Lori H

Loan defaulted 6/30/10 to an active participant. appx balance was $2100. 1099 was not issued. 15 participant plan only allows for 1 loan at a time. In Oct 2010, participant completed paperwork to issue another loan for $2000 and stated on paperwork that she had no outstanding loan. She is current on this loan. I understand a defaulted loan restricts the possibility of future loans. The plan sponsor is of the opinion that he will just send in the loan payments on the defaulted loan to get it current. Inexplicably, Paychex just quit with holding loan payments on the participants loan, so therefore I doubt the participant could just "make up" the missing loan payments even if that was an option. Should the plan sponsor submit a VCP filing and perhaps request a 2011 1099-R issued for the defaulted loan and request that the plan be amended retroactively to allow for 2 loans? Oh and the sponsor did not file their 2009 calendar year 5500 electronically. Hello DFVC

A plan participant has a significant account balance in a plan. he is 87 years old and has been estranged from his wife, not divorced, for 25 years. The wife is currently living with another man. The beneficiary of his plan is his estranged wife. He would have to still obtain her signature to designate his sons as beneficiaries, correct?

Thanks. I will suggest that to her.

If a traditional IRA converts to a ROTH in 2011, can they spread the taxes over 2 years or was that just for conversions in 2010?

Couldn't they just pay an excise tax and have the contribution for 2010? it was 10 days late. Also could they not write in and request abatement of the tax? Seems 4971(a) applies here.

I know the IRS is looking at more DB plans that choose NOT to file for determination upon termination. Does anyone have a link that gives reasons why it is a good idea for a sponsor to file for determination? Thanks

a 10 participant plan that was to be terminated circa 2005, but never did, started a new plan in 2005, in which active participants rolled their funds over into the new plan at that time. only terminated participants were left in original plan. Sponsor did not terminate, file 5500's past 2005, or restate for EGTRRA. DFVC has been done and VCP filing has been submitted. IRS has sent a letter regarding VCP filing and asks to list those PPA amendments that were not timely adopted. They give a 3 page list. My first inkling is to check all of them, however this is a standardized profit sharing plan and a lot of the provisions would not apply (Comply with 411(b)(5), Implement EACA/QACA. comply with Codes 436, 432, etc). Many standardized plans offered default elections and would not have elected amendments such as HEART. However, should we choose them as "failing to timely adopt" since the sponsor could have elected to over ride such defaults?

I have read in the ESOP Answer Book that employees who terminate employment after the record date of the dividend will receive divdend payments, even if they already have recieved their account distributions. However, if the distribution occurs before the record date, they will not.

In order to make distributions to terminated participants, the company purchased stock from the plan. The stock paid dividends during the first month of the plan year. Would dividends be paid to terminated participants who received a total distribution of their 12-31-09 account balance? Doing this would mean they are still participants with very small account balances. If dividends are allocated to participants of record at the boy minus those that received a distribution then how can the excess be handled?

Thanks. Can you provide appx. what the excise tax penalty is?

I believe if a plan exceeds 415 the sponsor is required to move the excess to a forfeiture/holding account for future use. What if the plan is a one participant plan and no future contributions are going to be made and the sponsor wants to terminate? The plan exceeded 415 for multiple plan years starting in 2003 and ending in 2006. Would an effective remedy be to amend the tax returns, distribute the excess plus allocable yield, and file VCP? Total excess is $12000.

Each year the number of participants at the beginning of the plan year is automatically carried over from Question 6f of the previous years 5500. For example if the 2009 Form 5500 question 6f was answered 214. Then question 5 for the 2010 5500(number of participants at the end of the plan year) will reflect 214 as well. How can this be if an entry date is typically the first day of the plan year? Both Relius and Ft William carry over previous years numbers.

Thanks Jim

I want to piggyback on this thread as I have a similar situation and I don't think Mbozeks cites really answered the OP's question. The OP asked what are the implications for late contributions on a PSP. I have a small plan that has less than 10 participants. The plan sponsors filing deadline was 3/15 and they did not contribute the PS cont until about 2 weeks later. The plan sponsor's father died and some other extenuating circumstances caused the delay in making the contribution 2 weeks late. Their CPA is concerned and wanted to know if he should do an amended return on their behalf showing no deduction. If so, can they deduct the 2010 cont and 2011 contribution, when they file the 2011 return?

Who generally prepares them (CPA?, TPA?, Actuary?) and how expensive/inexpensive are they?

a high school has immediate entry on deferrals, but a 2 year waiting period for the employer match. their new doc states that for matching purposes, the match has two entry dates the earlier of the first day of the plan year (June 1) meeting 2 year requirement or first day of the 7th month(dec 1). However, they have not been administering the plan as such. They assess eligibility at the first day of the plan year (June 1) and if a employee lets say started working in August of 2007, they qualify for the two year requirement as of June 1, 2009 or appx 1.8 years. Something under the "3/5ths rule". Since they are a school and a lot of their employees being in August. Aside from the fact their document is not in line with how they are administering the plan, is this 3/5ths rule ok?

so if the HCE ADP can not exceed 2.00% for example, all HCE deferrals above 2% get refunded for each HCE? There is no overall average ADP for the HCE group? The refund could be considered Catch Up if over 50, correct?

a SARSEP fails adp test, are refunds to HCE's determined using same method as a 401(k)? First step, you reduce each HCE ADP until it passes the 1.25 spread of NHCE starting with HCE with the highest ADP, then determine excess contribution then allocate excess first to the HCE with the highest deferral amount and reduce down accordingly?

a SARSEP fails adp test, are refunds to HCE's determined using same method as a 401(k)? First step, you reduce each HCE ADP until it passes the 1.25 spread of NHCE starting with HCE with the highest ADP, then determine excess contribution then allocate excess first to the HCE with the highest deferral amount and reduce down accordingly?

...when does the document have to be in place? Lets say for a new 2010 calendar year end plan. Before they fund the plan?

a straight PSP was updated for GUST and amended for Mandatory Distributions in March 2005. What amendments affecting PSPlans have occurred since then? 1) Final 415 2) PPA 3) EGTRRA restatement anything else?

the younger you are the more aggressively you should invest. Mutual funds are, in most cases, safer investments than stock. morningstar is a great tool with lots of helpful advice.

What is the procedure in VCP filing? For example, a plan was abandoned in calendar year 2005. A new plan(403b) was set up and the TPA failed to terminate the old plan. Distributions from the old plan occurred as well as rollovers into the new plan. A resolution to terminate was not prepared. No 5500's were prepared for the old plan as well as amendments or restating the plan to comply with EGTRRA. When submitting the filing, should the sponsor go ahead and amend, restate and then submit those to the IRS or just outline it's intentions in the filing and wait for approval from IRS. The sponsor has already filed prior 5500's under DFVC. They are aware that their new plan has "tainted" rollover funds. This is a small plan. About 10 participants.

thanks for the link and responses.

...yes?