buckaroo

During the review of my client’s 2004 401(k) plan, I found that an employee was allowed to make 401(k) deferrals into the plan, even though he was not be eligible. (He will not be eligible until 2005.) I have read through the document and it states that the contributions need to be refunded to the employee with any attributable interest. So far, so good. However, it does not state how the participant is to be taxed? Is this like a 402(g) failure (contributions taxed in prior year, earnings in current year)? How is this taxed? How many 1099R forms? With what codes? Any help would be greatly appreciated.

I have a client who has a 401(k) Plan with a discretionary match in a Corbel volume submitter. Over the past year, they have incurred a large amount of forfeitures from the match source. They wanted to know if they could use the match forfeitures to reduce a possible match contribution or a possible profit sharing contribution. Is the forfeiture limited to the source from which it occurred? The document states (Section 4.4©) that the forfeiture is (among other things) used to reduce Employer contributions. It does not specify matching or profit sharing. Any help would be greatly appreciated.

cosmo1215, I believe what you have stated is correct. Since the ees of company B are now part of the Plan of Comapny A, they would be subject to the same determination year and look back year of company A and its plan. Therefore, you would look at the Co. A's prior plan year. If the calendar year election was made, you would look back at the calendar year data. For further guidence and confirmation, take a look at the ERISA outline book definition of HCE. Pages 1.203 -- 1.209 would seem particularly helpful. The only thing I would be unclear on would be the timing of the amendment of the plan to the calendar year election.

We are converting a MP Plan to a P-S Plan as of 1/1/2005. On 4/1/2005, we are then adding a S-H 401(k) feature using the 3% NEC. We are defining compensation from the beginning of the year (rather than date participant entered the plan). Here are my questions: Can we state that the S-H contribution starts on 1/1/2005, even though the ptps will not be able to defer until 4/1/2005? When is the S-H notice due to the ptps? If we start the S-H conts on 4/1/2005 and the plan is top heavy, will the employer be responsible for the T-H min conts for 1/1/2005 – 4/1/2005? Can we make catch-ups eligible on 4/1/2005 as well? Any help is greatly appreciated.

One of my clients was aquired by a new (unrelated) employer and the old corporation terminated. The plan was terminated prior to the merger date. We are in the process of terminating the plan, but there are a number of participants over 70.5 who have account balances. Normally, if the participants are still active and not 5% owners, they are not required to receive the RMD. However, in this case, they are still active with the successor employer. They are currently being paid from the new employer under their EIN. 1) Are they still considered active employees for 401a(9) purposes? 2) IF they are still considered active employees for 401a(9) purposes, my assumption is that they do not need to receive the RMD. Please confirm. 3) Does the fact that the plan is terminated affect this in any way (other than vesting)?

Plan is a Safe Harbor 401(k). Employer makes the Safe Harbor match contribution. The only conts to the plan are deferrrals and Safe Harbor match contribution. Client wants to know if top heavy is satisfied by the Safe Harbor match contribution? Is an additional contribution necessary for those participants who do not contribute and, therefore, do not receive the match contribution? Any help is greatly appreciated.

The employer maintains a 401(k) P-S plan with a match formula of 10% upto 5% of deferrals. They contribute the match on a payroll basis. Some of the participants have contributed 5+% to the plan, but their match is less than the maximum amount of .50% of pay. Normally the document states whether or not the match is based on annual compensation or payroll compensation. The problem is that the document does not state if the match is based on annual compensation or payroll compensation. Is there a default that should be used or does the client have discretion regarding the match and possible true-up? (We are the new recordkeeper and in the past, they have not made any true-up contributions.) Any help would be appreciated.

