From the payee's side, a 401(k) participant's non-spouse beneficiary failed to take a full RMD after five years. The plan document required a five-year full distribution. Year 5 ended several years back. No RMDs have been taken, and the entire original balance is still in the plan.

Not concerned about the plan sponsor's side, except to the extent their submission through VCP would help avoid payee's excise taxes.

I'm reading 54.4974-2, Q&A 5 to say that the RMD for each year after Year 5 represents a separate RMD failure for each subsequent year based on the entire remaining balance in each subsequent year.

Say Year 5 end-of-year balance is $100,000. Failure to remove everything results in a $50,000 excise tax in Year 5.

Year 6 end-of-year balance is $110,000. Failure to remove everything during Year 6 (the required RMD for Year 6 per Q&A 5 is the entire remaining balance) results in an additional $55,000 excise tax for Year 6.

Year 7 end-of year balance is $120,000. Failure to remove everything results in an additional $60,000 excise tax for Year 7.

And so on. After three years, the excise tax would be greater than the original plan balance,

I don't see any relief except potentially the IRS's consideration of waiving the excise tax for "reasonable error."

Would someone point out what I'm missing?

Plan year amended from 2/28 plan year end to 12/31 plan year end. Short plan year from 3/1/2014 to 12/31/2014. Adoption agreement states entry dates are the first day of plan year, fourth, seventh and tenth month of the Plan year.

So for this short plan year, would the entry dates be 3/1, 6/1, 9/1 and 12/1? I was thinking the entry dates would be 3/1, 4/1, 7/1 and 10/1 based on the calender year, but rereading it, that does not appear to be correct.

As an example, someone hired 9/23/2013 would enter on 12/1/2014 and would they also be statutory excludable for testing at 12/31/2014?

thanks for your help!

If a plan under contributed to a former participant (for example, due to an incorrect definition of compensation) and now owes a small additional amount under the EPCRS procedures, is this a corrective contribution, a corrective distribution, or both? I am asking to figure out how to apply the de minimus exception. From Rev. Proc. 2013-12:

"If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions. Corrective contributions are required to be made with respect to a participant with an account under the plan."

It seems to me that this paragraph (and particularly the last sentence) is attempting to distinguish between corrective contributions to current accountholders (for whom providing a corrective contribution would require almost no administrative cost) and corrective distributions to former participants who no longer have an account balance (and for whom providing a corrective distribution would result in a (potentially) significant cost).

Is this the way that others are reading this guidance? If not, how are plan sponsors handling very small contributions due to former participants?

Is there a window for how far back you can correct an ACP test? If it's failed 5 years can I do SCP? Only affects 1 HCE in all years.

Using last day of quarter rule on matching contributions. Would it be permissible to have as an allocation condition that states you are not eligible for the matching contribution unless you are actively employed 15 days after the last day of the quarter? So employment on 4/15 for the quarter ending 3/31.

We are trying to avoid people requiring residual distributions after the match is funded.

Happy holidays y'all. This is the first time we've had a client make late quarterly payments and were wondering if an IRS audit would likely be forthcoming once they see line 20b on the SB being answered 'no' indicating such, along with the required attachment? I would guess it would be an easy target for the IRS - what is everyone's experience with this?

Just curious how necessary a TPA is for a barebones Solo(K) Plan held in a brokerage account? Assume client uses a current prototype document to set the plan up and is smart enough not to overfund the plan, makes contirubions in a timely manner and restates the plan/makes ammendments as necessary. No other employees, no loans, no hardship distributions and plan assets would be rolled over to an IRA at retirement and before distributions are taken. I understand this message board is for benefit consultants whos job it is to administer plans, and it is seemingly not in your best interest to say that a TPA isn't necessary. In that regard, I'm not implying in any way that a TPA isn't worth the money they're paid. Just trying to determine the risks a clients is taking on in administering their own plan withing the above constraints.

Thanks!

I've managed to confuse myself here on something I shouldn't be confused about.

Say you have a 401(k), immediate entry for deferrals, and semi-annual entry for PS contributions - new comp with everyone in their own group. Plan excludes compensation prior to the time you become a participant in the particular component of the plan.

So, when you are doing your average benefits percentage test, and you are calculating the benefit percentages, do you calculate using compensation only from July 1 if that is when the participant entered the plan for contributions other than deferrals? Clearly you can do this purely for Gateway, but I'm getting confused about the rest. And even though deferrals are added back in, for this purpose, seems you would not add back in deferrals prior to July 1?

This will probably all be clear tomorrow morning after I've had a chance to step back for a bit...

