I have a client that employs a minor child of the owner, and the child was paid $20 for the year. Is there a de minimis amount of compensation that should be paid in order to include this HCE child in the ADP test?

We have a few clients that are considering adding a Cash Balance Plan to go along with their current DC plan. Is there software available to do the combined testing?

Re the correction for 415© violations under the new Section 4.04 in RP 2015-27.

Is this limited to plans that do NOT provide matching contributions? The language could probably be read either way. I'm not sure if this is meant to act as an example, or if it is meant to limit it only to plans with no match. Any opinions?

"A plan that provides for elective deferrals and nonelective employer contributions that are not matching contributions is not treated as failing to have established practices and procedures to prevent the occurrence of a 415© violation in the case of a plan under which excess annual additions under 415© are regularly corrected by return of excess deferrals to the affected employee within 9-1/2 months after the end of the plan's limitation year."

I have a plan that made a contribution to participants based on satisfying the gateway using the 3 times ratio. The contribution they made to participants was as follows. When calculating the contribution for participants, it was calculated out to three percentage decimal places as shown below.

Calculated contribution Illustrated rounded several places

Lowest NHCE% .635% .6349543249

Highest HCE% 1.905% 1.9050052640

Using the numbers above, it would appear that the plan satisfies Gateway, since the numbers in the first column satisfy the 3x1 ratio. The numbers in the second column would also appear to satisfy gateway if rounded to three decimal places.

When using our testing software, the system is rounding to two decimal places and several participants with the contributions shown in the far right column are ending up as .63% for the lowest NHCE with a resulting failing gateway test.

My question is this, is there any requirement that gateway testing be rounded to two decimal places? I have researched this and am unable to locate such a requirement any thoughts our guidance would be greatly appreciated.

Ownership of Co. A is

X 42.5%

Y 42.5%

Others 15%

At 01/01/13 Co. B was owned

X 35%

Y 35%

Z 10%

W 20%

Mid year 2013 W's shares are purchased by Co. B and are no longer outstanding.

Once Co. B purchased those shares form W, Co. A & Co. B becmae a controlled group. We just found this out. Any argument that the 410(b)(6) transition rules can be used? I don't see that it is really an acquisition, but I'm hoping.

Thanks for any guidance.

Question has come up where an employer is terminating its participation in a MEP. The employer will probably choose a SEP or SIMPLE IRA going forward.

The MEP is a 401(k) plan. Once the employer terminates its sponsorship, employees will be given distribution forms. Can the MEP force out distributions to participants with more than $5,000 in the plan? If this was a single employer plan and the employer terminates it, 1.411(a)-11(e) permits a cash out without participant consent if there is no successor DC plan.

With the MEP, the employer is terminating and not establishing a successor plan, so in that sense the cash out without consent should work the same way. However the plan is not going away so does 1.411(a)-11(e) apply?

On the flip side, even if the MEP can force the cash outs, must it force them? Or can it allow participants of the former adopting employer to maintain their accounts in the plan indefinitely?

I have a question and I am 99% sure of the answer, but I just want to confirm. We have a plan that has 2 participating employers. Here are the facts:

- One plan is an S Corp, and the 3 owners recieve equal W-2 compensation of $150k.

- The other entity is a partnership, and they each receive guaranteed payments of 99k, which is the only item taxed as SE Income in Box 14.

- They contributed the 3% Safe Harbor throughout 2014 for all employees of both plans.

- The only part they did not contribute is the 3% on the guaranteed payments for the 3 owners

They are asking if they can ignore the compensation from the 2nd entity when calculating the 3% since they have not yet funded it (but did fund the other part). I don't believe they can, the plan includes all compensation (no exclusions), and HCEs are entitled to the safe harbor 3% contribution.

Is there some amendment they could do after the fact? Again, I am doubtful, but thought I would ask.

Plan is new - started 1/1/14. It has almost $71,000 in profit sharing receivables as of 12/31/14. No other type of receivables.

