Tax on the trust income due to plan disqualification; do all earnings of the trust turn taxable, not just those earnings traceable to the contribution made in the year where disqualification occurred? What official citation would support this?

I do not refer to a case of a rollover of unqualified assets, but a case of losing qualification due to other circumstances.

A law firm client maintains two 401(k) plans. The first covers just associate attorneys and only provides for elective deferrals. The second covers partners and staff and provides for elective deferrals and profit sharing contributions. It appears that the partner/staff 401(k) plan does not satisfy Code Section 410(b) Here are the numbers:

40 HCEs benefit under partner/staff 401(k) plan

147 total NHCEs (47 are associate attorneys)

100 NHCEs out of 147 NHCEs benefit under the partner/staff plan with respect to 401(k) deferrals

Ratio is only 68.03%

Any idea as to how we can pass? If we aggregate plans and aggregated plan is top heavy, the client would need to make a top heavy contribution to associates ... not a good solution.

Thanks in advance. Ed

Things haven't gotten much better for me lately. I am planning on moving back home to Florida to be closer to my family. At this point, I have come to terms with the fact that I’m probably going to have to file for bankruptcy.

However, after reading this article, I really want to think this through and find out how to get the best “deal” (as much of a deal as you can get from going bankrupt..).

I am planning on taking the article’s advice and consulting with my California lawyer, but thought I could try to get some other opinions first, especially since I won’t be able to consult a Florida lawyer until after I make the move.

Which state’s bankruptcy laws are more favorable, California or Florida? And if Florida, any locals know of a trustworthy Tampa Bay attorneys I can consult with?

A nonspouse beneficiary can roll over through direct transfer a distribution to an "inherited" IRA.

A participant can roll over a distribution of pre-tax contributions to a Roth IRA.

Can a nonspouse beneficiary roll over through direct transfer a distribution of pre-tax contributions to a Roth IRA?

A nonspouse beneficiary can roll over through direct transfer a distribution to an "inherited" IRA.

A participant can roll over a distribution of pre-tax contributions to a Roth IRA.

Can a nonspouse beneficiary roll over through direct transfer a distribution of pre-tax contributions to a Roth IRA?

I was contacted today by a fellow attorney who learned that a 401k plan he set up in the 1990s has never had a Form 5500 filed by the employer's accountant.

The DFVCP of EBSA immediately comes to mind. It is a small plan, so the cumulative penalty will cap out at $1,500. However, I'm concerned that it might take two to three months to locate the necessary information for those years' Forms 5500 to be prepared, before we can then formally file the DFVCP application (along with the fee of $1,500).

In the meantime, is there a way that I can put the DFVCP office on notice that we've found the problem ourselves, are voluntarily coming forward, but need a few months' time to prepare all the Forms 5500? I want to do this to 'inoculate' the situation against possible detection in the interim by the DoL/IRS outside the voluntary program, under which circumstance the government agency might assess devastating financial penalties.

Also, what procedure is there to avoid IRS late penalties?

Plan is daily valued w/match subject to vesting schedule.

When someone is paid out, non-vested amounts go to forfeitures on date of distribution of vested portion to employee.

Plan uses forfeiture account to pay admin fees.

Question-Document reads that forfeitures occur on last day of plan year. So do we have an issue? And volume submitter checklist we are working off of does not have option that forfeitures occur on day of payout so we'd have to change vs language.

The problem we see is that if we wait til last day of plan year, how can all expenses be paid on 12/31 and if they are not, can we really roll the forfeiture bucket to pay the next year's expenses???

Currently, Plan Sponsor files 3 separate Form 5500s for its H&W Benefits.

Wrap Document was drafted effective January 1, 2009 to consolidate into one filing for 2009 and forward.

What is the proper treatment of the 2008 filings for the 3 individuals Plans? I have received conflicting thoughts and wanted to see if anyone had a definitive guidance.

Should you:

Check Box B3 as a FINAL Return and Report 0 participants on Line 7? Under this approach, should you also show 0 participants on the respective Schedule A's or do you still want to give some acknowledgement to the fact that participants were covered during the year?

OR

Should you enter Code 4R on Line 8b - indicating plan will not file a form 5500 for next year pursuant to 29 CFR 2520.104-20 (i.e. will be less than 100 participants on January 1st of following year)?

Anyone have any published guidance?

Hello,

Plan's loan policy only allows one loan outstanding at a time.

Participant has a loan outstanding and applies for and receives a check for a second loan, while the first one is still outstanding.

Participant refuses to repay the second loan in full immediately upon discovery.

I believe the second loan is treated as a default (deemed distribution) immediately as it violates the plan's loan policy provisions and therefore the second loan is taxable (with penalties depending on age), but like any other deemed distribution remains in deemed status until it can be offset.

