A SH 401(k) plan was terminated effective 12/31/2013. The employer continued to deposit deferrals and match beyond this date. What is the appropriate correction? Should these amounts be refunded/forfeited?

Is there any overall age discrimination issue in

Choosing the youngest ees to meet the 40% test in a combo plan even if only using the .5% accrual?

Sole proprietor with no employees made improper elective deferral of $17,000 to SEP/IRA on 2012 tax return. Employer contribution OK. Error discovered after October 15, 2013.

Can I get a confirmation that this is the correct way to remedy this?

Amend 2012 tax return and remove excess elective deferral of $17,000 from line 28 of 1040.

Pay 6% excise tax on 2012 Form 5329. Include form and payment with 1040x.

Excess contribution remains in the SEP/IRA account, and there are no reporting requirements on custodian's part to the IRS (other than the 5498 which reflects the total contributions made for 2012, including the excess contribution).

Carry forward $17,000 to 2013 as a deduction, subject to the 25% limit .

Is the 5329 the proper form to report and pay this 6% excise tax?

If the $17,000 is completely applied on the 2013 tax return, does that mean there is no more 6% excise tax required to be paid?

This may not be that uncommon, but I can't say I've seen it.

403(b) plan has custodial accounts only - not annuities. Plan provides for hardship distributions on deferrals. So far, so good. However, the employer allowed hardship distributions from employer contributions, as well, and disn't restrict it as they were told to do.

This happened on 5 out of 60 or 70 participants. There's no allowable SCP correction by amendment on this, as there might ordinarily be on hardship issues, because the plan can't provide for hardship withdrawals on employer contributions in the custodial accounts. So, this is an overpayment that would need to be corrected under Section 6.06(4) of Revenue Procedure 2013-12. This means the employer must take "reasonable steps" to have the overpayment

returned, with interest. Well, since these were hardship, chances of getting it returned are about nil. In this situation, there's no requirement for the employer to "make up" any overpayment that isn't returned.

So here's my question - it seems like the only "piece" of the correction that still applies is the notification to participants that this wasn't an eligible rollover distribution. Well, they already know that - they were informed at the time that they took the distribution that it would be subject to 10% penalty tax if they didn't meet one of the other exceptions. So really, what is the actual correction here? I can't see what it might be, other than to "NOT DO IT ANY MORE."

Is there any actual correction that can be done, other than a basic letter attempting to recover the impermissible distribution plus interest? And when that doesn't happen, end of story? Anyone had any experience, or audit experience on such a situation?

Folks, I'm on the Corporate side of the aidle now - been out of consulting for awhile. We have a new match in our plan and we use prior year testing. Last year's NHCE ACP was 0.42% from after-tax contributions and one member of the controlled group that had a match, but I'm expecting the introduction of the match (50% up to 6%) to the larger population to significantly increase the NHCE ACP. Since we use the prior year method, I expect HCE's will be signficantly limited from an ACP perspective. I think we can shift a full percentage point from the ADP test, but if that is not enough and we want to use a bottom-up QNEC to pass the test, can we use the forfeiture account to fund the QNEC? Is it permissable to use a combination of methods to pass ACP, i.e. shifting AND QNEC.

Are there any testing gurus that can offer advice?

LL&P

Spock

A participant retired in 2013. He was over 70.5. He took his 2013 RMD and rolled over the balance to an IRA. He is now getting a contribution for 2013 in March of 2014, i.e. the 2013 receivable. Does he have an RMD for 2014 to take first before rolling this amount over? If they ignore the receivable for 2013, then his account balance was zero on 12/31/13.

Just wondered if anyone had any thoughts on the following - excerpt from a discussion among "DB people" - which I am not!

A little background - fairly young - mid-30's S-corporation owner, no employees, app. 200,000 in high 3-year average compensation, looking to potentially start a DB plan. The discussion was on which method to use to get maximum contribution, and whether there are any potential downsides to using the 10 year approach? I'd appreciate any thoughts.

When designing a new plan, and coming up with a formula, I have usually been taking the conservative route and using a unit credit formula that funds for 100% at NRD when taking into account the number of years to retirement.

So for example, if a 40 year old was interested in setting up a one-person DB plan, and wanted to know what type of annual contribution he could expect, I would probably set up a 4% per year formula for 25 years of participation assuming NRA of 65. My question is in this example, could I do 10% for 10 YOP? This person would be limited by the 415 $ limit and I'm just trying to figure out what the plan would look like once he's accrued the full benefit. There may be COLA increases for the 415 $ limit, but otherwise wouldn't he be keeping the plan for 15 more years (age 50 to age 65) with the chance that there may not be much in the way of deductible contributions during those years? I just don't know if I have flexibility to use a formula that accrues the benefit quicker than the number of years to retirement. If so, would it make sense to do so if someone is interested in higher annual deductions now.

Response:

The formula is limited by IRC section 415, which phases in the DB dollar limitation over 10 YOP and the 415 percentage of compensation limitation over 10 YOS. For a very-high-paid owner, the DB dollar limitation will be lower, and hence will apply. Thus, even if you give a 100% per YOP formula, the 415 limit regulations effectively converts the formula into a 10% per YOP formula for the very=high-paid participant.

The 10% x (YOP not > 10) x AvgComp is the most common formula I see for one-person plans. It is simple, easy-to-understand, and it corresponds approximately to the DB 415 limit phase-in.

After representing the Pension Board for nearly a decade, the attorney in question admitted his law firm had previously represented the Plan Sponsor during a restatement of the Plan Document.