Would you include the PS rec'bles in the top heavy test?

There were also rollovers into this plan of a significant amount. I have them marked as a regular/outside rollover. They came from a terminated plan but from a different plan sponsor - company name and EIN entirely different. Because of this, I did not mark them are related. I assume that all participants were given an option to roll the money from the old MPP under the other company to this new plan or put it into an IRA.

Thanks for your thoughts.

I have a plan where the plan was originally a sole proprietorship who had earned income. Since then, the owner also started a corporation who is an additional adopting employer of the 401(k) PSP. The sole proprietor had loss -35,000 earned income for 2014. He also receives W-2 compensation from the corporation. The plan is a Safe Harbor 3%. For purposes of calculating his compensation for the safe harbor contribution, do you net the loss with his W-2 compensation or can you base his safe harbor contribution solely off the W-2 compensation and consider earned income for the sole proprietorship to be zero?

Let's say "Inexperienced TPA" was doing the 2009 5500 and was not aware of the exclusion and therefore was preparing a compilation of the 30 custodial accounts (no trust level report), and about 10 or 15 of those are pre 1/1/09.

We would like to report the pre- 1/1/09 contracts as distributions to take advantage of the fact that they can be excluded.

Anyone have any problems with this? I do not see anywhere in the FAB's and articles that in order to exclude them you needed to do so in 2009.

A large employer is acquiring a small employer in a stock sale. Following the sale, the large employer is going to liquidate the small employer company and, thus, causing it assets and employees to merge into one of large employer's subsidiaries. Small employer has a group health insurance plan. Small employer wants to continue to offer that insured plan following the closing to its employees participating in such plan. The small employer plan provides more generous benefits than the large employer plan. The large employer is concerned that the small employer group health plan doesn't comply with the ACA requirements applicable to a large employer plan, including the minimum value requirements of a large employer plan. Are there any transitional rules (similar to 410(b)(6)©) that would allow the large employer to continue to provide only this coverage to those employees or must the large employer make an offer of coverage to these employees under its group health plan (and also allow these employees to elect to keep their current small plan) to avoid the $3,000 excise tax that would be incurred with respect to these employees?

Let me preface this by saying this is a client who we last prepared a 5500-EZ for in 2010 (under limit), and who came back to us after a few years asking us to clean up the mess he created.

Facts:

• He took a $45,000 loan requiring monthly payments, but has never made regular payments.
• He made a payment of $5,200 right before the loan would have gone into default
• More missed payments caused default as of 09/30/12
• He paid an additional $4,500 on 01/15/14
• He has made no further payments
• Plan is a DB, with NRA age 62; owner is currently 60 years old with a calendar plan year

Questions:

• We plan to declare a deemed distribution and issue a 1099-R. Should the deemed distribution be as of 09/30/12, or should I use the plan year end of 12/31/12?
• How do we treat the loan in subsequent plan years? How do we handle a loan that is not repaid for 2 or three years?
• Any ideas on how to show everything properly on the trust accounting? For DB plans, we do our own accounting in Excel.

Let's say the Form 5500 is prepared on accrual rather than cash basis for a 401k plan. If a recordkeeping invoice (that was payable for 2014) is paid from forfeitures after year end (in 2015), should that amount be counted in ending balance for 2014?

Basically, let's say the ending balance on cash basis is $1,000,000 and the invoice for 2014 that was paid from forfeitures (with the actual payment date in 2015) is $10,000. Should the ending balance be $1,000,000 or $990,000?

Anyone know why the IRS doesn't allow SCP for "significant" violations in the 2-year correction period otherwise applicable for "regular" qualified plans? Just curious - seems strange to me.

To add an example:

Revenue Procedure 2013-12 allows SCP for SIMPLE-IRA plans, but only for “insignificant” violations.

Suppose a relatively small business intends to terminate a SIMPLE-IRA, but due to their misunderstanding of the requirements, they do not give appropriate advance notice to the employees for 2014, although they do notify the custodian (sometime in mid-2014) that they are terminating the plan for 2014.

