If you aggregate a 401(k) and separate profit sharing plan to pass coverage, must you aggregate the Plans when testing for top heavy? Cites please.

Small 401k plan where one of the owners has an LLC with no employees (other than himself). We want to add the LLC as an adopting employer for the 2013 plan year to maximize the comp for the owner. It is a brand new LLC in 2013, and it would be a controlled group.

Plan is a safe harbor 401k plan. Anyone have a problem with doing this before year end. Let me rephrase because I know a lot of you would not do this. Is there anyone who would do this?

The potential bracket creep at distribution of NQDC participants deferring today and not already in the max tax bracket impacts these people for 7 to 9 years. Can take 7 to 9 years for the tax deferral benefits to outweigh the increased taxes - better off not deferring if don't plan to stay with the company / need the cash in the next 7 to 9 years.

With this being deferral election month - I'm curious approximately what percent of your client's NQDC participants are not in the maximum tax bracket?

Took over a non-electing church 403(b) plan, which originally was effective 10/01/2003. Plan document specifically states that eligible employee includes clergymen treated as self-employed individuals for purposes of the Federal Insurance Contribution Act. Plan document does not state that the church intended the plan to be a 403(b)(9). Plan was updated for EGTRRA, but not for PPA, HEART, and WRERA. It is my understanding final 403(b) regulations provide that self-employed ministers can only particiapte in a 403(b)(9) retirement income account. Therefore after 01/01/2009, self-employed clergy were not eligible to participate in the plan. An operational defect occurred and appropriate correction remedy would be to distribute excess salary deferral contributions back to the affected individuals with earnings, and matching contributions, attributable to the salary deferral dollars, would be forfeited to a suspense account to be used immediately as a credit towards future contributions.

What do you think?

Client owns 100% of two separate corps. Each has its own 401k. One (Plan B) is safe harbor match. The other (Plan A) is non safe harbor match. Plans have been separately administered for years and years. Client never told either tpa about the other until this year. So, testing on a control group basis was not performed until this year.

One plan (plan A) passes 410b ratio percentage test. The other (Plan B) does not. Plan B also fails the non discriminatory portion of the average benefit test. So, 410b coverage test is not passed.

Plan B is much smaller. Document is silent on correction method. However, it appears at first impression that the appropriate correction method for prior years would be to add Nhce employees from company A to Plan B so that Plan B can pass either the ratio or abp test.

That said, this will require many employees of A to be added to Plan B. And, many of the employees of A who would be added to Plan B are employees who have participated in Plan A and, received matching contributions from A.

Is this the appropriate correction method?

Is there another one?

If this is the appropriate correction method, what criteria should be used to select the A employees who would be retroactively included in the A plan. What level of benefit should they receive? Should there be a ' set off' for what they have already received from plan A

Any other comments are also welcome.

Thank you.

Client owns 100% of two separate corps. Each has its own 401k. One (Plan B) is safe harbor match. The other (Plan A) is non safe harbor match. Plans have been separately administered for years and years. Client never told either tpa about the other until this year. So, testing on a control group basis was not performed until this year.

One plan (plan A) passes 410b ratio percentage test. The other (Plan B) does not. Plan B also fails the non discriminatory portion of the average benefit test. So, 410b coverage test is not passed.

Plan B is much smaller. Document is silent on correction method. However, it appears at first impression that the appropriate correction method for prior years would be to add Nhce employees from company A to Plan B so that Plan B can pass either the ratio or abp test.

That said, this will require many employees of A to be added to Plan B. And, many of the employees of A who would be added to Plan B are employees who have participated in Plan A and, received matching contributions from A.

Is this the appropriate correction method?

Is there another one?

If this is the appropriate correction method, what criteria should be used to select the A employees who would be retroactively included in the A plan. What level of benefit should they receive? Should there be a ' set off' for what they have already received from plan A

Any other comments are also welcome.

Thank you.

Imagine a standard corporate 401(k) plan (not ESOP, etc.) with illiquid private company stock as an investment in the plan (<2% of plan assets). The company now believes that including the stock in the plan may not have been a good idea, due to additional fidicuary risk, accounting complications, limited liquidity, limited company growth, etc. They don't want to move the stock to another plan, but completely remove it from the existing plan somehow.

What are their options to remove the company stock, beyond terminating the plan? Can they have it valued by an independent third party (which they already do) and credit the participants with cash in the plan in exchange for buying back the stock? Or can they force the stock out some other way? I don't think they can force distribute the stock out to IRAs for each active participant, since there is no distributable event to make that legal.

Do they have any reasonable options to eventually get to a plan with no company stock in it? I haven't been able to locate any white papers or DOL guidance on this topic.

I have a propective client who wants to set up a regular profit sharing plan, not an ESOP, and contribute only plan sponsor stock. I’ve never done anything like this before. I’m not even sure our prototype would permit such an arrangement. Has anyone dealt with such an arrangement?

I can't find anything that explicitly prohibited this. However, I have questions.

1) Where does the stock come from? Treasury Stock If it is publicly traded, as this stock is, but thinly traded, how is it valued?

2) What about fiduciary concerns? It is unlikely that 100% stock would satisfy ERISA's fiduciary standards, especially 401(a).

3) Is there a better way to accomplish the same goal, without using an ESOP (stock purchase plan, etc).

4) Would it be better not to get involved as a TPA with an arrangement like this?

Thanks.

Does anyone have a problem running beginning of year valuations for Cash Balance Plans?

