401(k) Plan - 1 year of service dual entry for non-elective PS and Safe Harbor, 3 mos of service monthly entry for deferrals. Plan is top heavy. Client is allocating a profit sharing so we must meet top heavy minimum requirements. Plan Compensation is date of entry for each source.

ee#1 - hired 4/1/13 - enters plan for non-elective ps and safe harbor 7/1/14. Receives combined profit sharing and safe harbor on 1/2 year comp (7/1 - 12/31/14) of 5%. Gateway testing on 1/2 year compensation passes. In addition, making sure it meets 3% top heavy on full year comp.

EE#2 - hired 4/1/14 - not eligible for non-elective profit sharing or safe harbor.

Since plan is top heavy and eligible to defer, must receive top heavy 3% on full year comp. Now that top heavy is allocated, must test gateway, Correct?. What compenation would I use for the gateway portion since eligible compensation for non-elective ps and sh is $0 since not eligible. If I use comp from participation date for deferrals 6/1/14 - it doesn't seem fair to ee#1.

What compensation should I test gateway for EE#2? Thanks!

We have a plan that is closing down and there is a deceased participant with $250.00. We have tried to locate his listed beneficiary with no luck. Any thoughts on how to handle this?

Is it ok for participants to take a cash option from a Cafeteria Plan that is taxed as regular income, and use that money to go to the Exchange and purchase health insurance on their own? I'm thinking it is ok, but I'm having a hard time "proving" it to myself. All the FAQ's/guidance is rather confusing. It seems to me that an insurance purchased on the Exchange isn't an "individual health insurance policy" for purposes of the guidance?

Where on Schedule H would these expenses be included? They include an appraisal and maintenance/landscaping. Nothing in the Plan seems spot-on. It doesn't seem to fit into the description "appreciation/depreciation" but doesn't really feel like an expense either.

As a pre-emptive disclosure, this is in the context of a large pooled plan, and real estate makes up less than 5% of plan assets. And its being leased to an unrelated tenant.

I have ran into a non-profit organization that has an old 457(b) deferred compensation plan that has not been funded for years. They replaced the plan with a 401(k) plan several years ago. Several participants have accounts in both plans and would like to roll their 457(b) accounts over to the 401(k) plan but have been told they cannot rollover and can only get to their account upon termination of employment or at age 70 1/2. I am unfamiliar with these plans and wondered if the plan could be terminated or restated to a different type of plan that could then be merged with the 401(k) plan.

Any suggestions as they feel locked into this old plan..

Hello everyone,

I have quite the mess on my hands. We recently took over the administration of a client that has an executed plan document from 2010 with age 21 / 1 Years of Service and semi-annual entry dates for all contributions. Before the beginning of 2012, the client asked for an amendment to be drafted that would reduce the eligibility requirement for deferrals to three months of service with monthly entry dates. Unfortunately, somehow this amendment slipped through the cracks at the client's office and was never executed.

Fast forward to 2014. The client informs us that they have been providing a Summary Plan Description with the "unexecuted" eligibility change to new employees.

My question is in relation to the EPCRS self correction method of retroactive amendments. Let's say out of the 55 people hired during 2012 and 2013, only seven decided to defer. Do we draft a retroactive amendment to allow just the seven employees into the plan, or are we forced to let in all 55 people, provided they all received the incorrect SPD based on the provisions set forth in the unexecuted amendment?

My gut says to let all of the employees in, but am unsure whether the 48 employees that did not defer would be considered as being a true "early inclusion." All of the examples I have reviewed (IRS website, EPCRS, etc.) strictly address early inclusion errors where employees actually deferred or received employer contributions, and do not address where employees were just misinformed on the actual plan terms.

Any thoughts to help me wade through this mess is much appreciated.

Thanks!

- WickedP

Takeover client's 401(k) plan eligibility requirement is:

"Eligibiiitv: All employees other than excluded classes shall become a participant with respect to employer contributions on the entry date on which the participant first meets the following requirements:

(I) Attains age twenty-one (21) and

(2) Completes 500 hours of service."

The 1000 hour year of service rule applies after the first year.

Entry dates are semiannual.

