I'm curious what the penalties are, if any, for a first year PBGC Premium Filing that is submitted after its due date. Assuming the first year filing had no payment due, would there be a penalty charged for a late submission?

This is what I found on the PBGC website:

The late payment penalty charge is established by us, subject to ERISA's restriction that the penalty not exceed 100 percent of the unpaid premium amount. Subject to this cap, the penalty is a percentage of the unpaid amount for each month (or portion of a month) it remains unpaid with a minimum penalty of $25.

So if the unpaid premium amount is $0, would there be any fees?

We have a participant who died with no beneficiary designation on file. Under the terms of the plan, his estate is the default beneficiary. We are ready to make the distribution to the estate, but I had a question on withholding. The distribution is in the form of a single, lump sum payment.This is not an eligible rollover distribution because the estate is the beneficiary, so are we required to send a 10% withholding notice and allow the executor to opt out of withholding? Not sure what to do here because we do not often make payments to estates.

Hello All,

A recent discussion in the office brought rise to a hypothetical question on eligibility of minors. Assuming the plan has no age limit on contributing, what would be the youngest age someone can participate in the plan?

From research not much came up, and the few posts I could find on here were dated 10+ years ago.

My guess is as long as they have eligible wages as defined by the plan they would be okay, but I also am thinking it wouldn't make sense to have a 2 year old deferring (say from a advertisement for that company).

Thanks

Recently took over a profit sharing plan where the one owner participant died in 2014. He was 80 when he died so he had already been taking RMDs. His spouse is the sole beneficiary and she is almost exactly his age. The plan has about $6M of assets. In 2014 the participant already took his RMD by the time he died. It looks like his beneficiary (his spouse) was paid an RMD in 2015 based on the Uniform Lifetime table.

Per the plan document, the 2015 (and now 2016) RMD should be based on the single life table. Since they were both the same age, it should have been the single life expectancy at age 81 for 2015 and 82 for 2016.

I am not aware of any exception to using the single life table other than if she would have rolled over the death benefit to her own IRA back in late 2014. Then the 2015 RMD and beyond could be based on the uniform table.

It looks like VCP for 2015 and a large RMD for 2016.

Question: Can she now roll over the balance of her death benefit to an IRA and then be able to use uniform lifetime table for 2017 and beyond?

Could she instead somehow roll over the balance of her death benefit inside the plan and be able to use the uniform lifetime table? The plan accepts rollovers from ineligible participants.

Thanks!

Professional partnership firm with money purchase pension plan.

One of the partners no longer has ownership in the firm, but is now a nonequity partner with his own MP plan that is tested together on a control group basis with the main plan.

Are there compliance issues for the main plan if the one separate nonequity partner either does not deposit his contribution or take his RMD?

A participant in a DB plan designated his trust as beneficiary for payment of death benefits. Upon his death, the trustee of the trust requested a direct rollover to an IRA established fbo the trust. I've never seen this. Can the plan rollover the money to the IRA? Any thoughts would be appreciated.

Participant exceeded the 401(2) limit for 2015 with two un related plans.

the error was not discovered until AFTER 4/15.

1. Excess is income for 2015.

2. Excess and income will be distributed in 2016 and income for 2016

is the excess subject to 10% since the participant is under 59 1/2? since he was not eligible to defer the amount, I would think the 10% does not apply.

Thoughts

According to the plan provision plan allows one loan at time and does not allow loan refinance. So, if a participant paid a 2nd loan mistakenly, how to correct the error?

I believe that a governmental grandfathered 401(k) plan is subject to the same safe harbor hardship withdrawal rules as non-governmental plans. I have someone who is insisting that a governmental plan is not subject to the deferral earnings rule. I looked at the regulations and didn't see an exception.

If these plans can permit deferral earnings accrued generally after 1988 to be withdrawn on account of hardship can you please give me a cite.

Thank you.

Does anyone have any recommendations to prevent a 402(g)(1) failure given the following information?

