Bird

I would continue to accept loan payments. The plan being "terminated" doesn't necessarily mean all activity ceases; certainly contributions. But until assets are distributed, the plan still exists and financial transactions, other than contributions, can continue.

I thought I remembered that if it's not a plan-imposed limit it is ok. Sorry, no cite.

Same here.

American Funds has opened accounts with the employer's signature. But you can't just go to some random bank or investment company and demand that they take that money; go to the one that is getting the other money and tell them that that's part of the deal. Repeat as necessary until you get satisfaction.

So you have a corporation owned by multiple shareholders, presumably this corporation sponsors the plan? And you have one shareholder who has a sole proprietorship who is paying another shareholder directly and reporting that on a 1099, which effectively means the receiving party has his own sole proprietorship. Well, if the corporation is indeed sponsoring the plan, then, in theory at least, the sole proprietorships have nothing to do with anything; i.e. you ignore the 1099 income. If the sole props are adopting employers, then you need to consider the 1099 income. If the sole props have employees, then there's a whole 'nother set of worries about coverage. (I'd bet that someone is going to be unhappy about something at the end of the day because they don't truly understand the consequences of sloshing money around as they appear to be doing.)

Key phrase from Belgarath's post reads (with my underlining): "...the applicable distribution period for distribution calendar years after the distribution calendar year containing the employee's date of death is either—" So yes, it is essentially the final lifetime RMD.

In this case, find the section of the document dealing with forfeitures, and ask him to find where it says what he thinks it says. And tell the Employer that failure to follow the terms of the document is a potentially disqualifying event, meaning either the account balances all become taxable, or the Employer has to pay a lot of money, in fees and penalties, to fix the error(s). Feel free to use this thread as confirmation that other people, who actually know what they are talking about, disagree with the auditor.

I'm pretty sure you can just amend the existing plan into a "regular" 401(k). For the reasons you mention, it should be effective 1/1. As I understand it, a Simple 401(k) is just a qualified plan with special provisions, so there's no reason not to be able to amend it...that I know of.

Amen; read the document (!) Vague statements like "...an Employer can rebalance the unvested portion of a terminated participants account into the Forfeiture Account upon termination of employment..." are usually an indication of someone who knows just enough to be dangerous. And, FWIW, when you do look it up in the document, you are looking for when to forfeit, not "rebalance."

True that; I inferred it was a corp based on reference to "employee."

Not eligible for an EZ; from the 5500 instructions about who may file an EZ: "A“one-participant plan” for this purpose is: (1) a pension benefit plan that covers only an individual or an individual and his or her spouse who wholly own a trade or business..."

Because I'm stubborn. It is. Nah, it's only a handful of people. No, I used the term "sister organization" loosely.

Form 5304.

Not eligible for an EZ filing. I took a quick look in the instructions and couldn't find phrasing to clarify that to be eligible to file an EZ, it has to cover the owner(s) only for the entire year, but that is pretty well understood.

Thanks for the feedback!

I'm re-posting under 403(b) plans since there was no response in the 5500 section... An employer has a basic deferral-only plan that meets the safe harbor for not filing a return under DOL Reg 29 CFR 2510.3-2(f). For unknown reasons, they adopted a resolution in 2008 that said "the plan is covered by ERISA." (Don't have a copy of that.) Do you think that, in itself, does make the plan subject to 5500 reporting? The safe harbor describes how a plan is generally subject to Title I but if specific requirements are met, is not subject to the reporting requirements of Title I. Just saying it is doesn't necessarily make it so, IMO. I suspect they were trying to say that there is a written document, maybe? Is there a reason that I don't know of to go out of your way to adopt a resolution saying a plan is subject "to ERISA?" Making it weirder is the fact that someone convinced them they should file a return, and someone filed an extension - on August 6. It was rejected. They're he**-bent on filing and paying the late filing penalty, in part because a sister organization has filed under similar circumstances, and the controller has ties to both and assumes they have to do the same thing. I think they don't have enough to do.

