Bird

Yes and no...yes it is tedious to manually reconcile the statements, if that is indeed what will have to be done. But the tracking by source/vesting isn't so bad; we let our admin system allocate the total gain across sources once per year...although it does present an additional hassle at the moment of payout with a moving target. We try to steer any plan with more than a handful of participants to a true platform - American Funds, John Hancock, etc. - where they recordkeep by source, and we can get electronic downloads of account information (and they process distributions). We still have some holdovers, including one almost this size at Schwab, and while I guess we make a profit on it, I don't know that it's worth all the time that could be spent somewhere else.

We always took premiums out of a participant's account (almost no plans any more with insurance, yay!), so the only issue I see there is potential incidental benefit restrictions, which seems unlikely. And if a policy paid less than full face value, I see the plan as a mere conduit of those benefits. I may be missing something but I don't see any problems.

I think that's a QDIA problem, not 404©...for 404© you have all of the explanations - that the plan is intended to be 404© compliant, descriptions of the investment alternatives, descriptions of fees, etc. Some of that may be in the SPD or other materials, or may not. I'd say that in general it's going to be difficult to be compliant without some sort of a package, either a comprehensive platform or additional materials specifically designed for 404© compliance. The trustee may decide that the hassle of trying to be compliant is not worth the teeny-tiny risk of one of those 25 participants suing it for giving him or herself enough rope to hang. And, if you don't have some sort of comprehensive reporting, you might wonder if it's a great idea to have 25 separate Schwab accounts...depending on what they buy, and if you actually reconcile the accounts, that one plan can almost turn into a (low-paying) career.

I am running Firefox... ...and this seemed to do it: so maybe it was my browser after all. Thanks Sieve! (and others who responded).

Yes, it sounds like they were incorrectly withholding based on net pay.

mmm, I don't see that at all, is it near the "time is now" line?

My burning question for today...I must've accidentally hit some combination of keystrokes that has made everything bigger - fonts, icons, etc. It's making me feel old; anyone know how to change it back? (It's just this site, not my browser.)

Yes, the 3% counts towards the 5% so only 2% extra is needed. Matches don't count...matches are for starting fires.

It makes better sense now; good luck. And pmacduff is probably correct about the proper language being in the plan already, but the decrease in comp could significantly affect the testing.

The 401(a)(4) nondiscrimination testing discussed here converts contributions to projected benefits at retirement age and then compares those benefits to prove NHCEs are not being discriminated against. It's complicated to say the least, and software or a pretty well programmed spreadsheet is required. The 5%/one-third rule is known as the gateway, and as I recall is in the final (final, final?) a4 regs. One important thing to know is that the plan must permit the disparity in contributions that you are contemplating, and just because the profit sharing contribution is "discretionary" doesn't mean "everybody gets whatever we say they get." Discretionary means that the total contribution amount is determined by the company, but then it is allocated according to a formula - which could say that everyone in the plan gets the same percentage of compensation, or it could have the special provisions allowing 13% for one person or group and 2% for another person or group. If I can ask, what is your role wrt this plan?

You might want to think about paying those trailing dividends as fees instead of distributions, and accrue the divs and the fees in 2009 so the net assets are zero...I don't think it's technically correct, because you do have assets (and equal liabilities) in 2010, but I've done it and will do it again. I'd be less comfortable receiving the divs in 2010 and paying them out as distributions, because then they really and clearly are 2010 distributions, at least IMO.

If the employment arrangement is informal, without a contract, and both sides agree that the employee's pay for a period is x-y, and for the next period is x+y, I don't think it's a problem. If it is more formal, with contractual rights to x per pay period, I suppose it is more problematic, as per vebaguru's post.

Yes, I believe you are correct on all counts.

We're seeing more and more partnerships and especially LLCs taxed as partnerships where the partners are getting W-2 income as well as the expected K-1 income. I've always thought that partners should not get W-2 income, but apparently accountants don't care, because it seems every new partnership I come across is doing this. I don't see it as my problem, if it is a problem at all, and I net the numbers - with a negative K-1, just subtract the loss from the W-2 and ignore the SE tax deduction; they will have paid too much on their W-2 income but if that doesn't bother them, it's ok by me. You'll have to subtract the PS from the K-1 also, which makes the whole calculation more difficult.

I agree, no problem. We usually include optional PS language even if the company never intends to use it.

