Just picked up a client that didn't make their 2000 ($30K) or 2001 ($9K) money purchase contributions. Luckily, the plan was converted to PS in early 2002, so there were no more required contributions. And now we want to make things as right as can be, given the circumstances.

If I understand the pyramid-like way this is supposed to work, I think I submit the following Forms 5330 with the penalties like so:

2001: $30K * 10% = $3,000

2002: ($30K * 2 + $9K) * 10% = $6,900

2003: ($30K * 3 + $9K * 2) * 10% = $10,800

2004: ($30K * 4 + $9K * 3) * 10% = $14,700

2005: ($30K * 5 + $9K * 4) * 10% = $18,600

Total penalty due: $54,000

And don't even get me started on earnings calculations... unless, that is, they're counted in the accumulated funding deficiency (which I don't believe they are).

Does this look right? I know I can't be the only one with a plan like this... thanks.

This company at one time had over 30 participants. Now there is one last terminated participant who has a loan. He wants to repay the loan prior to rolling it over to an IRA. Is there any reason why I cant file a 5500 EZ?

A 40 year old participant in a PS plan (with rollover money) is looking to take a hardship withdrawal for almost all of his account balance for the purchase of a home (1st time home buyer). Am I correct that this is not an eligible rollover distribution and therefore taxes do not need to be withheld? Also, the 10% early distribution tax does apply so he could gross up the hardship amount to cover the 10% penalty. Finally, can the TPA fee be paid directly from the participants account?

Thanks

Should you use code 3e, or any other code on the 5500, to identify a volume submitter plan?

I am very new to this area and do not work with IRAs much and given that Section 529 plans are relatively new, I am hoping someone can help me. My question is:

Can an owner of an IRA make a death beneficiary designation in favor of a Section 529 plan/acct?

Contributions to a defined contribution plan generally must be made by the time for filing the employer's tax return, plus extensions. What is the contribution deadline for an entity that is not required to file tax returns?

Cites would be helpful.

Employee terminates employment 12/31/04. Anniversary date of PSP is 6/30. Plan says terminated participant's account balance will be distributed as soon as administratively feasible after anniversary date coinciding with or next following date of termination of employment. Broker was notified in writing that no distributions were to be made without authorization from Plan trustees. Terminated participant talks to broker and broker distributes 10K out of terminated participant's account in March 2005 without communicating with trustees. From the dollar perspective there won't be a problem b/c participant's account balance is sizeable enough that the early distribution of the 10K won't create an issue of trying to get money back from the participant. However, it seems there is an operational defect as well as a reporting problem that has to be dealt with. Not only has the distribution been made prior to the distribution date in the PSP, but now distributions will be in two different Plan years. Also, the Plan only allows for one lump sum payment. I understand from the accountant that the coding on the distribution will be an issue. It won't work out the immediate issues but would an indemnification/hold harmless type agreement from the broker and possibly the participant as well suffice as to the consequences of the operational issues? Need some suggestions.... Thanks.

Employee terminates employment 12/31/04. Anniversary date of PSP is 6/30. Plan says terminated participant's account balance will be distributed as soon as administratively feasible after anniversary date coinciding with or next following date of termination of employment. Broker was notified in writing that no distributions were to be made without authorization from Plan trustees. Terminated participant talks to broker and broker distributes 10K out of terminated participant's account in March 2005 without communicating with trustees. From the dollar perspective there won't be a problem b/c participant's account balance is sizeable enough that the early distribution of the 10K won't create an issue of trying to get money back from the participant. However, it seems there is an operational defect as well as a reporting problem that has to be dealt with. Not only has the distribution been made prior to the distribution date in the PSP, but now distributions will be in two different Plan years. Also, the Plan only allows for one lump sum payment. I understand from the accountant that the coding on the distribution will be an issue. It won't work out the immediate issues but would an indemnification/hold harmless type agreement from the broker and possibly the participant as well suffice as to the consequences of the operational issues? Need some suggestions.... Thanks.

First, I apologize for putting this in (probably) the wrong forum. I'm just concerned that no one would look at the "investment" topic.

Anyway, we have a large ($20MM) plan with American Funds A shares. They'd prefer not to go to R4 shares.

We are wondering how serious of a problem it is to not have a good "safe" option. The CMT (cash mgmt. trust) yields a pitiful .35% - there is no real GIC/safe option that returns what one might expect for that class.

The gvt. bond fund is not a "safe" option that is a member of this asset class. We'd prefer to stay on the current platform (old TRAC/DISC system).

Any suggestions? Is this a fiduciary breach?

thx!!

