In 2003, I rolled a 401k from a former employer to an IRA. I neglected to account for roughly $1,000 in after-tax contributions when I completed the 8606 for that year’s after-tax contribution to my IRA.

In 2008 I converted a portion of my traditional IRA to a Roth IRA and would like to be able to benefit by not being taxed on the appropriate portion of the unaccounted after-tax contributions from 2003.

Should I just include the additional amount of the after-tax contribution as basis in the calculation or do I need to amend my 2003 return to modify the 8606 from that year?

Is it too late to modify a return for tax year 2003 if there is no change in the amount owed or refunded?

Thanks.

Permitted disparity and self-employment earned income, to some people, present a Gordian knot. However, it seems that I somehow stumbled onto a relatively easy solution. However, I steel uncertain of the mathematical validity of my results. Does someone feel willing to contact me off the boards and see the file I came up with?

How to correct overstated compensation used to calculate allocations? This resulted from the calculation of self-employed earned income. The participant got more money that allowed by the plan for many years (11% of his or her compensation had it gotten calculated properly), but not over 404 or 415 limits. This happened for many years, so how would one correct it under current law?

Have a small DB plan where the 2008 and 2009 AFTAP is <80%.

A terminated participant has a lump sum benefit of $1,400. Even though restricted, I believe lump sum benefits of under $5,000 can be distributed under WRERA.

Question: Must it be an involuntary cash out to qualify for this? Can lump sums of < $5,000 be made to any terminated participant?

This a new one on me. I have just discovered that client has had a long practice of requiring that an applicant for a Plan Loan demonstrate a financial hardship (and they use the safe-harbor definitions of hardship, i.e. 213(d) medical expenses costs, costs related to purchase of principle residence, costs for tuition, and expenses to prevent eviction).

Now they want to expand the list of loan application criteria and asked about the risk of doing so.

Since there are no such limitations required on plan loans, the only 'risk' I see is that they'll get more loan applications. But by making the loans more broadly available, I think they'll actually better comply with the requirement that loans be available on a 'reasonably equivalent basis.'

Any thoughts?

Has anyone else ever seen a plan limit loans using a 'hardship'-type test?

IRC 436(f)(8) states

(8) Adjustments for investment experience

In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year, the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance to reflect the rate of return on plan assets for the preceding plan year. Notwithstanding subsection (g)(3), such rate of return shall be determined on the basis of fair market value and shall properly take into account, in accordance with such regulations, all contributions, distributions, and other plan payments made during such period.

Comment by Mr. Holland at 2009 EA Meeting (as nearly as I remember the quote):

"I don't think you want more than you already have."

So, it appears we won't have IRS regulation on this. IMHO, that is a good result; Mr. Holland is correct.

Issue

I have a spreadsheet to perform this calculation. I'm willing to post it, for public domain. Is this a good idea? If so, should it be protected? Any other comments? Anyone (actuary, attorney, etc.) see any problems with this?

I believe I have seen some conflicting info ....... can someone clarify please>

Assume 2008 AFTAP was 100%. Assume the 2009 AFTAP is certified on 7/1/09 as 70%, thereby limiting prospective benefit payouts to a 50% lump sum (or the PV PBGC Cap if applicable). Assume the participant takes the OTHER HALF as an annuity. Assume the AFTAP stays at 70% until year 2013 whereupon the AFTAP exceed 80% and the lump sum restriction ends.

Can the participant that retired in 2009 with half of his/her benefit as an annuity INSIST on being offered the PV of the balance of their annuity as a lump sum in 2013? Does the Plan have to specifically ALLOW this ? If allowed, which lump sum interest & mortality rates apply in the 2013 lump sum calc., the 2009 or 2013 year rates.

Thank you ..........

Also, in addition to IRS 436, can someone provide a link to the latest IRS guidance on the 2006 PPA, and more specifically on AFTAP calculations. More than one source or link is welcome ! (still learning).

Can someone help me understand whether or not a church could set up a SEP for its priests. The church has been putting money aside to pay for contributions on behalf of two priests who can no longer receive contributions to the Church Pension Fund because they are no longer a part of the Church.

For two priests, there is approximately 10,000 for one in a savings acct and 5,000 for another. Can this money be put into a SEP for these individuals? There is one other employee who has been at the church part time for the past 3-5 years, would he have to be put into the plan as well? There are no deferrals just church contributions. I am not sure what else they could do. It is too much money to put into an IRA and the money would have to be given to them first and then put into the IRA, correct? So it would have to be taxed as income?

