I have a new Profit Sharing 401k Plan with a 3% Non-elective SH contribution that is running on a calendar year. The employer's corporate year ends on June 30.

For the 2008 plan year, what is the due date of the 3% SH contribution so it can be counted as a taxable deduction for the corporation? Would it need to be paid by 9/15/09 - the date the corporation's 2008 tax return is due?

Thanks.

a 401(k) is considering adding a loan provision to its current plan in order to allow certain executives to purchase stock of the plan sponsor, which is privately held. Is there anything in the code that would forbid such an amendment? Off the top of my head, I can not think of anything, but there might be some party in interest issues that I have not considered. The loan provision will be available to all participants and non discriminatory.

IRS Notice 2008-30 Q&A 7 states that a nonspouse beneficiary that is ineligible to make a qualified rollover contribution to a Roth IRA may recharacterize the contribution pursuant to §408A(d)(6). Presumably, this recharacterization would go to an inherited traditional IRA. The notice then states that "a surviving spouse who makes a rollover to a Roth IRA may elect either to treat the Roth IRA as his or her own, or to establish the Roth IRA in the name of the decedent with the surviving spouse as the beneficiary". The Roth IRA would be similar to an inherited IRA.

My questions is: What happens if the spouse beneficiary was ineligible to make a qualified rollover contribution (MAGI greater than $100,00)?

The Notice only allows recharacterization for ineligible participants or nonspouse beneficiaries. If a spouse beneficiary is ineligible, does that mean the rollover becomes a regular contribution? If so, is the spouse then deemed to have made the election to treat the Roth IRA as his/her own Roth IRA, by virtue of making a contribution [Treas. Reg. 1.408-8 Q&A 5]? Is the wording in the Notice an oversight, and would the spouse be allowed to recharacterize to a traditional IRA established in the name of the decedent with the surviving spouse as the beneficiary? If so, how does this fit with §402©(11) and Notice 2007-7, both of which clearly state that only a nonspouse can roll to an inherited traditional IRA? The definition of inherited IRA is found in §408(d)(3)© and specifically states that an IRA shall be treated as inherited if such individual is not the surviving spouse.

Another question: If a spouse beneficiary rolls to a Roth IRA established in the name of the decedent with the surviving spouse as the beneficiary, how is the distribution period determined under the life expectancy rule?

Notice 2008-30 refers us to Notice 2007-7, which says that the rule for nonspouse beneficiaries applies. That means that life expectancy payments would be required to start the year after death. However, we have a spouse beneficiary, and a spouse beneficiary would have the option of waiting until the year the decedent would have attained age 70 1/2 to begin payments [iRC §401(a)(9)(B)(iv)]. Which rule applies?

When considering the 20% threshhold, exactly how is it being counted? For example, A plan has 9,000 total participants, but 7,000 are already in pay status or termed vesteds. If 600 of the remaining 2,000 active participants are terminated due to downsizing, is that a partial termination? It's 30% of the actives, but only 6% of the total particpant base. Is there a clear line or is this something that is still the discretion of the courts?

In past years we have only included the participants enrolled in the basic coverage (Life & Disability Coverage), does the fact that some of these participants purchase additional buy-up coverage also have to be reflected on the 5500? Thanks for any guidance you can provide.

Hello,

Recently I invested in some mortgages on the secondary market in my profit-sharing plan (I am the sole participant). These were pre-foreclosure situations where I bought the loans at a discount and got paid off when the property sold. There were some legal fees associated with each transaction. Must these legal fees be paid from the plan, or is it okay to use my company's or my personal money to pay them? I prefer the latter because it leaves more money working in the plan. However if I do use company or personal money, can the plan reimburse me/my company later if I want?

Addendum: there were professional appraisal fees for one of the properties as well.

Thanks,

Tom

Two related entities together sponsor a 401(k) plan under the belief that they are in a controlled group relationship.

The prototype document defines "Employer" to include controlled group/common controllled entities without separate plan adoption.

Entities turn out not to be in a controlled group or common control relationship. Plan is now 2 years old. Can they retroactively revise plan documentation to reflect the multiple employer relationship? Plan document permits related but non-controlled group entities to adopt plan as related employers.

The MRD paid in 2007 (for accrual in 2006) for a participant was incorrect. It was calculated using the account balance method which I believe is now inappropriate for use after 2005.

Whats the remedial action for incorrect MRD distributions. What kind of taxes/penalties etc apply?

Thanks

If a person has taken a loan, does the loan reduce the amount of the hardship availability if they have paid a portion of the loan back?

Say a person had contributions into the plan of $10,000.00 - took a loan for $7,000.00, loan balance is now $5,000.00. What would the hardship availability be?

