I have a dentist with 3 employees who has a SAR SEP plan. He can only defer 125% of the average deferral of his 3 employees I believe. In 2014 he was allowed to defer 5.38% based on this test. He is self employed for taxes.

My question is what his wife is allowed to defer (%) now that she is eligible on 1/1/16.

Can she max out her salary deferrals up to the IRS limit for 2016? Or is she limited by the ADP test since she is the spouse of the owner ? What can she contribute for 2016 ?

Thank you !! The fund companies do not have answers to these kind of questions.

Client decides to terminate their plan. Client owed top heavy contributions to the plan for 3 prior plan years. We instruct client to deposit the funds before anyone can be paid out. Client deposits the money.

5 employees who had no account balance at the Alliance were entitled to part of the overdue funds. Alliance informs client that the social security numbers provided for these 5 employees did not belong to them, so Alliance will not distribute the funds in the name of the participant and returns the company to the client. How the Alliance knew the numbers were fake, I do not know. But fake SSNs are not the only problem the client now has.

What, if anything can the client do with the funds?

If the funds are not paid to the participants, then I think you have to answer questions on the Form 5500 that assets reverted to the company. But this generates an excise tax.

Client has come to us and would like to start a new plan for their employees covered under the Service Contract Act.

Currently the client sponsors a QACA match plan, no other employer contributions. There were 65 eligible employees in 2014.

Client wants to start a new plan effective 1/1/2016 for the 8-10 employees covered under the Service Contract Act, but do not want to provide the QACA match to these employees.

Can a company sponsor a safe harbor plan for one portion of its employees and a non-safe harbor plan for another portion of its employees?

If it is permitted, what would be the pros/cons to doing this?

Client notified us that a participant who term'd in early 2014 has since died. I don't know how the client found this out (this plan is currently in transition to me from a co-worker). Debra, dec'd ee, did not designate a beneficiary. Plan sponsor heard thru the rumor mill that she had an estranged daughter. The plan sponsor is located in FL, the participant in Nevada. She was 60% vested at the time of her termination from the company. Her current account balance, vested or not, is still under $5,000, the force out amount.

1) Can the plan sponsor roll her assets into an IRA payable to the Estate of, a possible assumption on their part?

2) Can the assets we escheated to the state of Nevada? I don't know if they pay state taxes there (we do not here in FL) and I also didn't think you could do this anymore...

3) the plan doc indicates that the order if there is no bene on file is spouse, issue, parents, estate. Is the plan sponsor required to try to find out if there really is a daughter out there? How would they do that?

4) Would her vesting change? The plan does vest 100% due to death, but she was already terminated when she died, so I am not sure if that applies. On the fence about that one.

Thanks for your thoughts!

We have a situation where a father is an over 5% owner in a company. He has a son who works at the company as well. So, the son should automatically be an HCE by attribution.

However, the stock shares that the father owns are in an irrevocable trust! The question is this: is the son still considered an HCE? My thinking is that the fact that the trust is irrevocable should not affect the ownership and the son is still an HCE. What do you think?

2015

Instructions for Form 5500-SF

Short Form Annual Return/Report of Small Employee Benefit Plan Code section references are to the Internal Revenue Code unless otherwise noted. ERISA refers to the Employee Retirement Income Security Act of 1974.

Changes to Note

IRS Electronic Filing Requirements. On September 29, 2014, the Treasury Department issued final regulations under sections 6058 and 6059 of the Code providing that certain filers must electronically file the Form 5500 series

returns/reports (including actuarial schedules). (See T.D. 9695, 79 FR 58256 at http://federalregister.gov/a/2014-23161). Under the regulations you are required to file a Form 5500 series return/report electronically if you are required to file at

least 250 returns of all types during the calendar year that includes the first day of the applicable plan year. Because the IRS may now require certain filers to electronically file the Form 5500 series returns/reports, the IRS is adding questions to the Form 5500 and its Schedules relating solely to IRS compliance issues. However, these new IRS compliance questions are optional for the 2015 plan year.

IRS Compliance Questions. New Lines 10j, 14c, 14d, and new Part IX (IRS Compliance Questions) were added to this Form for purposes of satisfying the reporting requirements of section 6058 of the Code. These IRS compliance questions are critical to the IRS to effectively focus on specific factors

and issues of the Federal tax law compliance. Although these questions are optional for the 2015 plan year, the IRS strongly encourages filers to answer these questions.

....................................................................

looks the IRS is not all that happy this is optional for the upcoming year

oh well....

