We are restating a plan from Paychex to our DATAIR document software. The Paychex adoption agreement did not allow matching contributions, but states that matching contributions are 100% vested. Further, their vesting section does not have the option to state, "Not applicable."

We are amending the plan to allow for discretionary match, and giving it a 2/20 vesting schedule, but I'm not sure what to do about the current participants' vesting.

Can you attach a vesting schedule to a source that wasn't allowed in the first place? If not, then I assume I can attach the 2/20 schedule to all participants. Otherwise, they are subject to the 100% vesting schedule, even though contributions of that source were not allowed.

We are doing a correction for failure to allow an eligible employee to defer. Making up the missed deferral opportunity does not cause any problems, but the earnings in the QNEC would put the employee over the 415 limit, if counted toward the limit. Should we reduce the QNEC to fall under the 415 limit, or does the earnings in the QNEC not count toward the limit?

Thank you!

It seems that once in the past I heard that an owner of an IRA was not allowed to pay any unrelated business income tax the IRA may owe. The tax must come out of the IRA. I can't seem to find any authorative guidance (however I have found some information by non-traditional IRA custodians on the Internet that says the same thing). Does anyone know why this is, and more importantly, does the same rule apply with respect to a qualified plan? Can a sponsor pay the Unrelated Business Income Tax for their retirement trust.

Thanks for any help you can give.

Dean Huber

Hi,

I am looking to get away from the heavy use of paper by retirement plans, is it possible to use e-signatures on forms for retirement plans. If we used a third party site for the certificates, and they went through the general verification what would be the downsides? (We would institute identity verification policies for each plan that would basically say as long as the infor matches whats on the form, and there is no recent changes we assume its you.)

Also, could this be used for plan enrollment? Forms would still be available for anyone who requests it via paper, and distribution forms would always still be sent first via mail. Only electronic via requested (or if they login to the particpant portal)...

I don't see any problems for loans, hardships or inservice withdrawals, since we can set it up to chain (email) to the administrator for approval before it comes back to us.

Thanks all!

Hi. We have a non-governmental 457(b) plan. Our NP is being acquired by a for-profit. Upon the deal, the 457(b) will be terminated. My question is how should we handle the distributions. We have 10 participants. The deal will happen this fall. Does the organization have to choose when to make the distributions? Or can each participant choose whether to receive his/her distribution in 2013 or wait until early 2014? The Plan's distribution options include lump sum as well as installment payments. So could a participant elect to receive part of his distribution in 2013 and the rest in 2014?

I haven't been able to locate any guidance on this.

Thanks.

Leave it to our clients to drive us crazy.

We have attorney client who was desperate for money and withdrew over $470,000 from his plan in 2012 without consulting us. After running calculations for 2012, this left his own profit sharing account overdrawn by approximately $42,000, and left the trust with only $50,000 remaining to cover other participants' balances totaling about $92,000.

We have referred him to an ERISA attorney to resolve this - we will not get involved. However, I have to prepare the 5500-SF for 2012, and I have never encountered this before.

1) I assume the transaction has to be reported on the 5500-SF somewhere, probably in line 10. Can someone please advise me where they would report this, and do I report the entire $472,9500 transaction, or just the $42,000 he is overdrawn?

2) I also assume we have to prepare a Form 5330. Same basic question - where on the form is this reported and what amount do I list?

If not for the clients, we might still be sane. But we would also be broke.

Leave it to our clients to drive us crazy.

We have attorney client who was desperate for money and withdrew over $470,000 from his plan in 2012 without consulting us. After running calculations for 2012, this left his own profit sharing account overdrawn by approximately $42,000, and left the trust with only $50,000 remaining to cover other participants' balances totaling about $92,000.

We have referred him to an ERISA attorney to resolve this - we will not get involved. However, I have to prepare the 5500-SF for 2012, and I have never encountered this before.

