I feel like my head is full of sand today.

A corporation is dissolving, and all employees, including the HC, will oficially terminate employment on September 30, which is one month prior to the plan year end. The plan will be terminated, with a plan termination date of 10/31/13 - the plan year end.

Plan currently has a 1000 hour/last day requirement. Since the HC owners will be terminating employment prior to the last day of the plan year, they want to amend the plan to provide only 1,000 hour allocation requirement, but no last day requirement. So far, so good.

Here's the question. They had one NHC with 1000 hours terminate in May, They don't want to give her a contribution, so they want to make the amendment effective June 1, 2013.

Am I imagining trouble where none exists, or is this going to be a discrimination problem? It will only affect 1 NHC adversely, and there are a total of 4 NHC, so even if a potential problem, should pass nondiscrimination testing?

Thoughts?

If a 401(k) is amended to not allow for new life insurance policies to be purchased, may the old policies continue? If they are permitted to continue, is this subject to annual non-discrimination testing?

Is it permissable to take a loan against an insurance policy that is held as a plan asset? If so, would it be treated as any other plan loan with regards to limits, repayments, default etc? Seems to me it would.

I have a client who granted an employee a hardship distribution to make the next 12 months payments on their student loan. The Hardship safe-harbor for educational expenses required the expense to be for educational expenses to be incurred in the next 12 months. Do you think studen loan payments qualify? Thanks in advance.

I am trying to figure out what to quote for adding Roth in plan transfers.

It seems like most of the work is at the time of the transfer.

I will need to:

1. Set up new sources on my computer for each old source being rolled.

2. I will have to set up new accounts for each new source.

I am guessing this will take 20-30 minutes. (I'm slow, I know)

At distribution time, how much extra time will be needed?

Does anyone have a Roth distribution checklist they would be willing to share? (or help me build) Things like "Is there a recapture?"

small plan that is top heavy contributes a safe harbor match and a profit sharing contribution. Document states p.s. is allocated based on a comp percentage. however, system is allocating profit sharing giving each eligible participant a p.s. contribution of 1.13%. Is this acceptable? The plan has $36898.22 of it's $90,000 employer contribution after a $53101.78 safe harbor match.

Has anyone had experience with whether the IRS is willing to allow the VCP program to be used for something that is not a qualification issue? In the situation I'm looking at, employees were permitted to choose at retirement whether to have accumulated leave contributed to a defined benefit plan or to receive it in cash. The employer erroneously believed that in the case of the employees who chose the contribution, it would be a pretax contribution. The employer therefore did not withhold taxes on the contributions. Having now received legal advice that such contributions would be after-tax, it is attempting to fix the situation for past years.

Reading through Rev. Proc. 2013-12, I cannot see a way that VCP can be used to remedy a provision which is not disqualifying, but which caused unanticipated adverse tax consequences. However, I entered this matter late, after another firm had already prepared a draft VCP submission. I therefore want to be very sure of my ground before I talk to the client.

LLC member made a $17,000 401k deferral on 12/27/12 to TD Ameritrade. Their CPA is telling him today (9/11/13) that he earned NO schedule C income in 2012 and therefore there was no way he could have deferred money into the 401k Plan. Is there any IRS guidance on how to handle this? We are asking Relius about our options and will need to call TD Ameritrade but the CPA is saying that there "must" be IRS guidance on what to do. Thx.

I have a plan where an employer failed to make required contributions under a Rehabilitation Plan. IRC Section 4971(g)(2) imposes an excise tax on the employer equal to the amount of contributions owed. We are filing a lawsuit to collect the Rehabilitation Plan contributions owed and were wondering if the plan has any obligation to add a cause of action to collect the excise tax. It appears it is the employer's responsibility to report the tax on IRS Form 5330 and pay that to the IRS, so we're not sure if we have an obligation to attempt to enforce that requirement.

Any help would be appreciated.

Custodian used DB plan assets to pay 401k plan benefits in 2012. Error was discovered in 2013 and 401k plan reimbursed DB plan with earnings. Would you consider this a prohibited transaction?

Dumb question

On the SB -- what is the contribution date (line 18)?

(a) Date contribution is reflected on the asset statement?

(b) Post-marked date of check?

© Receipt date of check?

(d) Other

Thanks.

What if a person does not modify their auto enroll deferral %, but does modify their investment allocation %? Does this person remain in the autoenrollment group or does the affirmative investment allocation % remove them from the group?

