Bird

Sorry Sieve, this is s standardized prototype and they have > 501 hours so they will always share in PS. But I think you provided the cite that's needed to allow TH only and not test it for non-discrimination, which is really what this thread is about (I think).

EPS2, can you confirm that a Key deferred 3% or more so that there really is a required top heavy minimum? If not, then any PS contribution must be allocated under the terms of the document, and the two terms are included; end of discussion. (FWIW I would guess that it is allocated pro rata on the first 3% so TH would be satisfied with exactly 3% but that's a different issue.) If so (a Key deferred 3% or more), then what you'd like to do is say "oh darn, we need a top heavy contribution to satisfy that requirement - 3% to anyone employed on the last day of the year." And those two don't get that; you don't put in a dollar more or less so there's no profit sharing, right? In that scenario, you are just following the terms of a standardized prototype plan, and should not have to test for coverage, even though the TH contribution would fail coverage if you tested it. (I can't say I'm 100% sure and would have to research exactly what it means to have a Std Prototype...but I'm sure someone else will jump all over that if it's not so. In any event it seems that the discussion keeps coming back to adding a little bit to the PS allocation to satisfy TH, but as noted, it's probably pro-rata anyway up to 3%, but that is not responsive to your problem of keeping these two from getting a contribution.)

Yes

We give clients the plan document when adopted and keep a copy for ourselves. We give clients a nice, bound report every year showing plan activity, etc., including a copy of the tax return. We keep copies of that, plus we keep our working papers. I may not know the law very well because I fail to see how my copies are their property. If they ask for stuff we already gave them we charge for it - not much, frankly, but enough to cover the time spent on it. I'm probably behind the curve but when we take over a plan, we get everything we can from the client and then and only then go to the prior TPA for missing information. Now I see that the first post said "recordkeeper" and not "TPA" so I'm not even sure we're talking about the same issues.

I think you are correct. I don't understand the questions in the other responses - it's an RMD after death and must start by the end of the year following death, or completely within 5 years. If the daughter wants to spread distributions over her life expectancy, she must start this year (all ignoring the RMD waiver for 2009, of course...I guess it is as simple as allowing the full rollover with no RMD this year, then she starts RMDs from the IRA next year, using life expectancy this year - 1).

I thought that allowing insurance could be discontinued without creating a BR&F issue but have no cite or reasoning, just that recollection. But from a practical standpoint, I'd probably just express my concerns to the client and note in my engagement letter or elsewhere that I'm taking over a plan that doesn't allow insurance but that has an existing policy, and don't blame me if it blows up later. And I'd encourage the insured to buy it or otherwise get it the heck out of the plan.

WDIK got my drift. The plan probably says something to the effect of "participants over the age of 70.5 must take distributions based on their life expectancy and keep taking them blah blah" not ""the plan will comply with 401(a)(9) however it happens to read at the moment."

Actually, a strict reading of your document in place right now would probably lead you to continue to provide the "RMD" since it's all spelled out in there, no? A lot of people are assuming it is optional (or will be clarified that way). I think I smell an interim amendment coming out of this ill-conceived mess. Any distributions that would otherwise by an RMD are not subject to mandatory withholding as not an eligible rollover distribution, although they may in fact be rolled over.

What kind of "report" are we talking about? In our office, we prepare an annual, accrual-based full valuation report, with an account balance statement, financial statements, and tax return all in one place. I think that's the way it should be done, to tie everything together. In my experience, if you don't do this, a lot of stuff gets missed, no matter how well you think you are handling it on a daily basis. But I've seen plenty of TPAs (especially if we use that term loosely to include the ADPs and Paychex of the world) who just spew out whatever their computer generates and throw it at the client at random times. If you are talking about participant statements, then generally no, we're not going to prepare an additional statement, as long as the investment company includes vesting. If they don't, then PPA requires you to provide a statement with vesting or a separate statement describing vesting, and since we run everything through our system, it's often easiest to just spit out accrual-based statements. (Of course that probably confuses some participants into thinking they have twice what they really have, but that's another matter.)

I just imported the Roth source successfully yesterday. I don't remember whether I had to map it or it just "knew." You might want to double check your source setup to make sure you have the Roth box checked. Sorry, probably not that helpful!

Yes, that problem was resolved.

