Situation involves a plan with 2 loan failures.

Failue 1 can be corrected through reamortization because the 5 year term has not already expired.

Failure 2 cannot be corrected within the 5 year term and we are requesting that the deemed distribution be reported in the year of Correction as opposed to the year of the Failure.

The problem is Schedule 5 (Form 14568-E) does not accomodate both corrections on a single form.

I was thinking of either doing 2 separate schedule 5s for a single VCP filing, or not using schedule 5 at all and just drafting something individualized for this situation. At this point I am leaning to doing two separate schedule 5s, it just strikes me as a little counter intuitive.

Any thoughts on this would be appreciated.

We have a small employer with less than 15 employees, they offer a group health plan to employees with ER paying 25% of premium and EE's paying remaining 75% of premium. ER also pays 100% of 1 Key EE's insurance outside of the Cafeteria Plan as a general business expense.

When running the necessary non-discrimination tests for the Cafeteria Plan we are including both the ER Paid and the EE Paid premiums for the Health insurance.

(1) Is it proper or is ER permitted to exclude the Key EE premiums paid as these were paid outside of the Cafeteria Plan as a general business expense? or does this ER paid premium amount need to be factored in for our Non-Discrimination testing?

(2) If the above is not permitted, can we elect to run our Non-Discrimination testing only looking at the EE's portion of the Health Insurance premiums being paid? Thus the ER paid premiums would not be included in the Non-Discrimination testing.

Problem is that with the Key EE's ER paid insurance premiums factored in the Cafeteria Plan fails the 25% concentration test.

Thank you for any assistance with this question - Nathan

A 401(k) plan has a recordkeeper platform offering a significant number of mutual funds as its only current investment option. The recordkeeper charge is 50 basis points. The plan is considering adding a managed brokerage account where a participant would be subject to a minimum annual advisory fee of $5,000. Would this managed account option be considered discriminatory because of its relatively high fee?

We have a situation where a company with a 6/30 PYE 401(k) started up a separate 401(k) plan with a 12/31 PYE for a company they own.

If they can separately pass coverage, then ADP/ACP could be run separately. However, if coverage fails, then wouldn't they have to be tested together? If that's the case, we couldn't know the results until after 12/31, which would be well after the 2.5 month correction period for the 6/30 plan.

What are you thoughts on this? I was under the impression that they couldn't be permissively aggregated because of the different PYE but what if they have to?

Thanks!

Former owner of my client terminated with said client and took another job at an unrelated company. He had some nontraditional assets in his account and I believe instead of rolling to an IRA he decided to set up a 401k plan for the sole purpose of accepting rollovers. I am suspicious that there is no business tied to this 401k plan, he just preferred this to the IRA platform because he would have more flexibility. So I am concerned that the plan is not qualified.

Now I could be ALL wrong about this. Remember, these are only suspicions. The amount involved happens to be quite substantial. What obligation does the plan sponsor have to vet this out? The sponsor "should know" enough to be suspicious because based on the Plan name on the rollover request it is clear that it is being sponsored by this individual and they do know he has not gone into business for himself. And he has been employed by them for "several years" so the existence of an old plan seems remote.

Newbie here looking for advice.

We have a client who has had an established loan policy for the last several years. Within the loan policy it states that the loan rate will be prime plus 2%. However, the trustee/custodian only charged prime plus 1% for all loans through the time it was recently discovered. This was an administrative error on the trustee/custodian side. Upon discovering the error, all new loans were issued with the correct rate. The client would like to retroactively amend the loan policy to reflect the loan rate actually used during that erroneous time period.

Questions:

1. Would self-correction as described above be sufficient in this case?

2. Would VCP filing be a better option?

3. If VCP, we are having trouble determining where it fits under Form 14568-E - Appendix C Part II Schedule 5. There is no clearly defined option, as the loans were not in default and did not violate the terms of 72(p).

Any advice would be greatly appreciated.

I haven't been doing FSA plans for quite a while. I think that unspent FSA deductions used to revert to the employer, who had a couple options of returning it to the plan, but didn't have to.

Can employers now "keep" unspent FSA funds?

Company B did an asset purchase for Company A and acquired Company A's employees under "same desk rule". What should the board of resolution language be for this amendment?

Employer X maintains a cash balance plan. It wants to amend the cash balance plan so that it only has to make a principal credit for a plan year if an employee is employed on the last day of the plan year. Is there any reason they cannot do this? Thanks,

In an attempt to reduce safe harbor contributions for an underperforming subsidiary, it has been proposed that the accounts belonging to employees of that subsidiary be spun off into a new safe harbor plan. The spinoff plan would then be amended to replace the safe harbor match with a discretionary match.