Facts

1. Participant A receives compensation from Company X and defers $18,000 in salary to a qualified retirement plan in the 2015 plan year.

2. Participant A also receives Self Employment Income of $9,000.

3. Participant A sets up a Solo 401(k) Plan for herself, and “defers” $9,000 of income to her Solo 401(k) Plan in the 2015 plan year. This contribution wasn’t coded by the investment house.

Question: What is the best way to treat the $9,000 contribution to minimize the amount of potential excise tax due?

Solutions

1. Profit Sharing: The $9,000 could be considered a profit sharing contribution, but it would be limited to 25% of compensation. So:

a. $2,250 ($9,000 * 25%) would be a deductible contribution,

b. $6,750 ($9,000 - $2,250) would be a nondeductible contribution, and

c. $675 ($6,750 * 10%) would be due in excise taxes due to the nondeductible portion of the contribution.

2. Voluntary Contribution: The $9,000 could be considered a voluntary contribution, and it would be limited to 100% if compensation. So:

a. No excise would be due, but the plan did not provide for voluntary contributions in 2015.

Has anyone encountered this problem? If so, do you have any recommendations aside from the two solutions listed above?

Thank you,

A

I am trying to be discrete about how our Company's ESOP was terminated, two years ago and I have some new information and I need some answers and advisement. Here are the facts:

1. 110 employees of my company held ESOP shares resulting in ownership of 49% of the company

2. We incurred valuation every year for the share value. The last valuation we received was for total for $3.1 million dollars for the 49% of the company

3. The President of the Company bought out the owner's 51% of the company. We attempted to find out what the purchase price price was and we were told that it was confidential. We believe the owner received between $18 - 25 $million dollars for his 51% of the company.

4. In the industry that we work in company's are sold typically for 2 x the sales revenue. At the time of owners buyout, we were at $30 million in sales revenue, current sales revenue is $45 million dollars.

5. Soon after the owner was bought out, we were told by the President of the Company the ESOP was being terminated and told we had to sell the stock back to him for the $3.1 million dollars for the 49%

6. We had no lawyer represent us

We had no independent valuation done to represent fair market value at the

time of the stock buy back from the President / Owner.

If the owner received $18 million dollars for his 51% shares how is it we received $3.1 million dollars for our ESOP 49% shares?

Can someone clarify this. Is this legal and does this follow ESOP guidelines??

NEED HELP / ALOT OF US ARE HURTING IN OUR RETIREMENT.

We have single person plan covering only owner & his wife. He is terminating plan, and before advising us he rolled over ALL of the money to his IRA. We advised him that some of the money belonged to his wife and that he had to re-open the plan's account to put her money back in so the plan could pay her out.

He of course got it all wrong and transferred money directly from his IRA to his wife's IRA. Not only has the wife never been properly paid by the plan, but we are also concerned about the tax consequences to both of them.

Some of our concerns:

1. Can husband transfer IRA money from his account to wife's?
2. What amount is reported on 1099-R as rollover for husband?
3. Does wife get 1099-R from the plan?
4. How might IRS view the plan in all of this since the plan never actually paid out the wife?

i have been asked to weigh in on the following situation:

participant is in a contributory career average plan for 20 years(part A). the plan is then amended to a cash balance plan with the pay credits based on a combined age and service schedule. for the first five years of the cash balance plan the participant will accrue under the contributory career average formula if greater(transition benefit)(part B). the participant retires 8 years after the cash balance effective date with three years cash balance accumulation(part D).

the benefit is then described as A+B+D(pre cb plus transition plus cb). Note if first five years of cash balance is bigger it is called C. Participant marries five years before the cash balance effective date and divorces shortly after retirement. for simplicity the cutoff date is being deemed the retirement date. When participant went into receipt he was told what A,B, and D are. Counsel for alternative payee proposes marital portion to be (13/28*A) +B+C with spouse to get 50%. I think 13/28(A+B+C)is more fair and equitable. In any event counsel should use 5/20*A+B+C to even have the summation approach make sense. Any thoughts?

note:accrued benefit at date of marriage is not known.

there are a few policies in a terminating plan, a couple participants have significant CSV north of $300K. If they do not have the funds to buy the policy and it is their desire to keep the coverage, is the only option to take out a loan on the policy?

thank you.

