austin3515

I thgink that was my recollection too. Next question - can I still use 11g to amend to correct? Client is in hurricane irene zone... Plan ye is 12/31/2010.

That would be a fabulous answer... I will check it out thanks!

Facts Owner owns Company A and Company B. Company A employs 5 employees. Company B employs those same 5 employees. Company A sponsors a safe harbor 401k Plan which excludes HCE's from the 3% SHNEC. Owner has earnined income from ONLY Company A (Company B is an S-Corp and he did not take a w-2) Plan Year Ended 12/31/2010, and therefore it is too late to make a -11(g) amendment. Question: Is there anyway I can do contributions for Owner in Company A's plan? Or is my best course of action to have Owner not benefitting in the Company A's plan. I note that Plan A passes coverage since all employees of the controlled group are benefitting. But I'm wondering if I have a definition of compensation issue (since half of the employees comp is excluded, and NONE of Owner's comp is) that would require general testing on the SHNEC.

It makes no sense to you because you are an intelligent person. The issue is that QNEC's must satisfy THIS requirement included in 401(k)(2)© © which provides that an employee's right to his accrued benefit derived from employer contributions made to the trust pursuant to his election is nonforfeitable, and It's just an insane interpretation in my opinion, especially when condiered that it is a cross-reference to 401k!! So whoever drafted this section was thinking about 401k contrbiutions, NOT QNEC's. Whatsmore, a literal interpretation of this section is ridiculous because a QNEC is irreconcilable with the end of the sentence. A QNEC is not made pursuant to an employee's election. So I'm left with no other conclusion other than the IRS wants to make life more difficult for small business owners. The clear intent of the cross-reference was the nonforfeitability requirement. A logical persopn of sound mind could reasonably intepret this to apply to a QNEC contribution at the time of allocation. Sure someone else could reach a different conclusion, but it is encumbent upon rulemakers to consider the impact of their actions. I see so little of that from the IRS (or the DOL... no wait, especially the DOL) when making decisions.

PS - Anyone who posts on this message board as though their clients are not going to be infuriated about this policy doesn't have the same kind of cost-focused clients that I do. When I tell my client that they have a $30,000 safe harbor deposit, oh and by the way, they need to allocate an extra $7,500 in forfeitures as a matching contribution, they are going to go ballistic.

OF course I would never let my example happen in the real world. But the point is the forfeitures should be able to be used to offset the only contrbution that is intended. I mean really, what is the policy agenda being fulfilled here? Are the employees really being disenfranchised by using forfeitures to reduce the deposit required to fund an already generous benefit? I believe some version of my example is going to play out somewhere in this country, perhaps several times a year. And the outcome will be plan termination. So I ask you, who does this serve? You know, you hear about all of these unfriendly business policies. This is such a perfect example of that. And unfortunately, it only imacts small businesses who don't donate enough to political campaigns to make a difference.

I'm comfortable trusting Corbel. If they find out they're wrong, they'll let me know. Practical question regarding their ridiculous provision: -Plan is intended to be a SH Match plan, taking advantage of the TH Exemption. -Plan has forfeitrues of old regular mach money of $1,500. -Plan expense do not exceed $1,200 for the entire year. -So now, there is $300 of forfeitures which must be allocated -Plan document does NOT inlcude any additional discretionary match. -There are 100 eligible employees not deferring. In this situation, the $300 needs to be allocated out as profit sharing, and a top-heavy minium of 3% must be provided to the 100 non-deferring employees, right?

This is Corbel's position, which I like much better "The IRS has reviewed and approved these documents. Employers who properly adopt these documents are entitled to rely on those approvals. In part, this means that while the IRS could require prospective changes, it cannot retroactively disqualify the plan for failure to follow the law. That reliance should be valid until the employer restates for PPA on a prototype or volume submitter document that does not include the offset language. For prototype and volume submitter plans, the likely restatement time period will be between April 1, 2014 and April 30, 2016, but the IRS will announce the actual period closer to the time. "

There would but, the question is, is it an prohibition on using forfeitures for Safe Harbor? Or just tha tif you do CHOOSE to use them you need to do a THM. My point is just that the SHNEC will take care of most the THM anyway. And Sieve, Corbel is saying that because we all have our opinion letters, that we can continue to use our documents as written. The new LRM's are really the first authoritative guidance released and will only affect the PPA docments in 2014.