I have a client who has been having major financial difficulties for the past few years. As a result, they are consistently delinquent depositing the 401(k) contributions. (The client has sometimes been months late with the deposits.) When this first occurred in 2001 (under Voluntary Fiduciary Correction Program (VFC)), we calculated the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client and completed Form 5330 for their signature. They made the deposit to the plan account for the lost earnings in 2002. Then, in 2002, the client was again delinquent depositing the 401(k) contributions. We completed the valuation, Form 5500, and informed the client that they needed to make a similar correction (but exactly the same correction) to the plan for the delinquent deposits. Due to a billing dispute, the final correction work was never completed. In February, 2003, they came back to us and brought their account (with us) up-to-date and asked us to complete the 2003 Valuation. We are in the process of completing the valuation and (surprise, surprise) they were delinquent depositing the 401(k) contributions for 2003. Here are the first round of questions: 1) Since we used the VFC program in 2001, can we use it again in 2002? 2003? 2) If yes, what needs to be done? Is it as simple as the calculation the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client with Form 5330? Is there anything else we are missing? 3) If not, what needs to be done to correct the problems above? Any help would be greatly appreciated.

I have a client who has been having major financial difficulties for the past few years. As a result, they are consistently delinquent depositing the 401(k) contributions. (The client has sometimes been months late with the deposits.) When this first occurred in 2001 (under Voluntary Fiduciary Correction Program (VFC)), we calculated the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client and completed Form 5330 for their signature. They made the deposit to the plan account for the lost earnings in 2002. Then, in 2002, the client was again delinquent depositing the 401(k) contributions. We completed the valuation, Form 5500, and informed the client that they needed to make a similar correction (but exactly the same correction) to the plan for the delinquent deposits. Due to a billing dispute, the final correction work was never completed. In February, 2003, they came back to us and brought their account (with us) up-to-date and asked us to complete the 2003 Valuation. We are in the process of completing the valuation and (surprise, surprise) they were delinquent depositing the 401(k) contributions for 2003. Here are the first round of questions: 1) Since we used the VFC program in 2001, can we use it again in 2002? 2003? 2) If yes, what needs to be done? Is it as simple as the calculation the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client with Form 5330? Is there anything else we are missing? 3) If not, what needs to be done to correct the problems above? Any help would be greatly appreciated.

Thanks.

I have a plan that is failing the ADP test. The client wants to know the refund amount. I was about to calculate the refund and the earnings, but after a discussion with a colleague, I now have the following question: Are the earnings to be calculated on the 401(k) monies only or each particpants total account balance including other money types. My opinion is to use only the 401(k) money type. My colleague think it should be total account balance. I checked the ERISA outline (Good Old Chapter 11) and it says that there is no definite answer, just be consistent. I still do not know which method to use. Any help would be greatly appreciated.

I have a client who has said that they have an ERISA bond, not a fidelity bond. My questions are: 1) Are they the same thing? (The client does not think so.) 2) If not, what is the difference? 3) The client also states that the fidelity bond is not required. I believe it is. Please confirm that the fidelity bond is required. Any help would be greatly appreciated.

I have a client with a 401(k) Plan. In 2001, the client failed to transmit the contributions in a timely fashion. To correct this problem, they utilized the VFC program. (They deposited the missing interest into the participant’s accounts, filed Form 5330, sent out the required notice, etc.) Now, for 2002, they have again failed to transmit the contributions in a timely fashion. According to the information I have read, they cannot use the VFC program because (1) they used it last year and (2) some of the deposits were not made until after the 180 day deadline. Can anyone confirm that the Plan cannot use the VFC program? If that is correct, what is next step/correction method used to fix this situation? Any help would be greatly appreciated.

I am trying to complete the 2002 Form 5500 for my client. I am up to the Schedule T and I have a problem. I know that certain parts of plans have to be disaggregated for coverage testing purposes, but my problem is how detailed do I need to go for testing. For example, suppose a plan has a 401(k) portion and a profit sharing portion. Both portions of the plan have statutory excluded employees which are tested separately. It is my opinion that on the Schedule T of the 5500 form, I need to show the test results for the four different portions of the test: 401(k) - nonexcludable 401(k)-excludable nonelective - nonexcludable nonelective – excludable Does the above sound correct? If so, how are the above supposed to be filled in (verbage?) on the Schedule T? Should the nonelective just be split into “nonexcludable” and “excludable”? Any help would be appreciated.