Wondering if anyone has encountered this...

100% ESOP-owned plan sponsor has foreign subsidiaries and, as a result, has an obligation under the FBAR regulations (Bank Secrecy Act - UBS scandal etc...) to disclose all financial interests in foreign financial accounts. Although the ESOP, in its capacity as an employee benefit trust, is not obligated to file since it's invested solely in domestic employer securities and maintains no interest in foreign accounts, based on the regulatory langauge the ESOP trustee appears to have a obligation to file in its capacity as the plan sponsor's sole shareholder. The filing instructions and FBAR reg. state - "A United States person (e.g., a trust - no exemption for qualified plans) has a financial interest in a foreign financial account for which...the owner of record (i.e. plan sponsor) is...a corporation in which the United States person owns directly or indirectly...more than 50 percent of the total value or total voting power of shares of stock." Penalties for the failure to file are punitve (50% of foreign accounts up to $100,000).

Although such filing will be redundant, the intent of the regs is to be overly broad. That said, it otherwise seems apparent the ESOP trustee has an obligation to file, right? Am I missing anything?

Many people guess that a retirement plan’s administrator (not a recordkeeper or TPA) has an ERISA fiduciary duty to maintain the plan as a tax-qualified plan. Recently, a consultant told an employer that this idea is wrong.

The consultant said that ERISA requires a plan’s administrator to administer a plan according to the plan’s written terms and ERISA. Further, the consultant said that if a plan becomes tax-disqualified in form because the employer failed to amend the plan, nothing in ERISA requires the administrator (in its role as the plan’s administrator) even to try to get the employer to amend the plan.

In fairness, the consultant said that the administrator must use prudent care to not make (and not allow) any communication to describe anything about the plan’s or its transaction’s tax treatment in any way that is false or misleading. The consultant suggested revising the summary plan description to omit any explanation about tax treatment. The consultant suggested editing the § 402(f) notice (if any) so that every explanation is preceded by “If the Plan is a plan described in Internal Revenue Code § 401(a), ….”

The consultant said that a plan’s administrator administers the plan that the employer created.

Do you think that the consultant is right about the absence of an ERISA fiduciary duty? If not, why not? So that the reasoning is something more than a sense that something doesn’t seem fair or decent, what language in ERISA’s statutory text supports the fiduciary’s duty?

I'd very much appreciate the opporutnity to talk to any traditional 401k TPAs who are expanding into health plan compliance services as a result of ACA and what their experience has been to date.

If you're willing to give me 15-20 minutes of your time for a phone call please reply to JMPeterson@KaufCan.com

All responses will of course be held in strict confidence.

Thanks

I have a client who deposited a 2012 contribution in 2011, Is this allowed? Would it be listed on the 2012 SB with the date in 2011?

Any comments would be appreciated.

Thanks!

Parents are divorced. Children live with mother. Health insurer mails out a letter to two children (each received a letter, addressed to them at their father's residence). Letter contains information regarding a prescription medication they take, gives name of medication. Letter is dated"may 2013". Just received letter from father today. Aren't the name of medications covered under HIPPA rules and regulations?

I can't seem to find anything that specifically addresses my question - Is there a deadline for amending a 5500?

A golf pro would like to take a hardship for "professional development". It's a class to further his golf career. Would this be considered under education for the hardship rules?

I really hate trying to wade through the prohibited transaction issues. Just so you know.

Not looking for chapter and verse here, just whether I'm headed in the right direction.

Is a trustee/director of a mutual fund allowed to purchase that fund using assets of his self directed 401(k) account?

I can't decide if it's really a retirement plan potential prohibited transaction or an issue that would cause a problem for the director regarding his independence on the board.

Thanks.

Plan allows for hardship withdrawal of both 401(k) and roth deferrals as well as 100% of rollover accounts.

One of the big 401(k) vendors is telling me that the participant cannot have 100% of her roth rollover account only the contirbutions. They apparently must have obtained an original contribution figure from the participant when she rolled the roth assets into the Plan.

Other than the taxation issues for the participant is there any reason she cannot take 100% of her roth rollover account as hardship if the Plan allows?

This appears to be a rare occurrence but I can't believe that this vendor has not come across this particular situation.

Is it still legal to limit HCE's to 4% of pay to get them into catchup area sooner?

Ii read something today that makes me wonder.

When calculating the number of active participants to determine whether or not an independent audit is required, is an employee who is new and has not satisfied the 1 year eligibility requirement to participate in the plan considered an "active" participant?

