The participant was paid out in 2008 and rolled her distribution to an IRA. We now have determined that the plan failed ADP for 2008 and needs corrective distribution in 2009. This terminated participant is one who needs a corrective distribution. We plan to notify her that the ADP amount can not be in her IRA and needs to be returned but how do we handle the 1099R issue. Since the ADP correction is taxable in 2009 do we just correct the 2008 to reflect the 2008 amount eligible for rollover and then issue a 2009 1099R for the difference?

If a plan's adoption agreement has a blank where its permitted disparity rate ought to have gotten filled in, can one use an EGTRRA RAC clarifying amendment to correct this situation?

Also, what if the plan document had a specific formula for the plan in top-heavy situation, but one actually used the formula for normal (i.e. other than top-heavy) years? May one use the self-correction program?

2008 calendar year DB plan with a 9/30/08 plan termination date. This plan is not covered by the PBGC. I have read some prior posts regarding whether or not it is appropriate to apply RR 79-237 to prorate the minimum funding requirement under PPA. I do not know of anything in PPA that would invalidate 79-237. Does anyone think that the maximum tax deductible contribution should be prorated? (I don't think so but the plan sponsor may do the max so I want to be sure.)

I would love to pose this question to the ethics folks on the ASPPA board, but since posting there uses my real name and that would risk disciplinary action from my employer, I'll post it here instead. The company where I work is primarily in the mutual fund record keeping business, but also has a small TPA division. The TPA group is mostly comprised of credentialed ASPPA members, but managed by individuals with mutual fund backgrounds who often don't understand that there are differences between SEC rules and ERISA rules.

A plan sponsor who is both a CPA and a stock broker recently called the record keeping part of the company to inquire about a plan loan. He was told that the plan only allowed one loan to be outstanding, and since he currently had an outstanding loan he would need to pay it off before taking another one. Without consulting his written loan policy or the IRS regs that a CPA should know exist, he sent in a payment of $17,000 or so.

A few days later he sent in a request for a new $60,000 loan. The processor, without looking into the history of the account, informed him that the maximum loan allowed by law was $50,000. The next day a new loan request for $50,000 was received. When attempting to process this request the computer accurately pointed out that the individual's maximum available loan (due to the balance outstanding within the past 12 months) was approximately $2,600. At this point the request was given to the TPA unit to handle.

Although the participant had several valid in-service withdrawal options, he did not want to pay tax on his distribution. After he threatened to withdraw several million dollars of business for his own and his clients' accounts, management decided to reverse the $17,000 loan repayment and return those funds to him.

Those of us with TPA backgrounds are left wondering how this transaction could be justified to an auditor. Suggestions?

Someone please tell me the difference.

I think I know what the Carryover Balance is: the >0 number on our 2007 Schedule B - Actuarial Information that represents, as of 12/31/07, how much we have contributed, cumulatively, more than the minimum required by law. It's called 'Credit Balance' on the Schedule B. [Please confirm.]

So what's a prefunded balance? It seems to be more than just a renaming of the Carryover Balance. Can I determine from the Schedule B how big ours is?

When I was at the ASPPA Conference last October, I attended a session on Plan Documents. I wrote a note during the session that said if there is a feature in the plan that is not being used and probably will never be used, then don't put it into the plan on restatement. For example, a discretionary match that never happens.

I know the reason to do this made sense to me as I sat in the session, but I cannot for the life of me remember why it was important to remove unused features.

Can anyone out there tell me why it would matter?

Thank you.

Is there anything in the code that would prevent this? Client has a traditional IRA and is now self employed, as the only employee. He wishes to establish a SEP. Can we simply convert (or re-title) his traditional IRA to a SEP IRA? Any insights would be appreciated.

Regards.

We have a plan with an excluded class of employees, and it passes 410(b) - non-excludable members of the excluded class are considered non-benefitting.

Q: Are the otherwise non-excludable members of the excluded class included in the 401(a)(4) general test with a $0.00 allocation or are the omitted from the test? (EX: 10 participants + 2 EEs in excluded class, does 401(a)(4) cover 10 people or all 12 people?

Can the owner's sons be participants in the company's Profit Sharing and 401(k) plans, defer nothing and get a 0% contribution and still be allowed to contribute to their own individual IRAs?

402(g) limit for 2008 is $46,000. If participant defers $15,500 to PS/401k combo, he can get up to an additional $30,500 Profit Sharing (assuming plan passes all required testing). It is our understanding that if he is over 50/eligible for catch-up, we can actually give him $35,500 and re-characterize $5,000 of his deferrals as catch-up. Results: $10,500 Deferrals + $30,500 PS + $5,000 Catch-Up.

Q: If instead of one combined plan, the sponsor has the 401(k) and PS as 2 separate plans, can the same thing still be done, or can we no longer use the catch-up in the 401(k) to increase the PS contribution?

402(g) limit for 2008 is $46,000. If participant defers $15,500 to PS/401k combo, he can get up to an additional $30,500 Profit Sharing (assuming plan passes all required testing). It is our understanding that if he is over 50/eligible for catch-up, we can actually give him $35,500 and re-characterize $5,000 of his deferrals as catch-up. Results: $10,500 Deferrals + $30,500 PS + $5,000 Catch-Up.

Q: If instead of one combined plan, the sponsor has the 401(k) and PS as 2 separate plans, can the same thing still be done, or can we no longer use the catch-up in the 401(k) to increase the PS contribution?

Calling all recordkeepers or administrators - Can I get your opinion on or experience with accepting faxes or copies of documents related to participant distributions vs. requiring the participants to send documents with original signatures. I would like to know what your practices are and what you feel the risk is related the accpetance of documents with non-original signatures.

Thanks!

Calendar-year profit sharing plan has a fixed contribution (equal to a percentage of participant compensation); i.e., it's funded exactly like a money purchase pension plan. Sponsor has been hit by the downturn and can't, for the time being, make the '08 contribution. If the plan were a money purchase pension plan, Sponsor could apply for a minimum funding waiver (or, if that were unavailable, permission to implement a retroactive cutback). Obviously, profit sharing plans are exempt from the 412 funding rules, and accordingly the waiver and retroactive cutback relief wouldn't seem to apply, but the plan's situation is essentially identical to a money purchase plan whose sponsor is in financial difficulty. Does anyone have experience with the IRS granting analogous relief in these circumstances? Any suggestions appreciated.

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.