I work with a CPA, JD that has a client whose wife, not realizing the tax implications, cashed out her IRAs and put them into a CD at her bank. The wife is over age 59.5 and maybe even over 70.5. She took the IRA distribution during October 2008 so we are clearly past the 60 day rollover period. Is there any way this client can put the money back into an IRA? From everything I've seen, its too late and what's done is done. The only upside is that the 10% penalty won't apply b/c of her age.

The CPA, JD believes they remember seeing something that indicated the IRS had a procedure where you can explain the circumstances and they'll let you put the money back into an IRA (i.e., but not a PLR).

I read a post on this board from March 29, 2002 that kind of addressed this same issue and nothing was mentioned about a special procedure, but wasn't sure if anything else has developed over the last 7 years.

Any help would be appreciated!

I have truly tried to find an answer to my question by searching the boards, but after reviewing post after post, I have not come upon this question. I have, however, learned some very scary things about Multiple Employer Plans and SEC rules.

We are TPA for an MEP. An eligible participant moved from one employer to another employer, within the MEP, mid year. She had 834 hours with one employer and 1400 with the other. I know that her hours are combined for vesting purposes. However, if the allocation formula requires 1000 hours and employment on the last day I believe she would not be eligible for an allocation from the first company because she only worked 834 hours and was not there on the last day.

Would someone be kind enough to confirm or refute this?

Thank you.

Since there is no bank account for distribution withholding to be deposited and paid, the employer writes a check from the plan to the employer and then pays the withholding out of the employer's account. The tax id used for the deposit is the plan id. Is this violating some rule relating to mixing or reverting funds?

I appreciate any insight.

Thanks!

SOmeone told me that on a TV news report of some kind earlier this week it was reported that actuary is one of the best professions of the future.

Regarding pensions, it seems large plans are terminating and freezing, and not many mid size companies are implementing new plans.

Is my perception that pensions are struggling correct?

When they report actuary as a great profession for the future do they just mean non retirement actuaries?

Any thoughts on these reports that have been coming out?

Thanks.

Under what circumstances is a pension increased by a social security leveling option subject the 436 restrictions?

Is this different than a social security supplement?

What is a QSUPP and is that relevant to this matter?

Can anybody explain how these things are affected for AFTAPS below 80%? The Code is clear as mud, and various conference seminars touch upon these matters but are less than clear. Thanks

I thought I had understood that burning the credit balance was only required when it would impact the AFTAP enough to move the AFTAP percent to a less restrictive category (e.g., if it moved you from say 75% to 80%). However, when reading the new 2008 Schedule SB instructions it seems to state that the burn is required if the FTAP from 2007 is less than 80% (even if it didn't move you to a higher category; say from 75% to 78% it would still be required to be burned).

Am I getting that right ? For the most part, I don't think many of our clients (small plans) will want to optionally burn credit balances to improve the AFTAP, so I'm mostly concerned about the "deemed" election to burn when AFTAP % is too low.

So, credit balance always partially/fully burned whenever less than 80% funded in prior year ? Or just when it moves you into a less restricted category (e.g,. 75% to 80%) ?

We are the CPA firm trying to complete the client's 2008 tax return. Client had an excess 401k deferral of $12,000 in 2007 (she participated in 2 different employer plans). We correctly included 12K as taxable wages on her 2007 Form 1040. We advised her to have the excess deferral distributed to her before 4/15/2008 to avoid 'double taxation'. Client failed to do so. Client then took a total distribution from her 401k, after 4/15/2008 as a direct rollover to her IRA. I understand that if she would have taken a lump sum distribution of her 401k balance during 2008 but after 4/15/08, she would have not have 'basis' and would have been taxed again on the $12,000. But what happens now that the money is in an IRA account? How can this be fixed and what are the tax implications? Also, what about the related match on the excess.

A participant is contesting that a payment made to him on 12/31/08 should not be reported on his 2008 1099R because he received and cashed the check in 2009.

Is there any validity to there being a "gray area" for distributions close to the calendar year end? I've always seen reporting based on date payment issued.

Individual A owns 100% of S-Corp and 75% of C-Corp. Other 25% equity interest in C-Corp owned by non-employee investors. S-Corp and C-Corp both adopted the same pension and 401(k) plans. All employees of S-Corp and C-Corp participate in both plans.

Client paid himself more compensation from S-Corp. than he did from C-Corp. He is not able to deduct the entire contribution under his S-Corp. (due to basis amount limitations) Is the client able to shift more of the deduction over to the C-Corp.?

