Lori H

An employee of an HVAC company which sponsors a 401(k)sop wants to start his own company and rollover his acccount balance (appx $70,000) to his own company's plan. He will be the onnly employee and wishes to have a loan provision in the plan, obtain a $10,000 loan to assist with start up costs and effectively repay the loan back. I'm thinking this may be a prohibited transaction and that he could do a partial distribution of say $15,000, pay the taxes, use the net towards the start up costs and roll over the balance of appx $55,000. thoughts?

the check was cut to the plan's money market/checking acct, which was then cut to the husband/trustee. we have no fiduciary relationship to this plan. also, i am a bit apprehensive about reflecting this as a prohibited transaction on the 5500 as that could be a nice big red flag for an audit.

OK, thank you.

ok, now i'm even more confused. I'm aware family aggregation does not apply, what about family attribution? if the owner is the father, he is an hce as well as his wife, his children(in this case his daughter), his grandchildren, his parents and his grandparents. no?

daughter of an owner is classified as an HCE. her husband, who makes less than 90K and has no ownership, is he classified as an HCE for adp test purposes? imo he is not.

i agree. my strategy is too address the irs/dol locator options in a letter. the husband should send a certified letter return receipt requested to his ex's last known address and if that does not produce a response, consider the locator services. first the money has to get back in the trust with interest and i have advised the agent on the plan that he needs to follow up on this. i really don't want to shell out my money to an attorney because of some wild stunt the trustee thought he could getaway with.

well, that might be a bit too proactive. Obviously, there is bad blood between the two. I'd rather not lose the client, by going behind the client's back and doing what they should be doing. I think just including her on the SSA each year and letting the SSA do their job should suffice. We have no contact or forwarding info on the ex-wife.

the ex husband is the owner of the company and we are the companies tpa. we have no fiduciary obligation whatsoever. the check was requested by the trustee, the ex husband, and made payable to him. i actually received a return phone call this am from him and he started the conversation by "you are calling to see why i stole this money". i hesitantly laughed and asked if their was a qdro in place. he had no idea what that was. he said he has no idea where his ex-wife is and she is not getting the money. i gently explained to him that the funds were hers and that she had been terminated for years. he said she was too stupid to even know she had the money. i then explained that we had been filing schedule SSA's with her name on them for a few years and while the SSA is slow they will in fact notify the former participant that she has benefits in this plan and that it is his fiduciary duty to make every attempt to contact former missing participants. he said that he would put the money back and write a check today. in 12 years working on qualified plans, this is a new one. i guess formally documenting our conversation would cover me as their tpa in the event of an audit.

a 401(k) had an account in the name of a ex-wife of the president of an auto dealership. balance as of 12/31/04 was just over 30K. they had been divorced for a few years and the wife's status was terminated and had been listed on the schedule SSA for a few years as well. in 2005 a check was cut to the still employed ex husband for the full balance of the ex-wife's account. no taxes were with held. ex husband was 55 at time of distribution. in a situation as such were the ex husband is our client, how much should we pry to determine legitimacy of such distribution? seems as if such distribution would be directed in a QDRO. ex-husband has yet to return calls to explain transaction.

TEFRA would not come into play here would it, since said owner/employee is technically not self employed?

a sole employee of a c-corp. what is the most he can contribute? 25% of his comp from the corp? and deferrals of 100% of comp up to 15k for 2006?

sorry, may i said husband and beneficiary one too many times. the husband IS the beneficiary of her 401(k), he gets her 2006 rmd and then the remaining account balance. wondering: she died prior to attaining age 79, yet still use 79 divisor factor????

