Corbel non-standardized prototype plan

Adoption Agreement:

REQUIREMENTS TO SHARE IN ALLOCTIONS OF EMPLOYER DISCRETIONARY PROFIT SHARING CONTRIBUITON, QUALIFIED NON-ELECTIVE CONTRIBUTIONS (other than Qualified Non-Elective Contributions under Plan Sections 12.5© and 12.7(g) AND FORFEITURES

A Participant must complete a Year of Service if employed on the last day of the plan year

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So, I go to Plan Section 12.5© which is the section that talks about QNEC to pass ADP, which is what we're doing. It does talk about terminated participants and how they DO NOT get an allocation

BUT

What about those participants that ARE employed on the last day, but do not have the 1000 hour requirement.

Do they get a QNEC allocation?

Help...

Employer is selling company and all of the employees have terminated and are now employees of a new unrelated company. Plan was safe harbor and was terminated as of 12/31/07. However, the employees all left several months earlier. Safe harbor contribution was made through dates of employee terminations. Do we still have a safe harbor plan? Should we test for 401(k) discrimination?

We have a Safe Harbor 401(k) effective 1/1/2007. The effective date for deferrals is 10/1/2007. The plan has 90 days eligibility and quarterly entry dates. There are several participants that terminated employment before 10/1/2007 so they did not have the ability to defer. Do those participants still receive the 3% SHNE? The plan also uses full year compensation. I believe they are entitled to the 3% contribution because the safe harbor provision is effective 1/1/2007.

A plan document has been drafted to provide for discretionary matching contributions. The client has been applying a % of compensation discretionary match with a dollar cap ($1000 annually). The plan document does not indicate a dollar cap on the match. Is there a problem in need of remedy under VCP? Can the match be completely discretionary in regards to both percentage and dollar cap as long as both parts of the formula are applying in a nondiscriminary manner?

Thank you for any help or for pointing me in the direction of any guidance in advance!

10/01/04 -09/30/05 employer contribution was not deposited. We calculated lost earnings on the 2004 contribution and instructed the client to deposit the lost earnings with the 2004 and 2005 contribution. The client deducted the 2004 contribution amount and 2005 contribution amount on the 2005 corporate return. The client never made any of the deposits including the lost earnings and will be amending their 2005 corporate return. This client is not contributing to the 2006 plan year/tax year. The employer contributions are discretionary, not sure if that matters at this point. I believe this client will need to make the 2004 and 2005 contribution in addition to lost earnings for both plan years and also pay the 10% excise tax under Section 4972 for the nondeductible contribution amounts. Is this correct?

I have a client with a profit sharing plan with no eligibility requirements. It is a small plan covering only around 8 employees. Most of the company work is done by union employees whose benefits are under a CBA and they are excluded from the plan.

Client had questions on situations that have come up with several union employees.

1) Some union employees work for the client when there is no union work, doing another type of job to fill in the caps from the union work. Client wants to know if for those periods of time and the compensation paid during those times, does he have to include them in the profit sharing plan. Has anyone encountered this before. It is usually more cut and dry between union and nonunion.

2) Client also has retired union workers that have come back to work for the client to help in a smaller role on the jobs for extra cash. The employees do not want to be under the union or get benefits from the company. Just want some extra cash. Do not feel comfortable saying they should do 1099 since they are working for the client. Anyone have experience with this?

Any thoughts would be appreciated.

Under what circumstances can federal income tax deductions be taken by a for-profit employer with respect to IBNR welfare benefit liabilities (for example, is it necessary that the funding of the IBNR be "set aside" in a trust holding plan assets per ERISA Section 403(a))? A corollary question is whether the contribution must be paid in cash (or is the acknowledgment of the liabililty by the fund sufficient to take the deduction)?

I have a client with a brand new plan. The plan is effective retroactive to 1/1/08, with 401(k) provision effective 2/15/08. Plan is using safe harbor nonelective. Can the nonelective contribution be calculated on pay from 1/1/08 - 12/31/08 or can I only use pay from 2/15/08? I am getting various answers from attorneys with whom I have posed this question...

A DC plan has been terminated and everyone paid out other than the owner and one participant. The participant will not return the forms. She is not missing, she just won't return them. This participant has the mistaken opinion that she is owed more money, which is why she will not return the forms. To date the only follow-up correspondence has been by phone. It's been a few months since the forms were issued. The distribution amount is approx. $10,000. Can she be forced out? If so, what is the procedure, and is there any IRS guidance to back it up?

I have seen various practitioners perform this test while looking at the full year, rather than at one date. For example, for a calendar year plan, if one prior participant terminates on 7/1 with 1000 hours, and another is hired and enters on 9/1 and is still active on 12/31, both would count in the denominator of the test, and possibly in the numerator, depending on other facts.

