Lori H

Bird, So are you thinking that another option for him would be to take the insurance out of the plan altogether and replace the current cash value with personal assets outside the plan?

Don, He was 44 in '85 when policy was issued. No major health concerns. So he could replace the plan policy with a newer policy, higher face value and just show the "hit" (loss in csv) on the 5500 if he so desired? Thanks

Don, its a Genworth issued Flex Premium Adjustable Life issued in 1985 when the rates were much higher than they are now. He is trying to decide whether the CV is more important than providing more life ins for his family at the same $1500 annual premium. His agent estimates that it would more than double the current face amount of $100,000. However one downside is that he would have to pay income tax on a lot more of the 1500 premium, which he(the agent) explains is due to 1) More life ins. to pay the PS 58 tax on and 2) lower cash value, because the CV is going to purchase more life ins. Thanks.

A doctor maintains a early 80's 100,000 face policy in his plan. Premiums are $1500 annual and he has about $50,000 cash value in it. He is considering changing the policy to one that would not build as much cash value but would give him substantially more than double the face amount of the current policy. Are there any reasons to keep him from making any changes? The plan has about 1.4 mil in assets with just over 1 million allocate to the doctor.

i think i just found my answer: if they are actively particiapting in a SIMPLE IRA at any time during the plan year, they would have to wait until the next plan year to start up the safe harbor. true ?

so they terminate the SIMPLE IRA and start up a safe harbor 401 mid year. any problems with such a strategy thanks

Can they maintain both plans and the Safe Harbor start up at any time? Or like converting a 401(k) to Safe Harbor 401, does the sponsor have to wait until the beginning of the plan year? Thanks

Can they maintain both plans and the Safe Harbor start up at any time? Or like converting a 401(k) to Safe Harbor 401, does the sponsor have to wait until the beginning of the plan year? Thanks

A 401K miscalculated its match and ultimately deposited too much match into some participants accounts. In addition the ACP test failed and and match refunds were do. The financial company issued checks to the participants, however we were under the impression the funds should be transferred to the holding/forfeiture account or at the very least returned to the company, not the participants.

so if they waited til end of year to fund, lets say november, it would be deductible on 08 return?

plan year ends 12/31/07 on a safe harbor 401(k). The plan doc states the plan will match on an annual basis rather than payroll by payroll. The company has until 12/31/08 to fund, but just to confirm, the company gets the deduction for the 2007 plan year even if they wait to fund the plan after they file their corp return, correct?

I don't think he can do it either, just want to make sure every scenario is covered. if he rolls it into a straight trad. IRA, pays taxes on it, then rolls it back into the plan?????? seems as if I read something that a participant could pay the taxes on his/her pre tax deferral 401(k) balance and then treat the remainder as ROTH 401(k) ultimately taking the remainder out tax free. perhaps I read it in a dream

A 63 year old active participant is inquiring as to the possibility of rolling out his assets into an ira, paying taxes, and then rolling it back into the plan as roth 401(k) money. The plan has ROTH provisions, but does not allow for in service distros. Has anyone had experience with such a transaction? Thanks

I actually presented my situation to a revenue agent and received the following response: Shooting from the hip for the first take. This information is provided solely for conversational purposes and cannot be interpreted as an official IRS position. 1)Were the PS contributions discretionary under the plan? a) if yes, did the partners meet and declare by a resolution what the contribution would be (contemporaneously with the end of the plan year under discussion)? If they did not, then it a moot point and current contributions for allocation with respect to prior years cannot happen. Ship sailed. If they did meet and declare a discretionary contribution, then they have the problem of failing to follow through. Also not good. b) if the PS contribution was required by the document and not made and allocated, then you need VC not SCP. Correction would have to be made (without violating any other sections) and a fee paid to VC. In general there is also a time limitation for self correction under RP 2007-27, after which you can take your chances on an audit (not recommended) or go to voluntary compliance. Also in general, only required operational (and some form) issues are subject to the RP. Discretionary issues such as contribution amounts (not required under the terms of the plan) have time limits to be invoked, usually the longest time, is the due date of the sponsor's Federal tax return. Hope this helps.

I'm sorry but your choice of words is a little troubling to me. Maybe I'm being picky but it's not a "could have" situation, it's "should have but didn't." So either they're going to fix the error or they're not. If it's fixable under SCP that's the way to do it; I think there is a limitation on how many years back you can go. I don't know if there are exceptions to the 404 and 415 limits when using the program. Yes Bird you are correct. It is in fact an error and therefore correctable under SCP. I too am not sure how many years they can go back and correct. This is truly a unique situation.

i believe he will be subject to a 50% excise tax penalty on the amount that was not distributed as well.

Well, the plan is now Safe Harbor which meets the Top Heavy Requirements.

I am thinking using the SCP to allow them to make up the PS contributions they did not allocate but could have and keeping in mind the 404 and 415© limits when they are determined. Is there a flaw in this course of action?

The document stated that all eligible participants receive a PS allocation based on a comp %. Therefore, despite the fact that the partners understood they would not be getting a PS allocation for whatever reason(TH concerns, etc), the document provisions were damned and I guess it would be an error. With that in mind I'm thinking an SCP would be available to the plan whereby the partners could go back and fund an allocation based on whatever PS funding was done for the years that they did not receive an allocation. Good course of action?

These are not errors. The partners intentionally skipped receiving a PS allocation for several plan years. Why, I am not sure. However, they are inquiring as to if they could go back and make up for the years they missed. So how would you allocate to the 3 partners? For example, let's say one plan year the firm made a $100,000 contribution on a comp percentage basis. Each partner received zero dollars of the allocation that was distributed to the NHCE's. Could you just allocate it in a future plan year as a supplement contribution in accordance to how it would have been allocated? Let's say each partner's comp percentage was 10%, therefore they WOULD have received $10,000 allocation. You allocate that in a future plan year as long as it does not exceed 415?

so, if they went back and funded for the plan years they didnt receive a p.s. allocation, it would just be allocated in the current plan year, They would not have the issue and cost of going back and amending 5500's, k-1's, etc. The profit sharing allocation is currently allocated based on a comp/pro rata percentage.

A 3 member law firm never took advantage of allocating a profit sharing to the 3 members. While NHCE's were receiving a PS allocation, the attorney's did not. Reason unknown, perhaps to keep plan Non Top Heavy. Anyway, they are bringing up the question if it is possible to go back and fund the "x" amount of years that they did not receive an allocation. They are aware that there would be revised K-1's, Form 5500's, etc. I personally see red flags and a possible audit, but if it is permissible, how far back could they go? Has anyone here ever had such an inquiry?

I have read an ESOP is not favorable to an S Corp company. Was this the case years ago or does it still apply? The article did not elaborate.

An attorney has both a 401K and an IRA, can he take his RMD from one source based on the total account value in both or does it have to come from each? Thanks

Well at the time the non SH was established(1998), its doc was written as a non controlled group/non-asg plan. Only recently has this question about it possibly being an ASG come up. I guess they could apply to the IRS to determine ASG status.