It seems a plan was terminated several years ago. Although it was once an orphaned plan it is orphaned no more and the participants are receiving their distributions from the recently rediscovered plan administrator.

There is a problem is with a forfeiture account.

Forfeitures were permitted for contributions in the same year in which the forfeitures occured, but forfeitures were not to be used to pay plan expenses.

There is a balance in a forfeiture account. Because the plan was terminated years ago, there is no plan to amend.

Company would like to use remaining forfeiture assets to pay any fees that may be charged against the remaining ppt accounts in the future, until all distributions are made.

Any words of wisdom will be greatly appreciated.

Y'all, I am having such a hard time finding what I need by "Searching" these forums. I know that's a whole nother topic, but I wonder if I'm the only one?!? I get very few, very old results that come up...

Anyway, I have as a client a small dental office who uses a payroll company. There is a distribution that requires 945 w/h, and the payroll company won't do it. (Don't ask me why, I don't know). So we sent this client an 8109 to fill out and take to her bank with a check for the withholding. She just called back to say that her CPA told her the IRS may impose a penalty (!!!) for her using a non-electronic form of payment!

Has anyone heard of this, and if so, what is this client's option to get the 945 paid? The only remedy I could think of was to wait and send it with the 945 at the end of the year. But there'd be a penalty for that, too, right?

Thanks for ANY advice!

Trying to research any restriction on DB Plan Lump Sum payout rerstriction on highest paid employees .... I seem to recall a restriction on higest paid 25 (or top 5?).

Can someone summarize restriction and direct me to the source information (ERISA ... US Code Title 29, Chapter 18 version) or in specific IRS Section(s)?

Thanks.

Say you have a money purchase plan with a 25% formula. Granted that most people amended out of these, there are still some who have them because it is old and comfortable, like an old shoe, or because of employee or union situations where a mandatory contribution is desired or required. Like an old shoe, however, it may also be nasty and smelly.

The employer, for 2007, misses minimum funding deadline and undercontributes by $50,000. Understands penalties on the 5330 for missing minimum funding. However, under 404(a)(3)(A)(v), a money purchase plan is subject to the 25% deduction limit, rather than being able to use the 404(a)(1)(A) methodology (which they did use pre-EGTRRA). So, first, the employer must contribute the $50,000. Then must contribute the 25% under the formula - which is the maximum deductible. So there's a required contribution of $50,000 which cannot ever be deducted! Furthermore, there are arguably penalties every year for a non-deductible contribution of $50,000.

Now, they can amend the formula downward to use this up at some future date. They could also argue that the $50,000 isn't nondeductible, but is merely not currently deductible, and thus not subject to the penalty tax. It just seems completely unreasonable to have to take these approaches.

Anyone run into this before? Had conversations with someone at the IRS who actually knows something about it?

We've got a wierd situation...the accountant filed a "final" 5500 for 2008 for a terminated plan, but three participants had not yet taken their distributions. Those assets were still in the plan and reported on the "final" 5500 (the three participants were reported as well). Clearly we'll have to do another "final" 5500 for 2009, but must we amend the 2008 return? What will the Department of Labor do when it sees the return as filed?

Many of the 401(k) plans we service use contracts that have the account recordkeeping done by the "asset vendor". Examples would be the very popular "annuity contracts" made available for 401(k) plans by institutions including Guardian, ING, John Hancock, Hartford, Fidelity, Oppenheimer, Transamerica and T. Rowe Price (and others).

Under these contract you will find a fund selection naming funds of Neuberger & Berman, Fidelity, etc... You will also find proprietary funds that are offered by that institution. It has been my understanding that this type of arrangement does not result in self dealing, etc... and does not represent a transaction with a "party in interest".

Am I wrong? If so, why and how would this impact 5500 Reporting?

As always, thanks for your comments.

A 401(k) Plan currently has a 6 year graded vesting schedule for the Profit Sharing Contribution.

The Plan Sponsor wants to amend the Plan to read "Employees hired prior to and including 12/31/06 are 100% vested in the Profit Sharing Plan".

Is this allowed?

I am out of my element with health care stuff but am not getting much response from the vendor. If a company currently has a cafeteria plan that includes health care reimbursement accounts AND may have Health Saving Accounts added as one of the options next year, exactly what $ amounts need to be included in the Section 129 testing for the contributions and benefits testing?

Everyone has an equal opportunity to elect any options under the plan and the employer contribution/employee cost would be the same for any given option. So I think they are okay with the eligibility testing. However, it's the benefit availability/utilization testing that I am confused about.

Thanks.

PAL

A plan sponsor implements a new Db plan combined with a new 401k/PS plan.

The plan sponsor decides to give each employee up to 5 years of past service when implementing the DB plan and the 401k?PS plan starts contributing allocations from date of participation.

So in other words the employees potentially receive past service credit with the DB plan and not with the DC plan.

