I am hoping for guidance.

If an employee has excess deferrals for 2013, what are the mechanics for getting those funds refunded?

The excess deferrral arose from the participant deferring 15,000 and the company putting in a 40% vested contribution of 10,000. That gets deferrals to 15,000 + 4,000 or 19,000 with excess deferals of 1,500.

Is the 1,500 returned to the employer and they pay out on a Form W-2?

If this is discovered after the end of 2013 - does an amended 2013 W-2s need to be done?

Thanks much

• Our Adoption Agreements identify the last day of the plan year as the valuation date.
• Our actuary uses the first day of the plan year for the actuarial valuation and Schedule B
• On this basis, only participants on the first day of the plan year accrue a benefit

As a result, we have several participants in one calendar-year plan who entered on 07/01/13 and so did not accrue a benefit for 2013. Are these people non-benefitting participants, or can the 410(b) test be run as of the beginning of the plan year, which would make them excludable?

We have a number of government DB plans (city, fire, police). The plans are all contributory, and the employee contributions are employer pick-up contributions. I have two separate 1099-R questions.

For surviving spouse pensioners, we have always used "7" as the distribution code. They are receiving a reduced portion of the participant's monthly benefit as an annuity for their lifetime. A few of them have called us saying that the code should be "4". That is what their accountant is telling them. Input?

For refunds of employee contributions, we have always used "7" as the distribution code here too. It seems that it should be 1 or 2, based on a variety of circumstances like age (59 1/2), age at termination (55), police or fire (age 50). whether Alt Payee or beneficiary. My question to the group is, does is make any difference that these are employer pick-up contributions?

Thank you in advance. This is my first post, I hope I was clear.

Anne

I have a client with a calendar year 401(k) plan. The plan currently has a non-integtrated, pro-rata allocation for employer contributions. Unbekownst to us, the client added a cash balance plan just prior to year end.
The cash balance plan uses a non safe harbor allocation method. The cleint has come to us to amend the 401(k) plan to provide for the non safe harbor alocation. We told them we could do it for 2014 but not 2013 saince they requested the change after the plan year end. The client's financial advisor has come bact to us and requested that we amend the plan retroactively under 1.401(a)(4)-11(g). I am not sure this is really a corrective amendment for the 401(k) plan but I did see one example in the regs that indicates that if the client has 2 plans, the correction can be made in either plan. The plan is not a safe harbor plan.

Thanks for any help.

Is there any way to merge a 401(a) plan into a 403(b). Is it specifically prohibited in the regulations? I saw threads on the 403b to 401a merger.

An expansion on the topic from a few days ago, and I'm not sure about this question.

Background: You have a controlled group, corporations A and B. Each corporation has a separate 401(k) plan. Assume 401(k) deferrals and match only, no other contributions.

For employees who have met age/service and are eligible:

Plan A has 10 HC, 9 of whom are deferring. It has 90 NHC, 80 of whom are deferring.

Plan B has 2 HC, both of whom are deferring. It has 10 NHC, 7 of whom are deferring.

When testing the plans separately for coverage using all employees from both plans, Plan A passes with no problems. But Plan B does not pass.

Here's my question - does Plan A get "tainted" or potentially disqualified due to the problems with Plan B failing coverage testing? Or is Plan A ok, and just Plan B has the problems to deal with?

I'm really not sure on this.

When an investment adviser says they do all of their 401(k) plans "open architechture", what do they mean?

Are two separate 401(k) plans that are sponsored by two separate employers in a controlled group required to be aggregated for coverage and nondiscrimination testing? If so, where does it say this in the regulations?

Ten unrelated engineers own equal shares in a partnership A that provides engineering and architecture services. These ten people also own equal shares in partnership B that provides building inspection services for lenders and purchasers.

The engineers primarily spend their time working for A and are paid by A for those services. However, they also do building inspections for B and, are paid by B for those services. The partnerships have separate management, separate offices and are otherwise separated.