When this error is discovered late in 2014, they realize this must be corrected, and that the correction will involve the normal 50% of the missed deferral opportunity, plus the full 3% match, for a total of 4.5% plus earnings for ALL eligible participants, based upon entire 2014 salaries.

In spite of the fact that this involves all participants, it is a one-time occurrence. Can this reasonably be considered an “insignificant” violation eligible for SCP?

My inclination is no, but I wondered what others think.

The employer made deferral contributions during the year for the 2 partners. Ned of year comes around and the partnership has a net loss, so those "deferrals" that were deposited are returned to the employer. Did these deposits trigger a TH requirement for the plan?

I have a client who is a salaried W-2 employee not covered by an employer plan. Client also has an unrelated side business with Sch C income. Can he contribute to a SEP based on his Sch C income and make a deductible contribution to a traditional IRA based on his unrelated W-2 income? My software wants to know if he is "covered" by a retirement plan. Is he deemed to be covered by a retirement by virtue of the existence of his SEP which would place stricter contribution limits on his ability to contribute to the IRA? Sch C business has no employees, no common control issues.

This is a one-person profit sharing plan. He hasn't contributed to the plan in quite awhile, and realizes it's time to simplify and terminate the plan. However, he wants to keep the town house. Assuming the property isn't being rented out by a family member and there are no prohibited transaction issues [i'll quiz him more about this to be sure], I think he would need to make sure that there is an up-to-date appraisal, then roll the property over to a self-directed IRA, which, according to what I've read on the internet is the only way an IRA can hold real estate. The only other thing I can think of is to replace the town house with cash equal to the appraised value (assuming he has cash available to do that) and have the deed transferred out of the plan's name to his name. Then his rollover would consist of all cash and he can follow the normal IRA investment rules. If neither of those options works, what would be the proper way to handle this? Guidance would be appreciated.

I am a former employee of a public university of Illinois, now receiving retirement benefits. Ordinarily that would include health insurance benefits, but I took the option to opt out of receiving that benefit in exchange for a monthly cash incentive.

This money is subject to Illinois and federal income tax, which suggests to me that it is treated as wages and salaries. I wouldn't especially mind paying the income tax, except that I live in Texas (which has no state income tax) and now find myself having to file Illinois income taxes, which is a paperwork headache. It would be very helpful if I could divert this "salary" into a 403b or similar plan, as I did while I was employed. (The opt-out incentive will disappear when I turn 65 in a few years, at which time I will want to start cashing in those very 403b and 457 accounts.)

I am still trying to track down who in Illinois has the authority to tell me if this can be done or not, but I would like to find out whether it is at least within the framework of IRS rulings to do so, and if so, whether other benefits plans make this kind of arrangement possible. (That would give me some ammunition if I try to request that such a program be created in the Illinois system.)

So ... is it considered normal to treat health insurance opt-out incentives for retirees as income that can be placed pre-tax in a retirement plan?

dave

Fidelity Investments and, I understand, other large investment providers in the

401(k) space, are performing SSA checks on participants' SSNs and when a duplicate or otherwise "bad" SSN turns up, they are preventing the participant from:

• taking loans
• taking a withdrawal or distribution
• accessing their account online.

They will permit ongoing deferrals and employer contributions, but employees are reluctant to continue to defer with no assurances they will ever see their money again.

This practice creates a sub-class of 401(k) participants and raises a number of legal issues going beyond ERISA.

This is particularly a concern for employers in the agricultural and hospitality fields, who may validly have documented their employees' right to work in the US based on work permits rather than Social Security Cards.

Just wondering if anyone else has dealt with this type of situation and whether there are any means by which affected employees can access their retirement savings.

• Deadline to establish solo K would be 12/31/15.
  
• He would have until at least 4/15/16 (later?) to deposit his employee deferrals.
  
• He would have until 10/15/16 to deposit his employer contributions.