TBob

I know the DOL's rules on deposit timing and the safe harbor, etc. What are the ramifications / issues if the employer deposits the 401(k) contributions before the actual pay date for the employees?

If a 401(k) plan that currently has the NRA set to 59 1/2 wanted to change NRA to age 65 and add an early retirement age of 59 1/2, would that constitute a cutback in benefits? There are no ISW provisions tied to NRA. The reason for the change is tied to a change from a pro-rata profit sharing allocation to a cross tested one.

The corporate partner is a participating employer in the plan. The contributions for the staff and for Individual (partner) A are being paid by the partnership. The contributions for individual B and his wife are being paid by the corporation. Would your answer be different if the partnership were paying all of the contributions including those for Individual B and his wife?

Bueller....Bueller....

Plan sponsor of a 401(k) profit sharing plan is a partnership. The partnership employes a dozen or so employees. One of the partners is an individual (A) with K-1 income prior to deduction for plan contributions and 1/2 SE tax that is approx 200K. The other partner is a corporation The corporation is owned by individual (B) and both he and his wife receive w-2 income from the corporation. The partners share expenses 50/50. When calculating the earned income for individual A, I need to adjust his income for his share of the contributions to the plan for the employees. The question is, do I include the contributions to the plan for individual B and his wife before I divide the plan contributions by 2 to determine individual A's share of the expenses? It would seem to me that I do not include their contributions but I get really confused with these odd structures.

A participant in a 401(k) plan names two primary beneficiaries for their account, his sister 50% and his brother 50%. The participant also names two contingent beneficiaries for their account, niece 50% and nephew 50%. At the time of the participants death, his brother is already dead. Does the remaining primary bene, his sister, receive the full 100% of his account or does the brother's 50% fall to the contingent beneficiaries? Does the answer to this question hinge at all on how the beneficiary form were completed? For instance, had the participant indicated on the beneficiary form "my brother and my sister in equal shares" rather than specifically giving each one 50%?

A sole prop has a safe harbor (3% non-elec) 401(k) Plan. He has a couple of employees that have been deferring and have received the appropriate SH contributions for the year so far (funded with each payroll). The plan is being terminated effective at the end of November. The plan year is the calendar year. The question is... Will the owner have compensation for this plan year? Will he need to wait until the end of the calendar year when the accountant can prepare the Schedule C in order to determine if he had a profit for the year. Is that number then prorated for the portion of the year in which the plan was in operation in order to determine his SHNEC contribution amount? OR will he have no compensation since it is not determined until after the plan is terminated?

Thank you for your comments. Several of my clients have stated (and I have to agree with them) that they feel that the IRS sends these letters out when they are low on revenue. Based on the volume of these letters that must be going out, DFVC must be generating some fast, easy income for them.

We have had several clients recently that have received letters from the IRS indicating that the 2007 Form 5500 was not filed. We have copies in our office of the signatures and many are trustworthy clients that would not have missed sending the form in. In addition, several of these clients sent their forms in via certified mail and have the proof they need. I am wondering if others are experiencing the same thing with their clients. Is it possible that these letters are being generated by mistake. I have read several posts debating the merits of sending a letter, calling the IRS, or just having the clients "take it in the seat" and file through DFVC and pay the amount owed. Are you seeing the same thing and has anyone had consistent luck with any particular method of dealing with this?

Masteff - Thank you for the comments. Good point on the IRA. I will make sure that the partcipant is aware of that. Regarding the comment on the 4/1 RBD.... If the participant retires after taking this ISW, I understand that the RMD will not be required until 4/1/2011 but since the RMD is actually for 2010, the amounts withdrawn for the ISW will satisfy the RMD. Then I will need to follow Bird's advice about correcting the 1099R's. Correct?

I have a participant that is turning 70 1/2 during 2010. They are still actively employed at this time and are not now, nor were they ever a 5% owner so they need not take an RMD attributable to 2010 unless he actually retires later this year. The plan allows for in-service withdrawals and he wants to use the ISW option to roll his entire account to an IRA at this time. The question that I have is, if he rolls his money over to an IRA now, what happens if he retires later in 2010. Will that not trigger the RBD in which case he will need an RMD for 2010 and the rollover that he did prior to his retirement now becomes the RMD (which can't be rolled over) since it was the first money out of the plan for the year? Please let me know what I am missing.

This is a really old post that no one replied to. I have read other posts that have indicated that you are still required to provide a notice before involuntarily cashing out a balance of less than $200.00. Other reading has suggested that we would not need to provide a notice. Can anyone clarify for me if a notice is required in this case and is it the 402(f) notice or some other notice?