They are not a control group because the 80% test is not met. However, could they be deemed to be an A affiliated service group? They would meet the ownership test by attribution(414)(m)(2)(a)(i). However, partnership A itself is not providing services to B or, regularly involved in providing services to B. It is the owners who provide the services.

414(m)(2)(a)(ii) requires that the organization be providing services.

That said, there doesnt appear to be any other authority which explicitly confirms that-although the statute would control of course.

Has anyone reviewed this or found any authority which specifically addresses whether this would be an ASG?

If a plan has different vesting schedules depending on DOH, is it subject to BRF Testing?

For example, if you are hired before 1/1/2013, you are 100% vested in your match. Anyone hired after 1/1/2013, you are subject to a 5 year graded schedule.

Ten unrelated engineers own equal shares in a partnership A that provides engineering and architecture services. These ten people also own equal shares in partnership B that provides building inspection services for lenders and purchasers.

The engineers primarily spend their time working for A and are paid by A for those services. However, they also do building inspections for B and, are paid by B for those services. The partnerships have separate management, separate offices and are otherwise separated.

They are not a control group because the 80% test is not met. However, could they be deemed to be an A affiliated service group? They would meet the ownership test by attribution(414)(m)(2)(a)(i). However, partnership A itself is not providing services to B or, regularly involved in providing services to B. It is the owners who provide the services.

414(m)(2)(a)(ii) requires that the organization be providing services.

That said, there doesnt appear to be any other authority which explicitly confirms that-although the statute would control of course.

Has anyone reviewed this or found any authority which specifically addresses whether this would be an ASG?

What are the implications and/or penalties to the company, if a plan adminstrator does not get the Sarbanes-Oxley Letter mailed to participants within the required timeframe (e.g., 30 days from the freeze date)?

We have an old MPP effective in the early 1970's. It has always contained a provision as follows:

"Each employee who is eligible to participate and who desires to participate shall contribute 9% of his compensation for each plan year...." The Employer matches the Employee contribution.

For the first time ever, the Employer has an employee (a re-hire who formerly participated) state he does not wish to participate. The Employee was paid out when he terminated a couple of years ago.

Is it permissable for this employee to choose not to participate? Even though this is an MPP, does this bring into play the opt-out provision in the 401(k) regs?

Any thoughts are appreciated.

Note: These are after-tax mandatory employee contribuitons.

John & Mary Smith are getting divorced. John has 600k old 401k and 175k in new 401k and he earns approximately 115k a year while Mary will earn 25k in 2014. Their attorneys mutually agreed along with the Smith's that John should cash out his 600k 401k to pay off the house for Mrs Smith (370K). I came onto the seen after John removed 600k from his retirement without a QDRO (Qualified Domestic Relations Order). I have put the breaks on this Ill-advised scheme. However, the custodian withheld 120k for taxes and penalties. Is there any way to get this withholding returned quickly? They now have 45 days to correct this IRS disaster. Mind you that the effective tax rate on 740k is 53% fed, State, and penalty. Apparently neither attorney considered the sheer tax onslaught this would lead to (400/hr doesn't by much these days). Nor did they consider the alternatives (72T to pay the mortgage over time). However, this 120k withholding will still kick their combined effective tax rate up considerably if it cannot be put into an IRA within 60 days!!! The Smiths are still legally married so this occurred before divorce was finalized (dumb). Any advice, direction would be great. I'm at a loss...

Background: Sally worked for ABC, ABC adopted XYZ 401k Multiple Employer plan. Sally then opens her own business and adopts the same XYZ 401k Multiple Employer 401k plan. Sally and three employees, to my knowledge, never termed, who knows. Sally and three employees assets are moved from one participating employer to another. No distribution was processed because of the MEP, so no rollover coding on the assets. Sally's assets are substantial, and of course the plan appears to be top heavy for the first year and subsequent years. The plan has since been moved to an individual 401k platform.

