I have a client that has a cash balance plan. In May of 2013, he froze his benefit because he did not think he would be able to afford it. After year-end. he realized he could afford it. If we amend the plan to unfreeze his benefit and reinstate the benefit he was getting in prior years, is that considered discriminitory since we are not increasing the NHCE benefits in the amendment (the NHCE beneft was NOT frozen in May)?

If tested with the plan, it passes, but if just the amendment was tested, it clearly would not pass since we are giving an HCE an allocation with no NHCE allocation.

Are all amendments after year-end considered corrective amendments?

I have a client that has a safe harbor match with profit sharing. For 2013, the profit sharing allocation is pro-rata.

Is it possible to amend the 2013 plan to make each participant that own group? Will this cause the plan to lose it's safe harbor status and possibly effect the ADP test?

Are all amendments after year end considered corrective amendments?

I know I could set up a seperate profit sharing plan and just merge the two plans next year, but this is a last resort option.

Are monthly installments payments over a period of 10 years or more paid to the participant from a 401(k) plan's trust considered an annuity? A question came up that if a participant is under age 59-1/2 (under 55 if separated from service) s/he should get a Code 2 on Form 1099-R as this type of installment payment is an annuity. Many recordkeepers tax report these as Code 1.

If you consider these annuities, please provide the applicable cites. Thank you.

Are 409a employee contributions exempt from New Jersey State tax at the time of the deduction from employees check?

Rules seem to be very vague or unclear at this point

So, the tax department where I work recently questioned whether a leveraged ESOP that we represent is required to issue a Form 1099-INT to the former shareholders who are carrying the financing for the ESOP's purchase of stock. This is the first time I have encountered this issue and cannot find any guidance out there. Has anyone dealt with this? Does anyone know of any guidance that would dictate whether the ESOP is responsible for issuing Form 1099-INTs?

IRC 6041 says that persons (including qualified retirement plans - Treasury Regulations) engaged in trade or business need to report payments that are greater than $600 to the IRS, but does not state what activities rise to the level of "engaged in a trade or buiness". Alternatively, IRC 6041 excludes interest governed by IRC 6049, which says that every person (including qualified retirement plans) who pays interest in excess of $10 needs to report this to the IRS. I cannot find an exception that applies to relieve the ESOP of this obligation, but I have never known of a leveraged ESOP that issues Form 1099-INTs.

Please help.

Hi,

Plan is top heavy for 2013, safe harbor 3% and employee deferrals are the only contributions for the year. Compensation is considered from date of entry (7/1 in this case), a participant enters on 7/1/13 and is employed on last day. Would the new participant's 3% safe harbor contribution be based on compensation from his entry date of 7/1 or their full plan year compensation?

I believe that since only safe harbor contributions & deferrals are funded for the year they are considered not to be top heavy and can use the compensation from 7/1 on for the 3% allocation, am I off the mark? I know any PS allocation would be full year compensation just fuzzy at the moment on the safe harbor..

Thanks.

Plan year runs 2/1 - 1/31. Participant terminated in August with a year of service. Resolution to terminate was executed in January. Would participant fully vest despite terminating 4 or so months prior to formal termination? If not, a portion of her forfeitures will be reallocated to her.

It is my understanding that the quarterly participant statement falls under both the IRS and DOL electronic disclosure requirements. Is there any way under either set of rules that a participant could NOT be allowed to request a paper copy in lieu of the electronic version?

Code 2 (early distribution exception applies) says "A distribution from a qualified retirement plan after separation from service in or after the year the participant has reached age 55.".

Does a plan termination count as a "separation from service" for these purposes? Someone is age 56 and takes a cash distribution from a plan because the plan terminated. Would this be Code 1 or Code 2?

I have a client - controlled group. Each employer has their own plan, but for testing purposes, the plans are aggregated.

It appears during some prior plan years, the documents were not updated to add additional participating employers to each plan document.

The recordkeeper suggested filing under VCP to bring the participating employers into the plan - note, the employees in the participating companies have been participating in the 401(k) feature. The recordkeeper is filing a VCP for each plan.

Since they are a controlled group, can one VCP filing be done for the plans. This may reduce the over cost of the filing.

thanks for your assistance.

Not sure if I'm splitting hairs or not. Plan authorizes forfeiture to be "added to the Employer's contribution under the Plan." Other than a SH Nonelective, the employer contributes 5% PS during the plan year. At the end of the year, the employer missed allocating the 5% PS for bonuses.

