I got a client who made a SEP contribution to her account for $900.00 during calandar year 2008. She can not take the SEP deduction for 2008. She has no employees, it's just her, the owner.

Can she get the custodian to transfer the amount to a non-deductible IRA as an option? Or can she just put the whole amount out, principal

and earnings, then go back and amend the 2008 return, just for the earnings, if any.

So I guess I like to know my options. Thanks for your help

David Banford, CPA

Question - I have to give a synopsis on this topic to a small group of people this week.

Can you someone explain to me what the difference is between doing an ADP/ACP test by Testing Seperately or doing it via Carve Out? This is one of those topics that I inherently KNOW, I just can't seem to explain in laymans terms.

For example, I recently had a plan fail the ADP/ACP. I tried to Test Seperately and the failure was just as bad. So I tried the test by Carve Out and while it still failed, it only failed "less" miserably. Instead of giving 3 refunds, I only had to give one.

Can someone explain to me what Relius is doing when you test via the Carve Out method?

Thanks.

I have a question concerning a 401(k) plan which has a discretionary contribution option. The plan has a one-year eligibility period before an employee is entitled to a discretionary contributin BUT once the employee is eligible, the company makes a discretionary contribution based on the employee's first year and second year compensation, all in one.

Ex. An employee is hired in October of 2008. The employee becomes eligible to participate in the plan on Nov. 1, 2009. In February 2010 the employer makes a discretionary contribution for the 2009 plan year. For the new employee, the employer makes a contribution based on the employee's 3 months worked in 2008 in addition to the employee's compensation earned for the plan year 2009. Thus the discretionary contribution is based on 15 months of salary (3 from 2008 and 12 from 2009).

Is the employer allowed to do this?

Thanks!

Hello-

In late July I received a QDRO as part of my divorce settlement. My ex had no cash to pay his settlement, so I agreed to accept a lump sum of $108,000 from his pension. I received a letter from the administrator in late July 2008 that they had received the order and were verifying it, and that they would be in touch as soon as a decision had been reached, typically within 60 days. It said if there was a delay, I would be notified and told why. It stated that once an affirmative decision was made, the funds would be segregated and arrangements could be made for transferring them (basically). I heard nothing and heard nothing, and finally contacted in mid-January 2009 to request the distribution. I sent another copy of the QDRO. Still heard nothing. Inquired this week, and received a letter saying they could not execute because the value of the account that this money was coming from had fallen to $91,000. They want me to submit an amended QDRO saying that this amount will be acceptable, or that this amount and some other arrangement is acceptable. What went wrong here, and am I going to need a lawyer to figure this out? I need this money to pay my lawyer from my divorce action, and this lawyer likely will not be interested in performing more work as I owe them $4500. I live in Pennsylvania. Please give me some direction!! Thanks so much.

If you pass 401(a)(4) on an allocation basis (with non uniform rates) are you subject to the Gateway for those benefitting?

Can an employer continue to sponsor a health plan after all employees are terminated for the purpose of offering COBRA coverage?

As if you forgot.

As A. Einstein's relatives (may have) said on 3/14, 'Does anyone care for birthday pi?'

Not that I plan on filing any of these any time soon (at least until after the EA Meeting to make sure that all issues are addressed), but has anyone noticed on Relius Government Forms that the Schedule SB prints with no bar codes at the bottom?

Can a currrent Profit Sharing only plan for a non-profit be converted to a 403(b) plan?

Can a 401(a) qualified plan be amended to a 403(b) plan with Employer non-elective contributions?

Any thoughts on how to terminate an ERISA 403(b) plan for an employer that is no longer in business? We have contact with the employer so it is not an orphan plan situation. The plan would still need to go through the process of adopting a plan document, terminating the plan, distribution instructions, etc., correct?

Anything else?

Thanks

401(k) Plan with SH and PS

Adoption Agreement says that forfeitures get allocated once a participant has been distributed his "entire vested benefit".

Participant gets paid out mid year, before the SH match is allocated. He won't get a PS allocation because the plan has a last day, 1000 hour rule.

The investment company automatically transfers the unvested money into a forfeiture account that does not accrue any interest, on 12/31/08 his statement shows -0-, but his Participant Certificate will show that he still has the safe harbor match as of 12/31/08.

Technically the participant is not paid out all the way because he still will be receiving a SH match contribuiton...right? Or is this not a correct statement.

Does his forfeiture get reallocated using 12/31/08 census data?...or must we wait until 12/31/09, after his SH match gets allocated to his account, and then he gets all the way paid out?

Any guidance would be appreciated.

Thank you.

Safe Hargob 401(k) Plan for calendar year end 2008

W-2 form reports $1536.90 as 401(k) deferral

401(k) deferral deposited into investment account $1626.10

$89.20 excess deposited into 401(k) account.

EE has since been paid out his deferral , so he was paid out too much.

What do we do now?

The plan still needs to receive the PS and SH Match which will be deposited sometime before April 15th.

The terminated participant is still due about $700.00 in SH match ...should we tell the employer to deposit $610.80 for that employee with the justification that he has already received 89.20 of it? The terminated participant is not a highly or related to a highly.

I don't see anything in the document that addresses this issue.

Any guidance would be appreciated.

Thank you.

On what line under item 2 would insurance premiums paid for policies in a DC plan be listed on the Schedule I?

Looking at line 20 on 2008 Schedule SB and 20(a) asks if plan had a "funding shortfall" in prior year. Since prior year was 2007 what do we use for the "funding shortfall" calculation (substitute current liability for fdg target ??).

Then it asks on line 20(b) if Quarterly Contributions were made in a timely manner ? In this client's case they were not, but I don't see any place on that same page, or any other page of the Schedule SB, where you add the additional late quarterly contribution charges. I thought maybe they just lumped it in with TNC or the Net Shortfall Base installment charges but reading the line-by-line instructions it doesn't appear to be included (added) to these components.

Does anyone know where the 2008 late quarterly contribution interest show up on the Schedule SB ?

If it does not show up on the 2008 Schedule SB, then are they really required for 2008 ?? (e.g., kind of like "if a leaf falls in the forest and no one is there to hear it did it make a sound").

Plan's investment committee decides to replace some funds in a participant directed 401(k) Plan.

What type of notice is required to plan participants? Is there is a specific notice requirement that includes a timing element (e.g. 30 days before or after the change is made)?

How long must a plan be a safe harbor plan to avoid testing?

We have a client who gives their employees a phenomenal match, but are still failing their testing. When during a plan year can it be switched to a Safe Harbor Plan, if at all?

In December 2008 Employer adopts resolution to terminate DB Plan effective 1/1/09.

Employer wants to prolong the date it distributes benefits pursuant to plan termination as long as legally permitted - say to beginning of 2010.

If a participant terminates employment during 2009 (after the effective date of the plan termination), is the participant entitled to a distribution earlier than he otherwise been entitled to one due to the plan termination?

Does the cost of a bus pass to get to work qualify under the qualified transportation expense program? I would think so, but want a second opinion.

Has the IRS issued any guidance on this?

What if, as is the case for 2008, the return on assets is negative? Is the credit balances reduced!? I hope not!

I know that credit balances are to be adjusted using the actual rate of return on the plan investments, but there are a couple different ways to come up with a rate of return. Does anyone have any thoughts on a reasonable way to calculate this?

I've heard that some think some sort of weighted average rate of return would be appropriate. Has there been any sort of guidance I've missed?