Is there a statutory or regulatory obligation to amend a 5500? Client timely files what it in good faith thinks is an accurate and complete 5500. Later, it's discovered that some of the information provided on the return is inaccurate. Does client have an affirmative obligation to file an amended return? Are there penalties for not doing so?

I know that this issue has been addressed many years ago but I have never run into it before.

If the client makes minimum quarterly contributions based on the prior plan year valuation results and then finds out that the plan is at full funding for the current plan year and no contributions are deductible for the current plan year, can the client have the (nondeductible) quarterly contributions back? If so, what is the process to get them back?

The document allows the employer to recover a contribution if it was made as a mistake of fact or the deduction for the contribution is disallowed under Section 404 of the Code.

I seem to remember some deminimus return of nondeductible quarterlies if they did not exceed $25,000 but it's been a while so I could be wrong.

I'd appreciate any cites you can give me to support the answer.

Two weeks ago the Ogden, Utah office of the IRS said that we could no longer get an ein for the trust, we use trust instead of "plan" without a client power of attorney, today I discovered that they won't issue a number to anyone other than the trustee.

What are you doing for this problem?

Thank you,

Michael S. Link

In PLR 199938052, the IRS ruled that an S corporation ESOP cannot use S corporation distributions paid on allocated shares of stock to repay an ESOP loan. Would the following work as an alternative to service an ESOP loan guaranteed by the company?

The ESOP would use S corporation distributions on the allocated shares to purchase additional shares from the company. The company would use the proceeds from the sale of stock to service the portion of the debt that would have otherwise been paid with the S corporation distributions.

Any thoughts?

I've never worked with a VEBA or grantor's trust before. I have a client who has one and I'm requesting info for the to complete Form 5500. What do I ask for as far as financials?

Okay, we have a possible 401k Plan with 250 eligible employees - 75 of which participate. I have heard that there needs to be some kind of an audit signed by an actuary. Does anyone know if this is correct and if so where I could find information on it? Thanks!

Client currently has a Money Purchase Pension Plan but now also wants a new 401(k) plan. Since the client desires to have only 1 plan, they have suggested merging the Money Purchase Plan into the new 401(k) Plan. Can this be accomplished?

I think an important factor here would be whether or not the client wants to continue to fund the money purchase portion. If the answer is no, then wouldn't a MP merger be any more advantageous than an MP termination? If the answer is yes, will the client be prevented from having the MP and the 401k in 1 plan, since I recall reading that MP plans cannot have a 401(k) feature? Is there a distinction in that if a 401k feature is prohibited in a MP plan, an MP feature is equally prohibited in a 401k Plan?

Thanks for any comments.

Under 105(h) nondiscrimination test as to benefits, is a requirement that some employees pay a higher premium than other employees (newly acquired sub paying full cost, while current participants cost is subsidized) discriminatory?

I am sixteen and will be seventeen in August. I would like to set up an IRA but I only work around 2 days a week, as part time. I was wondering if there is a minimum amount to put in each year (I know that you can put the maximum amount of $2000), and each month can you just add an amount? How does the whole system basically work?

I'm aware that there have been several threads on missing participants. However, I have looked through several and have not found what I am looking for.

A plan sponsor has one participant left to pay to complete a plan termination. The participant is due less than $25 and the plan sponsor has gone through has exhausted the means of trying to locate the participant.

In this situation, what should the plan sponsor do (try to find a bank that will take the assets)?

Does the amount of the distribution to the missing particiapnt affect what you would tell a plan sponsor to do?

Is anyone out there familiar with this scenario: a plan provides coverage for pre-x conditions, but will only pay at the benefit levels provided under the old (credited) coverage? Naturally, this will only be applied where the old benefit is less rich than that provided under the new plan.

THIS IS A NEW ONE ON ME.

In a D.C. plan containing QPSA/QJSA provisions a participant names his wife as the beneficiary for his entire account balance. The participant then divorces his wife, remarries, and dies several years later while still employed and without changing a beneficiary designation.

It would seem that spouse No. 2 is entitled to the QPSA benefit of 1/2 of the account balance and the prior election regarding spouse No. 1 for the entire account balance would be invalid as to the QPSA benefit. What about the other 1/2 of the account. Is the entire beneficiary election invalid so that the other half goes to his estate-- the "default" beneficiary under the Plan when their is no designated beneficiary. Or, does spouse No. 2 get the other 1/2 because the particpant was still free to name a beneficiary for the non-QPSA portion?

Are employers required to permit employees to pay back loans that are in default(that is, loan payments were not made on time and were not made during cure period)? If so, what are the repayment requirements? Cites would be helpful.

I have a large corporate client with a number of smaller wholly owned subs. The subs participate in the parents NQDCP. The plan provides that each sub is liable for the payments to its own employees. But the parent generally makes payments and then seeks reimbursement from the subs.

The parent would like to establish a rabbi trust. Clear the most significant part of the total liability will relate to the parent's employees. The contributions to the rabbi trust will come from the parent.

Does there need to be separate accounting for the sub liabilities? What happens if there is no separate accounting, and a sub goes bankrupt? I'm assuming this should have no real impact so long as the sub has not contributed dollars directly to the rabbi trust.

Thanks for any guidance-

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In 401(k) plans, do any employers vary the matching contribution level based on employee's performance? We currently match at 50% of the first 6% of pre-tax deferrals by employees. The survey information indicates that this is probably the most common matching level. However, we see that the "2000 Hay Benefits Report" posted at 2/16/2001 indicates that while 42% of companies match in this way, 46% match at a greater level, some even more than 100%.

We might consider this, but only if the additional match were to be tied to some measurable personal on-the-job performance measures. Can a plan do this without running afoul of discrimination rules? Does anybody know of any companies which do this, and how do they do it?

Has there been a change in the legislation regarding unused portions of a medical reimbursement account?

I asked a similar question before but I think the question was too hypothetical so here is a real scenario:

Employer discovers that for a large group of employees it has failed to count a certain bonus payment that was clearly covered under the plan's definition of pay.

This failure occurred in 1998, 1999, and 2000. Assume the employer has determined that in the aggregate this failure is significant.

The question is this: Am I precluded from self-correction because the initial failure occurred in 1998, outside the 2 year correction period? Or can I still self correct 1999 and 2000, and then "revisit" whether the 1998 portion alone is still "signficant?"

I think Rev. Proc. 2001-17's discussion of multiple defects and aggreation of defects is unclear.

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Just need to confirm that contributions to a dependent care account are also included in the annual additions calculation (along with elective deferral, match, profit sharing, forfs., etc.)

My only source of compensation is foreign earned income. I usually deduct all of this via form 2555 and line 21 on form 1040. Can I still contribute to a roth ira? Or can I leave $4000 "unclaimed" as foreign earned income even though it was all earned overseas and then contribute the $4000 to my Roth IRA and a spousal Roth IRA. I have read Publication 590 (specifically page 4) on this, but a Roth IRA in not deductible like a regular IRA. I would appreciate some clarification on this and also if the IRS has heard any cases involving this question. It seems to penalize US citizens that work and live outside the USA.

If a Plan Sponsor is unsure as to whether or not a Top Hat notification was ever filed with the DOL, what is the best course of action? Is it best to proceed with the Voluntary program of delinquency and pay the $2500? Is there any way to determine whether or not a filing is on record with the DOL without raising a red flag with the DOL? Is anyone aware of an actual instance where the DOL has gone after the Plan Sponsor of a DCP requesting 5500s in arrears due to the absence of a Top Hat filing?