We sent the forms to the plan sponsor twice (plan valued annually) and as it turns out, the ee did not get their RMD (a whopping $113). I am trying to make the correction by having her take it asap, along with her RMd for 2008, but I am going in circles about the correction. TAG Data says to fill out form 5329 and to see if the IRS will grant a waiver of the 50% excise tax, but I am confused. This form is dated 2007, but would this be the correct year for the form? The instructions I got were:

With regard to filing Form 5329 for exemption from the 50% excise tax,

the instructions to Form 5329 (2007) provide the following:

Waiver of tax. The IRS can waive part or all of this tax if you can show

that any shortfall in the amount of distributions was due to reasonable

error and you are taking appropriate steps to remedy the shortfall. If

you believe you qualify for this relief, attach a statement of

explanation and file Form 5329 as follows.

Complete lines 50 and 51 as instructed.

Enter “RC” and the amount you want waived in parentheses on the dotted

line next to line 52. Subtract this amount from the total shortfall you

figured without regard to the waiver, and enter the result on line 52.

Complete line 53 as instructed. You must pay any tax due that is reported

on line 53.

The IRS will review the information you provide and decide whether to

grant your request for a waiver.

The third paragraph throws me - I'm confused; I had incorrectly reported to TAG that the woman turned 70 1/2 in 2006, when it was actually in 2007. i put $113.26 on line 50 (amt required) and $0 on the next line (amt pd in 2007), so line 52 would be $113.26. 50% is 56.63, but the tax should be waved. I'll bet the form is still sitting in the valuation binder and the trustee never gave it to her (his mom). I emailed it to them again last fall, but who knows?

Thoughts?

The IRS issued final regulations on May 22, 2007 relating to the requirement for qualified retirement plans to include a definition for "normal retirement age" to mean more than years of service. The final regulations become effective for governmental plans the beginning of the first plan year on or after January 1, 2009. The IRS requested comments from governmental plan sponsors (see Notice 2007-69) relating to the normal retirement age requirements and its impact on governmental plans/employers. I am wondering if anyone is aware of the status of the IRS' review of the comments it received and whether the IRS intends to issue "new" proposed regulations or if the IRS plans to proceed with the final regulations in their current form.

A plan sponsor of a one participant plan distributed plan assets on 6/1/08. Plan was terminated 1/31/08.

Their plan year had been 2/1 to 1/31.

We prepared the pension return for the PYE 1/31/08.

We now have a final return as a result of the distribution of plan assets. No Schedule B required.

Can we use the 5500EZ for 2007 for the final return for the 2008 plan year or do we have to wait for the 2008 5500EZ, which may not be available until the spring of 2009 or so?

Does the owner of a business who is a sponsor of his own Solo K plan need to be bonded? At one point, his son was also employed and participated in the plan, but the son has now terminated and taken a distribution of his account balance.

Parent acquires 2 separate corporations (A & B) in late 2007. Parent causes Corporation A's 401(k)/PSP to merge into B's 401(k)/PSP on 1/1/08.

On 1/1/09, Parent intends to merge B's Plan into Parent's Plan. in early 2009, Parent intends to terminate Corporation A's business and all of its employees.

If A's business was terminated prior to merger of B's Plan into Parent's Plan, the terminating population is large enough for it to be a partial termination. However, once B's Plan is merged into Parents, the temination of all A's employees would not be large enough to be a partial termination if the relevant Plan and date are the Parent Plan and the date of the termination of A's business.

Question:

Is this a partial termination? What's the analysis?

Parent promised when it purchased A that A's employees would be fully vested in their Plan accounts, but never did so. The TPA suggests that the amendment should relate back to the date when the A Plan merged into the B Plan, 1/1/08.

What do you think about that?

A small defined benefit plan has a greater than 5% owner who turns 70 1/2 this year.

His beneficiary designation indicates that a family trust is the beneficiary. As such, could his RMD be based on a period certain annuity?

Just out of curiosity, what would happen if a greater than 5% owner turned 70 1/2 and refused to sign a beneficiary designation? My guess is that if he were married, the RMD would automatically be based on a J & S annuity.

A participant purchased a primary residence with his girlfriend. They each owned 50%. Now, six months later, he is acquiring the other 50% from his girlfriend and wishes to borrow from the plan for that purpose.

Does that qualify as a loan used to "acquire a primary residence" which would allow for a greater than 5 year repayment period?

A 501©(5) corporation is designated as the Plan Sponsor of an Insured Group Medicare Supplement Plan & a Group Medicare Part D Plan.

A 501©(9) Veba Trust is established as the Employer and Policy Holder ( Application of Coverage Terms)

Prior Employer contributes a portion of the Group Medicare Supplement Plan & Medicare Part D Prescription Plan cost.