Quick scenario involving RMDs and payouts. Please let me know your thoughts.

Our recordkeeper sends out notifications to termed employees to take their funds at age 70.5 to be in tax compliance for RMD purposes. It notifies the participant about RMDs and to take their balance and instructs them to call. Our plan document requires full payout at that point, not just ongoing RMDs.

If the participant does not call, these funds can potentially sit there and the participant can have tax consequences.

For a plan that requires full payouts or RMD with a rollover of the remaining balance, what is a good procedure to capture people and have them paid out? If they have more than 5k in the account, what can anything be done to force them out to keep the plan in compliance?

Can someone explain to me why the Schedule SB, Line 18 contributions would not tie to the contributions on line 2a(1)A on the Schedule H or the audited financial statements? And provide a reference/source, if possible.

The Form 5500, Schedule H normally ties directly to the financial statements and most of the time the contribution amount differs from the Schedule SB, Line 18 that we end up getting from the actuary.

TIA

If a plan has a springing safe harbor non-elective contribution feature, does the plan have to be amended each year in which a safe harbor contribution is made, or is the notice to the employees specifically designating that the safe harbor contribution will "spring" for the year sufficient?

Hello,

Here is the fact patter:

• participant takes a loan
• loan payments are withheld according to amortization schedule
• loan paments are sent to the recordkeeper timely

This is where it gets interesting:

• recordkeeper rejects the loan payments (recordkeeper is the one who produced the amortization schedule and promissory note). the rejected loan payments are sent back to the sponsor and this goes on for two years (payment and rejection) and no questions are asked by the sponsor or the recordkeeper as to why their deposits don't add up. Plan sponsor thinks it must be some sort of fee rebate or something....
• participant receives a 1099 for the defaulted loan balance two years ago. The participant just thinks this is normal and does not question the 10% penalty or the taxable amount.
• sponsor then figures out what is going on and makes a deposit for all the loan payments that were rejected and sent to the sponsor. We have late deposit issues and we can deal with that.

The issue now seems to be a double taxation scenario (I understand the loan "double taxation" argument and am not asking for that to be debated again). I am saying that a 1099 has been issued and after the issue date now all the loan payments have been deposited.

Question: My solution is to prove to the recordkeeper that loan payments were withheld and sent "timely". The recordkeeper should then issue a revised 1099 showing that there was no taxable amount. Based on the fact pattern, would you agree with that solution?

Thanks

Form 5500 filed a year late but did NOT do DFVC. IRS sends letter with penalty notice for late filing. So we're suggesting DFVC program. The question is, do you have to amend the 5500 to check the DFVC box in this situation?

I say no, because it seems to me the point of the box is to avoid getting the letter we already got.

Appreciate any thoughts.

I have been speaking with a prospective client who rolled money from his previous employer's retirement plan into a new plan and then invested it in a distributorship he now owns (against the advice of his CPA).

He has no employees.

Now he realizes it is costing him too much to maintain the plan.

I don't have a lot of details from him yet, but he is asking us to help him terminate the plan.

Any ideas on the types of questions I should ask him?

I am not really sure how he is going to "unwind" this now, assuming the plan assets are still invested in the business...

Client e-mailed asking if the down payment on a "rent to own" agreement will qualify as a hardship for the purchase of a principal residence. I'm not familiar with how that type of arrangement typically works or even if there is a "typical" arrangement. Any suggestions about what we should be asking?

As a TPA I am having a problem approving a Hardship withdrawal for an owner. The participant has an estimate to fix a roof and has termite, mold problems. This is not due to a loss from hurricane, flood etc. and he has not submitted a claim through insurance. He only has an estimate and has no intention on using the money to fix the problem since he is selling the house. Are we liable or are we just responsible for signing off on the vesting and the Plan Sponsor is liable for approving the hardship ? Under audit this could be a potential problem?

One of client asked a question regarding an employee who is a NRA and the plan excludes NRA's . The employee is no longer eligible to contribute to their 401K plan after the ESOP was put in place 9/1/2012. The employees 401K deduction were missed and not turned off so the employer continued to deferral pre-tax contributions until 4/16/2013.

The employer refunded the ineligible contributions and earnings that never should have gone into the plan however the refund back to the employee was subject to Federal Taxes at a percentage of 30%

The client question is should the refunded money be subject to Federal Taxes?