We have discovered that our clients 5500s were filed with the correct EIN number through 2004. When the plan was transitioned to our services, we received an incorrect EIN from the sponsor and the 2005-2007 Form 5500's were filed with this incorrect number. Unfortunately, we did not compare the number from the prior filings with the one the sponsor provided. The sponsor recently received a letter indicating that the 2005 5500 was never filed. We then discovered the error on the EIN. It has been my experience that it is a very simple mistake but causes HUGE problems. Does anyone have any sage advice on how to correct this and communicate with the EBSA so that they will understand that the filing was timely but just with the wrong EIN? Amended returns have not worked for us in the past since they do not have an original filing under the correct EIN number to compare them to. Generally, a letter submitted with the amended return are not understood or are not read. Any help would be appreciated.

Other than the IRS letter forwarding service, what services have you used for attempting to locate lost participants? Were they easy to use? Were they expensive?

I have read many of the posts on the message boards dealing with stale checks and how to handle them. Needless to say, there are a several different schools of thought out there. Assume that a TPA is informed by the custodian/trustee that a plan has a stale dated, uncashed check. Further assume that they intend to redeposit to the trust. The TPA has to put the $$ back into the participants account until the participant can be found (or until they have made reasonable efforts to find them). The question is, how would you include this deposit back to the plan on the Form 5500? Would this be offset against current distributions? What if that creates a net negative distribution on the schedule I/H? Also, is there any agreement out there as to how to handle the original tax reporting. One previous post mentions redepositing it as "after-tax" and leave the tax reporting stand. Does anyone agree/disagree with this?

The prototype has a nice little line on it that says: "Special vesting provisions: ___________. " As one great document expert once told me....Blank lines on a prototype are our friends! It goes on to say that the special vesting provision must satisfy 411(a), must be definitely determinable, must not descriminate in favor of HCEs and must not violate 401(a)4. I assume that we could fit this type of provision on this line in the prototype. I have never used this line in the prototype for this purpose before so I want to be sure that I am not crossing the line with this type of amendment. I want to be sure that I can apply this amendment to just a select group of individuals without causing a problem.

I have a 401(k) plan who's sponsor has decided to outsource one of their departments. A number of their employees are being involuntarily terminated as a result. We have looked at the partial plan termination issue and have determined that it will not be a partial plan term. The sponsor would like to 100% vest these participants anyway. The plan currently has a 6 year schedule. I want to be sure that there are no problems with amending the plan for just this group of participants. We will need to determine is this would be benefiting a non-descriminatory group but is there anything else I am missing? They are on a PPD prototype document if that helps. Any and all input appreciated.

Can a 401(k) plan be written with a tiered match formula based on years of service? For example: 50% on the first 5% deferred for the first 5 years of service and the match would increase to 100% on the first 5% deferred after 5 years of service. The clients current TPA is telling them that they could write this into an individually designed document but could not in their prototype. I would have thought that you could not do this in any document. Seems to me that the 5 year of service "requirement" to get the second tier of the match would violate the minimum age and service requirements for a qualified plan. What am I missing? Can a match be written this way?

Thank you for all of your input. As I mentioned when I started this post, I have read many of the prior posts on Real Estate in an IRA including the one copied by John G which was very helpful. I agree with all of the prevailing wisdom that this is probably not a good idea. I would never recommend this to anyone especially since it is well beyond the scope of my expertise. I needed to know specifically if RE could be rolled over in kind to an IRA. I have my answer... Thanks again!

I have read many of the post on this message board that talk about real estate in an IRA or qualified plan. I agree that in most cases, it's not a good idea. The specific question that I have is can a participant directly roll real estate held in their 401(k) plan to an IRA? Assume for purposes of this question that the document allows for in-kind rollovers and that the participant has an IRA custodian that would accept/hold real estate in the IRA.

Did you type this post really fast from your cell phone using only 9 keys? Couldn't resist!

#20 Robocop

An ESOP for an S-Corporation has all of the match and profit sharing contribution tied up in employer stock. The plan has not been in existance for 10 years yet so they haven't encountered the diversification requirement yet. Deferral contributions are invested in mutual funds but participant have the ability to transfer a portion of their deferrals to ER stock once per year. The plan sponsor is wondering if there is anything preventing them from allowing the participants to diversify their investments now? The document does not appear to address this question directly (Corbel ESOP Document). Is there anything restricting them from allowing diversification once a year. If they can allow this now, is there a percent of the participants account that it would be prudent to limit the diversification to? Any thoughts would be appreciated.

6. The Rock 21. The Game

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