Plan has been administered as requiring 500 hours of service AND 12 months of employment, and then entering the plan on the next semiannual entry date.

(It seems to me that, in the past, anyone who completed 500 hours of service at any time within the first 12 months of employments should have entered the plan on the next entry date, and not until the first entry date after 12 months of employment, so there may be corrective contributions to make.)

At any rate, we are now preparing the PPA restatement. Client wants to have a "500 hour and 12 months of employment" rule to permit part time employees into the plan, as long as they work over 500 hours annually. Client does not want to let employees with less than 500 hours per year (there are some) into the plan.

We can elect eligiblity requirements in our volume submitter document that would provide:

"Any Eligible Employee who has completed 500 Hours of Service within 12 consecutive months from the initial date of employment and has attained age 21 shall be eligible to participate hereunder as of the date such Employee has satisfied such requirements."

The question is regarding the phrase "as of the date such Employee has satisfied such requirements."

Similar language appreas in other prototype and volume submitter documents that I checked. I thought that, unless a plan used the statutory "year of service" definition, that any lesser hours requirement for initial eligibility had to provide for eligibility "as of the date the requirements are satisfied." So, in our document, as in the existing EGTRRA document, if a full-time employee meets the 500 hours requirement after 3 months, he would enter the plan on the next entry date, NOT after 12 months.

An associate has recommended using the "other" option in the volume submitter document to say:

"Any Eligible Employee who has completed 12 CONSECUTIVE MONTHS OF SERVICE in which he has at least 500 Hours of Service and has attained age 21 shall be eligible to participate hereunder as of the date such Employee has satisfied such requirements."

That would appear to require both 500 hours of service AND 12 months of employment, but I am still thinking that the use of both hours and months (and NOT using the statuory "year of service" definition) would still require the plan to count the hours and bring employees into the plan on the next entry date after the 500 hours are met.

Any thoughts would be appreciated

I am in disagreement with a CPA on this issue and would love feedback. It relates to an IRA borrowing or leveraging from others (e.g., individuals, financial institutions). And, while I don't believe it makes a difference (please tell me otherwise please), the account is a Roth IRA.

Question: Can any IRA borrow or leverage funds and not be subject to UDFI?

My position is that UDFI applies to any leveraged activity within an IRA. It is my understanding that a 401k has an exemption...for real estate only; however, the IRA, if it borrows and generates profits, UDFI taxes are due on the percentage of gains realized with borrowed funds (e.g., $50,000 IRA borrows $50,000 to purchase a $100,000 property...property sold later for $200,000...UDFI and taxes would be due on 50% of the profits, or in this case $50,000)?

CPA says that IRA could borrow or leverage and generate gains with no taxes immediately due.

I am pretty sure that I am right, but I am just questioning if it makes any difference if the IRA is a Roth...but, I don't think so.

Thanks.

Here is a question that is interesting. Hopefully I can explain it correctly.

Can someone invest (not lend) into another person's individual 401k plan? For example if a self-employed individual with a 401k plan accepts monies from an individual to invest as part of that plan, can they? Or through an established LLC where the the only members are the one person's 401k and the other being the individual choosing to invest into the LLC?

The reason for the question is that it is my understanding that a 401k can "borrow" or leverage funds for an investment; however, unless the investment was related to real estate, UDFI taxes would be applicable to earnings received from leveraged funds (and understanding that any loan is non-recourse in nature).

Therefore, the question if one person could invest into another individual's 401k account vs. lending the funds?

Thanks.

Can the brother of an owner be the paid investment advisor for the plan? (i.e., paid from plan assets).

A client has proposed to issue an SAR for all of its plans with a generic cover page, a back page summarizing the participant's rights and an attached spreadsheet which references all of the plans and contains the numbers used to fill in the blanks for what has to be in the SAR. Is this a valid way to do this? While I have no objection to having one giant SAR for all of the plans with each plan listed separately, I think the spreadsheet would be too confusing to the average participant. Any thoughts?

I am preparing a 5310 for an employer who was acquired in a stock purchase (C Corporation shares were purchased). The sale and plan termination were simultaneous and occurred in July 2014. We're in November 2014 and I'm completing the 5310. Throughout the life of the plan, the employer was not a member of a Controlled Group. Today, as we file the 5310, the employer is now a wholly owned sub of the acquring company and employees are participating in the parent company's 401(k).

