Bird

This doesn't make a whole lot of sense, although I can see one scenario where the results would be the same and maybe this is what was meant: The plan was top heavy in 2008, and the owners made deferral contributions, triggering top heavy contributions for non-keys. The plan would have to say that keys do not get TH contributions if in fact they did not. These top heavy contributions aren't exactly discretionary although that's how they would be treated once in the plan. The plan was not top heavy in 2009 and 2010 and discretionary contributions were made for non-keys, perhaps under the mistaken impression that they were required, so they are in fact discretionary PS in every sense of those words and the owners should share in them. Why there could have been this misunderstanding and why there wasn't more oversight on this I don't know. I'd want to get this confirmed before I gave any answers. (But based on how this was presented, it has no impact on the ADP/ACP testing.)

I thought it was pretty clear; ERPAs may sign. I don't think you need permission. I may have misunderstood but I don't think you can batch file extensions - you can batch print and then mail them all together but they must be filed on paper.

You can't have a SIMPLE plan and a SEP going at the same time. That's the kind of stuff I'm talking about where you can get yourself in trouble. fwiw the fees you mention seem reasonable.

Sigh. I don't want to drag this out, but paying that much for a document and then getting no ongoing admin support is not giving you much, if any, marginal benefit over just using a simple document from one of the big institutions as austin3515 mentions. Without a specialist (and your CPA is not a specialist) doing some kind of admin function each year, you will mess something up sooner or later. I know it sounds simple, and each calculation is simple enough, but there are too many interrelated limitations for a layman to be doing this stuff. Unfortunately, I guess there's not enough competition in our industry because you're not finding a good solution. Maybe check back with the owner of the "local" company and see if that person is more helpful.

You're on the right track. IMO, you could find a "local" TPA to do everything for 1/2 the price (or less) that an ERISA attorney would charge for just a document. No offense to the attorneys here but... Check with your CPA first and second, go through the local yellow pages under "pension plans." Just be clear about what you want when you call because so many aren't really doing admin; they're selling investments. You want someone to: 1) write the document, 2) maintain the document, 3) proved admin services such as contribution calculations and preparation of Form 5500-EZ, when needed.

I vaguely remember something passing my desk somewhat recently that was a reminder that partners can't have their own plans. Someone misinterpreted it, or something similar. Don't waste any time researching it.

#1 no problem; to be precise it is not "a regular 3% NEC could be give to the HCEs without any type of coverage/nondiscrmination testing" but "we know this allocation will pass general testing on a contributions basis because we've already given it to the NHCEs." #2 I agree with ETK - I'm not 100% sure but I wouldn't do it.

Perhaps yes, if it was anticipated and disclosed in the SPD. Now that the person is lost, revising the SPD doesn't do any good because they won't get the notice. Using the IRS search service is very slow and results are spotty at best - and it probably takes us more in time value, whether billable or not, vs. getting a quick and usually better response from a search service for a relatively low fee. And I would not forfeit accounts so casually, fwiw.

As long as they are performing services and receiving W-2 comp I think it's ok to keep the plan going indefinitely.

Still an EZ. It's based on participants in the plan, not employees.

You could definitely say that there are no assets in the plan if filing on a cash basis. But could you say that means you don't have to file a return? I'm not so sure about that. The plan had to exist in order for the contributions to be withheld from pay. And the instructions say to file a return for any plan covered by ERISA. (My answer might be different if it were a PS-only plan and there was no contribution at all for the year the plan was established, but that's only if I needed a bailout.)

Ditto. I think you really have to consider the value of fixing all of those returns, especially when they don't make it easy.