1) I assume the transaction has to be reported on the 5500-SF somewhere, probably in line 10. Can someone please advise me where they would report this, and do I report the entire $472,9500 transaction, or just the $42,000 he is overdrawn?

2) I also assume we have to prepare a Form 5330. Same basic question - where on the form is this reported and what amount do I list?

If not for the clients, we might still be sane. But we would also be broke.

C-corporation has leveraged ESOP. Say 2012 is the first plan year. Under their repayment schedule (and don't ask me how they arrived at it, 'cause I don't know) they make a December payment of interest only. Let's say that this requires the release of 1,000 shares, valued at $10.00 per share. Now they make a principal payment in September of 2013, and DEDUCT AND ALLOCATE it for the 2012 plan year.

They want to release shares as of the date the contribution was made in September of 2013.

So just for ease of illustration, suppose there are 10 participants, and they all receive an allocation of 100 shares in December of 2012. In addition, they all receive an additional $30,000 allocation for the 2012 plan year, based upon the September 2013 contribution.

Is there any problem with only allocating the shares released in December of 2012, on the 2012 valuation, showing each person with an account balance of $31,000 (100 shares @ $10.00/share = $1,000, plus the $30,000 allocation) and then in September of 2013, assuming no change in stock price, everyone will receive a share release of 3,000 shares which will be reflected in their statement of 12/31/2013?

It appears from 54.4975-7(b)(8)(i) that this is acceptable, I guess depending upon how you interpret the "For each plan year"- does that phrase allow cash accounting such as I have specified, or does it require accrual accounting?

Thanks!

Folks,

Let's say I have 3 employers, from all of whom I receive W2s at year-end.

These employers offer different match arrangements for their 401Ks.

For assumption sake, let's say I can put away $10,000 with employer A and they contribute $32K (match) to my 401K.

For employer B, I put away $5000 and they put away $8000 (match)

For employer C, I put away $2000 and they put away $5000 (match)

By year end, I will have made 17K of salary deferrals and my employers will have put away $45K on my behalf.

Is this legal, given that the total contributions on my behalf (my own and my employer matches) equals $62K, which exceeds the $51K limit?

Any input would be greatly appreciated. Numbers are hypothetical, but generally accurate.

SR

I have a plan that is both frozen to new entrants AND benefit accruals are frozen (hard freeze). When the freeze occurred back in 2008, there were 8 participants with a vested benefit in the plan. Today (12/31/2012 val date) there are 3 ppts left with a vested benefit. In looking through the census, there are 9 total non-excludable employees for 2012. A few more facts about the plan: it is not PBGC covered, it is greatly overfunded (think 160%), it is top heavy and there were quite a bit of formula changes during the years prior to the freeze. So here's my dilemma:

It would appear that since only 3 ppts have a benefit under the plan, this plan fails 401(a)(26) for 2012, as 40% of 9 is rounded up to 4. When I've researched the definition of "benefiting", I read that it is defined as earning an accrual. First off, if this definition is correct, wouldn't freezing a plan be considered a disqualifying event, as there are no additional accruals???

Two questions:
1. Are frozen plans really required to pass 401(a)(26)?
2. If the answer is yes, which I believe it is, am I supposed to give a minimal (0.5%) accrual to 4 participants in the plan, or am I supposed to give 0.5% accrual to 1 ppt in the plan and the other 3 that are already in will be considered benefiting, therefore making the total number of participants now in the plan equal to 4.

And finally, the second I give an accrual, I guess I have to go through all other non-discrimination testing, as the plan is technically no longer frozen.

Thanks in advance for your help.

