A client, which is a corporation, sponsors a 401(k) Plan and the only participants are the 8 owners.

Is a Fidelity Bond required?

I believe that it is required to be covered by a Fidelity Bond as Q 12 of FAB 2008-04 says that the bonding requirements do not apply to Plans that are not subject to ERISA Title 1, but since there are multiple shareholders of the corporation, then the Plan is in fact subject to ERISA Title 1 (at least according to my understanding).

Full disclosure, I am as my screen name suggests new to this industry, but I wanted some additional thoughts and opinions.

There are many threads on this topic but I cannot find the answer to my specific question:

Participant takes a hardship 7/1/2012. Deferrals continue. July 2013 the auditor informs the sponsor that the deferrals for the six months immediately following the hardship must be returned. Vendor sends a check to the sponsor for the deferral amount and says "make the participant whole via payroll".

Question: Logistically how does the correction via payroll happen? If the sponsor amends the participant's 2012 W2 then they also have to amend their quarterly tax filing and the participant has to amend his 2012 personal taxes. Is this really the only way to make the participant whole?

I am thinking the answer to my second question is yes, but thought I would ask.

Thank you

Plan has been a large plan filer for years. The recordkeeper holding the assets charges a check fee which is not waived for nominal balances. At the end of 2012 there were 4 or 5 terminated participants for whom a small true-up is due or who received a nominal forfeiture reallocation. In each case the allocation is less than the check fee. Jumping forward to 2013, this plan will be right around 100 participants at the beginning of the year. Is there a plausible argument that the 4 or 5 terminated participants can be excluded from the beginning of the year participant count? Again these participants will never see that money due to the check fee.

Thanks in advance for any guidance.

I have a multiemloyer plan where the non-bargaining unit group of a participating employer fails both the ratio percentage test and average benefit test. Unfortunately, the falure was not timely discovered and cannot be corrected by an amendment pursuant to Reg. 1.401(a)(4)-11(g)(3)(iv). Does anyone have any ideas how the plan can remedy this problem? I've seen some references that in a situation like this each HCE must include in income an amount equal to the employee's entire vested benefit not previoulsy included in income, but cannot find support for this in any regulations. Also, what about any penalties on the employer and/or the plan for noncompliance?

Any help would be appreciated.

A couple of years ago, a coworker asked me to prepare distribution paperwork for an alternate payee. I noted to my coworker that the QDRO states that the AP's benefit is not payable any earlier than the "attainment of the Participant's 'earliest retirement age' as that term is defined by internal Revenue Code 414(p)." Since the plan allows for distributions upon termination of employment, I understood this "earliest retirement age" to be the earlier of termination of employment and attainment of age 55 (plan's early retirement age). However, this person was 43 and still active. My coworker told me that it was okay, since the plan sponsor was fine with it and it was more advantageous to the AP. I prepared the distribution forms, but they were never completed by the AP. Recently, I was asked by the plan sponsor to prepare updated distribution forms for the AP. My coworker has since retired, and I think that she was mistaken, as there is no language in the plan itself allowing for distribution to an AP earlier than the date allowed in the QDRO. Does anyone have any ideas of what can be done (amendments, etc.) to allow the payment to this AP?

Thanks!

A QDRO was filed in 1996. The alternate payee (former spouse) has left her money in the 401(k) plan all these years. It is nearing the time for her first RMD. Is it calculated based on the alternate payee's date of birth or the employee's? The Pension Answer Book seems to indicate that the employee's RBD is a factor. That doesn't make sense to me since they have been divorced for so long and the employee has remarried.

Company A sponsors a SIMPLE-IRA.

Company A owns 51% of Company B. Owner A (no ownership in Company A) owns the rest of Company B (49%). Company B is an LLC.

Company B participates in Company A's SIMPLE

Owner A does not receive a W-2 from Company A or Company B, but does receive LLC payments that is declared as income.

Can Owner A participate in the SIMPLE-IRA without W-2 income?

If Owner A cannot participate in the SIMPLE and since no controlled group exists, can Company B start a separate plan (maybe a SIMPLE, maybe a 401(k)) that the owner can participate in?

If so, does Owner A have to wait until the current plan year ends (2013) before starting a new plan?