Plan document reads:

2.7 Transfer to/from a participating employer. The transfer of a Participant from one Participating Employer to another Participating Employer under the Plan shall not affect his rights under the Plan, and all amounts credited under his accounts described in Article 8, year(s) of Service and Credited Service accumulated under the Plan and other rights and benefits he is entitled to under the Plan shall continue to his credit after such transfer. The transferred Participant will carry with him to his new Participating Employer's Plan his accumulated account balances, vesting and eligibility service, and no termination of employment or One-Year Break in service shall occur as a result of the transfer. However, such transfer shall constitute a termination of employment from the prior Participating Employer only for purposes of ceasing Elective Contributions, Roth Elective Contributions, Nondeductible Voluntary Contributions and Participating Employer contributions for the transferred Participant. Matching Contributions and Non-Matching Contributions for the Plan Year of the transfer, if based on Compensation, shall be determined using the Participant's Compensation with each Participating Employer.

I was not employed at the time this transaction took place......

For top heavy reasons, I would have preferred to have a distributable event so the funds could have been rolled in to exclude the assets from being calculated in top heavy calculation. Under the MEP, the assets just get moved from one employer to another. (See above)

Is this plan just hosed in regards to top heavy? Of course, the TPA, didn't know Sally was owner, so the plan hasn't been top heavy yet.

Anyone see any wiggle room to have the assets excluded from the top heavy calc?

Thanks

Mr Bagwell

Can anyone provide a link to something that makes it clear that the K-1 an S-Corp owner gets isn't considered compensation? Just not having any luck putting my finger (or mouse) on it. Thanks!

Working through a census, we found compensation for someone who was terminated two years ago. We asked the client if it was a rehire, and they said that this was a commission from a long-term job that just completed; their policy is to not pay commissions until the job is completed, including for employees who have left before it was done (presumably they pro rate it or something, I probably don't really need to know about that part).

So this employee was terminated in 2011 - clearly, by any sane definition of "post-severance compensation", this is past the timing period. Following the document would exclude this compensation. Is there anything that I need to be concerned about - excessive delay of payment or anything like that that could come back to haunt me later?

Thanks.

A non-5% owner who is retiring in March 2014 and turn 70 1/2 in June of 2014 would have a required beginning date of April 1, 2015. It's my understanding that the RMD amount would be calculated based on his balance at December 31, 2013. We informed the participant that he could take the first RMD in 2014 or wait and take one by April 2015 and take a 2nd by December 2015. The participant is requesting that, upon retirement, his entire account balance be rolled over to an IRA in 2014 and then he will take the RMD from the IRA by April 2015. I don't think this would be allowed, correct?

My hesitation though is that as of the date of retirement he has not turned 70 1/2; would it be possible for him to rollover the value before he turns 70 1/2?

I can't seem to find anything on this so maybe there is no limit. We are working on a correction to a plan that goes back to 2005. We are going to file for a VCP on the correction. The question came up about the 5500s. I was thinking you couldn't amend them after 3 years like many of tax returns but I can't find that in writing so I am thinking I am just plain wrong.

So I guess the questions is can you amend 5500s that old or are those years closed?

Hello. We just took over the document responsibility for over 120 clients of an investment firm.

The investment firm was the document provider using an Relius Standardized Prototype In review of the EGTRRA restatements done by the investment house, there are very few Final 415, HEART, WRERA amendments and no PPA amendments in the files. The Investment Firm indicated that they did not adopt any amendments on behalf of their clients, but each were to sign the amendment. Needless to say that did not always happen.

So, we are in the process os submitting all of the plans of the clients of the investment firm under VCP using a Group Submission. Has anyone done this lately? If so, can you provide an estimate of the time the process took and what you might have charged for the submission work?

As part of the submission you are required to notify all plan sponsors who adopted the plans, that the plans are being submitted to VCP. Does anyone have a sample letter that they have used to inform the plan sponsors of the Group Submission.

Thanks for any guidance you can provide.