Example: A ptp in a plan is auto enrolled at 3% and has their contributions placed in the default investment election. The participant modifies the investment election to have the future elective deferrals invested in a different fund.

The plan now wants to increase the automatic enrollment % from 3% to 5%. Would this person still be included in ther automatic enrollment population and, thus, have their deferral % increased from 3% to 5%? Or would the change of investment election take them out of the auto enrollment population and cause their % to remain at 3%?

Side note: If the participant does not change the default investment election, but does transfer funds, would this change to their account balance take them out of the auto enrollment population?

Any help is greatly appreciated. Any cites would be desirable as well.

This is the first time I’ve encountered a 401(k) plan with “segregated accounts” whereby individuals can elect to have their assets placed into a separate trust that (i) is managed by the plan trustee's advisors or (ii) are managed by the participant's appointed investment advisor. Any particular issues the plan sponsor should be aware of when dealing with these types of accounts?

This seems like a very basic question, but I haven't been able to find a clear answer anywhere. Is it possible for a single employer to maintain two separate 401k plans, one each for HCEs and NHCEs. Obviously, they would want to do this to get around the discrimination/coverage testing requirements. From what I have gathered, the control group/aggregation rules would make this kind of pointless, as the coverage and discrimination tests would be calculated as to all of the employer's eligible employees in both plans. Therefore, for purposes of testing, both plans would be aggregated. Is that correct? Thanks.

For an active participant who is beyond NRA (which is 65), where the assumed retirement age would otherwise also be 65, can we assume a later retirement age (maybe 3 or 4 years in the future) for only this particular participant if the feeling his he will not retire in the immediate future, rather than go year by year?? I believe this is fine, but just wanted to confirm my thinking and maybe get thoughts on anything I may have not thought about. Thanks in advance.

I was looking at adding the in-plan Roth transfer option to a plan (knowing I will need to adopt a plan amendment by the end of 2013) and thought that would take care of allowing that option for all participants in the plan without the need of adding in-plan Roth rollovers. I never amended the plan to allow in-plan Roth rollovers because I didn't like the limited use of it (because of the distributable event issue).

However, the way I read Section 902 of the ATR Act of 2012, it appears to me that I should add BOTH options at this point (which means adopting the rollover amendment now and then adopt the transfer amendment once that is available) because it appears that the Roth transfer option only works with plan assets "not otherwise distributable".

Therefore, if the plan has an age 59-1/2 in-service distribution option and I only adopt the in-plan Roth transfer option, a 62 yearold participant would not be able to convert pre-tax money to Roth money because it would otherwise be distributable.

Am I interpreting this correctly?

Thanks.

James

Participant retired in 1988 with a 50% QJSA in favor of his wife (X). At the time of retirement he presented a valid marriage certificate and things were fine for 25 years. Participant just passed away and the retirement payment was reset to 50% and made payable to X. So far, so good.

The plan administrator received a call from a woman (Y) who alleges that she was married to the participant in the 1960's and they never divorced. She is asking what benefits she is entitled to from the plan.

The QDRO procedures obviously don't address this situation. We are inclined to tell Y that the plan intends to continue to honor the QJSA in favor of X until we receive a domestic relations order that tells us to do otherwise.

I know this has come up before, but I cannot find any cases or guidance.

Ideas are appreciated.

401(k) Plan uses the calendar year, and is notorious for providing data late. We just finally recieved 2012 data (after 4 written requests and numerous calls). In data submitted we find that ownership changed during the year so at year end, the three firms previously covered as a single employer are no longer a controlled group. Problem is when does this change apply to the Plan, and when does the Plan become a multiple employer plan. If we apply "multiple employer status" for 2012, one group under the Plan will fail ADP Testing and be considered Top Heavy. If status is applied in 2013, same problems for that year. During both years a key employee does contribute deferrals under the group that fails ADP and is Top Heavy, so where no employer contribution was used, a Top Heavy Minimum is required. Hoping there is a transition period under regs for this situation. Of course there has been no documentation on this topic processed. Any thoughts or insights? Thanks!

2 member LLC.

Schedule K-1 income subtotal was $409349.

I believe you deduct Sec 179 which was $5946

and then deduct deferrals which was $22000

is there another calculation to be made before you arrive at earnings for plan purposes?

I believe both partners have earned well in excess of 415 limit, but just want to confirm.

Can a company that is Sub-S have a medical reimbursement plan?