A CPA is insisting that the one of the partners in a husband/wife partnership share of k-1 income on line 14a, which is less than the Guaranteed Payments shown near the top of the k-1 statement (forget the line item) should NOT be used for the pension calcs and further should not be split between compensation and contribution. Essentially he seems to be saying that the guaranteed payments would be treat like unto w-2 wages for a corporation in that they are not reduced or split by virtue of the contribution made on behalf of the owner. I did not have that understanding, but I learn new things from time to time, and would appreciate any others' opinion on this. thanks in advance.

Plan sponsor wants to close the plans to new participants while continuing to accrue benefits for existing participants.

A couple of questions:

Must the 40% participation test, the 410(b) and and the plan's average benefit tests include the employees that - in the absence of this freezing- would qualify to participate?

I vaguely remember that it may be an exception for frozen plans, but I am not sure.

Any citations?

Usually when freezing a plan, the amendment simply replace the plan accrual formula with 0.0%. Any special language for an amendment that continue accruals for existing participants but close the plan to new participants?

Any potential pitfalls - excepting the employees happiness- I should be aware of?

Thanks for your help

I just heard from a business owner that she was told that RMD's did not apply to SEP IRA's. Is this true?

Took over a small DB plan that excluded two physicians by name and highly compensated nurse practitioners. For the past 5 years, they have only had 4 physicians who met the eligibility requirements. All were HCEs and Keys. The plan passed 401(a)(26) in past years as 2/4 = 50%, which is greater than 40%. They now also have 3 nurse practioners who met the eligibility requirements. All happen to be HCEs and are therefore excluded from the plan. One NP was given a 1/2% of pay accrued benefit to pass 401(a)26. This was done with a corrective amendment.

The employer also happens to sponsor a profit sharing plan. In this plan all the NP's are excluded (they are all HCEs) so no problem with testing across both plan.

The DB plan indicates that the top heavy minimum is provided in the profit sharing plan.

Question: By bringing in the 1 HCE Nurse practitioner, they passed 401(a)26. Since she was not covered under the PSP she received no Top heavy minimum in that plan. Must she get a 2% top heavy minimum in the DB?

Employer started a new 401(k) safe harbor plan in August 2013. Problem: The employer has only been making quarterly contributions of the participant deferrals, as well as the safe harbor 3% contribution. His first quarterly contribution was made mid September 2013, and every 3 months thereafter. Therefore, this first quarterly contribution included about 1 1/2 to 2 months of salary deferral contributions that hadn't been withheld from participants comp yet. There are only 3 participants total. The owner is self employed, so his "early" contributions really aren't an issue. It is basically the other two participants that are an issue. And to complicate matters further, all 3 participants have self directed brokerage accounts. The employer does not want to make a PSP contribution for the 2013 year.

Among the many issues that are presented, what are the issues with the early deposit of the participant contributions? Can he just "go forth and sin no more" (start making contributions with each paycheck going forward)? If he does this, is the concern that the IRS would audit the plan and require him to reclassify the "early" participant deferrals as a PSP contribution instead? Which of course would mean that all the allocations from the beginning of the plan would be incorrect? Any other problems this would present if he doesn't reclassify it as a PSP contribution?

I started with a new company part time in May and changed to full time in June. Our benefits plan year begins July 1st. My company only offers a HDHP with HSA which I was not eligible for until August 1. Because I started part time in May, I was able to elect some benefits to take effect July 1st and was told by HR to elect health by July 31 to take effect August 1 on my eligibility date.

I erroneously elected for a general purpose FSA that started in July. When I elected the HDHP on July 31st I checked the next day and did not have coverage. Human resources informed me a few days later I could not have coverage with the HDHP because I had the FSA which made me ineligible for the HSA.

Is this the usual protocol? I now know I cannot have both a HSA and a FSA. Would my not being eligible for health insurance until August 1 allow a change in status for my FSA? I wish human resouces had alerted me not to choose the FSA when I was inquiring of them about my eligibility date for health insurance.

I just was asked by one of our defined benefit plan sponsors for the amount of a lump sum that was paid in 1987. I am unsure if our firm even administered the plan back then, and we certainly don't have information pertaining to the lump sum. Does anyone have any suggestions of how I might go about researching this?

Thanks!

I've found that an employer with a SARSEP can only add a 401k mid-year if they adopted a prototype (and not the 5305A-SEP). Is there any way to get my hands on such a document? The Plan was with Fidelity but Fidelity indicated that they used the 5305A-SEP.

