I have a client who got a substantial package from them analyzing their plan unrequested. Has anyone seen this before? Is this just marketing?

Just to be clear, I'm not suggesting there was anything inappropriate about it. My client was just surprised by the sheer size of it and it's customization to their plan (which appears to have been done based on 5500 data).

I am a 401k TPA.  I have a client asking about setting up a cafeteria plan for medical expense and dependent care reimbursement.  Do the employee contributions have to be in a segregated account and payments made from it?

thanks!

Perhaps this has been discussed here but how would one go about determining whether an entity is a governmental instrumentality or agency? 

For example, lets say several counties joined together to create a nonprofit authority to oversee solid waste removal or establish a nonprofit rural transit authority. What should one look at to determine whether either of these authorities could sponsor a 401(k) or would be stuck using a governmental 401(a) only plan?

I thought the whole idea of inherited IRAs for non-spousal beneficiaries was the participant's beneficiary could roll the money over, e.g., from a 401(k) plan, to an inherited IRA.  Then, instead of being forced to receive the distribution from the plan under the plan's terms, the beneficiary could stretch out the payments under the Inherited IRA under the more friendly provisions allowed under the RMD rules, as opposed to the plan's rules.  For example, if the plan requires an immediate lump sum distribution on the participant's death, the non-spousal beneficiary could roll the money to an inherited IRA and take the money over the life expectancy of the beneficiary.  

Now that I re-read Notice 2007-7, Q&A-19, it seems the inherited IRA is required to follow the RMD rules that were in the plan from which the distribution was made.  Is that correct?  Thus, for example, if the plan requires the distribution to be made under the five-year rule, and doesn't allow for payments over the beneficiary's life expectancy, the inherited IRA must follow the 5-year rule.  Is that correct?

I am dealing with a Roth 401(k), but I don't think there is a difference between a pre-tax 401(k) or ROTH for this purpose.  The Roth 401(k) is subject to the RMDs and a Roth IRA is subject to RMDs at the participant's death.  

An error was made in a plan document, which resulted in the omission of a year of service requirement for matching contributions. Client is asking to submit VCP filing asking IRS to approve a retroactive amendment, or to approve the calculations for making up the missed contributions. Can you submit alternative correction methods in one VCP filing for the same error? Essentially, "if not this, then that"? Thanks.

Plan uses a pro-rata allocation and has three participants

The total eligible plan compensation for the three participants was $496,580

404 limit for the year is 25% of that or $124,145.

The employer deposited $124,140 to the plan which is just under the limit

Two of the employees are HCE's and

EE#         Comp                    PS Cont                PS Percent                                                         

EE1         $200,728              $53,000                  26.404%   - capped at 415 limit for 2016

EE2         $228,800              $53,000                  23.164%     - capped at 415 limit for 2016

EE3         $67,052                 $18,140                  27.054%    - got a higher % because other two capped.

Total      $496,580              $124,140

                25%

Limit      $124,145

First the auditor tells me no one could get more than 25%.  Then IRS auditor is arguing that because it is a pro-rata formula all three have to get the same percent - especially EE3 who got the extra amount to allocate the full deductible contribution.

It is my understanding that the contribution formula which in this plan is discretionary defines the contribution amount - which in this plan they wanted to take the full 25% deduction.  Then you have to follow the allocation formula which is pro-rata so you have to allocate pro-rata but only up to the 415 limit and they any extra contribution could go to the participant who has not hit their 415 limit.

So in essence they allocated a 27.054% contribution to employees but the plan had to limit the two HCE's to the $53,000 415 max.  Is this incorrect?  If yes please let me know.

For 2017, the filing deadline for a C Corporation was moved to October 15, 2018. Did that also move the deadline for making a contribution for 2017 to October 15?

Hi, I’m sending in our individually designed 401k plan document to the IRS for approval using forms 5300 and 8717. Form 8717 has instructions for finding determination letter fees, but the web sites are not valid. How can I find out the fee that applies to our plan (we are not exempt from fees because we do not have a non-HCE)?  Thank you.

apparently the Italian branch of the Poje family (ha ha ha) helped recover the painting

In the Autumn of 1913, two years after the Mona Lisa was stolen, a well-known antique dealer, Alfredo Geri, innocently placed an ad in several Italian newspapers which stated that he was "a buyer at good prices of art objects of every sort." 