Do I indicate on 5310 that they're a Controlled Group member? Since an affirmative answer requires a statement (explanation), my inclination is to answer that they are a Controlled Group member and provide the details in the required statement. Does anyone have a different opinion or experience with this scenario? I suspect it's fairly common.

An employer (our client) has purchased another business (asset purchase). Several of the employees from the purchased business are going to become employees of our client. Would thie plan of the purchased company be considered a "related" plan for purposes of determining any amounts avaialbe for loans of these new employees?

If a plan sponsor adopts an approved volume submitter or volume submitter prototype document, with no special language added, is there any benefit in applying for a determination letter in the name of the plan instead of relying in the approved document's letter?

Does anyone apply for determination letters in the name of the plan anymore if using an already approved document?

Hoping someone can help me with this.

Plan document requires person at 415 limit, and working past NRA to take their money.

Person past NRA is now being provided the monthly payments they should have received as a Retroactive Annuity. The rest is being rolled over.

The question involves eligibility for a rollover. I can see 3 ways of looking at this:

1): Since it is treated as being paid as a life annuity, my guess is it cannot be rolled over, since distributions paid over a life annuity basis are not eligible for a rollover;

2): Maybe it is considered similar to an equal installment distributions. If so, since this covers less than 10 years it should be eligible for a rollover; or

3): Maybe it is treated as a lump sum which would make it eligible for a rollover.

Does anyone know the answer to this?

Thanks,

Craig Schiller

For several years now, a man has unknowingly been paying his ex-wife's insurance with pre-tax withholdings through the cafeteria plan. He caught this and wants a refund.

We are processing the refund, but we need to know how to report it. Can we treat it as compensation paid this year, or do we have to go back to the year we withheld the amount and treat it as compensation paid that year (this would require us to go back and amend several years of W-2s, employer reporting, etc.)?

If you have any support for your conclusion, that would be great!

I am probably overthinking this. Looking for the simplest way to handle things, consistent with what a client WANTS to do.

Corporation A has a 401(k) plan - safe harbor.

Corporation B will be newly formed, let's say on December 1.

Corporations C-F are a controlled group. They currently have a SEP for 2014.

Corporation B, when formed, will be part of the controlled group with C-F - same owners.

Now, here's where the fun starts. Corporation B will be purchasing corporation A effective December 1, 2014. I haven't been given firm information yet, but let us assume that it is a stock sale. All employees of A will transfer over to B's payroll.

Effective January 1, 2015, C-F, as well as A and B, (all being part of one controlled group) will either adopt a new safe harbor plan, or will sign on as participating employers in the plan currently maintained by A. If a new plan is established, then A's plan will be merged into the new plan.

Since the employer wants this to be seamless, he wants the employees of what is now A, and who will be transferred to B effective the date of the sale, to be continued to be allowed to defer, based on the payroll that will now be from B.

Do you see any problem with B just signing on as a participating employer to A's plan for the balance of 2014, then having all of this, (either via new plan/merger or everyone signing on as a participating employer in A's plan) being handled under the one plan for 2015?

I feel like I may be missing something, but then I think I'm not missing something.

Sigh...

hello,

I am bringing in two excluded employees in order to pass 410b. They get QNEC equal to avg deferral rate of NHCEs in the plan and then SH match on such amount. I know that I can apply the QNEC to my TH minimum but can I also use it towards my minimum Gateway?

Thanks,

IRA account holder dies in 2014. Should have taken rmds beginning in 2012, but failed to do so. His child is the beneficiary. To add a twist the deceased had a will to which he leaves everything to a charity.

The chariy is asserting that the rmds for 2012 - 2014 should be payable to the estate and thus go to the charity. I dont see that that is the case, but it would help if I could point to a cite. Is there a cite that is on point?

Thanks in advance for any guidance.

Participant over age 70 1/2 retired on December 31, 2013. When is the first RMD payment? The Code/Regs say the distribution year is the year in which the participant retired. Somebody is arguing that since the participant worked on December 31, they didn't really retire until January 1, 2014.