Beyond the annual Certificate of Participation and the periodic Summary Plan Description is there any requirement to provide notice to a participant that they are eligible for a distribution from the plan?

Normally the distribution election forms and information are sent to the participant upon termination, retirement, etc. but if the terminated participant does not respond are you required each year to remind the terminated participant of his/her eligibility to receive there benefits?

I am adding a loan feature to a plan. Currently, the distribution rules call for spousal consent in lieu of a QJSA.

I have seen plans that did not have consent for distributions have it in place for loans.

Could we have the reverse situation wherein SC is required for distributions but not for loans?

(The owner wants a loan and there is some marital strife, and it seems unlikely the wife will oblige with her Jane Hancock.)

Having read a number of posts on this topic, I find myself still confused. Any help would be greatly appreciated.

Business owner is well over 70.5. Has been taking RMD for a few years. He dies. Spouse is only 60. She is the sole beneficiary.

From what I have read she must continue on with RMDs, but using the factor for her age.

It also seems that she can rollover the monies in the same plan (she is in the same plan with the owner), but she must take RMDs from her rollover account.

Lastly, what is the impact of rollong to an IRA?

governmental money purchase plan is thinking of amending, so that the 2% pick-up contribution now (mandatory for participation) will be changed to allow a range from which to elect (one-time, irrev). Question: Can existing participants change their pick-up amount on account of the amendment, or are they still subject to the prior election? if existing participants cannot change, then are only new participants able to take advantage of the amended pick-up terms? Tx.

Are health insurers required to maintain accurate claim history? I have had instances where the prior history has been deleted which indicates a much shorter claim processing time.

Owner (aka SpouseB) and SpouseA both work for a medical practice. SpouseA wants to name kids as beneficiaries and therefore Owner (SpouseB) must consent. Can Owner witness his own consent on behalf of plan administrator? Or is it foolish not to just get it notarized?

Does anyone have any information, or know of a report, that indicates the participation rates of exempt employees versus hourly employees?

Any information would be appreciated.

Thanks!

As we are now in the DC restatement cycle, I use this as an opportunity to formally review Plan provisions with my clients to see what is working for them and what might want to be changed (I discuss things with them every year but this is more formal).

Taking aside the issue with changing safe-harbor plans mid-year, I know there are certain provisions that cannot be changed if it makes it worse for participants. Retirement benefits is the first that comes to mind.

Typically, I could use a logical rule that says if it is going to "take away" a benefit from existing participants, then it is not allowed to be removed. Is that a rule set in stone?

What if a client is sick of handling loan repayments? Could they remove a loan provision going forward? I could argue that existing participants only deferred in the past because they knew they would have access to the money. But is that stretching it?

Besides the above, is there any list of specific provisions that can NOT be removed or made more strict when doing these restatements?

Thanks in advance.

One of our clients just sent me a copy of an IRS notice they received dated 9/1/2014. We sent in a 5558 for their 2013 plan year (calendar plan year) in late July.

The notice states it is for the year ending 12/31/2003, and the due date of the return is extended to 10/15/2004.

Anyone else seeing this?

Client has nonqualified ERISA plan. Wants to amend the plan to provide that if a participant "cost the employer money" (i.e. losing a large account or other signiciant detrimental financial result), management could, at their discretion, remove the participant from the plan and reallocate the contributions for that participant to other participants. Can they do this? The plan already provides for forfeiture of non-vested account if participant is terminated for cause, and forfeiture of vested and non-vested account if participant is terminated due to conviction of embezzlement, etc. However, now they want forfeiture of vested and non-vested accounts if participant costs them money but is not terminated.

We have a new client who is just adding Roth to their plan. Their payroll folks are asking about the order of deductions for people who might not have enough income to cover all deductions. Currently they are deducting pre-tax deferrals first, voluntary after tax second, then other things such as health insurance.

My gut reaction is that deferrals of any sort should be calculated first, but if there is a shortage the health insurance should be paid first. I'm also inclined to put Roth after pre-tax and before voluntary after tax. But I have no basis for those opinions.

Where would one look for an answer to such a question?

I'm not sure if this belongs in this forum or over in distributions. 401k plan has assets invested at large platform. Participant has been receiving RMDs for a few years and dies during 2013 before the rmd was distributed for that year. The beneficiary is a trust for the participant's children. Rather than make a distribution of only the RMD amount, the platform moved the entire account balance into an account ini the plan and named it "revocable trust for XYZ participant". the RMD was then distributed from that account. Is it permissible for a nonperson like this to be a participant in the plan?