My funding target keeps getting based on my end of year account balance as a starting value instead of my BOY value......thoughts on how to correctly calculate this?

Here's an interesting situation.

You have two spouses, each of whom have their own sole proprietorship business. NO other employees. Spouse A who makes scads of money is setting up a DB plan. They are a Controlled Group, or I guess technically a Common Control Group, which has the same effect. Due to the minimum participation rules, spouse B who makes very little money must be included in the plan, since there are only the two of them.

We're having a discussion - one seems to be telling us that some of the costs for the benefit of one spouse must be allocated to the other – rather like a 50/50 partnership. I don’t think this is necessarily required – it seems like it should be two entirely separate calculations – one for each sole prop, based solely upon their own Schedule C income, as they are separate entities, even though part of a controlled group.

Am I missing something here? Are you aware of anything saying that two such spousal sole props in a controlled group are treated as a partnership for cost/deduction purposes? I know there is “joint and several liability” under IRC 412(b)(2), but in the absence of any regulations, wouldn’t it be permissible/reasonable to simply allocate as per their own calculation based upon their own individual Schedule C’s?

Alternatively, is it reasonable for her to pay the entire contribution, as there is joint and several liability?

I have a situation where a Profit sharing plan invested in a partnership whose activity is investments and hedging much like a hedge fund. The plan has more than a 50% interest in this partnership but is a limited partner with no control or decision making functions. The other partner is the general partner ( friend and broker) who manages the investments. The DOL audited this plan and it's their opinion that this is a party in interest prohibited transaction, either because of the > 50% direct or indirect capital interest in the partnership or the 10% or more of direct or indirect capital partner interest of a party in interest. This has huge consequences because its investment in the partnership is 600K. My question is, since the plan is a limited partner and does not exercise any control of the partnership investments can the plan not be considered a party in interest and therefore not be considered a prohibited transaction. Cannot find anything that is on point with this fact pattern. Thanks for any help.

I don't think this is correct but someone told us that it is possible to have loan repayments less frequently than quarterly.

This comes back to a loan problem we had where the participants amortization schedule was set up annually for a home loan.

Is there any difference for a home loan from a 401k, the period can be longer than 5 years because it is a home loan but the repayment must be quarterly correct?

We received a "Sample DRO" for approval prior to submitted to court for judges signature. It awards 50% to the Alternate Payee. Participant wants Hardship for the rest of the money. Our QDRO procedures allow the Plan Administrator to put a hold on the participants account.

1. Participant needs money for principal residence. Any way to allow to get his 1/2 prior to the final DRO which allows us to segregate the account?

2. In order to maximize the hardship available for the participant, can the DRO pay out of just EE, Deferrals or must the 50% be taken from all sources pro rata? Does the basis used to calculate the hardship available get prorated by 50%?

Thanks

P

Currently have a 3/31 non-safe harbor 401(k) plan, which coincides with the plan sponsors year end. Due to the complexities of data gathering and testing issues (plan is using calendar year compensation), we are considering encouraging the plan sponsor to change the date of the 401(k) plan to a calendar year plan. I have come up with the Pros and Cons of the change as follows:

Pros: 1)more easily understood by the plan participants as the annual statements will include the same information as the W-2, 2)administration/testing of the plan will be less complicated 3)margin of error providing census information will be lessened

Cons: 1)Plan amendment will be necessary with notification to participants necessary, 2) plan modifications will be requried, such as entry dates will need to be changed to 1/1 and 7/1, from 4/1 and 10/31 3)analysis will be needed to determine effects on vesting and employer deductibility of contributions.

This plan was subject to audit in prior plan years but is currenly in the exception stage due to a decrease in plan participants. The count will rise within the next year and will then again be subject to audit.

Am I overlooking any issues I should be addressing with this type of change? Any thoughts would be appreciated.

Have looked high and low for some guidance on this:

Under ACA, can either the employer or employee deduct premiums for a Medicare Supplment? This employer is well under 20 employee so Medicare is primary. Currently there are no group health benefits offered, although that is likely to change. Any help would be a huge relief!

If I am a 100% shareholder in an S Corp and a 50% shareholder in another S Corp and I offer a 401k plan in the company in which I am 50% shareholder, am I then required to offer it in the S Corp in which I am a 100% owner?

An employer signed a lengthy PPA amendment that included the 436 language back in 2009. I was just reminded that there has been an extension on the 436 amendment until the end of 2013. It seems weird to me that this thing has been extended year after year. Or am I missing something? Is there new 436 language that needs to be adopted and the employer needs to sign another 436 amendment?

If a Plan Sponsor has not decided how the late deferrals will be corrected (either VFCP or self correction), should the attachment reflect "contributions not corrected?" I feel that even if the late deferrals/loan payments have been deposited, they have not been "corrected."

Any thoughts would be appreciated.

I'm a small (200 plan) firm with clients in SoCal and Phoenix. I need a referral to a small actuarial firm to assist and certify DB plans.

I've seen a couple generic questions close to this one, but they haven't provided me with the info I'm looking for. Can someone direct me to a specific cite, guidance or authority that would allow a participant to pay for individual investment advice from their retirement plan assets?

The scene would be as follows: Paul Participant has hired Mr. Churn to provide investment advice on his retirement plan investments for $500. Paul wants to pay Mr. Churn with funds from his retirement plan.

I have seen some articles (mainly IRA related) that have stated that it can be done. Also, I'm not as much concerned (at this point) with the royal PITA that it would logistically be to do this. I just need to read the authority behind it. Any direction you could give me would be greatly appreciated.