We have a plan for a sole Prop. Doctor. He has filed an extension on his 1040 for 2015. He has not funded his own $6000 catch up contribution for 2015. Is it too late or does he have until he files his 1040? I can't remember - since I guess his income has not been determined for 2015. He did contribute regular deferrals during the year.

Has anyone considered what, if any, type of correction would be corrected for failure to properly map participant's accounts to certain investments when switching service providers? The accounts were supposed to be mapped to the same investments in which they were already invested prior to the transition, but it was discovered that at least participant account was improperly invested and suffered a loss as a result of the improper mapping. The employer/TPA intends to make the participant whole, but I was wondering what, if any, any other corrective action must be taken?

How do you define receipt of a DRO?

I have seen some interesting questions here and on other sites lately, which caused me to take a closer look at my firm’s QDRO procedures. One thing that I am a little stuck on and that I’m hoping for some good input from the benefitslink community on, is at what point do you consider the Plan Administrator being in receipt of a DRO for a QDRO determination? And more specifically, what triggers the Plan Administrator’s duty to segregate and separately account for the assets subject to the QDRO.

Our current QDRO procedures states:

“Upon receipt of a written notice of a domestic relations order, the Plan Administrator will…”

If I (the Plan Administrator) get a request from an alternate payee’s attorney asking for certain information to assist them in drafting a DRO, am I in receipt of a DRO that would require me to not process distribution requests from the participant? Technically, I would say no, I’m not yet in receipt of a DRO. However, processing a participant’s distribution request after you know that a DRO is in the process of being drafted seems to go against the spirit of the law.

I have not seen any advisory opinions or other guidance on what is considered receipt of a DRO. Would anyone here argue that there is such a thing as constructive receipt of a DRO?

Thanks in advance for any input and (hopefully) spirited discussion

J

Can a 5500 filing be taken back?

Company filed in 2014 for fully insured welfare plan but count was actually under 100, no filing actually necessary.

(for lack of knowing an answer to that question, filing is being amended with code 4R to reflect no 2015 filing)

of course these types of things are use at your own risk, but this appears to be working well for our office.

much of the data on the last page is from user defined fields so you won't get much there - or the data won't make sense if you are using the plan spec user defined fields since they won't be the same as fine (I am set for next year's compliance question in the office here!)

about the only thing you have to remember to do is make sure you check the box to pull all accounts including those with no activity or balances. but the report includes a warning reminder for that purpose.

but basically the report will pull the data to check info on participant count for the 5500 including a rough attempt at the 5500-SF

even a random message from the 'cow', because, well, the 'cow' insisted on it.

report will also count # of ees deferring, those who contributed more than the deferral limit (since the IRS apparently is going to start asking for that info anyway, so I wanted to see if I could pull that data as well.

Although I am a seasoned benefits practitioner, there is a personal question based on a personal situation that is about to be raised in the next couple of weeks.

I have a daughter who is no longer a tax dependent of mine and she has health insurance coverage through her employer. She is going to be starting a job with a new employer in a couple of weeks, and it occurred to me that she might have a gap in coverage, even if it is over a weekend. If her last day with employer 1 is a Friday (which coincides with the last day she has medical coverage with employer 1) and her first day with employer 2 is the following Monday, in which case she will become covered under employer 2's medical plan as of either that Monday or not until the first day of the following month, what happens if she gets injured during the period when she is uncovered?

A couple of possible responses might be COBRA, but she would likely not get the election until after she starts working for employer 2 and possibly after she has medical coverage with employer 2. Another possibility might be the exchange, but what if it is not an open enrollment period and what if she is not able to limit her medical coverage to the period when she needs it?

I would greatly appreciate any thoughts you might have.