JButtrick

Well, Here it is 2017 and the 5500-SF instructions still don't seem to address how to report a DB plan reversion. Has anyone found an answer in the last 6 years?

A Non-HCE, who was one of the 25 top paid employees, terminated employment in 2006 and then married the owner of the business. By attribution she is now a >5% owner, but she wasn't when she terminated. Fast forward to 2016. She now wants a Lump Sum Distribution from the DB plan. Is she part of the Restricted Group?

Thanks for the feedback. It confirms my view of the situation. Now to convince the client that it needs to be fixed.

We have a PS plan with insurance that pre-dates our involvement. One of the participants dealt directly with the insurance company to take out a loan on the policy in his name and claims that the insurance company says he doesn't need to repay it. I don't understand how he managed to get the loan without the trustees consent, but that is a question for another day. I contend that since it is a plan asset, the loan needs to follow the same rules as any other loan i.e. have a loan agreement with the plan and be repaid in installments over 5 years. The loan is almost 3 years old now and I have been telling the client the whole time that there need to be repayments. I contend that the loan is in default and should be taxable to the participant. Is there any exception to the qualified plan loan rules for insurance????? This is our only PSP with insurance, so maybe there is something I'm missing.

The plan document says spouse, then children, then the estate and that if none can be located, then the distribution should occur in accordance with federal law and regulations, which I understand can be a forfeiture (per the IRS) or Escheat (per the DOL). The process of trying to locate the beneficiaries is underway. The former Plan Administrator was not proactive in trying to track people down. Now the plan is up against the 5 years and there is new PA that wants to get it cleaned up, but also wants to know what bad things will happen if the process goes beyond 5 years. Is there an excise tax or is it a plan qualification issue. I guess that is the real question.

A client has a participant who died and has no information regarding beneficiaries, family members or the executor of his estate. They are approaching the 5 year anniversary of the participant's death and want to know: 1) What they should do with the money. Is a missing participant IRA an option? 2) If there is a penalty if they hold on to the money beyond the 5 years. Can anyone point me in the right direction?

In Tom's second example, the senario is closer to there being a 10% of the draw deferral election, but the match maxed out at 4% of the draw. When the Net Income is determined, the actual deferral percentage end up being 3%, so the 100% of the deferral should been matched instead of 40%. I assume that doesn't change the view that it is a correction. So far it seems like the consesns is that the adjustment for the owners is a "correction", not a true up. But 401King seems to be saying if there is a correction for one then "it needs to be corrected for all participants" which would suggest that if I need to correct an owner using correct net income, then I need to correct the W-2 employees at year end as well - i.e. a "True-up". If that's what I'm reading, then I might as well check the "True up" box and eliminate any confusion. But given the distinction being drawn between "correction" and "True up" I want to make sure that y'all think that either way, I end up in the same place.

401king, To clarify, are you saying that if I need to "correct" for the 2 owners because I didn't have actual comp, then I need to "true up" for the W-2 employees for whom I did have correct comp. I guess this exactly where I am hung up - is there a difference between a "correction" and a "True-up" (which is an option in the adoption agreement). I'm thinking I should check the "true-up" and tell the client we need to look at everyone.

Note that in rereading the initial post, I think I forgot to include a "Not", which makes a big difference to the meaning of the sentence. I assume that Jim picked up on that in his reply.

The company is an LLC taxed as a partnership. The plan has a 100% of 4% Safe Harbor match. There are two owners participating in the plan. They both contribute to the 401(k) plan during the year out of a monthly draw, but we don't know what their actual compensation will be until after the end of the year (I realize this could be risky in the case of a loss for the year, but that is another question and it hasn't been an issue so far). During the year, their deferrals are in excess of 4% of the draw, so their match is limited. Historically, we calculate the match for the owners once their K-1s are done after the end of the year. All the other participants get their match with each payroll and the preference is not do a "true up" for them at year end. I am now doing the PPA restatement and have been pondering the "true-up" option. I would like rationalize that the year end match calculation for the owners is something different from a "true-up", but my gut tells me that it is NOT (added from initial posting) and we should be doing the true-up for everyone. Thoughts?

