katieinny

Haven't seen the plan yet. That seems like a weird circumstance for the plan to address, though.

A participant signed a distribution form requesting a large lump from his DB plan, then dies the next day. His spouse predeceased him. At this point, I don't know if the distribution form is still on somebody's desk, or if the check is in process. I'm hoping his children can at least get the benefit of inherited IRAs. Any thoughts?

We want to be accurate about this because of the Medicaid rules. They will not treat the IRA as an exempt asset if he isn't on a life expectancy distribution schedule. We'd like to make sure that he doesn't take more than he has to, so using a joint table will help. I was surprised when I saw that the uniform life table doesn't go lower than 70.

An IRA holder is age 66. His siblings are his beneficiaries (he is not married). He wants to start taking life expectancy distributions, but I noticed that the Uniform Life Table starts at age 70. Must he use the single life table to determine life expectancy distributions?

leevena: My best guess is the current plan offers a couple of benefits and the sales person picked up on the fact that more could be offered. He/she probably said something like "you only are getting A and B. I can offer X, Y and Z!"

A state government offers a Section 125 cafeteria plan to state employees. However, I have the same question even if it's a private employer. A sales person from another company is approaching the state/employer, saying that his company can offer a second plan that will supplement or compliment the first plan. I'm very leery of promises that seem to be too good to be true from sales people. Can the state/employer tack on another plan without running into trouble? Even the logistics of trying to operate 2 plans seems confusing, but just because it's beyond my scope of understanding doesn't mean it can't be done, I suppose.

The company filed a Form 5300 for a determination letter a few years ago and qualified for the user fee exemption. Now they are terminating the plan and filing a Form 5310. Does the user fee exemption still apply? There have been no changes, e.g., the company is still the same size.

A non-US citizen lived and worked in the US and participated in her company's 401(k) Plan. She has since moved back to her home country, but left a small 401(k) balance behind. I would think that she can avoid paying US tax (and early withdrawal penalty) by rolling the funds into an IRA and keeping the money there, at least until she turns 59 1/2. I'm looking for some IRS guidance, but didn't see anything about non-citizens after skimming through Pub 590. Can someone point me in the right direction?

The information you've provided is exactly what I was looking for. Thank you all for your help.

One of the owners in a business (not yet 59 1/2) has already gotten all the plan assets he can via hardship distributions. Now he wants access to more, but was told that he can't due to the terms of the plan. So, now he's decided to "terminate employment." The plan is that he will eventually be rehired. Of course, there's no way we can sanction this attempt to circumvent the plan provisions. Where do I look for guidance on this?

Thank you both for your comments. I'll start making some calls.

A non-publicly traded company that is owned 30% by the ESOP and 70% by the founder is being sold. According to the Plan, Participants are entitled to direct the Trustee to vote their share of company stock in the case of a sale of substantially all assets of the business, so it would seem that the sale must be disclosed sooner rather than later. What does that disclosure consist of? At this stage, we are reluctant to provide more detail than we need to.

Thank you all. I did print a 5310 and instructions, thinking that I would try to do a run-through since it's been a while since I last filed one. Hopefully, that will help me pick up any red flags.

We have a client that has a one-man plan that just got through a VCP filing due to loans that did not meet the dollar amount and repayment requirements. Now, we're going to terminate the plan. My feeling is that a 5310 should be filed to protect the rollover of what's left, but that $2,300 filing fee is certainly a deterrent. The plan documents seem to be up to date, but I suppose there could be other problems. Thought I would ask what others are doing.

I'm getting ready to do the DOL filing for the Top Hat Exemption and noticed that the DOL has a means for electronic filing. But I can't tell if e-filing is now required or is still optional. I have a mailing address that I used a few years back, but not sure if that's still the right address if we can still do a paper filing.

Thank you, jpod. I've continued to read this afternoon and now I'm thinking that the arrangement I described might be best called a salary continuation plan. I'm struggling with the "deferred compensation" label because there was no prior agreement to get paid less so that he could continue to get paid later. I'll keep reading... I think you're right about the income being subject to employment taxes, so I'll have to find out where the accountant is coming from in that regard.

One of the owners is retiring. The company has decided to pay him $50,000 per year over the next 10 years. It's not deferred comp because he's not delaying any of his compensation. He'll just continue to receive compensation for 10 more years, but won't be going to work. If he dies during the 10 year period, the payments would continue to his spouse for the remaining time. The accountant says it will be taxable income, but not subject to FICA or FUTA. I did some reading on Supplemental Executive Retirement Plans, but one article said that SERP income is subject to employment taxes. That doesn't make sense to me, but I suppose it could be true. So, if it's not a SERP, what is it? I assume there would have to be a written agreement to this arrangement.

As sometimes happens with one-person plans, the owner took multiple distributions that he intended to repay to the plan. This goes back more years than there are records for. In some cases, repayments were started, but not completed. The IRS is doing a compliance check, and has offered VCP as an option for the owner. The owner knows that there will be significant tax and maybe penalties to pay on these distributions. He's getting up in years and has his hands full with other things, so he's thinking of biting the bullet and letting the IRS disqualify the plan. He'll pay the tax on the entire balance and move on. Now that it's gotten this far, I doubt that simply terminating the plan is a viable solution. Any amount rolled over would probably be disqualified, since an audit is very likely in the not too distant future. Have any of you gone through a plan disqualification? Other than paying the tax (no small thing, I know), how painful is it?

Just so I'm clear -- not only can't the employer help with premium reimbursement -- but neither can the EE put money into a cafeteria plan from his/her wages to pay the health insurance premiums on a pre-tax basis?

I know I'm very late to the party, but I've been doing some reading on the not-so-new changes regarding the inability of small employers to reimburse their employees for health insurance premiums. The topic just came up at work, so I started looking into it for the boss. I got excited when I read that a cafeteria plan would do the trick, but then that's been ruled out, too?! Since this all started a couple of years ago, it seems no one has figured out a sure-fire way for a small employer to help out his employees aside from adding more taxable money to their income and saying "use it for health care if that's what you want." I feel like I must be missing something. Perhaps I'm not reading the right articles?

Holy Cow. I do appreciate the comments. It certainly gives me some things to think about.

The owner of the company owns 70% of the stock and the ESOP owns 30%. He wants to buy a whole life policy on himself through the plan. He's thinking that when he dies, the death benefit would buy out his 70%. Would that be a prohibited transaction? And can death benefits be earmarked for a certain purpose? Would deductible contributions be used to pay the premiums? Or maybe there's excess cash in the ESOP. I would love to get some input from ESOP people on this idea because I certainly don't know if this would work.

I think (just guessing) that the employer was probably concerned about paying the benefit to the wrong person, so they have been hesitant to distribute. I heard that the son did consult with an attorney, but not sure if it went beyond that.

The beneficiary form was completed indicating that the participant was not married. He named his son as beneficiary. After the participant's death, information surfaced that would indicate that the participant was still married, but probably estranged from his wife. She did sign a waiver after the participant's death. Her signature was not notarized. Something like 6 years have gone by since the participant's death. At some point during these intervening years, the spouse returned to her native country. After all this time, the ER would like to distribute the assets to the son. I'm hoping that there is an exception to the spousal beneficiary rule in cases like this. Any thoughts or guidance you can offer?

Yes, I understand that in a perfect world, plans apply for an EIN specific to the trust, and if that had been done here, all would be good. However, not all plans have done that. I've seen many that use the ER's EIN. We're applying for an EIN specific to the trust now, so I'm hopeful that everything will be back on track soon.