No Name

Call the payment a contribution. Allocate the terminated employee's money as that contribution. Expense the employee's account as a distribution from the plan. 1099 from the plan.

Just to clarify, the participant completed eligibilty in 2003. He made the deferral in late 2004. Plan year is calendar.

The Compensation Computation Period is the Plan Year. The documents says "True-Up to the current pay period for the Plan Year to date."

I have a client with a 401(k) Plan. The match is based on 50% of the first 5% deferred. Eligibility is 3 months and age 21. Entry is 1st of the month. Employee is hired 5/1/03. His entry date would be 8/1/03. He doesn't defer until late '04. From deferral election to year end, he defers $8,700 on pay of $15,000. Full year pay is $58,000. How would you calculate the match?

Rent times 3

Blinky, Is the premium more expensive than the flight to Vegas? BTW, I just got back from there (already married) and don't know why, but loved it!

Prior to the termination year, contribution level was $115k or so, and investment performance was sub-par. The consulting actuary was able to come up with a $26K minimum. I had thought it would be worse. Since the distribution was less than the accrual, would one convert the lump-sum to an annuity to determine 415 limits? As of what date? I know, its not your job....

Client had a one man sole prop DB Plan for 8 years. The benefit was less than the maximum under 415. He retired at age 65 and the plan was terminated 12/31/03. The last FSA year was 2003. He had no earned income in 2003, so was required to make a non-deductible contribution. Rollover to IRAs with consent and waiver of full lump-sum were in 2004. Again, no earned income in 2004 (he's retired). I prepared the final EZ w/o Schedule B (no FSA). He's now 67. He called to ask if we can roll back the termination or start a new DB plan. It would be sponsored by the same company (he's a sole prop using a dba). He says a UNI-K wouldn't be enough deduction if he went back to work. I can get my brain around "service" under the new Plan, but "participation" has me puzzled. I'll stop here and see what ideas may be out there.

Thanks, rcline, Problem is, this distribution is < $100. Other threads address that some former participants just don't want to be found. She's been paid. If she feels she needs a 1099-R, she should request one. This is a terminated plan. Probably won't get paid to produce the 1099-Rs (just paid $xxx for the software to produce them). I'm thinking, just.... (self profanity filter applied). Fortunately, no lost sleep this time.

Admittedly, I'm replying just to move the topic back to the top. I'm also interested in what others think. I can't see the forest for the trees on this one. I don't see a BRF issue. What you'd be removing doesn't seem to be a right. "If you don't elect a rollover, we're sending you a check and withholding".

As a side note, don't forget that if the plan is top-heavy, full plan year comp has to be used.

I used a search firm that found a current address. Sent a letter to confirm the address was correct. The letter was returned "No Such Person". Days later, participant comes to the place of business asking if there were any openings. Trustee hands her the distribution check. Neglects to ask for her new address. Now, 1099 needs to be filed.

After an unfruitful search, participant (formerly located) cannot be turned up. How are the 1099-Rs issued? I'm favoring company address for Payee's address.

Look to the possibilities of Prohibited Transactions. Many non-institutional plan documents allow a wide range of investments, but no assurance they are tax-exempt. Transactions between Disqualified Persons can be disadvantageous as well.

I have a 401(k) plan with the 3% non-elective option. I want to allocate a discretionary match. I'm confused by Notice 98-52 sections VI.B.3 and VI.B.4.b. HCE defers 6.34% of comp. Do I do a ratio limiting him to 6%, then allocate so that he gets no more than 4% of comp? Is it and OR or an AND? I'm confused. I hope you aren't.

Client is amending a profit-sharing 401(k) plan for cross tested allocations. He has some money burning a hole in his pocket, so wants to make a contribution before year end. I've told him that we need an allocation letter before the money goes into the trust, and that he should wait. This isn't sitting well with him. Any reason not to draft an allocation letter saying "This $XXX is to be allocated to the Partners on a salary ratio"? Later, we'll allocate money to the rank and file, and perhaps more to the partners as well.

Three cheers for John G for stepping up. Not a "tax advisor", but I'd have to say 5) Should have no bearing on opening a Roth IRA. Comes to mind, however: Why a Roth? Maybe your tax bracket is low enough that deductible/non-deductible is moot? Interesting....

WARNING! RANT. And what do you suppose DOL did with all those SPDs. Read them? Haw haw. Had 1 DOL audit in 24 years. Dude had to cancel because budget was frozen (Clinton, Republican Congress... can't remember). He had to reschedule about 6 months later. Probably burned the SPDs to keep the lights on. Nice pensions in those Gov't jobs. Maybe we know-it-alls can fill in for the IRS/DOL retirees and make it hell for those that stay in private practice.

I've routinely used the Employer's ID to remit withholding. As long as it's coded as 945 tax, 1099-Rs match up and 945 Form shows Employer's ID, shouldn't be a problem. You didn't create the problem.

Sole proprietor client terminated a Defined Benefit Plan in '03. Actuary calculated a required contribution of $25K. It was non-deductible because of no earned income. Deposit was made in 2004. Participant (client) rolled over the balance of the DB to an IRA in '04. I think I've looked this up, but 2 things: 1) Non deductible contribution OK in last year of the plan (no excise tax) 2) Rollover of said non-deductible contribution a) OK and b) creates no "basis" in the IRA. I'm away from my files, so I can't rifle through it for my cites. I'd like to sleep some time this week....

I disagree. The employee severed from service. The payment is for past performance of services, not current services rendered. Whether the payment is subject to FICA, etc. is one for the CPAs here.

Perhaps the $3,000 figure is a regular IRA limit? No "employer plan" there.

Can you argue that the son is an Owner? Oops, just brought up the Form instructions. No wiggle room there.

Don't know why not.

A SEP is an employer funded Traditional IRA. Rolling to a ROTH may trigger tax consequences.