Bird

The total distribution should be reported...by someone. You probably need to talk to the insurance company (good luck!) about what they think they are supposed to do, and whether or not they will actually do it. Are you saying the ins. co paid the at-risk portion directly and the CSV portion went to the plan? That would be...interesting; you probably meant something else?

I agree, but just because we don't like to have any clear answers in this business, will throw this out - at some point, and no I don't have a cite, some IRS official mumbled that this could create a 411(d)(6) cutback. So if you change someone from an NHCE to an HCE and they wind up not getting a QNEC as a result, that's a cutback, possibly prohibited depending on when they earned the right to that contribution. I don't think it would even potentially apply unless QNECs were the only correction method, and I don't know how you determine when the right to a QNEC is earned. It doesn't bother me but if you want to have something to worry about, there it is.

If you mean "can he convert the existing money to Roth money?" - no. If you mean "can he convert the existing plan to a 401(k) plan with a Roth feature, keep the old money as pre-tax money, but start making Roth contributions?" - yes.

Probably 1/1/09, but only the document provider would know this for sure. Well, now, that's just a shocking development.

That's somewhat awkward language but I think it means if the employee had 1000 hours in a year, any year, and didn't terminate during the year, then s/he is a "qualifying participant" which presumably means "gets a contribution." I would be surprised if it didn't also say something about working 501 hours during the year, even if terminated, being a qualifying participant (and having worked 1000 hours in a prior year). You said it was a "standard" brokerage plan; a "standardized" plan is a simplified plan that, among other things, says that anyone who has satisfied participation requirements and works 501 hours or is employed on the last day of the year gets a contribution. Not sure if you meant it in that sense or not, but in any event it sounds like some sort of "easy" prototype with generous allocation language in which your participant does get a contribution for 2009.

Sometimes there is no right answer - I would generally prefer to have more defaults and try to avoid sending money to the estate, but on the other hand with a large plan you might not want the burden of potentially sifting through various levels of default beneficiaries, as noted. Neither is right or wrong.

Masteff, wait a sec, the Sept 30 of the following year rule is to determine the beneficiary for RMD purposes, and while it implies that changes from the original beneficiary could happen for various reasons, it doesn't say that a plan could or couldn't have an indefinite contingency clause for actual distribution purposes. jpod, I'm not so sure that a J&S plan couldn't have a contingency clause; in fact I don't think whether the plan is J&S matters. The REA rules were put in place to protect the spouse, not the spouse's estate. I don't really know the answer...

It's easy to say that "he" has to make the deposits but I take it there is no money, right? It's not clear to me if the manager ever owned the company and/or was a fiduciary. I'd want to be surer of who is at risk of going to jail before I (presumably) borrow $20,000 with no chance of recovery. Some of it may depend on whether there was an actual change of ownership or not, and even with that information, I'd want a lawyer to advise me.

We try to control that process by preparing the forms and not having anything done until we give instructions. Even with that, we still find some participants who did or didn't get paid as expected. If you just ask clients who got paid, I doubt your accuracy will be much greater than 50%. I've learned to assume that everyone is stupid and/or lazy (experience has unfortunately proven that assumption correct all too often); the ones who aren't stupid and/or lazy recognize the need for pushiness and don't mind, the others need it.

Interesting, wasn't there a recent thread that spoke of a plan provision that said the primary beneficiary had to survive the participant by so many days? Maybe it was a one-man plan and therefore not an ERISA plan, but I doubt that [purported] language would be in a Vanguard prototype if it weren't allowed in an ERISA plan. As always, you want to read the document, but I have to admit, mine aren't clear on this.

I think it depends on how your document is written, and assuming you are using a document provider, they can tell you how to handle the effective date. I do think most or all documents have the retroactive stuff hard-coded, so you probably want to make the nominal effective date of the restatement the first day of the current plan year. Many documents are going to have currently effective tweaks, or major changes, and it would really tie your hands if you had to make everything in the plan retroactive to 2002. I agree that a retroactive eff date does not fix a nonamender problem. To answer your question more directly, you would need to use a "way back" retroactive date if the plan didn't specifically say when the various changes were effective. Clearing away some cobwebs and going back several restatements, I think it was TRA '86 (yeah really) that changed the permitted disparity (then "integration") rules, and you could do what you wanted in operation and catch up the language in the document later, and so in 1994 or whenever we were indeed using a 1987 (?) effective date for the entire restatement. But the IRS now wants documents to currently reflect operations, so that's ancient history - but probably does explain why the concept is still hanging around. Ow - that was harder than it sounded. Time for my geezer nap.