Yes. I think it makes a difference as far as new money is concerned. If you want new money to go directly to Vanguard, then it must be a non-designated. If it is non-designated and the money goes to Oppenheimer first, then yes, you can roll it out, but the issue then is whether or not you are buying funds with a sales charge. I doubt you want the money to go into Oppenheimer, pay a sales charge and then take it out. (That problem is avoided if contributions go into an A share money market fund - of course, if it is non-designated, then there's no point in the money going through Oppenheimer anyway!). If it is designated, then the money must go to Oppenheimer but you also have the right to transfer it without a sales charge being imposed.

Oppenheimer should be able to tell you if they are a designated institution or not. The 25% penalty applies to distributions within two years of initial participation in the plan (not employment). After that, any and all money may be rolled. I happened across the answer to the point I raised, and must correct myself. You can't roll to a regular IRA within the first two years. (I thought maybe you could roll but it would be subject to the penalty.)

"I'm sorry, but we cannot process the distribution as requested. The beneficiary is the estate and the plan must pay benefits to the estate." Period. End of discussion.

I would first determine which year's W-2 will reflect the pay and work accordingly from there. Unfortunately, I don't know that answer...I'd be inclined to think that it should be 2009, since that's the normal pay date. There are possible ramifications for SS taxes and whatnot and...well, we just don't know how that was handled. Bottom line is to let everything flow from that determination. If it means a negative accrual for the advance deposits, so be it. At least, that's how I would handle it.

I think you can roll at any time, but if within the first two years it would be considered a distribution for purposes of the extra penalty tax on SIMPLEs. I could be wrong, maybe you can't roll at all, but you don't want to do that anyway. You should be looking at this from a different angle - SIMPLE plans are either of the "designated institution" variety or the non-designated institution variety. If they are with a designated institution, and Oppenheimer is that designated institution, you have the right to tell Oppenheimer to move the money to another institution within a certain period of time, without them assessing a cost or penalty. If you don't have a designated institution, you can go wherever you want in the first place - although this is not necessarily widely advertised. (Maybe you know all that already and are just trying to salvage money that's already there. If so, sorry for providing too much information.)

The wife actually received the payment, so the 1099 goes to her, and it is on account of death, so it is code 4.

Our experience with the IRS has been the same as noted - IRS just says to get one (it's not their job to enforce it). I can't recall any DOL audits or other interaction where one didn't exist so no direct experience there. I'm quite sure that in the case cited, the guy was told to get a bond, several times, and refused.

We just did one of these and yes, did what you suggested. We also put that amount in Box 5.

She bought it? Then yes, $1,000 is just paid to her in a lump sum, not taxable, and the rest can be rolled over.

Benmark, I think Sieve is correct. It sounds like the other plan money was not yet distributed, so you had a loan default, and not a loan offset. A loan default is a taxable event, but the plan still holds the loan, so there was no actual distribution to roll over. Now, if he did get paid his other money, you might consider re-classifying the events so that the loan was offset, not defaulted, then I think what you suggest might work.

Plan Man, you are assuming that there are individual accounts and we don't know if that's the case. I'm guessing not. The wrong but very easy way to handle this is to treat the payment as a contribution to the plan and then a distribution from the plan, with the plan issuing a 1099-R. I guess instead of treating it as a contribution you could have the plan reimburse the corporation for the distribution, as if the corporation lent the money to the plan...I don't like that but I think it could be argued that this is actually "cleaner." One right way to handle it is to treat the payment from the corporation as a random extra payment of some sort, nothing to do with the plan, and issue a 1099-MISC. Then make a payment from the plan as it should have been done in the first place. I can think of no circumstance where I would have the corporation issue a 1099-R. Use your judgment.

My "NO" was to the original post. Trying to emphasize that there was no further discussion needed but I guess that backfired.

I think there are questions about how to apply a cash basis interpretation on this issue, such as: -in a pooled setting, if the employer makes a partial deposit during the year, do you allocate it, and how? As if it were the only contribution for the year, or some sort of pro-ration of the total? -in a segregated account setting, where estimated PS deposits are made during the year, I guess that actual balances are what you use...even though participant X might have a 3.7% allocation, on the way to 4%, and participant Y has 3.1%, and Participant Z has 0% (someone forgot to start making deposits)?

NO