Congress Repeals Automatic 3-1/2 Month Extension for Form 5500

"The conference agreement repeals the provision in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that provides for an automatic 3-1/2 month extension of the due date for filing Form 5500 [which would have applied to plan years beginning in 2016]. Thus, the extended due date for Form 5500 is determined under DOL and IRS rules as in effect before enactment of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015." [The Form 5500 provision is discussed at pp. 536-38 of the 555-page conference report. The conference report was agreed upon on December 3, 2015. It has not yet been signed into law by President Obama.] (114th Congress)

Hello! Given the following set of facts and circumstances, I would appreciate feedback concerning whether in this scenario D seems to be a member of a ASG: A Dental, P.C. ("A") 100% owned by Dr G sponsors a 401k plan, B Dental, P.C. ("B") 100% owned by Dr L sponsors a 401k plan that also covers employees of C (C Dental being a partnership in which the same Dr L owns 50%; other 50% owned by unrelated dentist). Now the wrinkle: Drs G and L purchase the stock of an existing, well-established dental practice from a terminally-ill dentist in which they are 50/50 owners in this D Dental, P.C. ("D"). D is not geographically located anywhere near their other offices. Since there is no sharing of employees (except that Drs G and L are the dentists in D), or any referral of patients between A and D, or B and D, I feel D can stand alone as the employer. However, what is tripping me up in the proposed regs under 414(m) is the interpretation of the phrase "'regularly associated' WITH the FSO in performing services FOR 'third parties'," i.e., patients. 1) Does this mean any/all patients, or intended to mean only the same, or a significant portion of the same, patients? 2) Do you believe the rule's intent was to preclude anyone from practicing their profession outside the scope of a ASG, meaning you can't separate the dentist in the service organization from the service organization itself (as without the dentist there would be no service organization!), hence the FSO/A-org relationship? Naturally, if Drs G and L weren't acting as dentists in D there would be no ASG. Thank you, in advance, for your thoughts on this. VTY, Nancy

A defined benefit plan provides for voluntary, after-tax contributions. The plan allows those contributions, plus credited interest, to be withdrawn in a lump sum at retirement, or to be annuitized and added to the monthly benefit otherwise payable under the plan.

A participant who made significant voluntary contributions and elected to annuitize those amounts (in the form of a single life annuity) died shortly after retirement. The participant's children are inquiring as to payment of a "survivor benefit" relative to the portion of the voluntary contributions that have not been paid out due to death. To illustrate, the participant's voluntary contribution account, with interest, totaled $100,000 at retirement. This increased the monthly retirement benefit by $500/month. The participant received only $10,000 worth of monthly benefits attributable to the voluntary contributions. The children are claiming they should be paid $90,000.

Is there any guidance out there on this? Any help would be appreciated.

I found this article to be interesting, funny and stimulating. Excerpt:

Can you believe it? Plug “How to be Steve Jobs” or “Steve Jobs lessons” into Google and you’ll get page after page of tips. One trite homily after another explains how to imitate a few of the great dictator’s tics. Switch “Jobs” for “Ballmer” and you get almost nothing.

I bet you could learn a lot from Steve Ballmer. More than you can learn from Jobs. You’re not like Jobs. Jobs was a handsome lustrous-haired genius who hooked up with another genius in his early 20s and formed a new, globally important (and immediately successful) company. Ballmer was a funny looking bald non-genius who joined a growing company as employee 30. Which is more like you?

Jobs’ net worth at death was $10 billion. Ballmer today is worth $22 billion. He worked at Microsoft for 34 years solid. He wasn’t fired once.

If you’re a non genius who hasn’t formed a globally important company in your early 20s — and especially if you’re funny looking — you’ll probably learn more from Ballmer than you can from Jobs.

Is seem to remember that the first day of a plan year must be an entry date. is that true? Can I get a cite?

My problem is that I have a plan with a PY of 10/1 to 9/30. Entry requirements are 21/1, with entry dates of 10/1 and 4/1.

But for the first year, for whatever reason, they made it a short PY of 1/1 to 9/30. So 1/1 isn't a plan entry date. Or is it? First day of the plan year.

I'm planning to sit for the last ERPASEE exam coming January.

where can I find any online free study materials?

Any help appreciated!

E-mail address: AdKu79@gmail.com

Hello,

I've a situation where someone created their S -Corp late in the year, so they received about $70K which will be reported on a 1099 for their SSN, and $50K since moving to the EIN.

