austin3515

10 to 1 the next paragraph says you should add back pre-tax defrrals under 401(k), etc. So you could either: 1) Start with box 1 and add back 401(k) deferrals and 125 contributions. OR 2) Start with medicare wages and add back 125 contriubtions (125 deferrals reduce Medicare wages).

Got it, Thank You!

Create a plan imposed limit to limit deferrals of owners to 0% of pay. If there was no 401(k) before, use PY testing, and then they can contribute 5% of pay PLUS $5,500. Then, on the first day of the next plan year, add the plan imposed limit of 0% on the owners.

Does anyone have a link to a good web-site that tells you when tax returns are due? (or in particular, the funding of employer contributions). My understanding is that they pushed back the partnership return due date to 9/15 for calendar 2008 tax years. Can anyone verify/send out a link?

It's not so much relief as complete and total elimination. Just signed into law yesterday - no RMD's for 2009. Somebody get me a tissue A 4/1/09 RBD is a 2008 RMD, and there is no elimination of 2008 RMD's. Same logic applies in reverse to 4/1/2010 RMD's, only in reverse.

Bird - I think one of the new rules for VS documents is that the sponsor can amend on behalf of its adopters - do you agree? That;'s my recollection from Corbel's EGTRRA Document class. I have a question though: What if we signed up to sponsor our own prototype, but just use the Corbel-sponsored VS check the box document. Would Corbel be responsible for executing snap-one regulatory update amendments (except that we would obviously need to be distributing copies to our adopters)?

We use documents from a major provider. As most of you know the differences between prototypes and the check the box volume submitter documetns have diminished signficiantly now that a) PT's can use cross-testing, and b) VS documents can have TPA initiated regulatory amendments. So if a) prototype has less flexibility than the vs (i.e., limitations on # of allocation groups), b) the pricincing is essentially the same, then why would anyone opt to use the prototype (other than branding). Or is branding the primary reason? Is there anything a prototype can do that a VS cannot?

Does anyone know where that table of permitted disparity factors can be found in an official format (i.e., for imputing disparity on an allocation rate)? I'm tlaking about the one that gives a disparity factor depending on the combination of the Plan;s NRA and the participan's SS Retirement Age.

I'll add another wrinkle - if, as Tom suggested, discretion is desired, then if the Plan is top-heavy, make sure the owner's/officers (i.e., keys) don't do any 401(k) until the decision has been made. If the any keys do more than 3% of 401(k) and then they opt not to make the safe harbor non-elective, then the top-heavy minimum will apply anyway, which is the same 3% of pay (basically), but the owner gets no exemption from the ADP test. Those dreaded top-heavy rules...

It seems strange to limit someone's 401(k) based on the prospect of a DISCRETIONARY contribution, just because you've always done one in the past. If the Plan has a fixed contribution, I couldn't agree more; but if its discretionary, I think it would be inappropriate to limit the deferrals.

1) The 100% tax basically never applies. Take a look at the defintiion of "taxable period" - at first read you assume it is a 12 month period, but it is actually determined based on the relevant facts. I was hung up on this myself at one point, but if you read the 5330 instructions carefully, and in particular focus on the taxable period definition you'll see what I mean. 2) See the following example (assume 6% interest, and assume that the late deposits were due on 1/1 and paid on 12/31): 2004 Late Deposits 2004: $10,000 is late, lost interest is $600. 2005: Lost interest from 2004 was $600, which is now worth $636 (600 x 1.06). 2006: Total lost interest through 2005 was $636, whcih is now worth 674 (636 x 1.06) 2005 Late Deposits 2005: $10,000 is late, lost interest is $600. 2006: Lost interest from 2005 was $600, which is now worth $636 (600 x 1.06). So, the total lost interest is 674 dollars, related to the 2004 late deposits, and 636 related to the 2005 late deposits for a total of $1,310. The key is to calc lost earnings for each individual late deposit separately, which is exactly how the DOL's web-site does it.

Maybe notice was sent out in November 2007 for the 08 plan year. Anyone have a notice I can use today to announce the decision to go safe harbor?

An accountant called to tell me not to process his clients RMD yet, because he thought there might be relief on the RMD rules for 2008 - Does anyone have any idea what he's read? It seems hard to believe that any relief would be in line for 2008, since so many RMD's have already been processed? Perhaps the relief will be to allow them to adjustment for investment losses?

No it won't. The only people not covered by the Plan will not have satisfied the plan's eligiblity requirements. Erego, no coverage issue.

1) We need to know the ownership split of the partnership 2) We need to know how (if at all) the S-Corp and the partnership work together, whether or not they are a service industry, etc. If a potential ASG exists, there are a lot more particulars, but what I've mentioned could help to quickly rule it out.