Client received $400,000 from S-Corp. and $50,000 from C-Corp. Assume proposed aggregate plan deduction is $200,000. Does it need to be pro-rated or can more of the deduction be taken by C-Corp? If compensation limit is $230,000, do you treat $180,000 coming from S-Corp. (78% of $230,000 limit) and $50,000 from C-Corp. (22% of 230,000 limit)? Is so, must $156,000 of the deduction be taken by S-Corp. (78% of $200,000) and $44,000 of the deduction be taken by C-Corp (22% of $200,000)?

Of course, we want more of the deduction to be taken by the C-Corp. Thanks in advance.

Ed

Company A sponsors a 401(k) Plan. Company B is an adopting employer of this plan.

Now, Company B wants to stop participating in the plan permanently.

If they do drop out, are the Company B participants entitled to take distribution of their account balances? The plan is not being terminated, so probably not. But the Company B will no longer be an adopting employer: does that mean their participant account balances have to stay there?

For a twist, what if its Company A that wants to get out? Do we have to re-do the document, showing Company B now as the plan sponsor, plan administrator, etc?

Thanks

We are a small TPA firm. Lately, we are encountering a problem which use to be an easily fixed problem. Now this problem seems to be "exploding" given the state of the investment markets. It is becoming a major problem for us.

Basically, a few financial brokers associated with several plans we service tell participants that they can do things like close their accounts under the plan at anytime. By plan I do mean 401(k) plans, and by participant I do mean people who are still in service and are below 59 1/2, whose accounts have deferrals monies which are not being paid out under a valid claim of hardship.

Getting right to the crux of the problem, these "professionals" are telling participants that they can do whatever they want; regardless of plan terms or pension law! These participants then go to the plan administrator at the firm, who then come to us to have the payment processed. When we say that the requested distribution is not permitted, the financial broker is contacted who then says we are wrong!

What makes this especially frustrating is that when you produce research materials and/or copies of regs showing why the distributions is wrong, we are still deemed to be in error.

With a long term client this is not a problem as they know we are right; but a new client who trusts the financial broker will typically decide we are wrong. We are then stuck with watching a "wrong payout" and a soured relation with the client. I note that we are not the recordkeeper, so processing does not require our actual input.

My intention is not to just simply whine about the problem. Instead, does anyone have any suggestions on how to address this?

Sole proprietor is the trustee of his own plan. Seems like he needs to treat the distribution as any other plan would with 20% withholding and a 1099-R. Anything special about withholding and reporting on distributions for sole proprietors?

Employer has had a SIMPLE IRA plan in place for a number of years (more than 2), and due to economic pressures in their business they cannot afford to continue the plan. What must they do to terminate the plan? Is it simply employee notification with a specified date? Does this need to be 60 days?

please advise....

In the components of net periodic benefit costs...

is net loss (gain)

1) unrecognized (gain) loss / future years of service

or

2) the difference between the actual return on plan assets and the expected return

The COBRA notice regarding the second-chance election period under the ARRA is due 60 days after the date of enactment. The ARRA was enacted February 17. Sixty days from Feb. 17 is April 18. April 18 is a Saturday. Does anyone know the rule on whether this means the notice is actually due?

Plan is using prior year testing for ADP and ACP and fails ACP only. There is plenty of room to shift percents from the ADP test.

Reading 1.401(m)-2 (final regs) only a shift of $ is shown in the regulation examples, and the examples only indicate the plan is using current year testing.

Can we still shift only percents?

Can we shift percents if both tests (ADP and ACP) are on prior year?

Thanks all.

Can a 401(k) plan keep its safe harbor status if it is amended mid-year to eliminate the safe harbor match for the HCEs only?

Thanks.

The sponsor is a construction firm who keeps many employees "on call" , sometimes for over a year, until their services are needed. They are reported as employees with zero compensation and no hours worked during these periods, but not terminated. Many of these employees became participants in the PS plan during the previous year, but will not be receiving an allocation for this year due to their lack of compensation. If they had a compensation, they would get an allocation since the plan uses new comparability and they would be eligible for a gateway allocation (plan is top heavy). If they are considered not benefitting, 410(b) fails. I suppose one way to avoid this is to have the employer consider them terminated during the year so they wouldn't be entitled to the gateway amount, but if the only reason they're not getting an allocation is a lack of compensation, can one say they are "benefitting" in a twisted, yet legal, way? Has anyone seen this type of situation before?

403(b) plan currently does not have provision for employer discretionary contribution. Employer would like to add provision for 2008. Can the 403b plan be amended by March 15, 2009 to allow for 2008 plan year employer contribution??

EE and spouse divorce. QDRO was signed by divorce judge and presented to PA. PA is processing the determination re the order for its status as a QDRO, when the ex-spouse informs the PA that she and the EE are going to get back together in a couple of months. I vaguely recall something several years ago about some airline pilots having gone through phony divorces to get QDRO payouts of benefits. Is there a case citation or DoL ruling/announcement anyone is aware of about that situation?