That's how I see it.

Absolutely. Employers often don't want employer money available for loans, but don't care what employees do with "their own" money, typically deferrals and rollovers.

For anyone who didn't click through and read the linked post carefully, it went back and forth and one of the final posts was this (my emphasis): http://www.relius.net/News/TechnicalUpdates.aspx?ID=468 ************** Short 2009 plan years. The 2008 Form 5500 instructions indicate that plans with a 2009 short plan year which have a 5500 filing deadline before January 1, 2010, may file a paper 5500 using the 2008 forms or are eligible for an automatic extension of 90 days following the date electronic filing becomes available. The result of this policy is that plans with short years having a deadline after December 31, 2009 (e.g., plans which terminate after May 31, 2009) have no option but to wait for electronic filing. DOL and IRS officials seemed surprised by this result and indicated that the DOL will not reject a paper filing for any plan with a short 2009 plan year, regardless of its deadline. ************** Looks like the 2008 Form 5500 paper filing will be accepted... in all cases regardless of the deadline/due date. (amazing that DOL was surprised, when they are pretty explicit on their website summary)

That was understood, but because it is a sole proprietor, and not another, more formal type of business, I think the sole proprietorship exists as long as the individual is alive, even if he is not actively running a business. Now you're confusing me. What entity would adopt the document? I think most people here would use the term "sponsor" to mean the employer adopting the plan, even though Vanguard or someone else might "sponsor" a prototype...but that's just semantics; the bottom line is that you need an employer to adopt the plan, and I'm not sure who you're suggesting would adopt it. As noted, I do think it is ok for the adopting employer to be an inactive sole prop.

Thanks for posting that article!

If the sponsor was a sole proprietor, then I'm not sure I'd worry about the sponsor "going out of business." I think the sole proprietorship continues to exist, even if it conducts no active business. I find it really, really, really weird that there are 4 trustees for a one-man plan. I think that does nothing in terms of continuity and permancy. I agree with the others that this is a lot of trouble for whatever perceived benefits are being gained. I'd find a way to achieve the "survival contingency feature" (which is a new one on me) some other way.

Starting at the end, the employer has no ability to control the assets in the employees' IRAs. Once the money is in, the accounts are, essentially, just regular IRA accounts, controlled by the employees. As for documentation, I think you just need the 5305-A-SEP form to restate the SARSEP (and a 5305-SEP if there is employer money too).

Agreed. I hope it is a self-run plan...actually I don't know what to hope for.

I would just keep saying the same thing over and over until you find someone with a pulse; that's usually what it takes. I don't think there was a chance of policy or procedures or anything; you just found the wrong person. Good luck.

I would wait. (Agreed the penalty starts at 7/31.)

I agree with everyone else - this is nutty. The only thing I can imagine that might have gone wrong is that you didn't note the old EIN when you filed the new return (and even if you did, they are notorious for not recognizing it, and if you didn't, no big deal, you can file an amended return to clean it all up). "Ludicrous" begins to scratch the surface of describing what is happening here.

Sure, he can ask... Seriously, I think it is ok, but probably a royal PITA, so if I'm the TPA, don't ask for my help in getting it accomplished. As an aside, this concept of paying someone extra to manage funds irks me. I'd first ask if there's a broker involved in the case, and let that person earn his or her money.

I guess you mean that she got "wages" of at least $245K that will be shown on a W-2, and she is also a partner. As has been noted here elsewhere, partners generally aren't supposed to be paid as employees, but apparently it's done all the time. I would definitely net the wages and loss.

We have always paid terminated employees when they were entitled under the terms of the plan, and made others wait for the DL. We don't know for sure, but there's a hint in the original post that the plan has some kind of a waiting period.