Doing an SE calc for a Schedule C / 401k Plan, but they also sponsor a cash balance Plan. How are the contributions to the plan deducted? I assume they are NOT deducted the same way as the 401k employer contriubtions (i.e., on page 1 of 1040) but rather as a business expense to arrive at net income?

Can someone confirm?

Do you still have to compute allocable income on distributions of excess deferrals?

Does this QNEC contribution for the missed deferral opportunity of one nonekey remove the Top Heavy exemption for the plan?

An existing client roughly 2500 employees is adding auto enroll to the 401(k) plan. Plan entry dates are January 1 and July 1. The vendor recordkeeping the plan says that they need to have the upcoming eligible census data each year no later than May 31st for a July 1st entry due to timing issues and the auto enroll information they will be sending out to the newly eligibles.

The client has people hired in June of 2014 that are "borderline" as to whether or not they will make the 1000 hour requirement for eligibility by their anniversary date. We won't know until we have the census info for June, which of course is after the deadline of the vendor to set them up for July 1st entry.

Once we do know who met the eligibility the vendor still needs ~30 days to send out the notifications, which would put the new enrollees past the July 1st entry date.

I anticipate we're going to have this same issue each approaching future entry date due to the type of business this is and the employee demographics.

What's the best way for the client to handle this and have others seen this issue? Or am I missing something easy and obvious?

Employer has an existing severance pay plan covering all employees for both involuntary and voluntary separation from service. Plan does not qualify for 2 /2 separation pay plan exception because it pays on voluntary termination as well as involuntary.

Lump sum severance benefit is service-based and terms comply with 409A. Plan also provides that employer will pay COBRA premiums (again for ALL employees) for the period used to determine severance (and this is always shorter than COBRA continuation period).

They now want to eliminate the health coverage continuation premiums and instead pay an additional lump sum benefit at the same time as the existing lump sum benefit. Not trying to get out of paying employees, but want to make it easier to administer and they envision that the company may stop offering health insurance altogether as it winds down operations.

The medical coverage should be exempt from 409A - meaning it isn't deferred compensation because it is a nontaxable benefit (or in the alternative, qualifies under the Medical benefits exception for separation pay plans that limit reimbursements to the COBRA continuation period.

So I am thinking that eliminating this benefit and replacing it with a lump sum benefit would not be a substitution of deferred compensation that would result in an acceleration because it wasn't deferred compensation in the first place.

Any one see any problems with this approach?

We have a few plans that did not adopt the PPA lump sum rates and instead are on a GATT minus rate. For example if a plan values lump sum based on the 30 year treasury rate minus 2.75%. The February 30 year treasury rate is 2.57%. To value a benefit under this scenario would result in a negative interest rate. We are thinking this ok, but does anyone think there should be a 0.00% floor for this purpose? Thanks in advance for all responses.

I understand that self-directed brokerage accounts are not required to furnish a fund comparison chart for 404(a)5 because the universe is virtually unlimited.

However, what if the trustee is doing something prudent, and following DoL wishes and having a 'suggested" fund lineup along with the open architecture. Do they have to come up with that chart pertaining to only the suggested funds?

If you can point me to where that says that either way, I'd be appreciative.

(I do know that even with an open architecture some sort of Notice is required, albeit somewhat abbreviated.)

Can someone please provide me with the regulations/site that states that safe harbor matching contributions must match catch up contributions.

Thanks,

3/31 Fiscal year end with a 12/31 plan year end.

Client has lots of extra income for the 3/31/2015 plan year and is looking for lots of deductions. What they want to do is max out heir 12/31/2014 contributions, and then contribute/deduct the 2015 maximum in the first quarter of 2015.

I know that one of the requirements for deducting contributions made AFTER the end of the year is that it must be allocated as of a date within the fiscal year. Is the same true for contributions made/deductible before the end of the year?

Safe Harbor 3%, funded each pay-period. I don't think anyone would have a problem deducting this on the 3/31/2015 return.

Full profit sharing. There are 3 other employees. The client essentially wants to fund 100% of the projected 12/31/2015 contributions in the first quarter. There are NO Allocation conditions.

Any way to make that work?

Is there a resource somewhere on precisely how the MPA would be calculated for a large DB plan? We need to get our arms around the potential exposure. Rev. Proc. 2013-12 lays out the basics, but if you try to drill down there are many ambiguities. E.g., the MPA includes the additional tax if the employer deduction is disallowed for contributions--does that include vested contributions (which are deductible even for a nonqualified plan). How is participant income-inclusion calculated for a plan with hundreds of participants? And does the IRS calculate the MPA, or does it merely review the employer's own calculation? Is the MPA estimated based on the Form 5500 alone, or is there a massive review of other documents? Etc.

Thanks for any info.

Interesting question here. Suppose you have a Schedule C filer, single, who is independently wealthy, so works a little but has very little earned income - only, say, $10,000 net Schedule C after deductions and SS tax reduction.