Recognizing that there is little in the way of guidance, what is your gut feeling about whether the spinoff would be considered a mid-year amendment? We don't want to endanger the safe harbor status of the "main" plan.

Please see post in Plan Terminations

http://benefitslink.com/boards/index.php/topic/57695-deduction-on-terminated-one-person-plan/

FACTS

1. Amenment timely adopted to terminate one-person DB Plan 12/31/2014.

2. IRS D-Letter received in July

3. Calendar year plan; BOY valuation.

4. Participant compensation always 100,000 except learned in 2015 that participant 2014 compensation 275,000.

5. 2014 5500EZ/SB NOT YET filed

6. No contributions yet made for 2014

7. 2014 Maximum Deductible determined as of 1/1/2014 = $300,000

8. Lump sum = $2,000,000

9. Plan assets = $1,000,000

Questions

1. Is $1,000,000 the deductible amount even though Plan not a PBGC plan? If not $1,000,000, then what?

2. Regardless of how much deductible, can it all be deducted in 2014 or is $300,000 maximum deductible in 2014 and the rest in 2015?

Does anyone have a current state by state taxation of 457(b) taxation

I know Pennsylvania and I believe NJ tax employee elective 457(b) deferrals

Also FICA taxation applies to fully vested employer matching contribtuions but do any state tax this as well

Much thanks

If a company sells substantially all of its assets to a buyer, but retains less than 50 FTEs for a short period of time to wrap up corporate affairs, are they still an ALE?

ALE is determined on prior year employee count. Seller will have less than 50 full time employees next year and will be terminating their health care plan as they will only be in operation for 6 months or less.

I don't see any transitional relief regarding ALE status in an asset deal. Any thoughts?

An audit client of ours just received notification from their TPA that, due to incorrect compensation provided for the PYE 12/31/2013, the ADP test was re-done and 4 participants who received refunds actually were "over-refunded". The TPA has requested that the 4 participants return the excess refund to the plan, and then a corrected 2013 Form 1099-R will be issued, reporting the correct distribution. The TPA then advises the participants to "seek professional advice when amending their 2013 personal tax return". The TPA has also suggested the auditor be contacted to "correct the 2013 audited financial statements".

I have never seen a TPA ask for participants to return a portion of their ADP refund. Does anybody have experience with this? The amounts are around $300 per participant; therefore, amending their personal returns for 2013 might net them a $50 refund, and cost them hundreds in tax preparation.

DB plan allows for bifurcated distributions, i.e., a partial lump sum with the remainder as an annuity.

How do you calculate the RMD for such a distribution? Participant has reached required beginning date and wants to roll over as much of the lump sum as possible--but any portion that is attributable to the RMD isn't eligible for rollover.

The RMD regs tell you how to calculate the RMD for an annuity or a total lump sum, but not a bifurcated distribution.

Cheers.

I have a plan that has a quarterly rewards program based on the profits of the company. They give the participants the choice of taking it in cash or putting it in the retirement plan.

What testing must be done with this? I believe I have to include it in the adp test? but does it also count towards the annual deferral limit?

any other testing I should do?

I thought this was likely to be relatively straightforward but I am unfortunately not finding much guidance. Large, long-standing tax-exempt with 403(b) establishes a for-profit subsidiary and controls 100% of the for-profit's board so clearly part of the tax exempt's controlled group. All of the for-profit employees are initially coming by way of transfer from the tax-exempt entity and all were participants in 403(b) plan.

I have generally assumed that the for-profit would not be eligible to participate in the 403(b) plan because it is not tax-exempt. General plan was for employees changing employers to take a distribution from 403(b) and roll those into 401(k) plan to be set up by the for-profit. Now accountant is saying they don't think that should be necessary because the for profit is part of the controlled group and employees should be able to stay in and continuing making deferrals to 403(b).

I have found a couple of threads suggesting general consensus that for-profits are not eligible employers for 403(b) even if part of the controlled group but I really haven't found anything squarely addressing the situation. I did find an informal IRS response to a 2010 JCEB Q&A where the IRS seemed to clearly say all employers within a 403(b) needed to be tax-exempt to participate in the 403(b) but that was fairly informal and I'm just surprised there isn't anything more direct addressing what must be a fairly common situation.

Appreciate any assistance or referrals to useful guidance.

Has anyone seen any written guidance confirming that the correction methods authorized by this rev proc can be used for defects that occurred before the effective date of this rev proc.

For example, this rev proc is effective April 2, 2015. Is there any guidance confirming that the new correction methods can be used for 2014 plan defects?

Rev. Proc. 2015-28 says it is effective April 2, 2015.

Has Irs issued anything confirming that the correction methods outlined in this procedure can be used for defects that first arose before April 2, 2015 (like a 2014 defect)?

(as opposed to defects that first arose after April 2, 2015)