austin3515

I feel a LOT better knowing the purpose of the 5498, which I had never known before. Obviously, whoever is getting the money will know more about it. For example, we (as I'm sure you all do) routinely review support for the source of incoming rollover to make sure it's eligible to come in. So the receiving organization will know it's pre-tax going to Roth and will issue the right 5498. All is well in the world again

But how in the world would they know it was from a pre-tax account??? Maybe they are required to know, in which case I would feel much better. There just seems to be a huge disconnect. For those of you saying check with the receiving IRA, do you process distributions? These operations are 100% incompatible with that type of a project. For example, we don't even have a phone number. And if you did have a phone number, why would the person answering the phone give us any information at all??

Of course, I thought of the need to update the form after posting the link. Another ambitious effort by the government to make plan administration as prone to error as is humanly possible. I fear the odds of them checking that box correctly are pretty low, then the 1099 goes out incorrectly, and no one will ever know. Ever. Then it creates a nice opportunity for tax cheats. If a tax cheat knew not checking that box could save an incredible amount of money in taxes, perhaps they'll opt not to check it and then plead "oh, I had no idea!!" OBviously, verifying that an IRA is Roth or Traditional will not be something that any providers or even the most diligent plan sponsors will be doing. The real world implications it seems were NOT planned for...

U'm being told that we need to code a portion of the 1099 as taxable. How would we know to do this, since we don't know if the account listed is a Roth IRA?

In this situation, is the plan paying the distribution responsible for coding the distribution as taxable? How in the world would the sponsor know whether or not the rollover account relates to a Roth IRA?

This Q&A was just published in the benfits link newsletter. If a plan uses the safe harbor standards for the hardships, this letter suggests that a participant would be required to take a loan before a hardship even if it would increase the hardship (i.e., disqualify the participant from obtaining a mortgage to buy a home). But they also said this at the very end: Does anyone know what commentary they are referring to? http://benefitslink.com/modperl/qa.cgi?db=qa_401k&id=93

Can I use the SHNECs (which are QNEC's) in the ADP test? I know I need to include it for the HCE's too, but in some cases, it might help...

And a follow-up! Account balance is less than $5,000 and the plan includes the automatic IRA rollover rules. Do those rules apply to this?

With a twist! She lives in Puerto Rico - I gather the rules would be applied the same as if she lived in Arizona, is that true?

Let's say the question is the same as before except: a) participant has just one year of service, and b) balance consists exclusively of 401k, c) participant leaves and comes back after 7 breaks. Same answer, right? Employee re-enters the plan on date of hire and still has one vesting year?

What about eligiblity?

Employee with 7 years of service incurs 5 consecutive breaks and then gets rehired. Document uses rule of parity. Is that person forever grandfathered in to vesting and eligiblity, or will it at some point be disregarded?

I guess I'm just not clear why, if you pass coverage after the exlcusion, you wouldn't be able to do it... You're talking about TESTING, and this seems to have more to do with ELIGIBILITY. Again, I assume you are correct because our documents say it, I just want to know you and Corbel are saying that

I tried to find this rule in the regs, but came up dry - can you point me in the right direction? The safe harbor regs reference only "eligibile employee" and the 401k reg defintion of "eligible employee" doesn't talk about those exlcusions. Is it perhaps a restriction that applies solely to prototypes? (I did see what you brough up referenced in our prototype document).

That's the second thing I've learned from you within a half an hour... Thanks!

Hmm.. So let's say you have a plan that matches 300% of the first 3%, so the total match is up to 9% of pay. In that scenario, it would be unusual to have to exclude any match because the "representative matching rate" provisions. As an example, if only ONE NHCE defers the full 3% and no one defers anything else, the maximum match allowed in the test is 5% of pay, and the other 4% would be disregarded? Is that basically what you're cautioning? I had absolutely never thought about it before. Fortunately, I don't think I've ever seen a match quite that generous, but you never know...

I would recommend talking to an ERISA attorney before going anywhere near there. It is not nearly as straightforward as "adding a new investment option." And the fiduciary liability goes up exponentially for the trustees.

I was suggesting that to do such a thing would be ridiculous... So it sounds like you agree with me - no match, no coverage, no ADP test?

People, please. No one int heir right mind should suggest doing an -11(g) amendment to correct a coverage failure in the match portion of the Plan when there is no match made. that's just ridiculous, and it is NOT the same thing at all. We'll just argue our way out of it by saying there is no match "plan" if no match is made. No match "plan"= no coverage test.

LEt's say, theoritically, you don't pay this $3 penalty. Let's say further that the IRS hunts you down and threatens all sorts of nasty things if you don't pay the $3 penalty plus the $1.50 of interest plus the $2 of penalties. Wouldn't you just pay it then? Also, I've heard the IRS say publicly that they will NOT pursue trivial amounts like this. As you can imagine, they lose money processing a $3 penalty tax return. There is no formal deminis amount, but I personally won't due one for less than $100 (I warn clients of the risk of course, which I believe to be extremely low). Based on GBurns answer, I'm sure he'll recommend that I be ex-communicated from the pension industry for such a void of principals...

We wanted to talk to someone about it, as we are considering doing this in-house to cut-out the expensive middleman (i.e., recordkeeper), particularly on small plans. We use relius for admin work right now.... Please send me an email if you would be willing to talk to us.

Believe it or not the answer is no. Absolutely no distinction is made between a reduction or a suspension. They both blow the safe harbor.

Got a multiple employer plan. Most of the employees from ONE of the employers were let go. So, the question is: Do apply the partial term rules at the "employer/controlled group" level or at the plan level. I would have to assume it is the employer/controlled group level, but thought I should throw this out there.

Boy, I'm not too concerned... Personnally, I wouldn't do anything other than you've already done. I just can't see this being a big problem. No one was hurt, it's fixed going forward, it's much more related to a failure to complete a little bit of paperwork than anything esle. OK, if you got audited, maybe the auditor would give you a little bit of a hard time... I think i's take the chance,

I just want to be perfectly clear about one crucial point: If you discontinue the safe harbor nonelective, or the SH Match for that matter, there is NO TH exemption no matter what. Therefore, if any of the keys defer/receive 3% of full-year pay or more, then the full 3% THM is due, despite the fact that those contributions were made before they knew they would discontinue. Put it another way, there is absolutely no relief (in the case of a SHNEC), and probably a severe detriment (in the case of a SHMAC) to discontinuning the SH in a top-heavy plan if the above situation applies. I assume everyone agrees, but its so shocking I wanted to make sure I wasn't alone... Once again, small business gets royally screwed by the top-heavy rules, and will be forced to terminate their plans (as the only means of limiting the top-heavy contribution) despite the relief afforded to the mega-corporations of the world... If I ever get to the senate, this will be my top priority...