While completing Schedule R of a Form 5500, we have discovered the brokerage firm is putting the distribution into an IRA and then paying lump sums from there. They are then generating a 1099R for the IRA. The client has not been preparing 1099R from the trust. Quite possibly, if the money stays in the IRA, no 1099R is generated. (This is the second instance we have uncovered this week with at least 2 brokerage firms.) We think there are 2 issues here 1)the EIN on Schedule R should be the brokerage house, which they are reluctant to provide; 2)nonexistant 1099Rs for the IRAs that do not leave the brokerage house. Anyone else with similar experience? What are consequences to plan? Please site regs. Thanks

Does anyone know if you can test by division in Quantech and if so, how??? I am referring specifically to the ADP/ACP Tests.

Plan Design:

Money Purchase Plan and 401(k) Profit Sharing Plan

Money Purchase Plan Formula: 25% to HCEs, 3% to NHCEs, money purchase allocation to each participant will be reduced to meet combined plan 415 limit

Determination Letter for money purchase plan says that plan passes nondiscrimination testing on the basis of the 401(a)(4) general test.

Money Purchase plan document is silent on what to do if 401(a)(4) general test fails.

Letter from plan sponsor indicates that an additional profit sharing contribution has been allocated in the past when the general test failed.

Profit Sharing Allocation Formula: uniform % of recognized earnings.

Is there any compliance problem caused by reducing the money purchase allocation to each individual due to the combined 401(k) and money purchase 415 limit?

Is there a default of how to get a 401(a)(4) test to pass when the test initially fails, or does the document or an addendum have to contain language specifying how to correct a failing general test? Is this language unnecessary as long as the plan sponsor continues its practice of making a profit sharing contribution to get the general test to pass?

Do reallocated forfeitures in the profit sharing plan affect the 401(a)(4) general test?

I am preparing to give a presentation to pension professionals on the topic of "ethics." I am now trying to explore the direction of my talk. If anyone has come across any articles, books, etc. on the topic of "ethics" please advise.

I've always shown the contributions in Form 5500 as the contributions "for the plan year." In other words, I take the contributions actually made during the year, add the receivable as of the end of the year, and subtract the receivable as of the beginning of the year. Pretty standard stuff. (And of course, the contribution agrees with the tax deduction taken.)

Recently, I've seen (and taken over) a number of plans where the contributions shown on the 5500 were the contributions actually made "during the year" --- and excluding receivables.

1. If I transition to the "for the plan year" basis, I will wind up including an extra contribution (the end-of-year receivable) in my first 5500. So, the contribution shown in the 5500 will not equal the deduction. (Of course, in future years, everything will be fairly normal.) Any problems with this approach.

2. Or, can I stay on the "during the year" basis? And, if the IRS questions the deduction vs. the 5500 contribution, explain that the difference is due to the receivables. (Assume that this is not a DB plan.)

This has come up several times on 401(k) plans where the employee contributions and assets were taken from the mutual fund statements (there were no company matches), and the receivable was ignored. The receivable is simply the employee's deferral in the last week of December that wasn't sent to the mutual fund until early January. Shouldn't the ADP test be done based on contributions deferred for the year (and not contributions actually made during the year)?

Shouldn't the 5500 include those late December deferrals?

I need to project total benefit cost per employee. I know we need to include all the standard benefits, health, life, ltd, etc. but wasn't sure what the norm is as far as FICA, Unemployment and Workers comp being included. Any advice would be appreciated.

Thanks, Adele

How can a person defer on tip wages if their base wages are lower than the deferral amount? (the document definition of compensation is W-2 wages).

Regarding highly compensated employees - two situations. First, in the first plan year of a 401(k) plan established in a newly-formed company, and assuming there are no 5% owners, is it correct that there would be no HCE's for testing purposes in the initial year?

Changing the facts slightly, assume the newly formed company is actually a newly formed spun-off company which is not in common control with the former parent corp. Again, assuming no 5% owners, it is correct that there would be no HCE's during the initial testing year?

Does anyone know of a recordkeeping system that can handle administration of a small (under 500 part.) ESOP, including cost basis?

Can anyone confirm this for me?

Revenue Ruling 89-60 together with proposed IRS reg 1.411©-1 may be relied upon in determining the single sum distribution of mandatory accumulated employee contributions with interest at date of termination as well as the vested deferred benefit attributable to employer contributions. I know 89-60 does not reflect the revisions of OBRA 89; however, the methodology under 89-60(I believe) still applies.

Looking for your feed back.

Thanks.

Does anyone know of a web-based solution or software that develops personalized benefit statements?

