient plan assets to collateralize the outstanding loan balances. They say this is because the plan was previously invested in fixed annuity products that could not be liquidated. Therefore the participant loans were made not from plan assets, but from insurance company assets, and must be repaid to the insurance company.

That sounds to me like a third party loan for which the participant has pledged his or her account balance as collateral, not a true participant loan from the plan. Is this really standard practice for plans with annuities?

Plan has a mandatory matching contribution provision and a last day of the plan year requirement to receive a match. Those who retire, are disabled or die prior to the end of the plan year can recieve an allocation (if they deferred). If we move to a discretionary formula during the plan year, we can avoid making allocations because participants have not accrued a right to receive the benefit (they don't accrue a right to receive unless they are employed at the end of the plan year). I assume those who retire, become disabled or die before or after the adoption of the amendment would be entitled to a match. Is that a correct assumption? I assume those who experienced these after the adoption date would not be entitled.

I've got a potential client that is fortunate enough to be experiencing rapid growth. There are only a handful of employees with 3 or more years of service. They are covered under an existing SEP. There are another 50 employees who have less than two years of service. The employer would like to provide a 401(k) plan with matching contributions. She understands the k feature must be offered to all employees with at least one Year of Service. The question is this:

Can the Employer continue to fund the SEP for those employees who have at least 3 years of service?

As you know, if profit sharing were offered in the k plan, the employer could not require more than a two years of service. Can you stretch this to a 3 year wait by funding a SEP instead of Profit Sharing in a 401(k) Plan?

There is plenty of guidance saying the two plans must be aggregated for 415 purposes. Does anyone know of an issue under 401(k), 401(a)(4), 410(a) or (b) that would prohibit the employer from funding the SEP (with only a few participants) for another year or two?

Thanks very much.

I have a Safe Harbor Match Plan. The ER is terminating all the employees. The employees will then become employees of another company that the owner has no ownership in. The owner will remain as a consultant/broker and will not be an employee of the larger company.

1. Since the employees are being terminated is there any notice required?

2. Plan will fail testing if it terminated now - can they keep the plan in place through the end of the year with the owner being the only employee and getting the SH match to year end and then terminate the Plan.

3. Employees will be doing the same job that they were = but will be filling out applications and will become employees of this larger company. The preious owner will be providing space for the employees. I do believe that the larger company does offer a plan.

Anything I am missing here?

Plan is updated for EGTRRA and PPA.

Thanks

Pat

I have a DB plan with a termination date of 12/31/07, because of many reasons, including not hearing from the IRS, the plan still had assets as of 12/31/08. Must I prepare an Annual Funding Notice instead of a Summary Annual Report? If so, any ideas how I do that without a valuation report?

Hi there -

We are completing the EEO-1 report for the first time this year.

We were told that it is recommended that you answer the question of ethnicity and race based on self-identification. However, if you are not allowed to ask these questions on any employment application or other form, how do you get the answer to this question? I'm afraid of making people uncomfortable or for starting a Big Brother type scare by putting out a voluntary survey.

Is this info on any HR or governmental form or document that I missed?

Many thanks.

Does anybody have any suggestions on how to handle an employee who has 2 loans outstanding from a 401(k) plan and has found himself in over his head and cannot afford to make the loan payments? The loan repayments are currently set up as payroll deduct and he is asking for the employer to stop loan payments and he'll accept the loan default. He does have a commission coming to him in January 2010 which he said he'd put $4,000 - $5,000 on the loans, but this won't help him right now. He's currently paying $384.24 every two weeks on his loans! Neither of these loans are at a really high interest rate - one is at 6% and the other is at 9.25%, so even reducing the interest rate by refinancing wouldn't help a lot. I'm looking for ideas to keep him from defaulting on the loans (which really can't happen since the loan payments are payroll deducted). Thanks!

I have my first participant request to roll 100% of her Plan balance into her Roth IRA account where her plan balance contains both pre-tax and roth monies. The plan is with one of the bigger 401k vendors, but I don't see the option for me to code the pre-tax portion as a rollover to the participant's Roth IRA. I have emailed the vendor for instruction, but wonder what others are doing.

Also - I found the info in Pub 590 regarding rolling from a qualified plan to a roth IRA somewhat confusing. Does the 20% mandatory Federal w/h still apply to the pretax portion?

any assistance appreciated.

I haven't been able to research the specifics on this yet, but off the top of your head does anyone know if there is a PT exemption for this?

The sponsor is an insurance company. The plan is invested in funds of the insurance company and the sponsor receives commissions based on those investments. It just seems "wrong".

In 1998, a client sent a letter (I have a copy) to the bank with instructions to make future plan investments into the XYZ Fund. The bank moved current money into the fund, but did not make any future investments into the fund. The client recently realized that his instructions weren't followed.

Aside from the fact that the client should have picked up on this 11 years ago, doesn't the bank bear some responsibility? The earnings loss is significant.

I am exploring general planning issues that need to be considered when you have a physician, employed by a university and contributing to their 403(b), and who also has solo consulting practice and wants to install a Keogh plan to maximize contributions/benefits for the next 5-10 years until age 65. We are looking for more than the normal 49k contribution limits so I am thinking of DB alternatives?

Question: Are there any glaring red flags that would prohibit or substantially diminish the value of a DB arrangement for this individual (no employees, just the owner)?

Are there any publications or articles that discuss features of solo DB plans and when they are suitable vs. when to avoid. Most clients have 403(b) arrangements and may have an old Keogh PS/MPP plan. I thought exploring the DB option for clients who fall into that category would make sense.

Any general advice or guidance, resources, etc will be greatly appreciated.

So the PBGC makes the Blue Book from the annual Enrolled Actuaries Meetings available on its website free of charge. Does the IRS do the same with the Gray Book? If not, is there free online access to the Gray Books anywhere? I suspect that if there were, I would have found it by now, but I thought I'd check with the knowledgeable folks here.