2006 rmd will go to beneficiary and then remaining account balance to husband who is beneficiary. thank you bird.

should the account balances as of 12/31/05 be combined and he take a rmd based on that amount?

participant died 3/30/06 would have been 79 on 4/24/06. last year her 2005 rmd was based on age 78 with a divisor of 20.3. calendar year plan. would i use the divisor for age 79(19.5) for her 2006 rmd and switch to husbands divisor next year. husband is beneficiary who is also 79 this year.

they are not required for 403(b) plans with annuities only, correct?

trying to determine correct procedure on the following: a 401(k) had two participants with outstanding loans. they received hardships in may 2005 and discontinued making payments on their loans as well. the tpa at that time nor the financial manager advised the client of the deemed distribution that would occur. in dec 05, the plan changed tpa's and it was discovered in march when doing the 2005 py admin, the participants had deemed distributions on their loans. should the plan sponsor issue 2005 1099-r's to the participants and have them refile their tax returns or what would be the consequences of issuing 2006 1099's?

i can't see any compliance issues with this, but am i missing something? his first loan is current and the plan can be amended to allow for more than one loan. his account balance can accomodate the second loan amount.

the plan doc is a standardized prototype and does not address loans to inactive participants. we have tried for years to have this doctor termminate the plan. he avoids this option and continues to pay ongoing admin fees to maintain. he has tried to diligently find heirs of the term participant whose account balance is less than $1000. this doctor wants a second loan to pay off a bank loan. he is under the impression that he would like to pay himself interest rather the bank. i explained that he was paying it back with after tax dollars and that he in effect would be taxed twice. he then alluded to the faact that he is paying his first loan back with disability income which is not taxed. i then told him his annual admin fees are around $700 to maintain the plan and any new loan would just extend the life of the plan. he did not mind paying those and basically just wanted to keep the plan available in the event he needed the funds in the future. at this point he is no need for the money

A defunct professional corporation has two participants in the plan. Once is deceased and the beneficiary is unlocatable. The plan has not been funded in years and we have encouraged him to terminate it. The doctor, age 61, is the remaining participant. He already has one outstanding loan from the plan wishes to take a seond loan for $40,000. We have determined that the amount of the loan is o.k. and the document does allow for a second loan. The current loan is being repaid by automatic draft from his personal account. He is disabled and therefore is not drawing income from the p.c. which is the plan sponsor. What would be the problems associated with him taking this loan?

the owner just wants to receive an income stream from his ira to purchase a piece of land. he is content with the investments. so he would need to incorporate both an early retirement provision(age 62) AND an in service distribution? he could just not amend for early retirement, keep working and rollover a portion of his account?

plan's NRA is 65, does not allow for in service distributions and has no early retirement provision. owner, age 62, wants to rollover a portion of his account to an ira and remain a participant in the plan. should the plan doc be amended to incorporate an early retirement age of 60 or add an in service distribution option? wouldn't the latter open up the possibility of more participants removing funds rather than those who have just reached age 60?

a plan whose document defines comp as w-2 wages, allows participants to defer from 2% to 17%. there are no comp adjustments except the period of the plan they were not a participant. there is a special deferral election with respect to bonuses that participants may make. a part. may elect to defer up to 17% of pay. a 2006 bonus was issued. no deferrals were taken out. would it be ok to allow the participants to go back and elect NOT to defer from this bonus? would this be ok, even if the part. deferred let's say 10% during the normal pay periods? basically, i feel the plan sponsor should go back, give the part. the option to defer any amount they wish from the bonus and adjust their bonus checks accordingly. any thoughts?

a partner in a medical practice has a tiaa/cref annuity from a former medical group that he wants to rollover to a ira. half of the present tiaa account must be paid out in a taxable annuity payment to him, which will be about appx. $10,000 per year. he is 56 so he would have taxable income plus, i think the 10% penalty for about 3 years. his current practice maintains a safe harbor 401(k) and he wants to maneuver his income from this practice to help offset the taxable income from the annuity. i understand the max he could defer for 2006 is $20000. any thoughts on helping him save a little more? should he elect to defer that $20000 as roth 401(k)? thanks

the plan passed the ACP test, yet a couple of participants received too much match, does the plan need to transfer the excess plus allocable income to a forfeiture/holding account and if the transaction does not occur prior to 2 and a half months after the close of the plan year, is the plan sponsor responsible for the 10 percent excess tax and filing 5330? if so, could they not pay the tax with the forfeited funds? thanks