Soon after he placed the ad, Geri received a letter dated November 29 (1913), that stated the writer was in possession of the stolen Mona Lisa. The letter had a post office box in Paris as a return address and had been signed only as "Leonardo."

Though Geri thought he was dealing with someone who had a copy rather than the real Mona Lisa, he contacted Commendatore Giovanni Poggi, museum director of the Uffizi (museum in Florence, Italy). Together, they decided that Geri would write a letter in return saying that he would need to see the painting before he could offer a price.

Another letter came almost immediately asking Geri to go to Paris to see the painting. Geri replied, stating that he could not go to Paris, but, instead, arranged for "Leonardo" to meet him in Milan on December 22.

On December 10, 1913, an Italian man with a mustache appeared at Geri's sales office in Florence. After waiting for other customers to leave, the stranger told Geri that he was Leonardo Vincenzo and that he had the Mona Lisa back in his hotel room. Leonardo stated that he wanted a half million lire for the painting. Leonardo explained that he had stolen the painting in order to restore to Italy what had been stolen from it by Napoleon. Thus, Leonardo made the stipulation that the Mona Lisa was to be hung at the Uffizi and never given back to France.

With some quick, clear thinking, Geri agreed to the price but said the director of the Uffizi would want to see the painting before agreeing to hang it in the museum. Leonardo then suggested they meet in his hotel room the next day.

Upon his leaving, Geri contacted the police and the Uffizi.

The Return of the Painting

The following day, Geri and Poggi (the museum director) appeared at Leonardo's hotel room. Leonardo pulled out a wooden trunk. After opening the trunk, Leonardo pulled out a pair of underwear, some old shoes, and a shirt. Then Leonardo removed a false bottom -- and there lay the Mona Lisa.

Geri and the museum director noticed and recognized the Louvre seal on the back of the painting. This was obviously the real Mona Lisa.

The museum director said that he would need to compare the painting with other works by Leonardo da Vinci. They then walked out with the painting.

Leonardo Vincenzo, whose real name was Vincenzo Peruggia, was arrested.

The story of the caper was actually much simpler than many had theorized. Vincenzo Peruggia, born in Italy, had worked in Paris at the Louvre in 1908. Still known by many of the guards, Peruggia had walked into the museum, noticed the Salon Carré empty, grabbed the Mona Lisa, went to the staircase, removed the painting from its frame, and walked out of the museum with the Mona Lisa under his painters smock.

Peruggia hadn't had a plan to dispose of the painting; his only goal was to return it to Italy.

The public went wild at the news of finding the Mona Lisa. The painting was displayed throughout Italy before it was returned to France on December 30, 1913.

Does anyone know of a way to get the excise tax under IRC 4980F for a late 204(h) notice waived other than a letter ruling request? I can’t find any other way to get a waiver and the user fee is too high to make a letter ruling request a viable option. Thanks.

Employer ABC sponsors a 401k plan. There are 3 participants. ABC sells practice location #1 of 2 to an employee Z (Non-HCE). The new owner Z does not continue the ABC Plan as a result of buying the practice location #1.

Is this a partial plan termination and should Z's account in ABC 401k be 100% vested?

Controlled group members, one non-profit with a 403B and one for-profit with a 401K:

Same vesting schedule, however the 403(b) excludes service prior to the effective date of the plan, meaning the 401K plan is giving more service credit.

Must I perform BRF testing?  The 401K plan has had no HCEs in prior years but does have one in 2018.  The 403B plan usually has 3 HCE's. 

Company A (a LLC 1065) is owned by  Owner 1& 2 from January 1 through August 31 of 2018.  They have one other employee. Company B is owned by  Owner 1 and two other unrelated people from January 1 through August 31. They have 20 employees.  As of September  1,   Owner 2 buys shares in Company B. 

At September 1, the ownership of both companies is as follows:  

Company A:  Owner 1 - 49%  Owner 2 - 51%  

Company B:  Owner 1 - 51%  Owner 2 - 40%  Other unrelated owners- 9%

So as of  September 1 - they are a controlled group - correct?  Ok  if so, the other question  Company A has is  " Can they make a SEP contribution for the period Jan 1 through August 31 - just for their employees of Company A? "

Any feedback, documentation,  cites, etc would be greatly welcomed.  Thanks!