So, defers the whole $10,000 to Roth 401(k). Can he ALSO contribute to a Roth IRA? Although it is counterintuitive, I'm having trouble finding anything that prohibits it. In spite of the Roth 401(k) deferrals, he still has earned income to report on his 1040, right? And if so, I think he can technically contribute to a Roth IRA. But it doesn't feel right! What am I missing?

Edit: I suppose, as I think about it, that this is consistent with a W-2 employee - say that an employee has $10,000 of W-2 income, and defers it all to a Roth 401(k) - the W-2 is still going to show $10,000 as taxable income, on which you could presumably contribute to a Roth IRA? I still have a feeling I'm missing something, but I can't find anything proving it is wrong.

Employer deposited amounts that were "deferrals" for the partners. After year end the K1s report a loss. The "deferral" amounts have to be returned to partners as there is no compensation. The Partners' CPA says that no 1099R should be issued and this is not a taxable distribution. I can see the argument that since the partners received no tax deferred "benefit" from these distribuitons. Money is going to come out of the trust. How is the 1099R supposed to be handled? Thanks.

3% Safe Harbor Nonelective excludes HCE's. Need I concern myself with the definition of compensation/414s? So for example, may I exclude bonuses and overtime from the calculation of the Safe Harbor? I will be doing some profit sharing for the HCE's, but all of the nondiscrimination testing would of course be done using a 414s definition of comp.

I have a money purchase plan with an attorney drafted plan document. The employer wants to amend the plan to not permit buy backs and not to permit forfeiture to be restored, even if the participant is rehired before not incurring 5 one-year breaks in service. I think I am OK with the plan not permitting buy backs, but I believe that they must restore forfeitures if the participant is rehired before incurring 5 one-year breaks in service.

Any 411 experts out there? Thanks

Hi Guys,

Please help in sticky situation.

The plan is frozen since 2003. The plans NRA is 62. The DOPT isin 2014. Expected payout date is in 2015. The owner currently is67. Each year he is over NRA he got an AI of his frozen benefit. However the AI was capped at his 415 comp limt. Suspension of benefit notice not given.

My first question is that is his comp limt also gets frozen at the plan freeze date? The guy has 10 YOS at the time of freeze, however is comp increase after the freeze date.

Is there a violation of 411 here? Should he have been given a forced suspension of benefits notice at the time the AI first hits the comp limit?

What if in between the comp drops and now he can get the full AI? I guess first it has to be clear if his 415 comp limit can change or not?

If there has been a violation of 411 what are the corrective measures?

A participant has after tax moneys (non-Roth) in a 401k of $10,000. 401k portion is $90k. The employee is over 59 1/2. Can the employee take a $10k distribution from after tax portion and roll over to a Roth IRA? If yes does it matter if the person is under 59 1/2 and the plan allows after tax distributions? Finally, if yes, can the person do it every year?

Does anyone know if there's an office of the IRS that entertains requests to allow late starting payouts over the life of the death beneficiary of a nonqualified annuity?

Section 72(s) has rules similar, but not the same as the RMD rules under 401(a)(9). If the annuity payout had begun before the contract holder died, then those payouts must continue as rapidly as if the contract holder had not died--unless payouts of the remaining value as an annuity over the life of the beneficiary begin within 1 year of contract holder's death. (Only if the annuity payout had not begun by the time of the contract holder's death must the entire contract value be paid out within 5 years of that death.)

I was contacted today by a beneficiary of a contract holder who died in 2013. The 1 year mark passed in 2014, without payout beginning on the life of the beneficiary. If you know of an office of the IRS with authority to waive that, it would be greatly appreciated if you would send information about that office to me at jsimmons@ida.net. Thank you.

Defined contribution plan that says that a Participant may take a distribution if he doesn't have any employer contributions made to the Plan for 6 months.

Can a Plan provide that, upon this occurrence, the Participant may elect any of the forms of benefit offered by the Plan? For example, if the Plan offers non-periodic installments, can that be offered for this termination benefit?

So if the Participant has a $100,000 balance, if he doesn't have contributions for 6 months, can he apply to take out $20,000 and leave the other $80,000 in the Plan?

Thanks.

Can you file your 1040 early i.e. before 4/15 and still have until 4/15 to fund your IRA?

A client has a number of participants who took out plan loans and then default due either to failure to make repayments or termination of employment. The client is filing under VCP and proposing to correct by reamortizing those loans to allow a longer period of correction for those participants who are within the five-year period for repaying plan loans. According to Section 6.02(6) of Rev. Proc. 2013-12, "the employer should pay a portion of the correction payment on behalf of the participant equal to the interest that accumulates as a result of such failure--generally determined at a rate equal to the greater of the plan loan interest rate or the rate of return under the plan." Does anyone have any thoughts on the meaning of the term "rate of return under the plan?" It might be easiest if the client took the pure earnings amounts on the previous year's Form 5500 and compared it to the beginning plan balance to arrive at the "rate of return under the plan." Thoughts?