This was intended to be a non-plan specific question as it has come up more than once. The Plan sponsors want to get old missing terminees out of the plan. Especially now with PBGC premiums being what they are. Let's assume that the plan allows Lump Sums and has a $5,000 cash out provision. My feeling is that the fact that the participant is missing doesn't change the rules - You still need an election to cash out anyone with a balance of $5,000 or more unless the plan is termianting

Maybe this is so obvious that no one has bothered to write about it. At least I haven't been able to find anything. Am I correct in my assumption that in an ongoing plan, a missing terminated participant with a Lump Sum value of over $5,000 cannot be "cashed out" to a missing participant IRA? If the LS is $5,000 or less, it is OK to set up a missing participant IRA. Other more obvious situations are: - If a DC plan is terminating, a missing participant IRA is the way to go. - If a PBGC DB plan is terminating, the benefit goes to the PBGC.

Here is the scenario: A client has a one participant overfunded DB plan, no 2013 contributions needed or made. He wants to terminate effective in 2013 and transfer excess assets to a DC plan escrow account, but the actual transfer won't happen until 2014. The question is, can he release from escrow for 2013 (up to his DC annual addition)? My presumption is yes, since aside from the lack of a deducation, it is little different from an accrued contribution. I would think that the termination resolution should specify the intent to accrue the transfer for 2013

H&W plans are not my area of expertise, but I have been asked to complete the 5500 for a client using our software. They have over 1,000 participants in their medical benefits plan, which included employer funded Dental & Vision benefits for which they have filed 5500s for many years. They recently changed the Dental & Vision benefits to be 100% employee funded. They deduct the premiums and forward them to the insurance company. They were under the assumption that those two benefits no longer needed to be included in the 5500 reporting. I have been unable to find anything that would support that view. In my ingorance, I assume that since they are choosing the provider, deducating and transmitting the premiums, that it is part of their Health plan and should be reported. I don't know if the D & V premiums are deducted pre-tax or not, if that makes a difference.

A DB plan is terminating and the particpants are being offered either a Lump Sum (which can be paid in cash or rolled over) or an annuity. If the participant elects a Lump Sum, he gets a 1099-R with either a code 1, 2, 7 or G. But what if he elects an annuity? My inclination is that he should get a 1099-R with a G, but the I don't see the words "annuity contract" in the code G description.

We have a one person plan and that participant's benefit is at the 415 Limit. As of the end of 2011, the plan had assets $5,000 greater than the maximum Lump Sum prior to the deposit of the $22,000 2011 MRC (BOY val). It may be worse now. The Owner/participant really retired in 2011, so there will be no opportunity to move the excess assets into a DC plan and absorb the excess. There are no other participants to whom the excess can be allocated. So the client currently has an asset reversion. And if he makes the 2011 MRC, the reversion gets larger. In fact by depositing the contribution the client loses 50% of the contribution to the Feds. What are the consequences if the client does not make the 2011 contribution (aside from showing the shortfall on the SB, which doesn't get filed with the 5500-EZ...unless there is audit)? Does anyone have a legal solution for not making the 2011 MRC?

I have a suite of Excel "Actuarial" functions that include calculators for annuity rates and social security benefits that were developed by a co-worker many years and many versions of Excel and Windows ago. I am finding that the annuity calcuator now occasionally encounter errors when run in Excel 2002 on some Windows XP installations (but not others). I have been dutifully updating the COLA, wagebase, covered comp and old wage base tables each year, but with this year, whether due to limitations on the size of the array or the Excel/Windows installation, the Social Security function is returning "#VALUE!" errors I am interested in either finding a source for obtaining updated replacements OR finding some VB programmer who might be willing to debug/update the current coding in exchange for the source code. Does anyone have any suggestions?