Any further insight will be appreciated.

andmik

Plan with 12/31 PYE adopts a resolution to terminate in 2006. They distribute all of the assets in 2007 and file a Final Form 5500. In 3/2009 they receive a check from settlement proceeds related to late trading and market timing. (See FAB 2006-1).

1) Does the plan need to file a Form 5500 for 2009? Does it matter if the funds are recevied and distributed during 2009?

2) If so, can you confirm that the participant count at the beginning of the year is zero?

3) Does the plan need to file a 2008 Form 5500?

4) Does the plan need to file an amended 2007 Form 5500?

All comments and cites are appreciated.

Any reason a wholly owned ESOP must own 100% of its subsidiary? or be in the same controlled group as the subsidiary?

Has anybody seen final treasury regulations, following the proposed regs that came out a couple of months ago? I have not, but it's not easy keeping up with everything. Thanks!

I have a minor (age 9) who is entitled to 50% of his grandmother’s account ($7,000). My document does not address what to do in the event of a minor child beneficiary however I have read multiple recourses that state the monies should be given to the guardian for the benefit of the child, and it should be placed in a UTMA account until the child comes of age (21). Is this correct? Also, does the guardian need to be court appointed or can the parents be named the guardian by the Trustee?

The beneficiary lives in New Jersey.

We have a debate going on about the proper handling of loans when an employee isn't paid in a given pay period (not a leave of absence) or is paid too little to allow a loan deduction. This typically happens during plant shutdowns when someone is taking the time unpaid, so they may be unpaid for the entire pay period, or be paid only for a day during the pay period. Our loan policy does allow for cure period.

Opinion 1 - the missed loan payment needs to be made up by the end of the cure period or the loan must be deemed. It doesn't matter if the employee makes a payment in the following pay period, the one missed payment causes a default.

Opinion 2 - When the employee is paid again, a loan payment is taken again, thus curing the loan default that occured from the missed payment. At end of loan repayment period, there is a balance remaining that participant must pay by end of cure period or loan is deemed.

Typically we try to make up the missed loan payment when the employee is paid again by doubling payments, however, we have multiple locations with decentralized payroll, multiple payroll systems involved, and multiple pay frequencies, so it is hard to enforce/monitor that this happens each time a loan payment is missed. So there has been discussion of whether it is truly necessary to try to catch these missed payments, and, since we have difficulty applying this consistently, would we be better off not trying to double up payments.

For leave of absences we reamortize, but our new 401k vendor refuses to reamortize for one or two missed payments when it doesn't involve a leave of absence.

I posted this under the 401(k) Plan Forum, but I am posting here as well, since it involves a DB plan, too:

If a DB and a DC plan are permissively aggregated, and the DB plan provides a subsidized death benefit to the surviving spouse of an active employee, how can such a benefit be provided for in the DC plan in order to pass testing? Will providing such a benefit under the DC plan result in any limit violations, such as 415?

If a DB and a DC plan are permissively aggregated, and the DB plan provides a subsidized death benefit to the surviving spouse of an active employee, how can such a benefit be provided for in the DC plan in order to pass testing? Will providing such a benefit under the DC plan result in any limit violations, such as 415?

My brother has a small business that is starting to offer health insurance to his employees. They cannot qualify for a group plan because they don't have enough participation. However, as the employer, he would still like to pay for half of the premiums for his employees and have the other half paid on a pretax basis by the employees. Can he do this thru a cafeteria plan? We can't find anything saying one way or another. Since it is individual policies can he still pay for part of it and have the rest pretax for his employees?

I was discussing this with an EA this morning, and we both were in agreement, but I thought I'd toss it out for discussion just for the heck of it. If a DB plan is in an AFTAP position such that distributions are restricted, can the HC still take participant loans?

We both agreed that they could, as the distribution restrictions do not specify participant loans as a restricted or impermissible distribution. This makes sense, because a loan is not a "distribution" per se.

Any other thoughts, opinions, or discussion?

Plan states forfeitures are to be reallocated. Forfeitures have accumulated for 3-4 years and have not been reallocated. Employer now wants to dispose of all these forfeitures. Assume the correction is to go back and determine who should have received the forfeiture reallocation for each year the plan required reallocation.

This forfeiture reallocation would be counted as a annual addition for the current plan year wouldn't it 1-1 plan year/fiscal year and no extensions)? If that's the case but what about former participants who are no longer actively employed and no compensation for this year? Is this a problem or are they due a share of the forfeiture regardless and no 415 issue for them.

Also - seems a significant enough of an error that VCP should be followed?

DB client establishes plan in 2008 and funds before 9/15 but after tax return due date.

Client intends to double up in 2009.

How is the 2009 maximum computed? Used to be the 2008 amount plus the 2009 minimum, I think. I know we have no regs.

This is a cash balance plan, so funding the 2009 minimum plus 2008 won't cover the total account balances, I am expecting.

Opinions please?