Any advice is appreciated.

Under our Section 125 Plan we offer a Flexible Benefit Medical Reimbursement Plan. An employee elects to have 38.00 withheld for the 2008 Plan Year. After employee quits on 5/20/08, we find out that Payroll did not withhold ANY money for the flex account and former employee never told Employer about the mistake.

Can we deduct the amount that WOULD have been withheld from his payroll check from the Flex Reimbursement Check?

Come March 31st and former EE turns in $988 flex claims for reimbursement. What is our Legal Obligation?

Do we pay because payroll didn't catch the mistake? Do we NOT pay because the Employee did not catch the mistake on his pay stub?

HELP!!

{This was also posted to the distributions board.}

I am having trouble understanding the language of treasury reg 1.402©-2, questions/Answers 5 and 6 regarding rollover eligibility of payments involving annuitized qualified accounts.

I am trying to determine iwhether a surviving spouse can roll the commuted value of an annuity into an inherited IRA after his/her spouse dies - and whether the decision depends on whether the decedent had already annuitized the account prior to death and had begun receiving substantially equal periodic payments.. The decedent had received an annuity for 8 years until death, and now the spouse apparently has an option of taking a commuted value instead of income stream. The surviving spouse wants to know if the commuted value can be rolled to an inherited IRA.

Link to the 1.402©Link to 1.402©

Answer 5 states, in part.......

© Changes in the amount of payments or the distributee. If the amount (or, if applicable, the method of calculating the amount) of the payments changes so that subsequent payments are not substantially equal to prior payments, a new determination must be made as to whether the remaining payments are a series of substantially equal periodic payments over a period specified in Q&A–3(b)(1) of this section. This determination is made without taking into account payments made or the years of payment that elapsed prior to the change. However, a new determination is not made merely because, upon the death of the employee, the spouse or former spouse of the employee becomes the distributee. Thus, once distributions commence over a period that is at least as long as either the first annuitant's life or 10 years (e.g., as provided by a life annuity with a five-year or ten-year-certain guarantee), then substantially equal payments to the survivor are not eligible rollover distributions even though the payment period remaining after the death of the employee is or may be less than the period described in section 402©(4)(A). For example, substantially equal periodic payments made under a life annuity with a five-year term certain would not be an eligible rollover distribution even when paid after the death of the employee with three years remaining under the term certain.

Answer 6 states, in part......Similarly, if an employee's surviving spouse receives a survivor life annuity of $1,000 per month plus a single payment on account of death of $7,500, the single payment is treated as independent of the payments in the annuity and is an eligible rollover distribution unless otherwise excepted.

Feedback is very much appreciated..

What notice do the qualified beneficiaries who terminated employment voluntarily between 9/1/08 - 2/16/09 receive? It's my understanding that all qualified beneficiaries who terminated employment between 9/1/08 and 12/31/09 must receive notice of the subsidy, but this group appears to be left out of the DOL model notices.

An informal discussion with a DOL representative suggests the notice for extended election period should be provided to those who terminated employment voluntarily between 9/1/08 - 2/16/09. Then if there is a dispute between the employee (who thinks he was involuntarily terminated) and the employer (who thinks the employee voluntarily terminated his employment), the employee can request an expedited review by the DOL.

I would appreicate any and all thoughts. Thanks in advance.

Notice 2009-27 has a lot of interesting information.

For example, if the loss of coverage is after December 31, 2009 [not just the involuntary termination], then the individual cannot become an AEI (Q & A-13).

(Maybe you all knew this already, but I miss it.)

Employer pays premiums to a third party insurer to pay short term disability to employees. Third party makes the payments to the ees. Third party sends quarterly statements to the employer detailing what benefits were paid and the FICA withheld. Employer adjusts W-2 at year end to reflect the amount paid and the taxes withheld.

Can these payments be excluded from plan compensation without doing the compensation ratio test?

A Plan Sponsor recently swithced payroll companies and just realized that they did not do the 401k contributions for February and March 2009.

They made these deposits into the trust yesterday.

I am looking for Guidance on how to calculate interest on the late deposits.