Allow me... Qualified Plans (i.e., non 403b) Small plans have been POTENTIALLY subject to the audit requirement for four or five years now. HOWEVER, the only time they will be subject to an audit is if they screw up. For example, the audit exemption is maintained by: 1) Providing participants additional disclosures in the Summ. Ann. Report (i.e., the summary of 5500 for the participants) regarding where the money is held. This is NOT required if the participant receives their statement directly from a regulated financial institution or insurance company etc (in other words, most plans are all set). This is really tarteted at "pooled" plans where the participant gets a piece of paper off a laser printer from a TPA as evidence of their accounts each year. 2) Having adequate fidelity bond protection IF more than 5% of plan assets are not in "regular" investments. So for example, if 10% of plan assets are invested in a racing horse, or a coin collection, Real Estate, private equities, mortages, etc. additional fidelity bond protection is required, potentially above and beyond the regular 10% fidelity bond. As you can see, maintaining the exemption is not particularly challenging, and I would therefore be surprised if any significant number of small plans have actually had to get an audit. With respect to 403(b)'s what she says is true (I'm not sure of the exact effective date)--this represents a DRAMATIC change in 403(b) plans. Compare this to the small plan audit waiver where the DOL really just wanted to deter "bad" fiduciaries from investing in garbage, and did not really want small plans to get audits.

Any number divided by itself is indeed 1, which in ADP test is 100% (that would have quite a dramatic effect in a small population!) But I thought it was more like any VALUE divided itself is 1, but zero is by definition the lack of any value at all... But admittedly I did not study match in grad school - truth be told I studied nothing at all in grad school (of course if I had gone to grad school I would have studied...).

Anyone whose a TPA knows you can't charge enough for loans - you will always lose money or barely break even on loans (particularly in the case of a client who is not diligent in administering the loan payroll deduction process, and particularly if participants are allowed more than one loan outstanding). I will say this though, we are relying a LOT more on the fund company's automated loan programs and a lot less on flipping through piles of amortization schedules, which has helped us keep our fees down.

I've never seen guaranteed payments not be included in earned income. I have seen CPA's forget to fill in the SE box by accident. Do with it what you will

Never run into this before, but my first reaction is that it seems strange that someone should incur the tax liability for a deceased indivudual's o/s loan balance simply because they were designated as beneficiary. Shouldn't the taxable income flow through to the estate or something? Can you assign someone your debt? It seems awfully strange if true.

Thanks for the link R Butler! I now understand the logic behind what I've always been doing. I have always thought it was strange that they didn't get a deduction for the employer contriubtion (i.e., because if it was a c-corp that bonused out all income, the c-corp owner would not pay FICA/SECA on those amounts). I still think its a silly conclusion, but at least now I understand the logic. It seems clear that the Q&A is either incorrect or very very misleading.

This was in the May 2008 IRS Q&A from the ABA: 12. § 401©(2) – Self Employed Individuals Earned Income Treas. Reg. § 1.415©-2(b) defines compensation for self-employed persons as earned income under § 401©(2) of the Code, plus amounts deferred at the election of the employee under § 401(k) of the Code. Earned income under § 401©(2) of the Code includes a reduction for 50% of SECA liability. When is SECA liability determined? Proposed Response: The SECA liability should be determined after the 401(k) contributions have been deducted from the person’s income. The 401(k) contributions are then added back to arrive at 415 compensation. IRS Response: The Service representative agrees with the proposed response. Is anyone calculating the 50% deduction for SE Taxes on comp NET of 401(k)?

There was a big thread on that exact topic a month or so ago - it was split down the middle re: whether or not that was acceptable. I personally wish the DOL/IRS would issue some guidance on that issue. I figured this "hardship" might be the path of least resistance.

Got a participant with a loan who cannot afford the payments anymore (got very sick, but is still working). She has a lot of medical expenses not covered by insurance AND she has a son who needs tuition money for school in the fall, so she really wants to get rid of her loan payments. Question: Can she request a hardship distribution for the above situations in the form of a loan offset? It seems strange given that the proceeds will be used to repay a loan, and not to fund the intended expenses, but I have always read that hardships can be in the form of loan offsets. Note that the participant could take a hardship in cash (because she is indeed eligible for the distribution) and then use the proceeds to separately repay the loan. I am aware of no requirement that a hardship distribution actually be used for its intended purpose. Once the hardship exists, the participant is eligible for the distribution. They could blow the money at the casino for all the Plan Sponsor knows. PS, the plan is in a 90 day black out right now so my idea in the previous paragraph would not work.

My answer was based on my reading of the EOB: Part 2 of the top-heavy exemption in the EOB states: to the extent there are matching contributions made to the plan, all of the matching contributions satisfy the ACP safe harbor prescribed by IRC §401(m)(11)... Since all of these contributions satisfy the ACP safe harbor, at least according to Sal, TH exemption would be in tact.