With all due respect, it's not likely that such a plan is in good standing. I'm a do-it-yourselfer and understand the sentiment that "it shouldn't be so hard" but the rules in this business are positively insane. Most, if not all, plans have something wrong with them; most, if not all, "self-administered" plans have something seriously wrong with them. Sorry for the lecture. Yes and no. The employer can terminate the plan (and should amend the plan for changes in the law that have not yet been incorporated into the plan) and would then give the participants the option of taking lump sum distributions or rollovers, as well as other options if the plan so permits, along with the appropriate notices. That depends on the plan provisions. Generally, deferral money can't come out before 59 1/2 except for hardship. The plan may or may not permit in-service distributions after that age.

What about testing on the 401(k) contributions? You can use the deemed 3% NHCE ADP so the owner can do 5%, but that's it; it sounds like this was set up too late to be a safe harbor. And who is reconciling the Schwab accounts? Unless you are getting true consolidated reporting from Schwab, that sounds like a lot of accounts to keep track of. For your specific Qs: Correct. You don't have to have the 401(k) account set up by 12/31/09. If the company simply holds the money until it can be deposited into a plan account, it is not a qualification or deduction problem, although you could wind up with late deposits. You could indeed set up a temporary plan account to hold the money until the regular plan accounts can be established. That's a pain and whether it's better to do that or just have some late deposits depends on who is doing the work and who is getting paid. Certainly PS can wait. I consider self-employed deferrals made more than 7 business days after 12/31 to be late - deductible, but subject to late deposit corrections. There's a school of thought that self-employed deferrals aren't known until self-employment income is determined, well after the end of the year, and therefore can be made up until the tax return due date without consequence, but I find that argument pretty weak. Certainly if a dollar amount is elected, knowing self-employment income doesn't affect the amount. On the other hand, I don't know if the DOL cares about self-employed deferrals being late anyway.

Correction. The broker didn't understand the difference. You may find it less-than-easy to get the brokerage firm to fix it, even though it is their fault. You'll have to go up and down 3 or 4 layers to the dreaded "legal department" who will get a corrupted message like the party game where something gets whispered in each person's ear, and it will come out "someone wants to move an IRA into a plan, can we do that?" And the answer comes back "sure, fill out the rollover paperwork." I've been there. I think once I got the brokerage firm to fix the error by re-running everything back as if it had never happened. Another time, I got so frustrated I had them do it as a rollover from the IRA to the plan, and just treated it as if it had been in the plan the whole time, and hoped to be able to explain it later as "no harm no foul" if it ever came up on audit. And didn't do anything through VCP.

I would make the LLC the sponsor and credit service with the old sole prop and have the sole prop be an adopting employer just to be sure. I think the LLC is the employer, and the Schedule C reporting is just a convenience.

Thanks, I'll try to keep that in mind for next time...it turns out there were other charges and now the payment is ok.

Maybe someone has already run across this...participant has medical bills and requests a hardship. Just about the time the money is direct-deposited, the hospital says "oops, that bill is too high" and adjusts it to some minimal amount. Is there any way to un-do that?

If the annuity is titled as a Roth IRA, then you can roll to another Roth IRA without tax consequences. There will be surrender charges, but that's a contractual problem, not a tax problem. I doubt that he gets a commission on withdrawals...he got a nice commission up front, but it didn't come directly from your account; the insurance company recovers it in small doses from your contract every year. If you surrender early, then they impose a surrender charge to recover the remaining amounts already paid (roughly speaking; it's not a direct dollar-for-dollar). If you took money from a Roth IRA and put it in a regular variable annuity...well, that's just wrong. You might think about asking the firm for damages because they allowed it to happen.

Sigh. I still think they'll take 'em (by 12/31) but for whatever reason don't want to make it official.

Gee, I think it is unfortunate that this veered off towards the validity or non-validity of the testing methodology because I do believe that the methodology can prove non-discrimination in (projected) benefits. The question is, should defined CONTRIBUTION plans be allowed to use those projected benefits when they are not guaranteed or even promised to continue to be funded for more than the one year in question? And I at least have my doubts, from a policy standpoint. As far as target benefit plans, to the extent that they exist any more, I don't think they prove that Congress meant to allow DC plans to test on benefits, because they at least have a required contribution element. One thing I am sure about...not enough time to do much more of this!

To be fair, we have given and received courtesy from other professionals. But we've also chosen to be less-than-courteous when dealing with less-than-professional organizations who more or less demand our records, and in a format of their choosing no less. So it depends. Looking at this one more closely, I guess if we were getting rid of the plan(s) for reasons other than non-payment, we'd expect to provide info. But the new tpa should be prepared to work from client records, and if they're not available, to say, "sorry but we can't handle the plan."