Since the employer resolved to contribute 5% for the year, could I use some of the forfeiture for a true-up of the PS? In a strict sense of the plan language, it seems that the employer would have to contribute the amount for the true-up, then allocate the remaining forfeiture.

What do others think?

I know this has been discussed before, but sometimes viewpoints change, or sometimes the IRS says things from the podium that indicate a change in their approach.

So, for ADP testing and coverage testing, in the absence of known clear guidance, my own viewpoint is toss them out of the testing entirely. Should be the same for rate group testing as well. If you leave them in, it seems to unreasonably distort the results, either "for" the NHC or "against" them.

Same for participant count on 5500 forms? Seems like for consistency, you'd have to not count them here either.

Thoughts?

I'm looking at my first floor offset DB plan. This is a takeover. The company has 30 employees and the plan does not exclude anyone other than non-owner HCEs. Eligibility is 21 & 1.

Spreadsheets show offset calculations for the entire eligible group (all 30 eligible ee's), however only the 3 owners end up with a DB accrual after the DC offset.

The prior SB and PBGC filings have shown a participant count of "3". I would have thought that the others are participants, it's just that they get completely offset. What is the correct way to count participants in a floor offset plan?

Plan fiduciary of a $25m, individually designed money purchase plan does not want to seek an updated Determination Letter. Quoted cost to restate plan is only $5k plus the IRS User Fee, but client believes that cost is not justified because plan is regularly updated. He really thinks that he is doing right thing for participants by saving them money.

What arguments would you use to convince this client otherwise?

Does the Irs publish or, does anyone else publish a listing or summary of corrective actions that have been approved in the VCP program.

The EPCRS guidance is certainly helpful. However, there are many situations and fact patterns which just arent covered in there. It would be very helpful to have more examples of what would be appropriate correction methods.

I have a plan I took over that has over $7200 in forfeitures that needs to be used as an allocation/spread to the plan. the last year this profit sharing plan made an allocation was 2008. the principal owner is basically retired and his current Sch c gross is less than his expenses. His 2 sons terminated 12/31/2008 and operate as sole props. Owner pays the 2 employees of the office.

the bulk of these forfs occurred in 2006 plan year with more being added in 2008. the account has gained since 2006. How do you think we should allocate the forfs? This is a bit ugly....thanks for your thoughts

Corbel PT 401k. Participant is 80 and minimum distribution will be $50,000 for 2014. Can this participant take $6,000 per month until the account balance is depleted (i.e., more than the "minimum")? I say yes because the a) refers to the "minimum" required distribution, and b) we did elect that installments are allowed with respect to minimum distributions. So while we do not want installments available for anyone, if Grandpa wants them, we are ok with that. It is not eligible for rollover because it is substantially equal installments over more than 10 years (in this case, it is 20 years).

Top Heavy Test: I understand unrelated rollovers are excluded from the amount of the participant's account balance as of the determination date. But what about subsequent transactions (in-service withdrawals of rollover money) associated with those dollars? Do these transactions get added back? Plan Document allows for in-service withdraw of rollovers. Example:

PPT Jones deposits an unrelated rollover of $100,000 into Plan A on 7/1/2011. Jones takes an in-service withdrawal of rollover of $50,000 from the plan on 7/1/2012. Jones does not contribute deferrral and has received no employer contributions. As of the determination date of 12/31/2012, Jones has an account balance of $50,000.

Question:

1. Would Jones be reflected as having an account balance for the top heavy calculation of $50,000? (account balance as of 12/31/2012 $50,000 minus $50,000 unrelated rollover attributable to account balance + $50,000 five year inservice withdrawal rule ) OR

2. Would Jones be reflected as having an account balance for the top heavy calculation of $0.00? (account balance as of 12/31/2012 $50,000 minus $50,000 unrelated rollover attributable to account balance and no reflection of in-service as it was part of an unrelated rollover)

Thank you in advance for your opinions.

I apologize if this has been asked, couldn't find it by searching...

Auto enroll plan participant opts out within the 90 day window and is refunded her deferrals.

End of the year arrives and Employer does a match.

If she otherwise meets the criteria for match eligibility, is she entitled to match?

I believe the opt out is as though those 401(k) contributions did not exist and think she should not receive match, but the software is "thinking" differently!

For a small plan that allows roth deferrals a participant gave a check to the plan sponsor who then made a large contribution to her roth 401-k money source (did NOT go through payroll). Is this allowed with a roth 401-k and if not what would be the correction?