The TPA of a self-directed IRA administrator has just discovered an account that had a prohibited transaction in 2010. The TPA will report the prohibited transaction via the 1099-R. Should the TPA file the 2014 1099-R, or should a 2010 1099-R be filed showing the prohibited transaction?

Never ran into this.

LLC is "taxed like a sub s". Some income is taken as w-2 the rest goes on a k1.

In a sub s, we cannot use any sub s "pass through" as compensation. Is that true with a LLC taxed like a sub s?

I think this is pretty obvious since you have to aggregate 401(k) plans and SEP IRAs for top heavy purposes, but I'd like confirmation -- if an employer has a 401(k) plan with all employees eligible (no service requirement), and a SEP IRA with no non-owner employees eligible (under the 3 of 5 prior years option), and makes a contribution to the SEP IRA, wouldn't that trigger a top heavy minimum contribution in the 401(k) plan?

This is assuming the SEP IRA agreement allows it to co-exist with a qualified plan.

Thanks.

Summary - A plan has a payroll by payroll fixed match. They may want to amend the plan retroactively to allow for a match true up. Does IRS Regulations allow for a match true up essentially at year end retroactively to 1/1?

The definition of a fiduciary is anyone with discretionary authority over plan assets. Are there any fiduciaries with respect to TIAA's old Individual Annuity products held by many schools/colleges? They have no control whatsoever which is why they are so frustrating from a fiduciary perspective. But perhaps that is their saving grace as a fiduciary?

interesting, the instructions are different than the form that was released earlier.

on the form Question 7 dealt with ESOPs - that is not on the instructions

on the form question 9 pertaining to amount of contribution is not on the instructions.

guess we have to wait and see - the instructions are a draft dated 12/18 so maybe they changed the form

of course, all this is somewhat moot as the SUP is for 2015, so it will be another year before we have to worry about it

From St. Louis Post-Dispatch.

While PBGC is mentioned, IMHO this is truly about Congress attempting to save the PBGC from bailout.

Bill McClellan_ Pulling the rug from under retirees _ 12-21-2014.pdf

We have a husband and wife DB plan that excludes HCEs that are nonowners. So far the plan has passed minimum participation, but next year there will be 6 additional employees who will be eligible, except for the fact that they are excluded because of their classification. 4 employees will then be needed to pass. The document, which is a Corbel nonstandardized nonintegrated prototype, says that you bring in anyone who is there the last day of the PY first to pass min participation - the fail safe language is elected in the AA. The BPD allows an addendum to the section addressing 401(a)(26) and I would like to change it so that only the minimum number of employees among those who are there the last day of the PY will be brought in beginnning with the lowest paid employee. All employees are HCEs. Does anyone see a problem with that?

Also, the document says that an accrual will be provided to certain employees to pass minimum participation, but doesn't describe or define the accrual. Is it implied that they will accue a benefit under the current benefit formula or could they accrue a lesser amount that is "meaningful", like a TH benefit since the plan is TH? Since they are all HCEs, there should be no discrimination issues.

Any opinions would be appreciated.

HYPOTHETICALLY - ERPA is employed by a small TPA firm (only 2 or 3 EEs), and the owner adopts a PS/401(k) plan. No PS or deferrals ever made; he opens checking account and rolls over money from an IRA. Over next year or so, withdraws all the money, closes bank account, and never files 5500-SF or 1099-Rs. Due to function in company, ERPA is fully aware of all of this.

1) Any suggestions on how to rectify this?

2) Any EPCRS program applicable? Any experience with anonymous submission?

3) How might IRS get wind of this?

I actually posted this awhile ago but the only response I got was "Good luck". I was hoping for something more constructive.

Say a plan has two options for their forms of distribution - QJSA and lump sum. If the plan allows for in-service withdrawals (with spousal consent), can these be limited to lump sum so that if a participant wants an annuity payment under the plan it must be a QJSA at retirement age and only lump sum before then?

I have a takeover plan that had late contributions due to a change in payroll company. By using the DOL calculator all of the earnings for the missed deposits are small and the excise tax is under fifty cents. Since I have to list each week separately, the excise tax then is zero. Do you file a 5330 showing no tax due? or do you put something in so you can pay the small penalty and have it filed.

Not sure then how to indicate on the 5500.

Client would like to just deposit the earning and the small excise tax to the employees accounts. (It amounts to less than $10.00 as the amounts involved are so small.

Any suggestions?

Thanks

Is tax withholding required on in-service withdrawals? I cannot find the definitive answer.