A plan participant was only age 57 and was not eligible for early retirement benefits based on the plan provisions in effect before the plan amendment (see below data).

Based on the answer key from SOA- the answer is C

Why do we have then compare the age 57 monthly accrued benefits when the participant retire at age 60, i.e., after the early retirement benefit amended?

Is this because of the  §411(d)(6)(A) accrued benefits or §411(d)(6)(B)(i) early retirement benefits and retirement type subsidies?

If it is because of (6)(A), I kind of understand that you cannot take away already accrued benefit.

But if it is because of (6)(B), can someone explain me why.

Provided

Benefit formula: 1.5% of final compensation per year of service.
Early retirement date: Age 60 with 10 years of service.
Early retirement formula:
        Before 1/1/2007: Accrued benefit, unreduced
        After plan amendment effective 1/1/2007:  Accrued benefit reduced 4% for each year the benefit
commences before normal retirement date
Data for participant Smith:
      Date of birth 1/1/1949
      Date of hire 1/1/1980
      Date of retirement 1/1/2009
     Monthly accrued benefit as of 12/31/2006 $1,650
     Annual compensation each year from 2007 to date of retirement $50,000

Question 30
In what range is the monthly benefit payable to Smith on his date of retirement?
(A) Less than $1,400
(B) $1,400 but less than $1,550
(C) $1,550 but less than $1,700
(D) $1,700 but less than $1,850
(E) $1,850 or more

401k Plan uses W-2 Comp. Numbers below are made up for example.

Company surprised its staff @ annual holiday party with $400 ipads. On 1/3 of next calendar year they processed corrective payroll for the value, including tax ($424). They also included 401k. So an ee with a 10% rate had $42.40 in 401k put in.

Something sounds fishy to me. Should the payroll have shown 424/.9=471.11 since 471.11-47.11=424? I'm seeing circles and wondering if the 401k was calculated correctly, let alone the right dollar amount used for W-2.

Hello,

I am looking for a little guidance (I believe the answer will be VCP, but wanted to be sure that nobody has a different idea).

We took over a plan, and 2016 is the first year we are doing the administration. Several participants made Roth Deferrals, but the PPA Restatement effective 1/1/2016 does not allow Roth contributions. Upon further questioning, there have been Roth Deferrals for years (the prior EGTRRA Restatement did not allow Roth contributions either).

The bulk of the Roth money is actually from the sole owner, but other participants have Roth money within the plan. The prior administrator kept track of all of these as regular pre-tax deferrals (they never requested or saw the W-2s).

Again, I think I know the answer, but can we self correct this in any way, or is VCP our only answer? Will they allow us to do a retroactive amendment to the plan to allow for Roth contributions?

Thank you

1. I don't see this addressed anywhere in the proposed 457 regulations (or existing regulations or 83 regulations for that matter). There's a somewhat bright-line rule requiring two years of services to create a substantial risk of forfeiture under 457(f). However, there's no mention of how long a non-compete must last. I would imagine the IRS would disregard a very short non-compete, e.g., you retire on December 31, 2017, and have a non-compete that lasts until April 1, 2018, at which point you are paid. Is anyone aware of any guidance in the form of PLRs, conferences, private conversations, etc.? 

2. Under the proposed regulations, I don't see anything that would prohibit entering a non-compete for the first time upon termination and relying solely on the non-compete to create a substantial risk of forfeiture. For example (assuming you meet the new non-compete conditions for legitimate interests, enforceable agreement, efforts to enforce) an employee voluntarily terminates with no deferred comp plan in place. In connection with the termination, the employer offers a five-year non-compete with payments of $100,000 for each year that the employee complies with the non-compete. I don't see anything that requires substantial services before the non-compete to create a substantial risk of forfeiture for the payments during the non-compete period.

Thanks in advance!

well, at least one pizza place from time to time has buy one 'pi' get one free, so I guess I need to celebrate the day.

double dang it, it may be 3/14 but it is only 1:36 so I am posting a little early

Traditional db overfunded with eoy valuations terminates during 2016 and val date is moved to plan termination date. assume no cb or conts for simplicity. What would you call assets/(ft+nc)

as of the val date if you were doing a separate aftap certification?; 2017 aftap? plan termination aftap?

final aftap?..val date and thereafter aftap? 