On a 5310, IRS asks about all partially vested payouts in the last 5 years, and in my experience will follow up and challenge the forfeitures unless the payout arose from a voluntary termination or termination for cause. In their minds, any other termination of employment is linked to the ultimate termination of the plan. (I'm probably oversimplifying but that seems to be their thinking - at least in the case of a termination due to adverse business conditions.) They don't really have any authority for it but you have to know that you're in for a challenge (if you submit or are audited - and I for one would not want to have that hanging over my head if I didn't submit). Honestly, I think they're right to not allow forfeitures in the year of termination, if that is in fact official policy (I suspect it's more of a "manual" guideline). I don't see how you can separate the two actions (paying terminees to get rid of them and terminating the plan). I think it's fair (whether it is code-ified or reg-ified or not) to look at the entire year of the plan termination and require full vesting for any payouts. And, as raised above, what are you going to do with the forfeitures anyway? They could, I suppose, be used for expenses, but re-allocating them based on comp for a partial year is questionable at best IMO.

It sounds like the issue is that you don't know right now which of you will have income for the year, but if you are in fact designating commission checks then you ought to have a good idea by December. So just set up the plan in December. Heck, set up two plans in December. Or set up two plans now (it's not like you have to fund it/them right away). I just wouldn't fund it/them until I was pretty sure I had the profits necessary to justify the contributions. You can each "defer" (contribute) up to $16,500 ($22,000 if over age 50) as a regular 401(k) or Roth or combination, but not more than your profits (actually a little less because you have to factor in half of your SS and Medicare taxes). I'm not a big fan of big investment company off-the-shelf plans as they get messed up constantly, due to the investment companies making them seem easier than they really are. (This conversation being a case in point.) But be sure to sign any documents that Vanguard sends you in regards to keeping the plan language up-to-date, and keep in mind that you have to file a plan tax return when assets exceed $250,000 - or in the final year of the plan, no matter what the assets.

That's exactly how I see it. (Now, typically, we are not given the "after 1/2 SE tax" number, we are given the Schedule C net income and have to reduce it for 1/2 of the SE tax, so you have to be careful and know which "number" you are starting from.)

Amen. I don't know how other people operate but we do financial statements and include the accrued contributions and look for them to be completed as we reconcile assets each year. To say "we sent a letter" is BS.

Thanks for doing that! Good grief...

I think it means that any SIMPLE contributions are excess contributions and must be withdrawn. I'm not sure if that means re-doing W-2s or what; it always seemed so ugly that I recommended avoiding it completely and just starting the PS later.

I think it's the other way around; making profit sharing contributions invalidates the SIMPLE contributions. A requirement of a SIMPLE plan is that you don't maintain another plan during the calendar year of the SIMPLE. (It's not a requirement of the PS plan that you don't have a SIMPLE.)

I see that but the specific instructions for line 6a/b are pretty clear (to me) that such participants are not on either line. It's like you should (must) report them but for whatever reason they don't get counted on page 1. Like I said, it probably doesn't matter either way...

So for those Code D participants, if you read the instructions to line 6 (the count on page 1); they are not properly counted in 6a or 6b, as I read it. Do we not worry about a mismatch between the number "required" to be reported on page 1 and the actual number reported on page 2? (I know the instructions are not changed from prior years and I suspect I've done it both ways and it probably doesn't matter!)

Yes, please!

I agree. The employer just needs to be told that he can't do what he thinks he can do and that it's no big deal to self-direct the PS along with the 401(k). And that it's no big deal to keep the optional profit sharing as part of the plan and simply not fund it.

I noticed the change too (actually I'm on the asap committee and suggested we draw attention to it as we did). The new -0045 zip+4 is in the 2010 5500-EZ instructions as well as the 2009 8955-SSA; the old -0027 zip+4 is on the 5558 instructions (that form still has a 2008 release date on it) and the 5500-EZ instructions for 2009 had the old -0027 code, so it is definitely a change for 2010. I asked Ft. William if we should be using the new code for all 5500s and they called the IRS. The original response was to use -0027, but then Ft. William pointed out that -0045 was on the 2010 EZ as well as the new 8955, and the IRS person put them on hold and came back and said to use -0045 for everything. ("True story." ) I would not be too worried about using -0027. I really can't imagine what would trigger this kind of change and don't want to think about it. Ed Snyder

I honestly don't know but it doesn't sound right to me. But fwiw, I would just set up the IRA using the employer's address or participant's last known address. For a SEP, I think investment companies recognize (maybe with some prodding) that the contribution is required and they must take the money.