Any help would be greatly appreciated. ALEX

I am having trouble interpreting the meaning of the following language of treasury reg 1.402©-2 Question/Answers 5 and 6 regarding rollover eligibility of payments invoving annuitized qualified accounts. I am trying to determine if a surviving spouse can roll the commuted value of an annuity into an inherited IRA after his/her spouse dies - and whether the decision depends on whether the decedent had already annuitized the account prior to death and had begun receiving substantially equal periodic payments..

Link to the 1.402©

Answer 5 states, in part.......

© Changes in the amount of payments or the distributee. If the amount (or, if applicable, the method of calculating the amount) of the payments changes so that subsequent payments are not substantially equal to prior payments, a new determination must be made as to whether the remaining payments are a series of substantially equal periodic payments over a period specified in Q&A–3(b)(1) of this section. This determination is made without taking into account payments made or the years of payment that elapsed prior to the change. However, a new determination is not made merely because, upon the death of the employee, the spouse or former spouse of the employee becomes the distributee. Thus, once distributions commence over a period that is at least as long as either the first annuitant's life or 10 years (e.g., as provided by a life annuity with a five-year or ten-year-certain guarantee), then substantially equal payments to the survivor are not eligible rollover distributions even though the payment period remaining after the death of the employee is or may be less than the period described in section 402©(4)(A). For example, substantially equal periodic payments made under a life annuity with a five-year term certain would not be an eligible rollover distribution even when paid after the death of the employee with three years remaining under the term certain.

Feedback is very much appreciated..

The deferrals are deductible the year paid. I understand that, I think.

The excise tax is not deductible: Correct?

How about if an amount equal to the excise tax is paid into the plan as a gain instead of paying the excise tax: Deductible?

The lost earnings put into the Plan: Deductible?

The fee for my time filing VFCP application: Deductible?

Can anyone think of any other costs?

What is the best way to deal with a plan-owned legal entity (LLC) that has no value? We'd like to terminate the plan, but really don't know how to deal with this interest. Can we divide that membership interest up by creating individual membership interests for the participants and then distribute "in-kind"? Or would it be better to dissolve the entity completely? I really have no clue here.

I just want someone to tell me that my thinking is correct.

In this case we have a person who's FMLA will end in two weeks. He is on Short Term Disability and has applied for Long Term Disability. He has a terminal illness and is not able to physically return to work.

My answer for this case would be no because the employer has not initiated termination of employment - the employee is not returning due to a illness or disability.

In reference to Notice 2009-27

A1: An involuntary termiantion meas as severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee's implicit or explicit request, where the employee is willing and able to continue performing services...

A1: "... In addition, involuntary termination does not include the death of an employee or absence from work due to illness or disability"

Q4: Does involuntary termination include an employer's action to end an individual's employment while the individual is absent from work due to illness or disability?

A4: Yes. Involuntary termination occurs when the employer takes action to end the individual's employment status (but mere absence from work due to illness or disability before the employer has taken action to end the individual's employment status is not an involuntary termination)

Please let me know your thoughts!!

Anything on quarterlies, Notices, interest discounting, anything of note? Anything confirmed as unclear?

What (if any) are the Plan's obligations in these circumstances (assume 2008 AFTAP>100% and 2009 AFTAP will ultimately be between 60 & 80% when calculated sometime before 10/01/09 but has not yet been done):

(1) Participant has 100% lump sum quote in hand from Plan administration (given to him in early April 09), on 4/10 puts in ALL paperwork to retire with 5/31 as last day of employment & with 6/01 as lump sum payout date. Meanwhile, Plan Actuary certifies on 5/20 that 2009 AFTAP is 70%, and no required notification has gone out. Note that the 30-day notification period ends AFTER the requested payout date. "Can", "Should", "Must" the plan give tha participant the requested 100% lump sum.

(2) Would your answer to (1) above differ if participant's submission-timing is the same, but the Certification was completed on 4/25 with notification sent out on 5/20 (this date being BEFORE the requested payout date).

(3) Now to complicate things ....... how about if the Plan gave the participant an unqualified lump sum quote AFTER the Actuary had certified and told plan administration of a 70% 2009 AFTAP but BEFORE a notice went out.

I'm guessing the answer to ALL OF THE ABOVE is that the plan CANNOT payout a 100% lump sum, but some of these situations will certainly lead to litigation & some really bad press