Is there any way that the personal payment of legal fees accrued in connection with preserving the favorable tax status of an IRA would be a prohibited transaction? Must those amounts be paid from the IRA?

I understand the accrued benefit is calculated by taking the account balance and projecting out at the accumulation rate and dividing by an annuity rate at NRA.

If the accumulation rate is the 30 treasury rate so as of 12/31/2006 we would use 4.65% to determine accrued benefit as of 12/31/06. However for 2007 the rate is 4.68%. When determining Normal Cost for 2007 using unit credit method and for determining increase in accrued benefit for 401(a)(4) do I recalculate the 1/1/07 accrued benefit using the 4.68 accumulation rate or do I still use the 12/31/06 accrued benefit and Normal Cost does not equal hypothetical contribution assuming funding assumption is 30year treasury rate.

A combined plan passes non discrimination by means of cross testing.

The allocation rate fo rthe HCE is 5% in profit sharing plan and 40% in the DB plan.

Therefore, on a combined basis it would indicate that a gateway of 7.5% is required.

The eligiblity for the safe harbor 401k is 21 & 1.

The eligibility for the PS and DB plans is 21 & 2 (immediate 100% vesting upon entry).

Employees who have satisfied the 21 & 1 of course receive the 3% 401k non elective safe harbor.

The plans are combined to pass non discrimination.

For employees participating only in the 401k safe harbor (only 21 & 1), can their 3% safe harbor satisfy the gateway, sicne they only participate in DC plan where the HCE allocation is only 5%, or do these employees need to receive the total 7.5% gateway?

My feeling is that they should receive the 7.5% gateway, but curious to hear other views.

Thanks.

Must a privacy official be named in a SPD?

Does anyone have a link for absolute requirements that the SPD must include? Thanks

db plan has been frozen for a number of years.

the company put 15% of current comp into the DC plan.

what % can be put into the DB plan since no one is accruing any more - one is simply funding the DB

In the very first paragragh of the 1.414(v)-1 reg. it states that catch-ups are elective deferrals that exceed the applicable limits ( as long as they don't exceed their own limit, currently $5000) and in Example 6(ii) of the reg. it states "once participant E's elective deferrals for the calendar year 2006 exceed $15,000, subsequent elective deferrals are treated as catch-up contributions ................"

Taken alone these excerpts suggest to me that an elective deferral is classified as a catch-up once the 402(g)(1)(B) is reached - however, we have differing opinions within our department here - some say that the 402(g)(1)(B) need not be reached in order to count a deferral as a catch-up - for example, you could have only a $4000 deferral and another $5000 catch-up on top of that.

There is also an internal debate as to whether or not you need any deferrals to have a catch-up - e.g. could you have $0 deferrals and $5000 catch-up ?

I'm primarily a DB'er and so any insights would be appreciated .

Post PPA, what interest rate should be used to project an employee contribution account to NRD to determine the benefit attributable to the ee contributions?

A current plan document says the definition of compensation includes all comp. It's been that way for at least a couple of years. The employer says that was a mistake -- certain compensation was supposed to be excluded. In fact, they've been calculating contributions on what they thought it was, not what it says in the document. I'm worried that changing the definition now, even if we only go back to the beginning of the current plan year (1/1/08), would be a cut-back. Does the change need to be prospective? I also think they need to go back and make additional contributions for those couple of years. Your thoughts would be appreciated.

Hello,

I operate a single-participant profit sharing plan. What is the correct board on which to post questions about such a plan?

Thanks.

Tom

simply identify all the football helments. off the top of your head of course, since you could easily do a search and find the answers. (please, no posting of answers, don't spoil it for other people) though if you want to 'brag' about how many you got correct - or how poorly you did! there is a running count in the upper right corner. even someone who doesn't follow the sport that much like me managed more than half.

Ok, before opening the file you might want to take a quick look at a list all the division I college team names - maybe that will help. I guess maybe that wouldn't really be cheating.

of course I expect Mike Preston to get a perfect score - even if it is an actuary adjusted score.

I mail hard copies of the form 5500 to all our clients (originals and copies). It is extremely tedious.

Is anyone out there filing FOrm 5500 electronically? I haven't even had the chance to research that option.

If so, how is it going?

I believe it becomes mandatory in 2009.

******

What is the concensus re: Form 1099R? Are TPA's doing it for clients or are TPA's leaving it in the hands of the plan sponsor to provide to ditributees? I have a lot of mom and pop plans with very few employees and they may not want to be bothered with this.

Curious to hear how others' handle that as well.

Thanks.