In checking the non discrimination on an accrued to date basis is it reasonable to determine the DB accrual based on the total accrued benefit divided by total credited service after the first year of the plan and test the DC plan accrual based on the accrual rate over the one year, since the allocation is only for the one year?

That is, both plans are being tested on an alleged accrued to date basis, but the service can be as much as 5 when testing the DB accrual and is only one when testing the DC accrual.

Thanks.

We are considering converting an ESOP to a profit sharing plan and redeeming all the employer stock in the plan for cash. Is there any reason why this would not be allowed under section 409? After the conversion of the ESOP to a profit sharing plan and the redemption of the employer stock for cash, the employer would like to amend the plan to eliminate the option to receive distributions in employer stock. Would this violate the section 411(d)(6) cutback rules or does Reg. sec. 1.411(d)-4 Q&A-2(b)(2)(iii)(A) provide an exception to the cutback rules that would be applicable in this situation? Does an ESOP that converts to a profit sharing plan continue to be subject to the section 409(h) distribution requirements?

are they? I know they are exempt from federal with holding but not from FICA. What about FUTA and SUTA? I don't think they are.

Do the regs under 414© regarding control groups apply to an educational organization which maintains a 403(b) plan? Specifically is the following used to determine control "common control exists between an exempt organization and another organization if at least 80 percent of the directors or trustees of one organization are either representatives of, or directly or indirectly controlled by, the other organization?" Reg 1.414©-5

Any insights would be appreciated.

An employer wants to offer financial planning for its employees. The financial planner would provide advice to plan participants on their qualifed plan investment choices in connection with investment direciton and would also provide information on insurance and presumably would make insurance product sales. The employer would like to compensate the planner in part from qualifed plan assets.

I see any number of problems with this idea including potential liability for the employer for bad advice given by the planner and the use of plan assets to compensate the planner.

Has anyone see this type of arrangement used successfully.

The EP News released by IRS on March 31st states that using yield curve and any of the lookback months for 2009 plan year is considered a reasonable interpretation of the statue and will not be challenged. My recollection is that the yield curve can be used only for the purposes of minimum required contribution. Does it mean the election to use yield curve applies only for the calculation of MRC? And for AFTAP purposes such as benefit restriction, we still need to use segment rates (if segment rates are what was adopted for the 2008 plan year)?

I have a terminated participant who received their distribution (rollover) of their entire account balance. The account is closed.

The employer now wants to make their employer contribution to which this terminated participant is entitled to. I told them that they will have to make the contribution (reopen the account) for the termed participant and then request a second distribution.

The employer asked if he could just cut a check to the rollover company instead of reopening and depositing it into their account, whereby the participant will incur another distribution fee from the investment company.

What are your thoughts on this?

I feel that for IRS purposes (paper trail) that the deposit should be made into the plan, and then distributed, but the employer would really like to avoid additional fees for the participant. Is there any clear direction (cites) on this that anyone knows of?

Thanks so much!

I am looking at a plan that has a Social Security Level Income optional form of benefit. The plan has an AFTAP < 60%. The level income option produces a value greater than a life annuity (until actual soc. sec. kicks in). Is that a restricted form of distribution under 436?

An employer established a presumed VEBA three years ago. At the time, I had not read the IRS Memo on Processing VEBA exemption applications and was unaware of the increased review on these smaller VEBA's. The employer made three annual contributions of $100,000. Amounts were invested in mutual funds that are now valued at $250,000. After more than two years, the IRS has indicated that an exemption letter will not be issued. All participants are owner-employees and their parents (HCEs through stock attribution rules). We can challenge the initial ruling or withdraw the exemption application.

If we withdraw application, can we take the $250,000 and put into an insurance product with no tax conseqiences? Amounts will be held in a non-VEBA trust. Are there also no current adverse tax consequences since assets have decreased in value?

Any thoughts on this matter would be greatly appreciated.

Thanks. Ed

A Defined Benefit Plan holds individual life insurance policies on eligible participants. One of the participants would like to purchase his insurance policy and hold it personally. This does fall, I believe, under the DOL class exemption. The major question at hand is whether or not there is some method to coming up with the amount of money necessary for the participant to purchase the policy. I was under the impression that it would be the current CSV of the policy; however, I have been told (informally) that there is some formula to determine this amount.

Am I off base, or is there a formula to determine the amount of cash necessary to purchase the policy? Thanks for any replies.

Let me say that I know just enough about HSAs to be dangerous! A CPA I work with has a client that called and explained that they, the employee, loaned their HSA money to pay for a medical procedure. The employee had this medical procedure, paid the medical bills with the HSA, and intends to withdraw the original "loan" amount when enough employer contributions are deposited into the HSA...is this possible????

I am over 55 and I just got a 2 week notice to be layed off. My employer says I can't get my 401k until renewl time which is Jan 2010. What can I do to get my money?

Thanks,

Dickey