However, the reg (specifically 1.401(a)(26)-7) doesn't seem to read this way. It says that the plan passes 401(a)(26) if it passes the test on every day of the plan year, but alternatively, it passes 401(a)(26) if it passes on any single day, but only if that day is reanonably representative. This doesn't seem to allow for a method that looks at the plan year as a whole, but as I said, I have seen various practitioners do it that way.

Can anyone shed some light on this?

A friend, residing in NY, lost her husband two years ago. One of his IRAs did not have a beneficiary designation according to the custodian. She has requested evidence of the documentation and has not been able to actually see how the account was set up. The brokerage firm is telling hewr that his estate(now closed) will have to be the beneficiary. She is now 50 so at the end of the five year period the she will not have reached 591/2. If the brokerage firm does not produce the documentation does she have any legal recourse against them? Are they not required to retain the paperwork in some format?

Thanks for any wisdom here..

I have recently been assigned to work on a PS plan for a small company. They had a different recordkeeper previously. They allocate the max contribution to the owners.

I have determined that in 2005, they made an error in allocating the contribution to one owner. They intended to allocate the max so he would reach $46,000 (42000 + 4000). They would then reclassify his 401k as catchup. After the client made the deposit, the recordkeeper noticed that the owner did not have any 401k. So they took out the extra 4000 from the contribution and gave it to him as 'other'. The 5500 reported the full deposit as the contribution. Is this allowed somehow?

With a desire not to revise the prior recordkeepers work in 2005, I thought that we could allocate him the full contribution for 2006, and then subtract that 4000 from what is assigned to him. He will be allocated 40,000 (44000 - 4000) in 2006. The plan document says that when there is an overcontribution in error, you can reallocate that amount as forfeiture, so we are then allocating that to the other participants who have not yet reached the maximum limit. Is that an acceptable 'correction'?

Alternatively, would it be acceptable to ignore what the previous recordkeeper did and bring forward his balance and allocate to him the full $44000 for 2006 without taking any other action?

Are there any circumstances under which a profit sharing plan can hold the mortgage of the son or daughter (not employees of the sponsor) of the company owner? Is there a residential loan program that allows such a loan in the plan?

A new plan grants past service and assume benefits limited by 415(b). Assume Plan effective 1/1/2007 and that formula accrued benefit is $50,000 on PUC basis. So, 415(b) as 1/1/2007 is $18,000 (zero years of participation but count 1/10 of $180,000) and 415(b) as 12/31/2007 is also $18,000 (still 1/10 of $180,000). So, accrued liability is based upon a benefit of $18,000 and there is no normal cost. Charges to FSA are 30 year amortization of AL so at end of year one the Plan is potentially grossly underfunded unless employer contributes larger amount (up to 150% of CL). If Plan didn't grant past service, then PUC would be the same number as the AL and there would be a whopping minimum.

Does this make sense or is something very basic being overlooked?

We have a bfwd plan, with annual valuations. Several participants had lump sum distributions processed in Sept. 2007, based on 12/31/2006 account balance.

They now believe they are due additional monies - any gains/losses for the first 9 months of 2007.

Is this an IRS or DOL law for a bfwd plan that they would not be entitled to these earnings, or is this something that would be specified in the adoption agreement? It's a standardized prototype.

Thanks in advance.

Assume calendar year plan.

Am I correct that a formal AFTAP certification has to be issued for 2007 in writing to the plan administrator or else the presumption for 2008 will be less than 60%, and that this presumption will create restrictions on amendments after 1/1/2008 and restrictions on distributions and accruals after 4/1/2008?

A husband and wife each own separate LLC's, 100% each. The 1563(e)(5) attribution exception notes that neither can be a director in each others' businesses. In this case being LLC's there are no directors, instead there are members. Does anyone think that makes a difference? Anyone know of a TAM or other legal precedent?

Doing a crss tested plan on 12.1.2. Does anyone know if Relius has a report which shows who is in what class?

Ideally it would show Employer contributions and be sorted by class with totals by class?

Unit credit method and end of year val date. Plan participant terminates during the year but worked more than 1000 hours and therefore accrued a benefit. Should this person have a normal cost? My initial reaction is "yes" but my valuation software company disagrees and says that for a participant that terminated during the plan year that the whole AB (as of the year end) goes into the AL, rather than the beginning of year AB for the AL and the benefit accrual going into NC. Their method creates an actuarial loss all else being equal. I can't find anything in a text book that would support their position, and I can't think of anything in the Code either. What I can come up with from the Code is that a method that inherently creates gains or losses is not "reasonable". It seems that would apply here. Opinions?

To keep the numbers simple lets say that for '06 and '07 I contributed the max of 4k. If I decided to take out the 8k, can I re-contribute those years at some point? Meaning at the end of '08 could I put that 8k back in, in addition to the 5k I am allowed for '08? Thanks for the help!