Maybe this should be under 403(b)s to get the right eyeballs, but here it is. An employer has a basic deferral-only plan that meets the safe harbor for not filing a return under DOL Reg 29 CFR 2510.3-2(f). For unknown reasons, they adopted a resolution in 2008 that said "the plan is covered by ERISA." (Don't have a copy of that.) Do you think that, in itself, does make the plan subject to 5500 reporting? The safe harbor describes how a plan is generally subject to Title I but if specific requirements are met, is not subject to the reporting requirements of Title I. Just saying it is doesn't necessarily make it so, IMO. I suspect they were trying to say that there is a written document, maybe? Is there a reason that I don't know of to go out of your way to adopt a resolution saying a plan is subject "to ERISA?" Making it weirder is the fact that someone convinced them they should file a return, and someone filed an extension - on August 6. It was rejected. They're he**-bent on filing and paying the late filing penalty, in part because a sister organization has filed under similar circumstances, and the controller has ties to both and assumes they have to do the same thing. I think they don't have enough to do.

You're trying to do the prudent thing, and I don't want to try to tell you to do the "wrong" thing, but you say you don't have a plan document, so is it really plan money? And there isn't really any consequence to not withholding; the participant would have to complain and then you would say "fine, give me back the money so I can withhold some." And, I don't see this being on a radar screen anywhere. Sorry to just hang it out there.

I wouldn't do anything about it.

I think you "have to" but...the more you treat them as plan assets, the more you have to think about questions like "mmm, should I amend the final tax return, and file returns for intervening years (late)...oh, and should the plan be restated for EGTRRA (late)...?" I don't think any reasonable agent would expect all that. So maybe the plan nature of this found money should be ignored completely and it should just be spread around, with no withholding? I don't know, but this is a real headache for terminated plans.

Sieve is correct; for reporting purposes the plan is "done" when the last assets are distributed. And yes, it's a short year. Did you get an extension to 10/15 (as if the year ended 12/31/09)? You might want to look hard and see if there weren't a few pennies left that could make a case for the year going to 12/31.

What's the question?

You're right, for a platform they are probably already doing it electronically under their own ID; I don't think this affects them or our functioning with them. For others - it depends. Ideally, under present conditions, you want them to cut one check directly to the participant and one check for withholding. We used to have that second check cut to the plan sponsor, who would then deposit it to their business checking account, and then write a check to their bank and make a tax deposit using Form 8109 (usually 8109-B "blank" that we prepare for them). (Tax deposits clear overnight so they have to have clear funds when the deposit is made, which means they won't take outside checks which means it has to be run through the business account.) Brokerage firms and brokers and their assistants vary in competence, but let's say they generally fall at the lower end of the bell curve in competence and cooperation. We try to take that out of the equation by preparing a "letter of instruction" spelling this out; sometimes it needs a signature guarantee and sometimes not. We've run into various problems with getting the deposits handled properly; apparently some banks can't handle tax deposits and of course depositing a check and writing another one is a challenge for some people, so this is often screwed up in one way or another. So, we've taken to having the second check cut to Financial Agent (the Federal Reserve), having it sent to us, and sending it to the address on the back of the 8109-B, St. Louis I think. That seems to work fairly well. Making the deposit electronically would go back to having the client take two steps, doubling the already good chance for a screw-up, as well as having someone set up the electronic stuff online. I don't really blame them for wanting it done electronically but for occasional/rare events it's a pain. Penchecks will take a check from the trust and write the check to the participant and handle the withholding for (I think) $50, which is very reasonable, but the reality is that you have to take some time to get an account set up for the plan with them and then get the check to them and it just seems silly when all you're trying to do is pay someone $372.85 or whatever.

I'm not sure about that, from a valuation standpoint. It sounds like there is at least a potential reversion to the employer which should be recognized when valuing the company, unless the company has taken action to state that benefits will be increased to use up the overfunding. I think I would be willing to come in and buy the company for somewhat less than the overfunding, minus applicable reversion taxes and penalties. I think that argues against an SF filing.

There's the problem, and the reason that we've always submitted deposits throughout the year even when we expect them to total less than the threshold. That, and consistency, so we don't have to try to keep track of who owes money at the end of the year and who doesn't. We'll probably take the path of least resistance and in most cases submit the WH at the end of the year, but I can see it getting FUBARed. Additional incentive for a self-directed platform that handles distributions and withholding.