austin3515

It's actually a DOL issue. Take a look at the DOL's Voluntary Fiduciary Correction Program to see how this should be corrected. Also, if you do a search for the "FAQ's on the VFCP" the DOL's FAQ's should pop up for you which is an excellent summary of the program.

SORRY!! If you fail the ADP, you must forfeit the match related to those deferrals. But if all you fail is the ACP, then you get to keep it. Is that more accurate? My question is actually about a 403(b) plan, where they are exempt from the ADP anyway.

No, if they're vested they get to keep it!

The second paragraph was to point that this would be N/A for a regular corporation as the additional money would just be bonussed out. I'm aware that there are no owners in a nonprofit. The benefit of failiing is to keep the additional match and be no worse off. The only hitch I've found so far is that the distributions need to take place before 2.5months after year end to avoid the excise tax for late distribution.

Small NONprofit has only one HCE, the CEO, who is 100% vested. Can they intentionally fail the ADP/ACP testing, knowing that he/she will be entitled to keep the excess matching contributions, which, had the test been passed, would have been foregone? If the only HCE was the owner, their would simply be easier ways to get the money out of the company.

If a terminated employee would have received a matching contribution but for the fact that he/she was not deferring, then the participant is benefitting. If a terminated participant would not have received a match even if they were deferring, the participant is not benefitting. Of course, if the terminated participant worked less than 500 hours, it doesn't matter anyway because the participant is excludable.

Got a client that has pooled separate accounts as their investments. On Schedule D, one line item is reported for all of the sepate investments options in the aggregate, because there are apparently "sub" pooled separate accounts. What should I do on the schedule of assets held? Should I list out each of the different investment options, or just list the same line item that is reported on the Schedule D?

What are other CPA firms doing to establish the proper payee is receiving funds from distributions from retirement plans? For example, as a CPA, how would you ensure that if the trustee says John Doe received a $10,000 distribution, how do you know that the trustee sent it to John Doe and not the Administrator who set up a bogus bank account to steal John Doe's money? Are you sending out confirms? How do you know you have the right address? I don't believe the question changes if the distribution elections are done paperless on the Internet or via paper forms (which can easily be forged) Please advise

Does anyone where I can find the 1983 GAM on the internet?

I work for an accounting firm, and this is something that comes up often - checks are printed but not mailed. If the check has not been mailed, then nothing really has happened. It has to be mailed. I actually think there is something called the "mailbox rule" somewhere. Probably lots of court cases on this one.

Never heard of such a thing. What's more, I can't see how its possible, since based on the DOL's correctiion program (VFCP, Voluntary Fiduciary Correction Program), the lost earnings is the greater of actual earnings that would have been earned or the underpayment penalty rate under IRC 6621(a). The former changes constantly, and the latter changes quarterly (or monthly?) Take a look at this program - it will have some good examples. A quick internet search should turn it up. Remember, the PT Excise tax is ONLY on the lost earnings - not the total amount of the late deposited deferrals. Read the instructions to Form 5330. There is an excellent example on how to calculate excise taxes on loans (which is what depositing deferrals late would be).

Good to see you again, Mr. Burns...

Joanne already indicated she was reducing the match appropriately. My only point is why rerun the testing if the results could only improve. Or were were you disagreeing with what I said about having the match paid to the HCE?

I would think only if you failed ACP the first time around... If HCE's forfeit match, it can only get better... Also, you know that if the HCE is partially vested, they actually should get the lost match directly to them.

I have a client with several late deposits of employee deferrals throughout two years. Can you attach a supplemental schedule to Form 5330 sumarizing all the PT's (and Schedule G to the 5500 for that matter) and reference this schedule on the Form? Otherwise, how would you handle 8 PT's in one year that weren't corrected, and 8 more in the next?? Because a PT is a new PT on the first day of each year (if not corrected), in year two you've got 16 PT's! I would need 4 separate 5330's! Any advice compadres?

I just thought if its unclear and defensible (because not specifically excluded), then go for it... But in retrosect I agree with you - they would surely be all over this..

If you answe that question on Schedule I as yes, you need to compelte both a Schedule G and a 5330. The DOL could easily catch you for not filing a schedule G, because its in the same form. It would take a little more effort for the IRS to catch you for not doing a 5330, but it would certainly not be hard for the IRS to get the information if they wanted it. Also, based on the reading of the new 5500 instructions it sounds like what would be included on Schedule I is the aggregate amount of deferrals - not the interest. So if your late deferrals each month were $100 and the poblem was for 5 months, the total on Sch. I would be $500, even though the prohibitted transaction reported on G and the 5330 would be $10. By the way, the penalty is 15% - You just lost $.50!

Why not take the opposite position since there are no regs - include him as an ADP of zero, thereby helping the testing results?

mistaken posting... sorry

How many employees are there? If there's 5 I would be more concerned. If there's several hundred I just think, absent any other pertinent info, its just not that big of a deal. No one can be perfect all the time. I think that the laws of statistics suggests that there are always going to be problems like this. For every one, like yours, that's found there's probably a dozen more that are not found. So the employee got a few extra bucks in an isolated administrative mistake. So what? Maybe I'm being to lax on this...

I agree. Remember, its worded "employed on the last day." If they received a paycheck for work on 12/31, they're employed in my eyes.

Technically yes. See Revenue Procedure 2002-47 and your plan document. Both should say what to do. But if you won't tell, I won't. If it's just one person, one time, I just don't see it as a deal breaker. Unless of course the person is an HCE or an owner or something like that, and it appeared to be discriminatory.

When you aggregate for coverage you need to aggregate for all non-discrim. testing. The original intention was to have one safe harbor plan and one non-safe harbor plan. Therefore, aggregating for coverage ruins my evil plan! As for otherwise excludables, we are aware of these rules. I didn't mention for simplicity's sake.

That's true, except the results for both the 401(k) and the match should be exactly the same. So there's techincail 4 tests in total. Coverage for match and 401(k) in Plan 1, and the same tests in Plan 2. I'm concerned that Plan 1 woon't pass coverage...

Plan 1 has 7 NHCE's and 5HCE's benefitting Plan 2 has 4 NHCE's and no HCE's Plan 1 coverage = 7/11 = 64% divided by 100% (5/5) = ratio percent of 64% - failing. The plan I was talking about is significantly more distorted than that (probably 25 or 30 people in Plan 1, and a couple hundred in Plan 2), so my only option is ABT, right? And f I can't pass the nondiscriminatory classification test without aggregating the Plans, the Plans are no longer effective, right? Also, these Plans have extremely low ADP/ACP test results and no employer profit sharing contribution. The owners always put in too much. Is the ABT test run before or after the ADP/ACP corrections? I hope after! Thanks for all the information so far!