We have a situation where the employer distributed a timely 3% Safe Harbor notice prior to the beginning of the 2006 calendar plan year and then forgot he had made the committment. He made no contribution for the year and filed his taxes without an extension and then responded to our year end data request indicating that he had made no contribution. I believe that having distributed the notice, he is obliged to make the contribution. The issue of the deduction is a question. Apparently his accountant is not up to speed on qualified plan deduction issues. Question 1: If the contribution is an obligation by virtue of the issuance of the SH notice, is there there any impact on the rule that the deposit must be made prior to the tax filing deadline (including extensions). Question 2: If it's too late to make the contribution and deduct it for 2006, can it be deducted for 2007 as long as the total 2007 deduction remains under 25% of 2007 compensation. He also distributed a 2007 3% notice, so under this scenario he would be looking at deducting something like 6% for 2007 The issue seems somewhat similar to a DB plan subject to minimum funding, but the deductibility of DB contributions is specifically addressed in the rules, whereas I have been unable to find anything that deals with this situation. I would like to be able to point the accounatant to some guidance if any exists

I have the distinct recollection that In-service withdrawals from profit sharing accounts with a Permitted Disparity formula are not allowed, but I have been unable to find the rule, if it (still) exists, in two prototype documents and the ERISA Outline Book. Maybe I'm looking in the wrong place or maybe the restriction was removed and I am showing my age, or maybe I was dreaming. Which is it? Thanks

When doing plan design, attention may be given to the ratio of retirement benefit to pre retirement income. I believe that historically a good target was considered to be between 60% and 75% of pre-retirement income. A question has come up as to whether in these days of 401(k) plans, those percentages are typically discussed with respect to employer funded benefits only OR taking into account all known sources of retirement income. For example if an employer has a 401(k) profit sharing plan, do people typically talk about: 1) Only the benefit provided by the profit sharing balance OR 2) The benefit provided by the profit sharing balance and 1/2 of the Social Security benefit, because the employee is funding the 401(k) and the half of the SS tax. OR 3) Profit sharing and 100% of Social Security. OR 4) Profit sharing and 100% of Social Security and 401(k). I would assume that in (1) the target ratio would be lower than in (4). I can imagine a more complex communicnation where we might say: Target Income - 75%, provided by: - Profit Sharing - 25% - Employer Funded Social Security - 12.5 - Employee Funded Social Security - 12.5% - Your own Savings - 25% How is the rest of the benefits world taking about this issue with employers?

I find that I am in need of the annual compensation limit and DB maximum annual benefit in effect for 1991 (how strange is that?) As it happens I have the benefit limits from 1975 - 1989 (except 1987) and both from 1996 through today, but I was doing other things in the early 90s and didn't keep my list up to date. Are there any other old timers around with those old numbers buried in some old file somewhere?

A recent newsletter I got from one of the larger document providers states that there has been an extension of the deadline for adopting the PFEA 2004 amendment as a result of PPA 2006. My document vendor doesn't know anything about an extension, but is thinking that something may come out of the ASPPA conference. Does anyone have any infomration on the topic either way?

I am just now looking at the 401(k) testing for a plan with a 12/31/05 year end. The document says to use prior year testing and the test is failing, however it would pass on a current year basis. I haven't been able to locate anything definitive on the deadline for amending the plan to current year testing. One source says the plan MAY have 12 months which is the correction period for 401(k) test failures and the amendment is a correction method. Notice 2005-95 makes a distinction between amendments necessary to meet qualification requirements and discretionary amendments. It is not clear to me on which side of the fence this amendment would fall, since there are other ways to correct the test failure (refunds), I'm not sure it would fall under the "required for qualification" heading.

Some IRS approved plans say that the Employer MAY force a distribution if the balance is $5,000 or less. It is apparently not mandatory. This sounds a bit too discretionary to me. I am rather surprised that the "MAY" got through the review. The question is: Since the distribution itself may be discretionary, if the distribution is $1,000 or less, it is acceptable to make the FORM of that discretionary distribution (Cash or IRA) discretionary as well. My feeling is that the participant should know in advance the form of the payment if no election is made and the benefit distribution is forced. However, it seems that not all potential IRA providers have their act together regarding the conditions under which they will accept a forced distribution, especially if it is under $1,000. AND providers may change. The use of a mandatory IRA disbursement assumes that the Employer can find a provider willing to take it. Therefore, it would be nice if the form could be discretionary. Comments?

Since I didn't like the answer, I spoke to both EFAST & the DOL. They both agreed that if there were at least 100 participants eligible on 1/1, it didn't matter whether they had yet benefited (recieved an allocation) or whether there was any money in the plan. They still need an audit.