Hi All,

My soon-to-be (marrying in 2016) minister hubby is facing some very large tax liabilities and has zero retirement savings (outside of Social Security), due to pathetic and egregious (if not downright “criminal”, in my opinion) tax return preparation and planning by his former tax preparer, bad and/or non-existent advice from his home church and somewhat willful ignorance of his own financial and tax situation.

I am involved because A) I realized the first time I saw his tax return that something was very wrong and started asking questions B) am in the accounting field (not a preparer or CPA, though) and love it so I understand all of “this” much more than he does and, C) am a bit panicked at the thought of having my modest retirement savings the source of support for both of us in the not-so-distant future (he is 59).

He/we do now have what I believe to be quite adequate tax representation but I would also like to get input from those of you who seem to know what you're talking about and, with the October tax deadline looming, his CPA is somewhat unavailable.

For now, we have increased his withholdings substantially and are about to open a 403(b)9 in order to defer income to decrease his tax liability. My questions regarding the TPA are probably going to be another post.

He makes approximately $30,000 in salary and $20,000 via housing allowance. My fantasy is that we can defer the majority of his compensation to the 403b plan (we can both live off of my income).

If I understand correctly, income deferred into a 403b is exempt from both income and SE taxes. Am I correct?

If I understand correctly his housing allowance cannot be deferred to a 403b because it is not considered taxable income (even though he pays SE tax on it). Am I correct?

If he cannot defer the housing allowance, can his church contribute into the 403b instead of paying the housing allowance (which would reduce the SE tax)?

If the church can contribute:

Would that make it impossible for the retirement distributions be allocated to housing expense?

If the church cannot contribute:

Should we request that the church reduce his housing allowance and increase his salary in next year's contract in order to defer a larger amount of income?

By the way, no, he did not file form 4361 because he was not aware of it until it was too late (and, likely wouldn't have filed it anyway because he doesn't really feel “right” about it).

My apologies for the long post and my thanks in advance for any input you have.

~Stephanie

ETA clarification.

We know it is easy to have a safe harbor 401(k) plan with SHNEC only to non-keys. Then in a good year a 3% NEC can be given just to the keys resulting in all participants getting a 3% contribution.

Does a safe harbor match work the same way? In other words can just non-keys get a safe harbor match and then in a good year keys only get a discretionary match?

Our document seems to allow this.

Thanks.

I have a situation where an employer failed ADP and ACP testing for 2012 and 2013. In both cases they refunded/forfeited in the 2/1-2 correction period. It turns out that the data relied on for those tests was incomplete. After retesting was performed, it was determined that certain HCEs are (i) due additional refunds for 2012, and (ii) were refunded too much for 2013.

I'm clear on my options for correcting where additional refunds are due, but I'm not as clear on correction where too much was refunded. I found a few threads here that suggest I need to treat the excess refund as an overpayment (under EPCRS), try to collect it back from the HCE for deposit into the HCE's account, and if the HCE doesn't agree, so be it (ordinarily, the sponsor has to make the plan whole for any unreturned overpayments, but since the overpayment would have been returned to the HCE's account, that would be a true windfall). Another poster mentioned that the IRS indicated at an ASPPA conference that the HCE should have to pay the 10% early withdrawal penalty if the excess refund isn't returned (assuming the excess refund was already reported on the HCE's W-2, I guess that means amending the W-2 and reporting the excess refund on 1099-R?).

Does anyone have any other thoughts for correcting the excess refunds? For example, can the employer offset the 2012 refunds by the amount of any 2013 excess refunds due to the HCE? I am inclined to self-correct, but the employer may ultimately go the VCP route to ask for an excise tax waiver.

Thanks in advance for any input.

Hoping someone can enlighten me

Plan is Safe Harbor Non-Elective 3%.(SHNE)

Age and service waived as of 1/1 for NON-seasonal employees.

Seasonal Employees are always excluded.

Eligibility is 21 and 1 year of service (1000 hours in 12 month period) with dual entry 1/1 and 7/1

I'm being told that as long as the Plan can pass coverage then the Seasonal employees will NOT receive a SHNE contribution even if they have met the 21/1 year and entry requirements. Something doesn't seem right - isn't this the very definition of discriminatory? The Seasonal people are not covered under a different Plan.

How does one go about defining Seasonal? Do you write a very specific definition into your Plan Documents? The client grows different crops and there are 3 seasons. Can you exclude one season (say Summer season) and not Fall and Spring?

We've been using the 1984 UP life table in our calculations. (Well, in Relius)

Given that many times most of the people I'm testing weren't even born by 1984, should we be using a more recent table?

What you you guys use?

Imagine an automatic-contribution arrangement under a governmental (non-ERISA) plan that does not provide a permissible withdrawal and so need not be an eligible automatic contribution arrangement. (The plan allows only salary-reduction contributions; there is no nonelective or matching contribution.)

Imagine also that the State statute that enables the plan and its automatic-contribution arrangement does not require an annual notice.

Even if no law requires it, should the plan's administrator do annual notices?

What arguments might one make for omitting annual notices?

have a client that initially wanted to adopt a profit sharing plan effective 1/1/15 for the entire year of 2015. They now want to adopt the plan as a 401(k) with a safe harbor match. They will also make a 10% profit sharing contribution for 2015.

