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.
  

I am working on a DB plan for a self-employed individual. Assuming that he doesn't go on corporate extension, we can still extend his 5500 deadline, which will enable him to make his 2014 contribution until 9/15/2015 - it will just need to be deducted for 2015. Is this correct?

Thanks!

I think I'm just having a "moment", but here's the situation:

Employer Funded an $80,000 Contribution

$79,000 Receivable

$1,000 used from Forfeiture

In theory that $1,000 is already in the Plan, but what do we show as the contribution amount on the Schedule I?

A CBP has invested the plan assets in 3 different accounts.

One is a variable annuity owned by the business owner.

The 2nd is a variable annuity owned by the other business owner (they are spouses).

The 3rd is a generic mutual fund (not important for these purposes).

I do not think these are appropriate investments for a CBP. Annuity investments must be owned by the Plan, they cannot be assigned to an individual annuitant. I fail to see how these are appropriate investments in a CBP.

They are contributing the CB credits to the two annuities, as if the assets in that annuity are solely for the purpose of the named individual on the annuity.

Could anyone recommend any specific IRS and/or DOL regulations that would back up the position that these are not appropriate investments for a CBP?

I'm a little uncertain about the fee exception in Rev Proc 2013-12 (as updated by Rev Proc 2015-27) Section 12.02(2). Does the reduced fee apply whether or not the plan sponsor requests a waiver of the 4974 excise tax?

The language states that the reduction applies only if "...the failure would result in the impostiion of the excise tax". So I can read this to mean that if there's a waiver request and the IRS won't go after the participant to impose the fee then the reduction doesn't apply, and if there's no waiver request so the IRS can go after the participant to impose the fee then the reduction does apply.

Am I reading this too narrowly?

Thanks to all.

When future cash balance plan employer credits are frozen does the plan still make future interest credits on the frozen hypothetical account balance?

I have a question about determination of 5% owners for purposes of RMD rules.

Law firm partnership has a 401(k) profit sharing plan. Several partners have P.C.s that have adopted the plan as participating employers. The owner of one of these P.C.s has just attained age 70 1/2 in 2015. He owns less than 5% of the partnership by capital interest or profits, but of course own 100% of his P.C.

For testing purposes, all of the employers of the plan are aggregated under 414(m). Does aggregation apply for determining 5% owners for 401(a)(9) purposes? 5% owners are defined as under the top heavy rules, and aggregation applies for top heavy, but does that mean aggregation applies and only those who own 5% of the partnership are treated as 5% owners for RMD purposes?

Put another way, is this partner's first distribution calendar year 2015 or will it be deferred until the calendar year in which he retires?

The intructions for amounts to be reported in Box 1a are confusing to me. Does anyone know what the IRS is looking for? Do we report the present value of the entire QLAC contract, the amount of annual payments from the contract or are they looking for just the amount of the first periodic payment that will be made from the contract ? thanks for your thoughts

2 employees are W-2 wages.

Each contribute $15,500 to their company's 401(k) plan.

Accountant urges them to form a partnership with one other individual. No control issues, no affiliated service issues.

Assuming they have the income, I do not believe they can contribute the full $53,000 each to the partnership plan as long as each has made the $17,500 contribution in the same year.

Doesn't the $53,000 maximum contribution include the individual's 401(k) contribution regardless of the employer?

Accountant says they can contribute the full $53,000 to partnership plan.

I could be wrong, but I do not believe so.

I currently work for my father in-laws company and we use an Investment Company to handle all of our 401K needs/accounts/investments.

Currently the company is made up of 40+ employees because there are 2 companies.

I am planning on purchasing the smaller side of the business and there will only be maybe 10 employees.

I still want to continue the employer matching program, and at the same time reduce our annual costs associated with using our current Investment Consulting Company and costs associated with the Investment Bank we use.

What is the easiest and least expensive way to do this...should I just have everyone sign up for their own account at one place like say Charles Schwab and setup a direct deposit?

My goal is to still provide this benefit to the employees, save money and eliminate any liability that may come with the us suggesting a place for them to use (Charles Schwab).

Any advice would be greatly appreciated.

Thank you!

Mitch

Company A acquired Company B on 3/27. Company A does not have a plan and Co B is terminating the plan and employees will receive a distribution payout. Co A wants to establish a Safe harbor 401k plan and allow all of company B employees to immediately contribute. Any reason that Co B had a plan would prohibit the safe harbor status? Also can employees that are in Co B that have a loan roll those loans to new plan. Thanks so much.

Employer A sponsors Plan B. Mrs. X is a participant in Plan B. Mr. X works for an unrelated employer, and will be terminating, and wants to roll his money into his wife's (Mrs. X) account in Plan B.

We all know you can't do this, but it is difficult to provide citations. All I could think of was the exclusive benefit rule under 401(a)(2) and ERISA 401(a)(1)(A), as well as the regulation under 1.401(a)(31)-1, Q&A 3 that specifies clearly specifies that a direct rollover that satisfies 401(a)(31) is “…an eligible rollover distribution that is paid directly to an eligible retirement plan for the benefit of the distributee.” Clearly the spouse is not the distribute.

Not to mention, of course, the plan document, which naturally wouldn't allow this.

Any other easy pertinent citations that I'm missing? I'm sure I've seen something on this before, but couldn't find the thread.

A client currently has a 412(e) plan in place - can they also sponsor a 401(k) plan? Are there any restrictions/limitations they should be aware of?

When is code 3C (Plan not intended to be qualified--A plan not intended to be qualified under Code sections 401, 403, or 408) supposed to be used? The IRS refers to this code in Rev. Ruling 204-19 when it provided guidance for plans accepting rollover contributions.

I did some brief research on the code and only found reference to Plans from Puerto Rico.

Is this a code that should be used if the plan has known qualification issues that have not been corrected?

Thank you

In late 2014 a 401(k) plan incorrectly allowed a new hire to immediately start deferring to the plan. Unfortunately the plan has a 1-YOS eligibility requirement. The sponsor's new payroll company made the mistake (not knowingly done by sponsor). The employee is not a 5% owner and did not earn enough to be deemed an HCE for 2015. However, based on their current rate of pay they will be an HCE for 2016 (will most likely earn more than $120K in ’15).

Would a corrective amendment under SCP be allowable since the only affected employee may become an HCE?

I believe an amendment under SCP is only allowable if it affects “mainly” NHCEs. The participant was definitely an NHCE for '14 and '15.

Any thoughts are appreciated.

two person db plan(h&w) that is underfunded..plan is invested in cash so funding is deteriorating. Suppose the plan is terminated 4/30/2015. There is no accrual for

2015 so the 2015 min is just a prorata amortization of the unfunded(using ppa mechanics of course), 1/3 if i understand it correct. Val date could logically be 4/30, date of asset distribution or 12/31. No more auto switch to term date so I think it is the later of the date of asset distribution and 12/31? If the val date is the date of distribution is the unfunded determined on that date prior to distribution?

If this is this case then client should distribute assets asap so that the prorata amortization is minimized due to deteriorating funding? If the assets have not been distributed by eoy, then the final minimum due is the prorata charge based on the eoy asset and liability amounts. Sound correct? Thanks for any thoughts..