Thanks for any replies

Investor has a 457(b) governmental plan and plans to work until age 75. Can he/she defer the first RMD until the year of retirement from the governmental job? While working at the governmental job must RMD from a former employer's 403(b) plan start at age 70-1/2 or can the first RMD from the 403(b) be deferred until retirement from the governmental job?

Disclaimer: I'm a pension administrator at a pension consulting firm, and I'm being asked to join the Dark Side of employee health benefits. So I may not be getting all the terms or concepts right; please feel free to correct me.

I got a call from an insurance broker who tried to explain to me that private health insurance exchanges are being set up that will allow the participants to pay for part of their insurance on a "defined contribution" basis. I was his first thought when he saw those words, which is nice, and he wanted to know if we were going to jump into this arena. Presumably, there will be documents to write at the front end, and most likely some kind of annual reporting each year.

I have a feeling this is not "defined contribution" the way I know it - 401(k), profit sharing, etc. And I don't see how the two are related except that they share terminology (which the IRS does all the time). Can anyone point me to someplace I can get more information on this, or just explain to me that I'm meddling in affairs that may be beyond my bailiwick (which I'm not against expanding)? Thanks.

In a 401(k) plan that provides for a safe harbor match - does the plan have to say "This is/is not a safe harbor plan" (and be amended each year in which it is not such a plan) or may it say "This plan will be a safe harbor plan for any plan year in which the Employer distributes a safe harbor notice."

I was thinking that safe harbor plans that use the contingent notice for the 3% nonelective safe harbor contribution had to be amended each year to say they were or were not a safe harbor plan but that the rules was different for matching contributions.

Any help is appreciated!

1/1 plan year, plan sponsor determining HCE status for the 2012 testing year (1/1/2012 to 12/31/2012), and they use the Top paid 20% definition.

To determine the 20%, they must look at their employees in 2011 - and rank them by compensation earned in 2011.

But I have a question on the service exclusion. §1.414(q)-1T Q-9 says that you can exclude "employees who have not completed 6 months of service by the end of such year". It goes on to say that service in the immediately preceding year must be added to service in the current year.

Is "such year" defined as the testing year or the lookback year?

If an employee is hired on 8/1/2011 and terminates on 5/31/2012, could they be excluded when determining the 20% for the 2012 testing year?

• If "such year" is defined as the lookback year, then yes - they can be excluded. They do not have 6 months of service by the end of 2011. "Such year" is defined as the lookback year - which is 2011.
• If "such year" is defined as the testing year, then no - they cannot be excluded. They have in excess of 6 months of service by the end of 2012 - because you have to add in their service from the preceding year (2011). "Such year" is defined as the testing year - which is 2012.

I know there is an example in the regulations - but it's not helping me at all.

And by the way - the Coverage & Nondiscrimination Answer Book defines this exclusion by saying:

The following employees may be excluded from a determination of the top-paid group:

• Employees who have not attained age 21 by the end of the plan year
• Employees who have not completed six months of service at the end of the plan year

When I think of "plan year", I think of the plan year being tested (2012). So that would lead me to believe the second bullet above in the example is correct. It would be nice if the regs & answer book used "determination year", "testing year", or "lookback year" - instead of "such year" and "plan year".

Any opinions?

For a one participant Defined Benefit Plan:

The 5500-EZ instructions indicate that the schedule SB should not be filed but instead it must be retained with plan records. The instructions also indicate that the enrolled actuary must deliver the certified schedule SB to the filer no later than the filing deadline.

It appears there is no requirement to actually wait for the schedule SB before filing. For example, if a client is on extension until 10/15/13 but files the 5500-EZ on 8/7/13, is that a problem if the SB is not signed until 10/14/13?

Thank.

Partnership has fiscal year 10/1 to 9/30, their 401k plan year is calendar year - when are contributions due for tax deduction purposes? - 7/15 of each year? (i.e. the fiscal year for the partnership of 10/1/12 to 9/30/13 ends within the plan year 1/1/13 to 12/31/13 so contributions must be made by 7/15/14 (i.e. 9 1/2 mos. after the fiscal year's end) - I believe this is correct...

