Does anyone know the regulations about rechacterization of per-tax salary reduction to a ROTH within a 401(k) Plan. If it can be done what are the limits as to the amount permissible? Is there an annual limit?

Has anyone read/used this book? Is it worth buying - I guess what I mean by that is does it address sort of real life situations, with good examples, or is it just statutes,regulations, and theory?

Employer would like to make the following Safe Harbor Match...

100% of the first 3%

50% of the next 2%

1. in the aggregate better than the basic match

Does the 50% of the next 2 cause this to fail as an enhanced match because it is an escalating formula??

So confused???

Thanks

Plan A has an unusual feature that strikes me as impermissible. If a participant submits a benefit application mid month (e.g., January 7), when the first check is cut (say, February 15), in addition to the full monthly payment for February it includes a "make-up" payment for the fraction of that month from the date the paperwork is submitted through the end of that month (here, January 7 through January 31).

This seems to either (i) violate the requirement that the annuity starting date be the first day of the first period for which the benefit is paid [§ 1.401(a)-20, Q&A-10], by making it the day the paperwork is filed rather than February 1, or (ii) provide for payments for a period before the annuity starting date (which can't be earlier than February 1, as I see it).

Is there some way this is permissible? Thanks.

Under Section 1.125-4(e) a mid year change is permitted when an employee or spouse "Becomes entitled to coverage (i.e. becomes enrolled)" in Medicare Part A or Part B.

If an employee does not actually enroll in Medicare when first eligible, does the actual enrollment in a mid-year in a later year (say beyond age 70) qualify as a change permitting him to drop health care under the employer plan? Premiums are paid pre-tax under the cafeteria plan.

I am wondering what the purpose of the parenthetical in the regs is and will it help this employee who has now decided he wants to enroll in Medicare, but he won't be covered in time for start of the plan year.

Roughly sixty employee company, half of the eligible are deferring, 50% of first 5% match, bad ADP and ACP but not close to being Top Heavy.

A Plan is going to start Safe Harbor Matching in 2015 (Enhanced Formula). I'm designating that Pre-2015 matching accounts (non-safe harbor) remain subject to vesting. Forfeitures may happen after 1/1/2015 in these prior accounts. If the amount of forfeitures is greater than Plan expenses, it would be great if they could be used to fund (reduce) some of the Safe Harbor Match.

The document we use is from one of the big providers and an adoption agreement provision is "Forfeitures will be used in the following manner:" (check box) "Any permissible method (restore forfeitures, reduce Company contributions (or reallocate as Company contributions) made pursuant to Article 4 or to pay Plan expenses)".

In response to a query of whether the forfeitures could fund part of the Safe Harbor Match, the document provider said:

"There is nothing in the plan document that specifically prevents forfeitures to be used to fund safe harbor contributions but the IRS has noted verbally that they do not agree with that position and will be providing clarification in future regulations. At this point it is a plan by plan decision on if they want to proceed with using forfeitures to fund safe harbor contributions."

I'd prefer to

a) reduce (fund) the Safe Harbor contribution by the forfeitures,

b) If plan expenses could soak them up, I'd like pay then, or

c) allocate to those deferring in some proportion

Any experiences anyone would like to share?

Am I correct in assuming that the recent IRS Notice 2014-54, addressing the allocation of distributed funds made to multiple destinations, between pre and after tax amounts, is only applicable to "pooled retirement plans", and not "allocated plans", such as John Hancock, etc?

Thank you very much for your insights!

An employer recently purchased another factory in another state. Currently we are within the transition rule period (not sure if it matters).

The company that was aquired also has its own 401(k) plan that has yet to adopt the purchisors plan. An employee from the purchasing company is leaving that company to work at the new facility. The plan sponsor wants to term him and give him a rehiredate and consider him as an employee of the other new firm. They want to distribute his assets to the new companys 401(k) plan. In essence he would no longer be an employee of company A but now an employee of company b.

Can we do this?

Please bare with me i am a nube, if more info is needed i will be happy to oblige.

A DB Plan is attempting to terminate but one of the participants refuses to elect to receive their distribution. They believe they have been "short changed" by the Plan and is threatening legal action.

what can the Plan do if she won't elect to take a distribution? Can the trustee rollover her benefit (well over $5,000) into an IRA for the participant without her election, or purchase a deferred annuity for her?

Thanks for any guidance you can give.

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?