Several months later, when the attorney was asked to provide written disclosure of the services his law firm had provided the Plan Sponsor, he now claimed his law firm had always represented the Pension Board. The attorney added, the prior Pension Board had authorized his law firm to work with the Plan Sponsor's representative to restate the Plan Document.

However, provided that prior Pension Board was a public body, as defined by Michigan law, the public record of that Board should support the attorney's written disclosure - but does not. Nowhere in that Pension Board's public record does such an authorization exist.

This may be a ridiculous question, but is this a conflict of interst the current Pension Board should deal with?

Previously, the Pension Plan Document (governmental plan) provided for a 5% COLA benefit, which, on an annual basis, was factored into the Plan's Normal Cost. Employee contributions (5-6% of their pre-tax gross wages) were deducted from that Normal Cost, and the employer paid the balance in the form of Annual Required Contributions (ARC). This process had went on for 15 years when the employer successfully reduced the COLA benefit from 5% to 2.5%, retroactively.

As a result, Plan assets that were reserved for a potion of the 5% COLA were now used to offset the employers future ARC. This description may be over simplified, but did this offset violate the Exclusive Benefit Rule?

I should add, because this Plan is situated in the State of Michigan, there are statutory requirements that require Plan assets to be held for the exclusive benefit of Participant's and Beneficiaries (PA 314).

Pretty sure I've researched this in the past but is there a de minimums refund limit that you don't have to make? We have 2 ACP refunds, one for $1 + earnings and another for under $100.

Unfortunately I think the answer is we need to make these refunds but just wanted to know if there was something I was missing.

Is there a listing of who the eligible employers are for a SEP? We're looking at a quasi-govt that has a SEP.

The Final rules came out on February 14, 2014. Does anyone know how the measurement period would work for a plan that has a September 30th plan date? I noticed in the regulations that the measurement period can not start later then July 1, 2014. However, the measurement period can not be longer then 12 months and the administrative period has to be less than 90 days. Please help.

I believe that a plan that covers employees is generally called an ERISA plan and is safe from creditors.

Can anyone point me to where that is explained in regs?

Thanks

A HCE took a full distribution from the 401(k) plan on 11/20/2013 and continued to work. He rolled all of these funds to an IRA> He resumed making deferrals to the 401(k) in January of 2014.

He is due a ADP refund from the failed 2013 test. Would it be okay to refund his 2014 deferrals to correct the failure? Or will the IRS deem a portion of his rollover ineligible, meaning that the refund amount should come from the IRA?

Can a small profit sharing plan that otherwise meets the requirements for filing a Form 5500-SF but has a life insurance policies file a 5500-SF? Do the policies qualify as "eligible plan assets" or does that fact that there is insurance in the plan require a Schedule A, thus requiring a 5500?

I have a heckuva mess on my hands and need some help sorting out the solution.

Client was sole prop/no employees in 2012, and opened a SEP/IRA with Vanguard in June 2013 (missed the solo 401k setup deadline)

Contributed a total of $32,909 to the SEP in June 2013 for tax year 2012, of which $17,000 was erroneously included as deferred compensation, and is an excess contribution. This mistake was just discovered this week.

Formed S Corp in early 2013, and opened a solo 401k with Vanguard also in June 2013 for 2013 contributions. No employees.

Salary deferrals for 2013 reported on W-2 as 12DD are $17,500, but only $14,318 has been contributed so far. Remaining contributions to be made by April 15 to bring the total employee contributions to $17,500.

Employer contributions to the 401k for 2013 total $14,530.50. There are additional employer contributions accrued on the books, but have not been made yet.

My questions are:

1. Can I get the plan administrator (Vanguard) to return the 2013 employer contributions to the 401k of $14,530.50 without penalty if done so before the tax filing deadline plus extensions?

2. Can I recharacterize or rollover the SEP/IRA excess employer contribution of $17,000 into the 401k plan without triggering penalty or a taxable event, since the SEP/IRA contribution was made in June 2013?

3. I realize I have to file an amended 2012 tax return for the client, but because she was a sole prop in 2012, there are no amended W-2's to deal with.

Any help or advise is greatly appreciated. I am sweating the penalties I will have to pay if this scenerio isn't feasible.

I think there's a way now to terminate am ERISA 403(b) plan invested in individual annuity contracts (something about assigning the contracts to the participants).

Questions:

1. Does the vendor/insured have to "agree" with the assignment or can the employer make the assignment unilaterally (just send the vendor the assignment and file a final 5500 showing all assets distributed)?

2. Anybody had any experience they're willing to share on doing this with TIAA-CREF?

Thanks

The Internal Revenue Service does not have a determinations program (except for its recent prototype program) for 403(b) plans.

In the 1980s and 1990s, some charitable organizations obtained letter rulings that were, in practical effect, similar to a determination on the form of the employer's plan document.

Is that still possible? For an employer that does not want to use a prototype document, can one request a letter ruling that contributions made under the plan stated by the document submitted would get the Federal income tax treatment of IRC section 403(b)?

Can anyone recommend a good training program/courses for cafteria plan administration? Something similar to programs that ASPPA & NIPA have for retirement plans.

Thank you in advance for any guidance.

Hope you can help a debate we are having . . . .

As a participant ages and would fall into different target date funds, does all of his money move into the current appropriate fund?

Or does the "old" money stay where it is and only the "new" money goes into the "updated fund?"

It would make sense that all of a participant's money would be in the same current appropriate fund based on age.

Even if the target date fund is elected rather than a default, would the funds move based on attained age?

Thanks!