Thank you.

I have a client who has a Premium Only Section 125 plan, and at plan year end it is determined that they have failed the 25% concentration test for benefits to Key employees. The benefits to key employees are now considered taxable income.Does anyone know how is this reported?,i.e. 1099, w-2, etc? Also, is the employer liable for any other related taxes, such a FICA, FUTA, etc? Any comments, or cites would be appreciated.

I have just been told that GE floating rate notes no longer qualify for Section 1042 ESOP rollover, because in IRS's opinion GE does too much non-US business.

I do not doubt the accuracy of this information. However, I would like to know:

1. Is there any literature to support this? An IRS ruling? Anything of the sort?

2. Does then the same restriction apply to GE common stock? GE common stock is NOT considered Qualified Replacement Property for the purpose of Section 1042?

Thank you for your help.

Regards,

Vladimir

A is married with children. A terminates employment and elects COBRA coverage. A few months later A takes a new job and the new employer offers health coverage. Is there anyway for A to maintain COBRA coverage for one dependent child while A and the remaining family members receive coverage under the new employer's health plan? Any authority out there on this issue?

"This issue deals with determination of an HCE. Here's the scenario: 1) Company has authorized 1000 shares of stock; 2) There are currently 800 shares of outstanding stock and an option on the remaining 200 shares; 3) EE A owns the 800 shares of outstanding stock; 4) EE B (unrelated) has the option on the remaining 200 shares; 5) The stock option plan is designed to allow EE B to exercise his/her right to acquire the 200 shares during the next 5 year period in equal amounts (i.e. Current yr - 40 shs, yr 2 - 40 shs, ..., yr 5 - 40 shs). The question is whether or not EE B is an HCE? In reviewing 414(q), 416(i) and Section 318 constructive ownership, I am not sure how to apply the rules of 318(a)(4) OPTIONS. What is meant by "an option to acquire such an option, and each one of a series of such options"? Possible conclusions to consider: 1) Even though the option to acquire stock is spread over a 5 year period, is this considered a "series of such options"? Does this mean you have to consider EE B as owning 200 shs or 20% (200/1000), thus making him/her an HCE? 2) Do you look at this on a year by year basis since 416(i) requires a 5 percent owner of the "outstanding" stock. In other words, is EE B considered owning 40 shares in the current year, thus making him a 4.76% owner (40/840)? Thanks for any thoughts.

Trustees just received a small amount of income with respect to a profit sharing plan that terminated and made final distributions 5 years ago. Is there any alternative to locating the 20 participants who would be entitled to a share of these additioanl earnings? The cost of locating and disbursing the earnings would FAR exceed the $325 of additional earnings.

"Under Reg. 1.416-1 Q&A T-30, distributions added to the PVAB means all distributions made by a plan. I understand this to mean one would have to include QDRO distributions in the top heavy determination. Also, I believe a determination of whether or not the ex-spouse (assuming this person is the alternate payee) is a "key or former key employee" must be considered. If the ex-spouse was married to a more than 5 percent owner, then I believe the ex-spouse is considered a "key employee" for top heavy purposes. I believe this has to reviewed in each of the preceding 4 plan years as well to make this determination. Is my understanding correct?"

Last year in April, I closed out 2 Roth accounts with one investment company, simply because when I was enrolled in them by an agent, he neglected to tell me of penalties and such. I wanted to put them into another investment company, and being new to this I did not know I could simply roll them over into it without ever withdrawing.

When I closed out the accounts over the phone, the rep on the other end said they could handle the tax penalty or I could do that. I told them I would, but I planned on reinvesting it. They said I had 30 days to reinvest the full amount without suffering the penalties.

Anyway, here is my question. I closed the account on 3-17, and finally got the new agent to finalize the paperwork on 4-17; I gave him the check for the full amount I had withdrawn then. On this company's statement, it shows 4-25 as their account creation date.

So, do I still have to pay the 10% penalty and add that money to my income, even though I got it reinvested? When I had my taxes done today, I had some 3rd year college student doing them, so I felt that she didn't have years of experience and information working for me.

Thanks

Shi

Hello:

I am the Director of Comp and Ben at growing tech startup in DC. We currently just hit the 70 ee mark. We still have our SARSEP. We need to change to something? But what? Please help, we are growing rapidly and do not have time for a lot of headaches yet we need something else, if for no other reason than the collective oppinion of the benefits community is the SARSEP is DEAD

Can an employer terminate a 401(k) plan and start a sep ira in the same year or do they have to wait for 24 months to start a new plan?