Hypothetically you have a CB Plan and a cross-tested 401k PSP. The compbnied Gateway is 7.5%. The average DB Allocation rate for NHCEs is .5%. So an NHCE would need to receive 7% in the PSP to meet the GW requirements (7.5% - .5%). What about a participant who does not benefit in the DB Plan in that year? For example, an employee is a participant in both plans, receives a 3% safe harbor contribution in the 401k PSP, but does not meet the allocation conditions for a cash balance credit (1,000 hours). Would this participant need the full 7.5% in the PSP, or still only the 7%?

Hi all,

I have a CB plan that wants to terminate. If they were to terminate today, there would be $53,000 in excess assets (approximately) above accrued benefits.

The FA suggested that we use the excess assets to pay plan expenses which were previously paid by and deducted by the plan sponsor.

I was certain that there were problems with this, but I am not finding anything that suggests this is a problem.

Am I off base here? Is this a legitimate way to absorb the excess assets or are there problems with this plan?

Thanks in advance for any and all insight.

This relates to a frozen DB plan. Assume that for the first 3 years all 10 employees accrue .5% a year except for 1 owner accruing a higher benefit such as 5% of pay.

The plan is frozen at the end of year 3 (2010, in this example). It is now 2012. Assume the same 10 employees are in the plan all 5 years, and no one else has become eligible.

The plan must pass 401a26 on its prior benefit structure.

Does this test fail at 1/1/2012? For 10 employees, their average accrual per year of participation is .15% / 4 if 2011, the frozen plan year, counts as a year of participation. On the other hand, if it is reasonable from the regulations to interpret the test as not requiring one to count Years of Participation after the freeze date, then the 10 employees' accrual would all average .5% per year.

Another words, plans using new comparability with employees generally at .5% will not be able to be frozen for more than one year if there is a < 40% owner to eligible employee ratio.

Other possible interpretations:

a): At the time of the freeze, the population of current & former employees is also frozen for purpose of the 40% test.

b): Years of participation don't count years after the freeze, but you do factor in newly eligible employees as a < 40% person in the test.

c): Same as "a", except when plan is re-activiated, you have to make up missing years of participation unless plan is terminated and not reactivated.

Has the IRS made any statements about how they enforce this?

Thanks for any opinions.

Craig Schiller, CPC

I am reviewing a KSOP Form 5500. The 401(k) portion of the plan is invested at John Hancock via their platform. The person who prepared the form used J.H. tool to download the Sch D information into F.T. William our 5500 software. It appears all the funds they are invested in are Pooled Separated Accounts (PSA) and need to be reported on a Sch D.

When they do that we get the same EIN for all the funds. Here is the odd part the plan number is 000 for all of them.

1) I really am thinking the 3 digit plan number can't be 000

2) I would expect the 3 digit plan number to be different for each fund

Those of you who use J.H. for their clients is the EIN with a plan number 000 sound right? If not, do you have any idea what we could be doing wrong to get this resutl?

Thanks.

A participant in a 401(k) plan is receiving disability from his/her employer (paid for by his/her employer). Since this income is considered taxable, can a portion of these payments be contributed to the plan (assuming they do not violate the 415 limits) as employee deferrals?

We have a few clients who after leaving us, saw the error of their ways and came back, with plans in distress asking us to help them bring their plans current. The most extreme is one case of a client with two plans needing 9 years worth of amended or DFVC filings (about 4 or 5 are DFVC).

Rather than preparing the 8955-SSA (or SSA) for each year that one would have been required, our inclination is to just prepare the 8955-SSA forms for the final year's filings (which will be 2012). If we do it this way, we also would report only those people remaining to be reported (in other words, if someone would have been added (code A) and paid out (code D) within the years we have worked on we would just omit them, leaving only those newly reported participants (code A), or participants who were paid out and had been previously reported (code D).

Opinions?

I am preparing a VCP submission for a defaulted loan. Participant and sponsor "forgot" to continue payroll deductions and we discovered non-payment when working on 2012 trust accounting.

The participant took out a second loan which was sufficient to pay off the first prior to the original maturity date of the first loan. She is now making payments on the second loan.

Technically, it seems the second loan is irrelevant; it shouldn't matter where she got the money to pay off the first. What I want to know from those of you how have some experience with submissions on defaulted loans is should I include mention of the new loan to payoff the first or should I omit those details? I don't know if it would be helpful or harmful to the client's position with the IRS.