I understand that 5305 SEPs don't integrate with the individual 401(k) but was wondering if there was any relatively straightforward way to create a SEP for the $70K that would be compliant?

It would be a one time event, as going forward the 401(k) would be maxed out.

Are there any firms that offer a prototype plan or quick to customize solution to create the SEP with relative speed and ease?

Best,

Matt

A client wishes to allow a separate deferral election on their bonus election. No problem there but they also offer auto-enrollment and escalation. The recordkeeper can not escalate the bonus election. So it will be set at the auto-enrollment rate on an evergreen basis absent any changes while the normal rate escalates up to 10% unless the participant opts out.

This plan is not a QACA but does this feature disqualify them from being considered an EACA? I am just concerned it violates the uniformity requirement regarding deferral elections. Thoughts?

This is another mutual client of same lawyer we discussed on another earlier post who is paranoid re CODA.

So here is the procedure for a Plan with 70 docs and 650 employees…

FACTS:

Thru 12/31/2015 they are a 401(k)/PSP SH 3% Non-elective – last day requirement for non-SH $$, allocation method was Integrated at TWB. No matching –just PS contributions.

PS contribution for 2015 will be about 17% of pay for docs and 15% of pay for staff, limited by 415 and catchup, depending on their deferral.

We know we could have fired up a new 2015 PS Plan and made new-comp contributions over there, but they elected to just move on and leave 2015 alone.

For the last 25 years they have always contributed 15% of staff pay – IOW, a very generous employer.

Effective 1/1/2016, docs no longer make deferrals except for $6k catchup…no longer have Safe Harbor, Safe Harbor discontinuance notice sent on 12/1.

Every participant in their own rate group.

We are Named Fiduciary of Plan under a 3(16) agreement crafted by our attys in concert with their atty.

Procedure for Setting the amount of Individual Doc PS New-comp contribution for 1/1/2016-12/31/2016:

We will calc the estimated 2016 equivalent PS amount that approximates the 2015 deferral+Integrated ps contribution - $6,000 catch-up, if applicable, IOW, the $xx amount per doc.

We will craft a recommendation to the Board Benefit committee[there is no Plan Level Committee since we are the Named Fid.] with a list of docs and the $xx amounts per doc.

We will send an email to the docs saying that $xx is the amount that will be credited to your account in 2016 and $yy is maximum permissible amount assuming your comp stays at $zz.

The doc notice will say that if they want to petition the Benefit Committee for a different amount, they must do so in 30 days. They need give no reason or rationale for such a petition.

Once the 30 days elapses, the Benefit committee will review all estimated contributions and petitions, if any, approve or deny them[we have no say in this matter].

The Benefit Committee will then send the gross amount of the expected employer contributions to the board for approval[no individual numbers].The benefit committee will then notify us of the amounts [which are an approximation].

We will communicate the doc amounts to the client’s accounting/payroll department.

We are done until end-of-year.

Does anyone believe this procedure will tag our client as being a CODA?

We are setting up 2 separate plans for a particular 401(k) because to leave as one, the required contribution for the union employees, will now make their former safe harbor match only plan subject to Top Heavy requirements. Council and I decided best to separate.

Question comes up from the advisor and this is where I need some guidance. Currently the funds are on one of the mutual fund platforms. The advisor wants to set up a separate division under the same contract in order to for cost to participants to remain down rather than a completely separate contract. Obviously, I'm not a financial advisor but my question is, is that okay? Can the funds of two separate plans be under the same contract at the financial institution but set up as a separate division basically. What questions do I need to ask to make sure my asset accounts are in compliance with 2 separate plans.

Have a client that has signed up with a PEO. They are transferring their single employer 401k to the PEO's multiple employer plan. As this is my first PEO transfer, what paperwork is required? Is there some type of amendment that is required?

Thanks in advance.

Do you have to apply coverage testing to a Top heavy calc if is just the NON HCE particpants are suposed to be receiving the Top Heavy Minimum?

I had 2 HCE. One terminated during the year one is still there and DEFERRING.

Husband and wife each own 100% of their own companies. His company has 10 employees and hers has about 20.

Since they are married each is deemed to own 100% of the others stock. So we have a controlled group.

If each sponsors its own cross-tested 401(k) plan, I would think both plans must be aggregated for the following:

401(a)4

410(b)

ADP / ACP tests

If any of the above do not require aggregation can they be permissively aggregated?

In this case, 401(a)4 and the ADP test will be helped by aggregation.

Thanks.