What exactly is it that I can only do if I am in ERPA?  Can I do a VCP for a plan where I prepare the 5500?

There has been some discussion in my office about how individual contribution amounts should be limited under a cross tested plan PS allocation. 

The primary question - If the Profit Sharing Contribution in total does not exceed 25% of TOTAL eligible compensation - can an individual participant received more than 25% of their individual compensation?

I always thought no, but if I am wrong - I'd be ok with that!!..

I would appreciate feedback please.  Thanks!

Here are the (simplified) facts:

2 unrelated employers (unrelated till 12/31/15) sponsor a 401(k) PSP.  As of 1/1/16 they became a controlled group and are tested together.

Question:  When determining top heavy status as of the 12/31/15 determination date would I aggregate the employers for the top heavy test or not?  Cites appreciated.

Thank you!

PS:  the actual facts are more complex, it is an overlapping CG/ASG situation.

The document excludes fringe benefits from comp.  I think I remember that cash in lue of health insurance is counted as cash and included in Plan comp.  What do you all think?  Can anyone provide anything in writing?

I have a client who is just now realizing that the safe harbor match true-up provision they've had in their plan for almost a decade is "costing [them] money" by making them do more match than just what they calculate weekly (I suspect a new bookkeeper).  They want to do a mid-year amendment to remove the annual true-up of the safe harbor match effective ASAP.

I don't see where this neatly fits into one of the prohibited amendment boxes, so I'm thinking this might not actually be too bad.  It feels wrong, but maybe that's just me.  If this is OK, would you keep the true-up through a date 30-days in the future (maybe April 30)?

Thoughts?  Thanks.

Employer A is part of a controlled group consisting of one other larger company (company B), but has a great deal of autonomy from the CG.  They are permitted to take part in Company B's 401k plan.  However, The owner of Company A is an HCE in the Company B plan and keeps getting hit hard with 401k returned deferrals since Company A plan is not safe harbored.

Can company A start their own safe harbored 401k plan immediately or do they have to wait until the start of a new year to have a new plan effective?

Would anything need to be done in Company B plan to then exclude Company A employees from being eligible for Company B plan?  I do not think that having Company A employees eligible for both plans would be desirable, so I would assume of a Joinder Agreement allows Company A employees to be in the Company B Plan, it would just be a matter of changing that agreement?

Company A employees have money in Company B plan.  Once Company A has their own plan, can Company A employees move their money out of Company B plan?  Would that be via distribution or transfer?  Since no one is terminating employment, I would think a transfer out of B plan to A plan would be the only option.

Both plans would have to be tested together correct?  The contributions in A plan might be better than B plan, but if B plan has more HCEs, there is a decent chance both plans pass 401(a)(4), would you agree?

Thanks

I got married recently on the 25th of February, 2017.

My wife has a non-limited FSA with her employer. I have an HSA/HDHP with my employer. I'm looking to move her over to my employer's health plan.

Her employer is willing to retroactively cancel her health insurance and FSA on the 28th of February.

I can enroll her on my company's plan which is effective immediately. She wouldn't have any overlap in FSA/HSA contributions. Would this be fine?

Also, if we went forward with this plan would we be constrained in terms of our HSA contributions?

Can I exclude all HCEs from receiving Safe Harbor Nonelective if the current plan document doesn't have any specific language to do so (below is the language from the plan document and the spd)?

I moved this question as a follow-up question

For those that like to run projections of the net after-tax advantage of pre-tax retirement plan savings you might consider this possible scenario:

Maximum Federal rate on wage, pension & other regular income 33%

Maximum tax rate on business income from flow-thru entities not paid to owner(s) as wages 25%

Exclusion from tax of 50% of interest, dividends & capital gains (making max tax on investment income 16.5%)

So the self-employed doctor has the following choice:

1. Keep $50,000 of business income, pay tax at 25%, reinvest after tax at 16.5% tax rate on earnings

2. Put $50,000 into a PS plan (assume doctor is only participant), save current tax at 33% but ultimately pay tax on all distributions at 33%

Some commentators say the results shift to favor option 1 even when you disregard the possibility of having to make contributions for eligible employees and pay plan administrative costs.