I believe as long as the plan is adopted by October 1, we can provide the safe harbor notice on that day as well as salary deferral elections etc.

Question: clearly when we calculate the profit sharing contribution we can use full year salary. When we calculate the safe harbor match for 2015 can we also use full year compensation or are we limited to only the compensation between 10/1/15 and 12/31/15?

Thanks a million.

Anyone have a problem with a SIMPLE Plan sponsor setting up a 0% money purchase plan to allow the owner to do a rollover and take a loan? Yes, the employees can make a rollover contribution as well.

Is there a table showing the maximum monthly benefit limits for older ages, for example, ages 66 to 80?

Profit sharing plan with 2 year eligibility. Jan 1 and July 1 entry

DOH 5/1/2013

Eligible 7/1/2015

Terminates 7/25/2015

If employer makes 2015 PS contribution, is employee a contribution?

If so, based on what comp?

Plan is top heavy but that requires end of year employment.

Can you confirm that for a new plan, there is no requirement to look to participant counts on the last day of the plan year as opposed to the first (i.e., similar to top-heavy).

I am pretty sure there is not but want to make sure I am in good company...

Client has a QACA which includes an intial deferral percentage of 3%, and subsequent annual increases at 1% to a maximum of 6%.

It's now considering changing the QACA formula effective 1/1/16 but only for new hires. The initial deferral pecentage will be 6%, with 1% annual increases to a maximum of 10%. It does not want to apply this new formula to anyone hired before 1/1/16.

The regulations require that the deferral percentage be uniform for all employees, except that it may vary based on the number of years (or portions of years) since the beginning of the initial period for an eligible employee. The initial period begins when the employee first has contributions made pursuant to a default election under an arrangement that is intended to be a qualified automatic contribution arrangement for a plan year and ends on the last day of the following plan year.

The regulations would seem to preclude maintaining the two differnt formulas. Has anyone seen informal guidance from the IRS that would allow different formulas for different groups?

Could the different formula's be used if the group covered by each formula passes 410(b)?

Can a 401k plan that has insurance still use the 5500-SF form?

Can anyone point to me the code that states that an SAR is not required for a one participant plan?

Also, does this still apply if the one-participant plan is filing a Form 5500-SF instead of the Form 5500-EZ.

I have a quick question regarding Control Groups. Here's the scenario: Company A did an asset purchase of Company B. They now form a control group. Company A has a SEP IRA and Company B has a 401k. Can both of these plans be maintained under this scenario?

Hi. I have a plan that is terminating. One of the participants had a few stokes and cannot think. He does not have a power of atty. Do we just transfer his account to a default IRA?

Would appreciate any input on the following:

Employer maintains an NQDC plan that allows elective deferrals and other employer contributions. (Every participant in the NQDC plan is an HCE.) The NQDC plan allow employees to defer up to 100% of their salary remaining after all payroll deductions.

Employer's 401(k) plan says any 401(k) participant who defers into the NQDC plan for the plan year may only defer a maximum of 4% of compensation into the 401(k) plan.

Read literally, this only violates the contingent benefit rule if the NQDC plan deferrals are restricted based on the employee's 401(k) deferrals (or lack of deferrals). Here, the NQDC plan is silent on the issue, but the employee's 401(k) deferrals are limited.

Permissible? Or "indirect" condition on NQDC participation?

We've received a favorable DL with the plan language, but with reliance running out fairly soon, I'm interested in hearing input.

I have an interesting question: can a defined benefit plan be merged into a 401(k) plan? I learned early on that the conversion of a defined benefit plan into a 401(k) plan would result in a termination of the defined benefit plan. However, I was not able to locate anything definitive which stands for this proposition in IRS guidance. There is a citation in the 414(l) that the merger of the two constitutes the conversion of one type of the plan into the other prior to the merger. Any helpful suggestions would be greatly appreciated.

We have a participant who exceeded the 402(g) limit by about $4,000 for 2015. Now, we want to process the corrective distribution for him. He's had a net loss for the year. I have 2 questions in regards to this distribution:

1) I believe the IRS allows for any reasonable method to calculate the gain/loss. I'm trying to figure out what's best to use as the "beginning date" of the failure for gain/loss calculation purposes. Would setting the beginning date as the date on which the participant first exceeded the 402(g) limit be reasonable, or must the whole year be used (until the date of distribution) for gain/loss calculation purposes?

2) Do we simply send out the check and 1099-R that's adjusted for the loss? Would the IRS know that there was a loss when they see that the 1099-R amount is less than the amount by which the participant exceeded the 402(g) limit?

Facts:

Owners of company X are selling the assets of the company on October 31, 2015. They will be paid over a three year period for the sale.The tax year ends 12/31/2015.

Would there be any issues setting up a cash balance plan starting Novermber 1, 2015, ending October 31, 2016?

My concerns are:

1. Combinig with the existing PS plan which has a plan year of 1/1-12/31

2. There will be no employees after the sale, but there are employees until 10/31/15.

3. Would they be able to deduct the contribution for the 11/1/15-10/31/16 plan year in the 2015 tax year?