After an internal audit of a 401(k) plan, it was discovered that in 1997 a top-heavy corrective contribution was made in error (the plan was not top-heavy), and in 1999 a top-heavy contribution which was necessary was made but it was less than what it should have been. Any suggestions as to how to correct?

Sub-S owner takes a plan loan, which, of course, the Plan and Code do not permit. The loan has been repaid. We know this is a prohibited transaction, but how is it determined when a "mere" PT becomes a disqualifying event? There are other issues of concern, but none dealing with discrimination against Non-HCEs. Is there a laundry list of offenses that would disqualify a plan? How can one determine this?

Thanks.

A Plan participant terminates employment and completes all required paperwork necessary to get her distribution as a lump sum. She had a $12,000+ loan at the time of her termination and decided to not pay it off. Trustee cuts her the check and mails it to her.

She receives the check and it dawns on her how much she loses in taxes. She has not done anything with the check.

She now wants to send the check back to the employer (over $5,000) and also came up with the money to pay off her loan. She wants to send that check in too.

Can she do either of these? Is it up to the Plan administrator to decide whether or not to accept either?

Thanks for any comments.

This may be too obvious of a question, but I have to ask anyway:

A new plan is established, effective 1/1/00, and there are 10 employees employed on that date who do not have to satisfy eligibility requirements, and enter the Plan on that date. For 5500 purposes, I presume I should report 10 participants at the beginning of the year, not zero, is that correct? Would it matter if the document was signed after 1/1/00?

If there were 101 participants, would Schedule H be required, instead of Schedule I?

Thanks

I am looking for examples of a salary continuation policy that we offer our exempt employees. Things like what are the # of days paid, limits, exclusions, etc. We want to be sure we are keeping with industry standards. Ours simply states that is an exempt employee is sick they get paid for up to 90 days and then qualify for LTD. We want to add more definitive guidelines and wording. Any ideas of samples is greatly appreciated. Thank you!

Can a plan be written so that amounts in excess of the 402(g) limit are returned to the employer rather than deposited in the trust? If so, how are the 402(g) excesses returned? To the employer to be included in the participant's next paycheck? To the employee via 1099-R? If not, is the recordkeeper acting in a fiduciary capacity by returning the funds? DOL regs are pretty clear on the fact that amounts withheld from a paycheck are plan assets when withheld. Any thoughts?

If a NON-SPOUSE beneficiary inherits a Roth IRA that has NOT been in existence for 5 years, what is the taxable implications for the beneficiary? Will the distributions (excluding contributions) be taxable as ordinary income or will they be received to the beneficiary income-tax free?

Can a participant in a 401(K) Plan be prohibited from contributing to the plan if his job status changes to an excludable classification? I believe the only requirement is that the participant continues to vest in his account while still an employee.

In a general tested profit sharing plan where an HCE who meets the eligiblilty requirements waives participation, is he/she in the general test as a 0% (as opposed to being out of the test)?

Can his comp be used for 404?

I think the answers are yes and no. Agree? Disagree?

But if so, if he/she were instead to get a contribution of $1, the comp could be used for 404, correct?

What needs to be done to reinstate a 401K plan?

The engineering company I work for makes it's money by the hours that the employees work. When the employees don't work we in turn are not making any money. We offer a four day work week and then in turn don't pay our employees for any holidays or sick time. They are basically paid for the time that they are here. Does anyone have any suggestions I can take to the President of the company to get better benefits for the employees?

a client has been making contributions to his company retirement plan but does not have compensation to justify the contributions. He has K1 income and thus is not entitled to make contributions to the Plan.

What should he do to remedy the situation?

should this be handled in one of the correction programs?

Participant has taken a loan from her 401(k) for eighteen months, and is later terminated. Plan allows her to continue making repayments, rather than making the entire balance payable right then and there. Does it seem wise or practical to allow the participant to re-amortize the loan to spread out the payments, say, to the five year maximum, at a lower per payment amount? More importantly, since the plan allows active employees to do this, does it *have* to allow the ex-employee (who, rumor has it, may return to work for the employer in a few months) this option?

If a plan document says that forfeitures will be restored upon repayment of full amount distributed to participant, how is a 0% vested participant treated? Is the participant automatically assumed to have repaid a $0 distribution, or is this dependent on the plan document? Does it make a difference if the plan does or does not have language about a 0% vested participant being deemed to have receive a distribution?

Do you have plans that do not restore forfeitures to 0% vested participants that are rehired prior to 5 consecutive 1-year breaks in service?

The employer of a calendar year 401k plan made a $15,000 discretionary contribution 12/08/00 for 2000. The salary deferrals made by employees for 12/00 (paychecks are issued twice a month) of $2450 were not deposited until 5/15/01. Other monthly deferrals were tranmitted on time. Should the schedule H question "Did the employer fail to transmit to the plan any participant contributions within the maximum time period" described in the DOL regulations? be marked yes or no?