Of course such a scenario would also need to consider making the $50,000 contribution as ROTH (immediate conversion of employer contributions to ROTH) which may result in ROTH becoming the game of choice for professional practices.

It seems to be about three years since this topic has come up, so I was just wondering what everyone's current opinion is regarding making the deposit of employer contributions timely.

Obviously, we'd prefer if the money was actually deposited into the Trust by the deadline date.  But we all have clients who, for one reason or another, aren't ready to make the deposit until the day before the deadline and still have to mail a check somewhere.  What's the best current guidance we can give those poor souls?

From searching previous threads here, I've found:

1. There’s a footnote to the 1996 DOL deposit regulations (the regulations that relate to the definition of “Plan Assets”) that gives an example of an employer mailing a check to the plan counting as the money being segregated as of the day the check is mailed (provided that the check clears).  This example relates to employee deferrals and doesn’t mention employer contributions.
2. IRC 7502 gives general guidelines about using the postmark date, but it explicitly says that this section does not apply if you’re making the deposit to “any court other than the Tax Court”.
3. There are apparently several Private Letter Rulings that use the mailing date as the deposit date for their various scenarios.  There is at least one instance, however, where the postmark date was rejected because the employer couldn’t prove what was in the envelope they postmarked.

Some of these threads are over a decade old, so I'm hoping that someone has gotten a clearer answer by now.  Thanks.

We have a plan that started in 2016.  The first year is a short plan year - 12/1/2016 - 12/31/2016.

It is my understanding that both compensation and 415 limits must be prorated to 1/12 or compensation limit is  $22083.33 and the max the HCE can put in is $4416.67 (which encompasses both deferrals and any employer contributions).   he is not age 50, so no catch up.   They want to put $30000 into the plan between the owner and his spouse.   He makes over 265,000 and she makes 45000.  I don't see any way to do that for 2016.   The most I  figure is around 8833. 

Just want some feedback and any guidance on what I may be missing here.  Thanks

Yesterdays e-News for Tax Pros included a webinar with 1 free CE Credit for those of us who need it.  

Working with the IRS Office of Appeals – What to Expect

CPE Credits 
 
You may earn 1 CE Credit for Federal Tax.

To receive a certificate of completion (if applicable to this show), you must:

• View the presentation for at least 50 minutes from the start of the program for one CE credit.

• View the presentation while signed in using the same email address that you used to register (you will not receive credit by watching on someone else’s computer).

• PTIN Holders : In order to get your CE credit reported to the IRS, ensure that your first name, last name and PTIN match your account. Your PTIN begins with the letter P followed by 8 numeric characters.

• If you don’t have a PTIN or your name and/or PTIN are entered incorrectly, you may receive a certificate; however, your credit will not be reported to the IRS. Other tax professionals will be sent a certificate and may receive credit if the broadcast meets their organizations' or states' CPE requirements.

• Only registrants who watch the live presentation may qualify for the certificate of completion and CE credit. You will receive your certificate of completion via e-mail about one week after the broadcast.

Client X is a 501(c)(3) organization that maintains a 403(b) plan for the benefit of its employees.  Up to now, the plan merely provided for a discretionary nonelective employer contribution.  X wants to amend the Plan to allow employees to make elective deferrals and receive matching contributions with respect to the deferrals.  A copy of the plan document has been requested from X.  In the meantime, the Summary Plan Description already provides for elective deferrals and the SPD is given out to the participants.  Assuming that the plan document does not provide elective deferrals, is there an operational violation because the SPD provides for elective deferrals, even though none have been made and even though all employees have been told that there are no deferrals under the plan?

We don't do these, so I'm not familiar with document details. But it seems to me like a "regular" 401(k) or PS document could be used for a ROBS plan, as long as the document allows essentially unlimited portion of the assets to be invested in the employer (must be a c-corp) stock.

Is that true, or is a special document necessary?

I know these have become more popular in recent years. Years ago, the IRS REALLY didn't like them, but it seems like for plans with no NHC, and a stock that is properly valued by an independent appraisal each year, that FILES 5500 FORMS, that they have dropped some of their previous objections. Anyone work with these?

https://www.irs.gov/retirement-plans/employee-plans-compliance-unit-epcu-completed-projects-project-with-summary-reports-rollovers-as-business-start-ups-robs