wsp

Count me as one of the not so smart ones. But, I'll toss a response in here anyways....To me, how they did it is very valid. If they had the right hardship available amount and still distributed too much then it's their responsibility to replace the funds. I suppose then we get into the windfall gains on behalf of the participant but I'm less worried about that then making sure the trust is whole and that there are no others who have the wrong amount being stored in the hardship available fields. Otherwise the whole "not do it again" directive is pretty pointless as they will do so.

suprisingly enough there are companies out there that still maintain that MPPP even though it can be accomplished with the psp. I've got one...they say the same thing. If we want to maintain two plans then so be it. Let us be! I'd say let him alone. If he's willing to pay for both plans just to have options then who are we to argue? But, if the option to take a loan is the driving force here then have him try to get some contract income so that gets him past the zero comp issue which would allow him to take the loan. Also would want to check loan policy to make sure it doesn't require loan payments via payroll deduction. That and nominal contributions to both plans should be able to keep them going, correct?

Be prepared as client may be forced to pay the withholding. Plan administrator is responsible for withholding and depositing the withholding unless assigned to the payor. Since the 20% was sent to the client rather than directly to the Feds it seems to me that no such agreement was in place. Which places the responsibilty back on the shoulders of the Plan Administrator/Client. The fact that the client sent it to the participant rather than to the Feds doesn't relieve them of the responsibilility. First, they need to go to the participant and see if the withholding will be sent back. If not then client can correct 945 using 941-c (section 2 I believe) to show it wasn't collected and request penalty (penalty is the missing withholding) to be waived. 1099-R should be corrected to show 0 withholding. When participant files taxes then it all washes. If the IRS isn't feeling particularly lenient and the penalty is not waived then client will have to fund the penalty and then seek a refund once participant pays his taxes for the year. If participant doesn't pay then no refund.... Either way the 945 and 1099-R have to be corrected to show the withholding wasn't taken. It's basically about who funds the penalty and when.

benefit = balance. The thought is to begin contributing to a 401k now because it gives you options. You aren't having to make the choice because you can always contribute to a 401k now and convert that balance to a ROTH down the road simply by choosing to pay taxes on the account. But you can't do the transaction in reverse if it turns out that the 401k would be better. Think of it as 401k contributions having a 'Y' in the road somewhere ahead. When you reach the 'Y' you can choose to convert to a ROTH or leave it as a tax deferred option. However, if you go down the ROTH road then you don't have the luxury of changing your mind. When you convert to a ROTH would be dependent upon the factors that j simmons states: Tax rates in effect at the time, possibility of tax cuts in the short term future, market timing, state income tax, possibility of the discontinuance of the ROTH option and many other reasons. It's up to you and your tax advisor to determine when/if the time is right for you.

I did not realize that a new designation had been applied. Already I am running amok. And thus the thought that power corrupts the individual is proven....

If the stars aligned and the groups only had individuals in it, with the exception of the final group having no one exceed the SSTWB, then could you do this? Doesn't seem right to be able to, but just tossing it out there as I have a few plans that fit the criteria mentioned above and also on occasion have issues with terminations fouling up the tests.

Better take that up with Mr. Tripodi. Just looked at the Outline Book and he says the catchup contributions are disregarded. He cites authority as 414(v)(3)(b) which says that making of such contributions will not cause a plan to fail to satisfy IRC 416. He also sources the proposed Treas Regs. 1.414(v)-1(2)(iv).

Ok...suppose I should have looked at the instructions before I typed. Seems illogical that we have to treat him as being covered for plan purposes yet he gets to treat himself as not being covered.

Hey John, I know it was a big mistake on my part not to contribute to my works 401K. My employer does match .50 on the dollar up to 3% of my annual salary. Our next open enrollment period for the 401K is July & I plan on contributing from then on. Trust me I'm trying to learn from that mistake. I also plan on seeing if I can do an IRA for 2007 also, but my wife is currently pregnant and that will affect our income, so I'm going to have to play with numbers to see what we can do. Thanks again for all of the great advice that you all give. Wait wait wait....I'm with Bill Presson on this one. If Bay is eligible to contribute to the 401k but simply chooses not to then wouldn't he be covered for 2006? Based upon what I've read he's, in a 401k plan with a discretionary profit sharing feature. Eligibility is unknown but entry dates are July 1 and January 1. Since he received the contribution in the profit sharing plan one would assume that he was eligible for the 401k at SOME time during the year. Simply electing not to defer doesn't change that. I say covered in 2006 and 2007.

Seems to me that they are trying to pin the duty of ensuring that correct compensation is being paid by the employers onto the fiduciaries. In order to ensure that the contribution is being correctly made you would have to determine the compensation. As much as I dislike Walmart....can't imagine them losing this one.

Eligibility is first of month following 3 months of service. Document also has last day/1000 rule for match. Turns out the employer prefunded the match on a payroll by payroll basis rather than annually as the plan document stated AND they neglected to wait the 3 months for a few participants. Fortunately this is first year of match so terms can forfeit entire account balance and I can figure the shares that were purchased early and have those amounts liquidated. But there are a number of individuals who received a match but did not work 1000 hours and client wants them to keep the money. Is that an amendment (eliminate the 1000 hour rule) that we can do retroactively? Match amount is not discretionary so it won't change/reduce anyone elses benefit.

My first inclination when this thread started was to defend the TPA..........nevermind. At least it wasn't "to be allocated among those that deferred less than 3%."