Sungard's write-up: http://www.relius.net/News/TechnicalUpdates.aspx?ID=588 "This week, the IRS released its List of Required Modifications for 401(k) plans. The LRM dealing with this issue includes the following note to reviewers: “Forfeitures may not be used as ADP Test Safe Harbor Contributions, and if used as anything other than ACP Test Safe Harbor Contributions, the Plan will not be exempt from Code §416." To me this almost suggests that a plan using the 3% SHNEC (which is satisfying the THM anyway) COULD use forfeitures towards the SHNEC. Corbel doesn't seem to mention this though? Anyone have any thoughts on that?

What are people entering for the hurricane Irene extension under special extensions box?

You're giving a hard time over semantics here... Practically speaking, the partner can amend the return and he can make individual contributions, BECAUSE HE'S A PARTNER and has control over these sorts of things with respect to the partnership. Both partners are in the same situation. I'm not talking about who's checking account it's comiung out of (I know it's the partnerships). This isn't PriceWaterhouseCoopers I'm talking about, which I believe is the vantage point of your comments. It's Joe Schmoe and his partner Jon Doe. So let's say: 1) The partnership and the individuals filed extenions. 2) The 1065 AND the 1040 were filed on September 10. 3) New information came to light and the 1065 is being amended to increase earned income by $10,000 Questions 1) If the Plan is a 3% SHNEC, can he contribute AND deduct the extra $300 of SHNEC in 2010 (based on the notion that it is deducted on the 1040)? 2) If no profit sharing was done before, can they now do profit sharing? Sounds like your answer is going to be no to both, but I'm still hung up on the idea that, as you even indicated, a 1065 is an informational return, so it's arguable (unless some document contradicts) that it is not DEDUCTED until it is reported on the 1040.

"You still have not responded to my Q of whether the amount on line 13, code R of the 1065 was increased on the amended 1065 given to the partner. " Isn't my question "can I increase line 13, Code R"? That's where I report the employer's contributions.

Somoeone called and proposed this: Have a SIMPLE IRA for two years. Because in a SIMPLE the match can be as low as 1% for two out of 5 years, they do 1% for two years, to take advantage of the "cheap" contributions (i.e. it's only a quarter of the SH Match, but ~75% of the contribution limit). After the two years, discontinue and do a SH 401k. Is there a problem with this?

mbozek - Sometimes it sounds like you agree with me, but others it does not. Can a partner amend the 1065 and the 1040 today (assuming an extension was filed) to make additional contributions?

Is nobody buying my "it's deducted on the 1040"?

That's certainly what we do with our clients. IT's based on the fact that the 1065 is due on that date. So my official answer is you are correct. BUT there is a school of thought that suggests what I'm saying in situations like this (i.e., this could be a plan B).

1065 is amended and generates extra income for partners. Can the partners make additional profit sharing contributions together with the amended? I'm assumign the answer is "maybe" but if and only if the return was on extension through octboer 17, and the additional amounts are funded by October 17th. Because the contriubtions are deducted on the 1040, many people suggest that this is when you have to fund the contributions by for a partnership. Any thoughts?

Just a different level of service for somoene who is away on vacation...

From 402(f) (f) Written explanation to recipients of distributions eligible for rollover treatment http://' target="_blank">(1) In general The plan administrator of any plan shall, within a reasonable period of time before making an eligible rollover distribution, provide a written explanation to the recipient— But it does seem like some notice should be provided. I'm glad I'm not the only one using the same 402f notice for purposes of hardship distributions. But I'm wondering if perhaps we just edit out the pieces that don't apply to the ability to rollover?

Andy, you are thorough! Thanks for the info!

Are people providing special tax notices for hardship distributions? I get that it's not an eligbile rollover distribution, but it seems like there should be some documentation warning them about the 10% penalty tax. Truth be told, we've been sending the same Special Tax Notice that we've been sending for termination distributions just to make sure they knew about the penalty taxes.

Thanks Andy! Where did you get that from?

I'll bet you could use FTW for just the SSA. Nothing really on the 5500 that is that hard to replace. Might be a LOT easier, and it's pretty inexpensive. The fact that Sungard is not providing this service is just shameful. I'm so glad we ditched them for FTW for government reporting....

Does anyone know if the IRS will acccept a faxed/photocopied version of a 5500-EZ? Client is out of town, and I want him to be able to just sign and fax back to me.