Plans are not considered an ERISA Plan.

I understand that the employer usually sets up the Veba Trust which is not the case in this example.

1. Why wouldn't the 501©(5) Corporation apply for the insurance coverage and also be the plan sponsor/applicant for insurance coverage and (2) why is the VEBA even necessary if the 501©(5) Corporation also contracts with a Third Party Administrator to coordinate the billing & collection of premiums from the prior employer and the retiree's and pays each insurance plan the premiums due?

All comments are appreciated. This just looks out of the norm and maybe non-compliant.

We have a client who holds property/mortgages in his profit sharing plan. His wife accidently paid a bill related to one of these properties with personal funds.

The owner wants to reimburse his wife from the Plan assets. This is a one person plan.

Is prohibited transaction? If so is it correctable under one of the IRS programs or can they just self-correct and document the error.

I believe that I am tossing a meatball question here and I suspect the answer is no. However, is there a need to provide language in a 401(k) plan document that a non-spouse beneficiary can roll over amounts into an IRA? Corbel EGTRRA restatement language does not mention it. Thanks. Ed

A question from the perspective of a firm that processes 403(b) distributions and prepares the 1099-R reporting:

If a participant wishes to take a distribution from his 403(b) and would like to take advantage of the tax-free benefits that apply to parsonage payments, how should we handle this from a processing standpoint?

Would we just process this as a normal distribution (code 7) and leave it to the participant to claim an exemption when filing his taxes? And if so, what about withholding? Under normal circumstances, we would be required to withhold 20% if the distribution were eligible to be rolled over; would the participant be able to opt out of this for a parsonage payment?

Has anyone had any experience with this?

THANKS!

I haven't discovered anything that would prevent a participant from voluntarily defaulting on a loan and paying the taxes. Am I missing anything other than it would affect the amount he could have on any future loans?

thanks

Can an employer require an employee to work 1000 hours AND have a service requirement of 6 months?

Is there anything out there pending that is going to give us some guidance for our 10/1/08 AFTAPs for EOY-valuation clients ? Any pending bills that will authorize the IRS to give us some guidance and/or relief ?

A potential client has a SIMPLE IRA. In July 2005, 2 newly eligible employees enrolled. Financial Advisor gave the employer the new account numbers to make deposits. The account #'s got switched (employer doesn't know if Financial Advisor gave them wrong or she mixed them up). The error was discovered in January 2008, but the deposits for these 2 employees have gone in switched since July 2005. Total contributions of $9,000.00 (less than 3% of plan assets).

The employer has attempted to correct problem with the investment company since dicovering it in January 2008. The investment company has the capability to go back and "redo" the deposits in both accounts so that gain/loss would be correct. They told the employer the correction would be made. They asked for and were given signed letters from the participants involved and a breakdown of the contributions. They have been stalling for 6 months and have now sent the employer a letter from their compliance department stating that the employer needs to go through the VCP and that they will not process any corrections without a compliance letter from the IRS stating that the correction is allowed.

1. Can the investment company require that to make a correction?

2. Couldn't the employer use self correction since this is an administrative error that can be corrected to the penny?

Thanks in advance for any help on this.

a client, who in the past tried to have his ex wife's account balance distributed to HIM, is now wanting to go back and reduce the employer match from 100% up to 3 to 100% up to 2% of comp deferred for several plan years. What is a gentle way of saying, "sorry you can't do this?" He claims he told us this in the past, but it just was not the case.

May an employer operating two qualified separate lines of business (QSLOBs) offer a 401(k) plan to employees in one QSLOB while offering no 401(k) plan (or other qualified plan) to the other QSLOB? If yes, does the answer change if the employer adds additional QSLOBs and offers separate 401(k) plans to each QSLOB except for one?

Client is under audit by the IRS. As part of the process, the auditor sent a letter requiring the client to prepare, file and pay am excise tax on testing refunds that were not made timely. The client prepared and filed the forms using the auditor's numbers. However, the auditor's numbers are about $5,000 higher than the actual test results.

Is anyone aware of a way to file an amended return using the correct numbers and receive a refund of the overpayment? Does the instruction from the auditor overrule the correction?

A payroll firm just informed one of my clients that total compensation for SIMPLE IRA contributions do not include an employee's contribution to a Section 125 plan. They are saying that only compensation subject to Soc Sec taxes are included. Is this true?

The Model form 5304 does seem to be silent on this in the Definition of Compensation in Article V.

I know it's bad business either way, but it must be done. I am not working at either of the places where these plans originated. I have one of each plan and was wondering if someone knows which one would be better to cash in.

Also...Am I right in thinking that the 401A is earning more interest..it's through a school district I used to work for in Michigan and earned 9.8% last year. Thanks!