Section 72(t) (which imposes a 10 percent tax on certain early distributions) applies to a deemed distribution as if the deemed distribution were an actual distribution. Reasons behind the need to deem the distribution are irrelevent and distribution needs to be processed as a normal distribution. Normal 10% exceptions apply. One of the possibilities that participants don't think about when they take out the loan.

I'm just happy I was able to add something instead of always being the one to glean the information.

I know of no other line than on the Schedule P where the Trust identification is reported for Form 5500 filings. Schedule R...depending on where the assets of the plan are invested and how the plan is structured. I bolded for emphasis but....from the instructions : Enter the EIN(s) of any payor(s) (other than the plan sponsor or plan administrator on line 2b or 3b of the Form 5500) who paid benefits reportable on Form 1099-R on behalf of the plan to participants or beneficiaries during the plan year. This is the EIN that appears on the Forms 1099-R that are issued to report the payments. Include the EIN of the trust if different than that of the sponsor or plan administrator. If more than two payors made such payments during the year, enter the EINs of the two payors who paid the greatest dollar amounts during the year. For purposes of this line 2, take into account all payments made during the plan year, in cash or in kind, that are reportable on Form 1099-R, regardless of when the payments began, but take into account payments from an insurance company under an annuity only in the year the contract was purchased. Seems to me that any time you have a Trust EIN it should go here.

First, I applaud your efforts in trying to learn...but I think you're focusing too narrowly on the vesting in terms of how to provide a benefit. Might be alternative routes to take if we knew what it was that you're looking to accomplish here. Who exactly is it that you're trying to benefit? And what type of contribution are you looking at providing? Profit Sharing? Match? What's the point of providing that employer contribution? Recruitment? Retention? Reward? Are you trying to provide full benefit to the bottom tier employees or the top tier? How long does the bottom tier typically stay on with you in terms of hours per year and years of employment? How long does the top tier stay in terms of hours per year and years of employment. And, the advice about seeking an independent TPA is spot on. The bundled provider or TPA that works solely with the bundled providers often will steer you towards solutions that fit their systems rather then what you want to accomplish. Those type of shops are for the most part designed around the "vanilla" plans that revolve around processing instead of consulting. If your current TPA fits that model, or is not working out, better to pay up on the bill and part ways rather than feel like you've been pigeon-holed into a plan that you don't want or doesn't fit your company's needs. This is especially true if you find what you're looking for on this board rather than from him/her.

So then, in this instance, we are back to what JPOD suggested earlier when the recommendation to seek experienced ERISA counsel quickly was made. The promise was made and subsequent payments were made. Sounds to me like a plan was established and maintained albeit sans documents and filings.

If the TPA ran a test mid-year the plan would still have been top heavy as the plan was top heavy on 1/1. Top heavy contributions would still be required (albeit in a smaller scale). So then, logically, we need to step back one more year to make sure that the key employees didn't defer at all. Did the 12/31/2004 Top Heavy Testing results not show that the Key Employees balance percentage was approaching 60%? The fact that the plan was top heavy (or narrowly close to being so) should have not been a suprise to the plan sponsor even at 1/1/2006 let alone mid year. Unless, of course, the plan sponsor didn't read the TPA's annual report for 2005. To me, that's the only error here. Everything else is a lack of communication.

In all reality is there anything to keep someone from simply noting their marital status as single and doing the same thing in a qualified plan? If someone is going to be manipulate the system to avoid making their spouse the beneficiary I would think it wouldn't be a stretch for them to deliberately not notify HR of his correct marital status or his spouse of his retirement plan balance/options. Certainly the rules mandate it, but can't apply the rules correctly if all the facts are not known.

Now wouldn't THAT be something. Buy out the ex's interest in the home with money that he/she was to have received in a QDRO anyway.

I'm absolutely shocked that a) Actuaries and TPA's are not on this list and b) that anyone on this board would entertain leaving their exciting and fulfilling careers for the menial and boring job as a Radiation Therapist. In all seriousness...is it suprising to anyone that the legal and medical fields are heavily represented on this list? And, no offense to the attorneys in this field, but what kind of society have we become that we even need ONE Animal Defense Lawyer let alone have it be called a cutting edge hot job!

Extend only the 1120S to get the funding extension. Extending of the 1040's has no impact on the deadline for the funding of the S-Corp. However, because the income passes through, if there is a doubt as to the ability of the S-Corp to actually fund the large contribution or if it's a possibility that the contribution may change prior to funding then it would be wise to extend. Alternative would be to file and amend the 1040 if the contribution changes. btw extension of 1040 is now 10/15 so that eliminates some confusion in that regard. So if you're truly fearful you can extend just to make it easier to sleep at night.

You do not have to wait. Once the contribution is calculated and the S-Corp's return is finalized you can file the 1040's. The 1120S (corporate return) can be filed later. Any change after the fact will require amended returns of course. <per one of the CPA's on staff at my firm>

Seems about as sensible as sending a diversification statement to someone that's going to take a distribution when they change jobs. I could be wrong, but in the plans that I work with the problem isn't with diversification....premature distributions make this whole vesting and diversification statement pointless.

Ah...now I got you. I was wondering if the smoothly increasing benefit to avoid the gateweay worked on a DC only plan or if it was limited to DC/DB hybrids. I was thinking that they were somehow able to avoid it based more upon the aggregation of the two plans and the extra benefit provided by the DB plan rather then solely on the smoothly increasing benefit on the DC side. After heeding SoCal's advice I looked it up in Sal's book and saw indeed that one can avoid the gateway in that way. But, that brings up a different question....must every band have a participant representing that band? Seems to me if you've got the majority of your employees in the early bands you can save plenty of money if you are skipping most of the later bands.