A plan is currently under investigation. The DOL auditor found late deposits and wants to use the greater of: the VFCP Online Calculator (IRC 6621 (a)(2) and ( c)(1) rates) or actual earnings for the late deposits. During the onsite review the investigator determined that the Employer could have remitted contributions within 3 business days after being deducted but used the 7 day safe harbor for small plans. We have already calculated the lost earnings using the online calculator. The problem is:

1) The late deposits range from 1 to 275 business days late covering 3 years of payrolls

2) The participants are in multiple self directed accounts

My question is: How would one go about calculating lost earnings for payperiods over a 3 year period in self directed accounts for multiple participants involving potentially hundreds and hundreds of fund transactions over this timeframe???

Suppose there is qualified plan that is a partnership. A partner may not know his/her earned income until after the close of the plan year. Does the partner have up until their taxes are filed in order to determine the amoutn and deposit any employee deferral or employer contribution to the plan? Or is there other rules that forces them to make this decision earlier? If there is, administrative issues are that earned income may not be available in time for such deadline.

Can someone please comment on the administrative timeline for SEI's making a contribution to a plan.

Thank you in advance.

I am working on setting up a plan for a new client. The only employees are the owner and his son. They want the father to get a greater contribution than the son, so I believe that eliminates SIMPLE and SEP. I have never dealt with a plan with only HCE's. Is cross testing an option with each of them in a separate rate group and a different contribution percentage for each? I assume it would pass testing since there are no NHCE's. Any other suggestions? My only other thought is aged based profit sharing.

Does an Employer contribution to a 403(b)(9) retirement income account plan cause a church plan to be suject to discrimination testing?

Participant bought a house (primary residence)with a Partner some time ago. Now, they do not get along and Participant wants to buy the other half of the ownership of the house. Does this qualify for hardship withdrawal?

Could a loan be for 30 years?

2012 Calendar year DB sponsored by a self employed person who's tax return is on extension to 10/15

2012 Minimum Required contribution $0

2012 Maximum Deductible Contribution $400,000

Contribution is made 10/1. Is it deductible for 2012?

Can an estate directly transfer defined contribution retirement plan accounts to inherited IRAs benefiting the estate's beneficiaries in a manner similar to direct transfers from IRAs held by estates?

In PLR 201208039 the IRS permitted an estate that was the sole named beneficiary of an IRA to make direct trustee to trustee transfers into separate inherited IRAs (one for each of the estate's beneficiaries). The transfers did not constitue taxable distributons and the beneficiaries were able to defer required minimum distributions over the remaining life expectancy of the decedent.

It would be very helpful if similar direct IRA transfers were permitted for defined contribution retirement plans. However, it appears that estates are not permitted to transfer (rollover) retirement plan accounts under Tax Code Section 402©(11)(A) because estates do not qualify as individual designated beneficiaries under Tax Code Section 401(a)(9)(E).

I have a friend that recently received a notice that her former employer is terminating his 412i plan that she knew nothing about and she needed to tell them what she wanter to do with the money. The administrator is telling her that before they can terminate the plan the IRS requires that her benefit must be fully funded and to do this they need to purchase an annuity on her before she can cash it out. If they do this she would be faced with a 7% surrender fee on the annuity. This does not seem resonable can anyone help

It must be getting too close to 9/15 -- my brain is on overload.

In a plan with immediate eligibility for deferrals, but 1 Year of Service for SH match, I'm questioning how the match is calculated. The document calls for compensation while a participant for the match calculation. We have a participant who deferred less than 1% of full year compensation and became eligible for match on December 1.

Using the basic safe harbor match formula, my first thought was that she should receive a match for exactly the amount of her December deferrals. ($15 in this case.) Datair came up with a higher number than that, so I started trying to figure out how it was calculating it. Apparently Datair is comparing the total deferrals for the year to the match eligible compensation and using that percentage to figure the match. ($125.72 in this case.) That seems to defeat the purpose of having delayed match eligibility and using compensation while a participant.

Is that correct?

Client is leaving Alliance A to go to Alliance B. Alliance A has sent client a bill for $1250.00 for their 'deconversion fee'.

Is this payable with forfeitures if plan allows for forfeitures to pay plan expenses?

Thoughts?