Here's the arrangement contemplated: The employer will provide and pay for 75% of premiums for a high deductible medical insurance policy for all employees except the highly compensated and 5% shareholders, who will not be included in the HRA. The employer will also pay for a portion of deductible expenses for those covered employees by paying the provider directly for covered expenses up to a specified dollar amount.

Since the highly compensated and 5% shareholders aren't covered by the HRA, the employer wants to pay 100% of their premiums.

Does this violate any nondiscrimination rules or ERISA?

A money purchase plan has QJ&S and QPSA requirements. If the participant dies, can the surviving spouse make an election to receive payments in another form? Everything I've read so far relates to an election by the participant with spousal consent. Would like to give the survivng spouse the option of taking a lump sum option.

If possible, please provide cites.

Thanks.

Employer has 2 plans; a profit sharing plan and a separate 401(k) plan. The plans are aggregated for testing.

There are more than 100 participants in the 401(k) plan but fewer than 100 participants in the profit sharing plan.

We know the 401(k) plan must include an audit with the 5500. Because the plans are aggregated for testing, does the profit sharing plan also require an audit?

Thank you.

Is it permissible to pay out the employee contribution portion of a pension benefit first?

We have a plan that brought several employers together. Two of the employers had plans where employees contributed after-tax. All of these different plans were "rolled-up" into the current plan. We have continued to account for all of the employee contributions but when an employee leaves we would like to pay that amount first if possible. We have situations where employees terminate and rehire all the time and the administration can get very cumbersome.

Further clarification-

We are looking to pay the employee contributions out first, when distribution is sought by employee according to plan document provisions.

So, employee requests distribution, employee contributions are first ones out the door.

Any guidance on this issue would be greatly appreciated.

Thanks,

Fred

A plan has its first plan year-end on 8/31/04. Therefore, the minimum funding is due 8 1/2 months after that date.

Their corp tax return is due 5/16/05 since 5/15 is a Sunday.

They make their contribution on 5/16/05.

Is this a funding deficiency requiring a 10% excise tax?

My recollection is yes, but perhaps there is an exception someone knows of.

How does one prepare the Sch B in this case?

I know that in 2000, the IRS changed their ruling to allow employers to treat the election of a spouse during open enrollment as a qualified status change (for open enrollments conducted at a different time of year).

Can we allow spouses to drop our coverage if they joined their company's group health plan during their open enrollment, however not allow them to add their spouse for the same reason? We would, of course, be changing our plan document accordingly.

Thanks.

I am not at all familiar with government plans but a Fire Chief asked if I could help...so, here's the question....is there an online calculator or program available for employees to use that would give them an idea of what it would cost them to buy back service credit? I'm not even sure I know what this means but I got the impression from him talking to me that if a Department restructure is done, it will affect their existing pension. To enable the employees to get a better retirement benefit, they'd be able to buy back service. Because the State that manages this existing plan is very backed up, etc. he asked if I knew of a program that would give a general idea if employees entered data in using a certain interest rate, etc.

So - if anyone understands my question and, secondly, knows if there is some online calculator available for this, I'd appreciate a reply. Thank you.

What is it?

Is this a Controlled Group?

Joe Smith owns 100% of company A.

Company A owns 75% of Company B

Joe Smiths kid age 23 owns 10% of Company B

Joe Smiths brother owns 15% of Company B.

We have been using Relius for about 10 years, and are considering a change. The bottom line is that it's more than we need.

We are a CPA firm, and plan administration is a "boutique" service for some of our clients who want to keep everything under one roof. Our client base is relatively small and likely to stay that way. We work with defined contribution plans only and generally provide balance-forward administration and/or compliance services.

I would like suggestions regarding software packages that we should evaluate.

Thanks!

I'm working on a plan that has been underfunded and frozen since late 70s. It contains no substantial owners, no key employees, no HCEs. Just a few long service employees. It is < 100 participants, so the AFC's don't apply.

The funding ratio is around 50%, although they have never missed a required contribution. We have been using unit credit method w/ relatively conservative assumptions (6%), but due to a large credit balance, there hasn't been a required contribution for years. Since it they aren't required, the employer isn't putting anything in and the funding levels continue to drop each time someone is paid out. (It does pay lump sums.)

All of the remaining participants are now approaching retirement age, but the plan doesn't contain enough money to pay them all.

Is there anything that would force the employer to make a contribution before the credit balance is used up? What if it runs out of money? Is there a Reg that would force them to make a contribution to cover the benefit? Plan document doesn't really address it. The employer is solvent, although they aren't rolling in cash.