Has anyone else had a problem with the IRS issuing letters stating that an IRA rollover is taxable income?

Five different participants rolled traditional IRA money into their 401(k) plans (4 separate plans, all different employers) in 2016. the 1099-Rs appear to have been issued correctly, showing a code G since they were all direct transfers, and zero taxable amount. 

These five individuals all received letters in the last few months stating the amounts rolled over were taxable and listed the amount of tax and interest due. In at least one instance the letter even mentioned that the 1099 had a code G on it. 

I'm not sure, but I think the common denominator may be that none of these individuals reported the rollover on their personal tax returns. Rather than reporting the rollover with zero listed as taxable, I think it was left off the return completely. I can't confirm for all of them, but for at least one this is the case. 

I do know the IRS sends out letters if things are reported to them by employers / financial institutions / etc and don't match up with what some reports on their personal return. But ultimately, the amounts aren't taxable, so saying the rollover IS taxable seems ridiculous.

We see our clients do a lot of rollovers, usually without a blip from the IRS, so to have several this year with inquiries feels like a lot, but maybe it is typical for the IRS. 

We have a nonaccount balance plan (i.e. a defined benefit plan) that is a top-hat plan.  Under the Plan, a participant is to receive a set amount per month for life, with a 50% survivor benefit to his spouse for her life.

It appears we can take FICA into account from the offset, since the amount is readily ascertainable under Code Section 3121(v)(2).  I get how that works for the set amount to the employee for life -- we just base FICA on the present value of is benefit.  But how do we deal with the survivor benefit?  Is the present value of that amount also taken into account for FICA purposes on the employee's tax filings?  If so, how does the wife report the payments in the years they are paid?

Thank you!

Looking for thoughts as to how the constructive industry exemption would apply in the context of a corporate transaction.  Specifically, seller is selling the assets of one of its entities to an unrelated buyer.  Buyer would be acquiring those assets and some of the employees and operating a similar but not same business in the same jurisdiction.  Seller won't be operating in that industry/area anymore.  Would the construction industry exemption preclude the application of withdrawal liability in this instance?

I have a sole proprietor, income reported on Schedule C, with 2 employees.  Contributions are basic safe harbor match and discretionary PS.  Owner puts in max deferral and wants to reach his 415 limit. I know he has enough compensation to contribute the max, but it's the determination of plan compensation and breakdown between match and PS that I can't figure. I have looked at a couple of the posted EI spreadsheets and they all seem to call for input of a set percentage for ER contribution.  I don't have that, instead I need to hit 415 limit.  Is this something I can run in Relius or where can I find a spreadsheet that can do this?

Company A sponsors a 401(k) safe harbor plan with about 80 participants.

Company A is going to acquire Co. B in an asset acquisition.  Co. B has about 40 employees.

Company A only requires a 60 day wait for participation.

We are trying to avoid the audit requirement for 2019.  Can Co. A adopt another new 401(k) plan by October cover the acquired employees?  If the new plan can be adopted is there an issue with amending the current safe harbor plan to exclude these employees that would be covered under the new plan?

My inclination is that we can't do what we are hoping, but still thought it worth checking.

Thank you.

Medical office has safe harbor match plan (no profit sharing funding).  Plan excludes HCEs from the Safe harbor match as there are a number of high-paid para-professionals.  Plan is not top heavy at this point.  But when it does become top heavy, certainly the non-key HCEs will need to receive 3% (since the key owners are deferring the max.)  And I assume ONLY the non-key HCEs who are excluded from the safe harbor match need to get the top heavy contribution (whether they deferred or not).  The top heavy would certainly not have to go to all non-key.

Comments?

Thanks

Unless there is a compelling reason, whenever we take over a 401(k) plan we at least discuss the topic of removing installment or annuity distribution options because they are not protected benefits and I like things easy.  In this latest plan document I'm taking over from, the language suggests that the "ad hoc" distributions it allows are a protected benefit.  This one, I'm less sure about.

First of all, I'm presuming (since I can't get a copy of the basic plan doc, only the adoption agreement) that by "ad hoc" distributions, they mean amounts allowed to be taken out by a terminated participant in any amount at any time.

Any thoughts as to if this might actually be protected somehow?  Thanks.