katieinny

The material I've read says that "when it comes to a distress termination, the most critical decisions will be made not by the PBGC but by a bankruptcy court." If the client is not in bankruptcy, who brings the matter before a bankruptcy court? The PBGC? The client will provide whatever information is needed to whoever needs it, but there's no mention in the PBGC distress termination forms about providing information to a bankruptcy court.

I'm guessing that the client signed the return, but somehow the inability to immediately fund the plan didn't come up. I don't know if the client can get a loan. I think he would rather see if he can get the extension first.

I've printed off the PBGC website material about distress terminations. The material includes a note that the contributing sponsor(s) are liable to the PBGC under ERISA section 4062(b) for the total amount of unfunded benefit liabilities under the plan. It was my understanding that if the company has a negative net worth, the sponsor would not be liable for the unfunded liability. Is that correct? The employer will be demonstating that the distress termination is necessary because otherwise it would not be able to stay in business due to the financial strain caused by the DB plan. Any pointers anyone can offer would be appreciated.

Has anybody had a situation where a CPA filed a client's tax return in March, but the cleint won't have the money to fund the retirement plan until the extension date? Apparently, the CPA didn't realize that the client didn't have the funds available now, so the return was filed. How would you fix that?

The company is using a 5305 SEP, so the definition of compensation is 414(s). Normally that would include disability pay. But, I'm wondering if the fact that the pay is coming from another source makes a difference.

An employee was out on disability for most of 2003. The disability pay was paid by an insurance company (premiums paid by the employer) and those payments do not appear on the employer's W-2. Is the employee entitled to a retirement plan contribution based on the disability pay?

An employee has been out on disability for most of 2003. He was being paid by the employer's disability plan, not through regular payroll. The employer uses a 5305 SEP document. Must the employer make a SEP contribution based on the disability pay, even though the disability pay will not show up on the employee's W-2?

The university teaches medicine and these medical practices are affiliated with the university. The practices are all 501©(3) organizations. So we're trying to determine if these practices, due to their not-for-profit status and their affilation with the university, can allow their employees to take advantage of the 15 year rule.

Several medical practices have been set up that are affiliated with a local university. Some have 403(b) plans and are wondering if they can be considered a qualified employer (educational organization, hospital, etc.) for purposes of using the "15 year rule." Your thoughts would be appreciated.

I recall that there used to be a restriction on the type of SEP document that could be used in cases when an employer had a DB plan, even though the DB had been terminated many years ago. Is that still the case, or has that requirement been removed due to the repeal of 415(e)?

Okay, now let me take it a step further. The fiscal year plan will be set up for the period from 10/1/02 to 9/30/03. Then the employer is converting to a calendar year, so there will be a short year from 10/1/03 to 12/31/03. I'm thinking that the annual 415 limit (40,000) applies for the fiscal year, then a prorated 415 limit (10,000) applies for the short year. Do you agree?

An employer is adopting a prototype SEP plan so that he can set it up on his fiscal year. Can he use fiscal year compensation when calculating contributions?

Yes, deductions would be lost. But I don't find anything that says the employer would face some kind of excise tax. For example, if it were a $500,000 plan and there's a 10% penalty to the employer if the plan were to be disqualified, he'd be paying a $50,000 fine. Other than the loss of deductions and the taxability of all distributions, there doesn't seem to be any other penalty imposed. Is that correct?

I haven't met with the employer yet and haven't seen the document. The top heavy issue is the only thing I've been given any information about so far. I'm going to tell him that not making the top heavy contribution is a disqualifying event which means that rollovers would be disallowed, resulting in taxable income to everybody. But are there any sanctions directly to the employer?

A plan is top heavy for the first time in 2002 and the employer is refusing to make the required contribution. In fact, he wants to terminate the plan and be done with it. I understand that failure to make the top heavy contribution is a disqualifying event, but what sanctions could be employer be facing?

An employer is converting their salaried, non-union employees from an indemnity plan to a PPO plan. Some people from this group are currently receiving their benefits under COBRA. Can they also be converted to the PPO plan?

I tried asking this question under Retirement Plans in General, but got no response (so far). Two unrelated employers would like to adopt the same prototype plan, making it a multiple employer plan. First, I'm hoping that the fact that the employers are unrelated isn't a problem; and Second, I'm hoping that the document will retain it's prototype status and not be deemed to be individually designed. IRS Announcement 2001-77, Sections II and III seem to support that, but I would like to get some opinions from other practitioners.

I can't seem to find anything that says that 2 unrelated employers can't adopt the same prototype. But we're getting close to year end and I would like the thougths of some of you experts before I let these folks proceed with that plan of action.

The HCE is a partner. The office person at the time was less than meticulous about keeping track of deposits to the plan, and the TPA relied on the office person. It was the HCEs intention to maximize his deferrals, so he told his CPA that he did. We were investigating a series of missing contributions for the NHCEs when this turned up.

If the remaining 2002 deferral is contributed now, I would think that a penalty would still apply that would require the filing of form 5330. Do you agree?

The HCE thought he had contributed $11,000, the maximum deferral amount for 2002 and that's what he deducted on his tax return. It was recently discovered that his actual contribution was a few hundred less than the max. The CPA is suggesting that the HCE put the additional amount in the plan now rather than amending the return to correct the deduction amount. I know there's a DOL issue with late deposits for the NHCEs, but what about for HCEs?

The not-for-profit ER has a PS plan for ER contributions and a 403(b) plan for EE contributions. Should the 403(b) assets be included when determining the top heavy status of the PS plan?

So, there isn't a requirement that the plan be set up by October 1 so that there can be at least 3 months of deferrals? Is that rule specific to Safe Harbor 401(k) Plans?

Is it too late for an employer to set up a regular 401(k) for 2003 (calendar year)?

I assume you're talking about the Americans with Disabilities Act. Do you mean issues with regard to the way the plan is currently set up, or do you mean if they impose the one or more of the restrictions mentioned in my second paragraph?