Also should a 5330 be filed and an excise tax paid for this situation? Thanks for your input!

Previous threads have dealt with the issue of"carving out' otherwise excludables from the various nondiscrim tests,but what about plans with multiple eligibility provisions? Specifically ,I have a 401(k) plan that requires 21/1 month for deferrals,and 21/1 year for the PS.The PS allocation is tiered, and there is a 1000 hr/last day requirement to get an allocation. The plan is top-heavy,so the 1-monthers get the 3% minimum.How are these folks considered for ratio%,average benefit,and general tests? Thanks for your help.

Are there any employer contributions that are "disregarded" when calculating a top-heavy mimumum contribution?

I was told a matching contribution should not be used to reduce the TH mim. However, I cannot find any documentation to that.

In regards to calculating the maximum loan limit (IRC 72(p)) when there are multiple savings plans and more than one loan offered in each plan, after finding the adjusted $50,000 limit (Part 1) and finding the maximum vested balance (Part 2), would the maximum loan amount be reduced by outstanding loan balances in the particular plan where the loan request is being applied or reduced by outstanding loan balances across all plans? So Line 7 below is where I have issue (all plans vs specific plan at this point in the calculation). I will illustrate with the following example for clarification:

3 loans allowed in each plan not to exceed 72(p) limits.

PART 1: FIND THE ADJUSTED $50,000 LIMIT

1.) Maximum amount (IRC Section 72(p)) $50,000

2a.) Highest outstanding loan balance(s)

during the last 12 months; this includes

all outstanding loan balances in all of

XYZ Corporation's savings plans:

Salaried 401(k) Plan:

Loan #01 $1,000

Loan #02 $2,000

Loan #03 $3,000

Supplemental Savings Plan/SSRP (After-Tax EE Contributions with annual 2% ER

Contribution):

Loan #01 $4,000

Loan #02 $5,000

Loan #03 $6,000

Highest outstanding loan balances

across all plans: $21,000

2b.) Less current outstanding loan balances

across all XYZ Corporation's savings plans:

Salaried 401(k) Plan:

Loan #01 $Paid Off

Loan #02 $ 300

Loan #03 $1,500

SSRP

Loan #01 $2,500

Loan #02 $Paid off

Loan #03 $5,000

Current outstanding loan balances

across all plans: $9,300

2c.) Highest outstanding loan balances minus

current outstanding loan balamces across

all savings plans: $11,700

3.) Reduced maximum statutory loan amount

subtract Line 2c from Line 1: $38,300

PART 2: FIND THE MAXIMUM VESTED BALANCE

4.) Participant's vested account balance (which

includes outstanding loan amount(s) in the

XYZ Corporation Salaried 401(k) Plan): $85,000

5.) Multiply by 50% which results in: $42,500

MAXIMUM LOAN AMOUNT

6.) Enter the LESSER of Line 3 or Line 5 $38,300

7.) Reduced by the participant's current

outstanding loan balance(s):

Salaried 401(k):

Loan #01 $Paid Off

Loan #02 $ 300

Loan #03 $1,500

SSRP:

Loan #01 $2,500

Loan #02 $Paid off

Loan #03 $5,000

Current outstanding loan balances across

all plans: $ 9,300

8.) Subtract Line 7 from Line 6 (maximum

amount available for loan): $29,000

Comments would be appreciated. Thanks.

Tim Cahoon

Client thought plan was terminated in 1996. Client says TPA was to handle everything. No 5500's filed since then. We are considering DFVC with the DOL. Question is whether it's possible to file a request for waiver of penalties based on reasonable cause and reserve the right to utilize DFVC program if DOL finds the facts alleged do not amount to reasonable cause? The request for waiver will be filed with the IRS as well. It appears that the IRS is currently asking for the 1997 and 1998 5500's. May be that the sentiment is that it will be less costly and burdensome to go ahead and pay 6,000 for the non-filed 5500's than to try to deal with DOL as to reasonable cause and possibly lose the ability to use DFVC???? Welcome your comments.

Client thought plan was terminated in 1996. Client says TPA was to handle everything. No 5500's filed since then. We are considering DFVC with the DOL. Question is whether it's possible to file a request for waiver of penalties based on reasonable cause and reserve the right to utilize DFVC program if DOL finds the facts alleged do not amount to reasonable cause? The request for waiver will be filed with the IRS as well. It appears that the IRS is currently asking for the 1997 and 1998 5500's. May be that the sentiment is that it will be less costly and burdensome to go ahead and pay 6,000 for the non-filed 5500's than to try to deal with DOL as to reasonable cause and possibly lose the ability to use DFVC???? Welcome your comments.