Bird

I've seen it done both ways, but usually it is a separate fee, I think. I guess it could be argued that when the fee is taken from the loan proceeds, it is not paid by the plan - effectively, at least from the plan's perspective, the participant has received a loan and paid the fee personally. I'm curious as to how this is all reported in the trust accounting. Does it matter...? I'm not sure. As long as a participant is aware of the policy, they can request $5100 to net $5000 (subject to limits of course).

Not a problem for me; it sounds like the plan did what it was supposed to. And I think "permanent" generally means while the business exists.

The company is most likely the Plan Administrator. so whoever owns the company is ultimately responsible for administering the plan, and appointing a trustee. If the son owns the company, he is responsible; if he delegated management to the attorney, then he should be able to take action. I wouldn't be too worried about spending someone's money if they are uncooperative. I may take a little pleasure in it...

As Belgerath said, it's unlikely to get an allocation provision with more than 1000 hours approved - this is in the LRMs: "(Note to reviewer: A nonstandardized plan may require, as an option on the adoption agreement, up to 1,000 hours of service.)" I also agree that there may not be statutory/regulatory backup for that position, but I wouldn't waste time fighting it, when you can just put everyone in their own group and do whatever the heck you want, subject to testing.

I always say if they're paying self-employment taxes on it, it's earned, and if not, it's not. Actually I tell them it's up to their accountant but I think it always boils down to that. Odds are they are not paying SE taxes on that income.

Yeah...our document won't let us use anything other than safe harbor comp for SH plans, FWIW.

I don't know all of the lingo in this industry so I don't know what "non CSP" means. I'm guessing it has something to do with not receiving sales compensation? Anyway, if you receive any compensation from a plan, you must disclose it under the 408 regs. That could be percentage-based or it could be, say, for loan processing, distribution processing, etc., where you receive a fixed dollar amount. The plan must disclose to participants what fees and expenses they are paying under 404(a)(5). I don't know about other TPAs but we are at least monitoring it for our clients.

I guess that is what it means, but I think you need to be looking at Treas. Reg. 1.401(k)-3(b)(2). It says the SH conditions are met if you use safe harbor compensation, and I don't see any option for testing if you don't - i.e. you have to use safe harbor compensation (at least for NHCEs).

Thanks!

...well, I found at least one IRS outline that gives this exact situation as an example of a missed deferral opportunity, so I guess that answers that. Still curious to see what others think.

I've been asked to consult on a plan that did not withhold deferral contributions on bonuses and commissions, although the plan says that elections should apply to all compensation. They're already about 90% done with the process and called me in to review and help implement the corrections (it's a former client that left on good terms and they know me/us as being able to cut through the lawerly BS). So, they've calc'd the "missed deferral opportunity" as 50% of the "missed deferral" as per Appendix A.05(5)(a). And the match on the missed deferrals. But just for the sake of finding the cite that I just noted, I went back to the ".05" part and it says this: .05 Exclusion of an eligible employee from all [my emphasis] contributions or accruals under the plan for one or more plan years. As emphasized, it says "all." These folks weren't excluded from all contributions. (And by the way, none of them said a word about it. And also FWIW, at least one election was verbal, and perhaps there was implied consent since no one complained...?) Would it be reading this too literally to say that this isn't the right section, and that it doesn't actually need correction, or perhaps some other correction? FWIW this came up on the CPA 5500 audit; they just noted it but didn't say anything about correcting it.

I agree with the answers above, but they might appear confusing or contradictory depending on what you meant by "negated"...technically a last day provision is not negated, but effectively you have to do something to make sure everyone gets the gateway. The plan may have language which overrides the last day rule, but often you need a 411-g amendment to make it official.

I agree, it sounds like they are crediting you with earnings. I think I'd simply ask them to show you the calculation of earnings and see if it appears reasonable.

The plan is responsible for distributing an RMD for 2013. Actually, it did, so the plan's qualification is not at risk - it left the plan, it just went into an IRA when it shouldn't have. If there is enough in the plan now to cover the RMD, then it's easy, you use that to satisfy the RMD. If not, then some of what was rolled over should get a 1099-R with Code 7 indicating it is taxable, then she takes that out of the IRA as it was an excess contribution - very important that she gets the IRA to code it properly so it is not taxed twice.

I think you have to lay it out pretty much as you did here. Just document it all so that there's no doubt about the amounts being refunded. Did you show them as a liability at the end of the year before they were refunded?

The 1/2 self-employment tax adjustment applies when a taxpayer is "self-employed" - that is, taxed as a sole proprietor or partner. They pay both ends of the SE tax and get to deduct half, just like a corporation gets to deduct its (employer) share of the SE tax. In your case, the owner is getting a W-2, so there's no SE tax adjustment to be made, and you are simply dealing with 25% of W-2 income. As far as the analysis of whether he should bump his income, it is probably 6 of one, a half dozen of the other. Of course, in theory the decision on how much to take as W-2 income should have nothing to do with how much he can contribute, it should be based on what is reasonable compensation.

Or just don't ask. The grayness isn't all that disturbing to me. Thanks for the analysis of the letter; much appreciated.

If it is in fact deductible under 165 (disregarding the 10% of AGI minimum for taking the deduction), yes. But "an issue with their water supply" is pretty vague and there are requirements to take a casualty loss...I stumbled on a link that says: According to the IRS,** a casualty is “the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. A sudden event is one that is swift, not gradual or progressive. An unexpected event is one that is ordinarily unanticipated and unintended. An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Generally, casualty losses are deductible during the taxable year that the loss occurred.”

So...is this an ongoing plan, and the idea is to file for 2013 as if it's the first year? Then you or someone would have to committ fraud. You could probably get away with it if that's how you want to operate. The only way they catch it is if they audit it, and check the document vs. the returns that are in fact filed.

It's not. I don't remember all of the details, but a brief synopsis of what I do remember is: the DOL originally said you had to pick something like 4 options and prepare a chart for them. there was a hue and cry over what a PITA that would be. they said "never mind (but we really, really don't like these accounts."

They're eligible to not file. Someone would definitely have to 'splain it when they get a letter in a couple of years.

We use those checks for fees whenever possible...I don't remember the cite but am quite sure that is ok.

I suppose if nothing changes then it would be accurate to continue checking the "yes" box, even though that resolution is essentially invalid at this point. I'd probably do a resolution formally revoking the prior resolution and start checking "no".

The reg cited is the applicable one - it might be from "new" regs now but was first in "final" regs back in 1992. Such an election would definitely cover all future plans of the employer, and I agree with PensionPro that it would cover all employers in a CG. Now, if you're saying that the election does not comply with the regs for some reason, then you have a CODA and any profit sharing contributions arising out of new participation are limited to the 402(g) limit, subject to testing, etc.

I wouldn't.