Bird

NO

With all due respect, I fail to see how consistency makes a bit of difference in the rightness of applying these rules. One way is right and one way is wrong, and using the wrong way consistently doesn't make it less wrong. Having said that, I doubt this is a burning issue on the IRS' radar screen and either way is not likely to be challenged - as long as you do it consistently. LOL.

Personally, I like to include as much equity as income needs will allow, further constrained by potential needs for large amounts of cash. Specifically, equity income type stocks and/or funds, which should maintain or increase income, even if they fluctuate in value. You should be able to find something yielding 5% or thereabouts, which is $6500/year or $542/month while maintaining principal. Not enough...but unless you go into high-yield bonds, you won't be able to generate enough income and maintain principal, so you'll have to slowly eat away at principal. This quickly becomes way too complicated, with too many unknowns, to generate any details, but that line of thinking might be helpful. Thinking a little more out loud, I guess I would keep enough cash to use to make up the difference between income generated and expenses for 2 or 3 years, which I think is a lot less than 25%. The 45% figure for equities is not necessarily objectionable to me, although I'd probably come in a little less than that in an effort to generate more income. You might want to check out the yields on "Income" funds, which are usually a mix of equities and bonds, to get an idea of the income that can be generated reasonably conservatively, and go from there in mixing in more bonds for higher current yields or more equities for (potential) increases in income and growth.

Not useless at all, Tom, that's a great piece of analysis. We've always done TH calcs on an accrual basis, more out of convenience than knowing the regs intimately, but this was welcome when it came out. I think it could be rephrased as "that 'adjustment' that everyone thought was for accrued contributions really had something to do with waived funding deficiencies and you can [should] do TH calcs on an accrual basis."

That's a good point, although I suspect you could still "get away" with paying the taxes with the 945, with nothing more than a scolding letter from the IRS.

I always took "the dollar limit under 415©" to mean, well, the dollar part of the limit, that is, $40,000 (as adjusted), as opposed to the percentage limit (100%). The fact that this participant's limit is $0 is a function of the percentage limit. I think this is debatable. What allows the plan administrator to re-classify a participant's elective deferrals as some other type of contribution?

FWIW, we control the front end of the process by getting the TIN online; that way we know it right away and despite the client's best efforts to mess us up, we win that battle. We always deposit the taxes right away, generally using Form 8109-B ("blank" - we get a supply from the IRS and fill in the TINs as appropriate). Then we prepare a 945 at the end of the year to reconcile the deposits. But, if your liability for the year is less than $2,500, you can just pay with the 945 filing and forget about the deposits during the year, and I think that's what I'd do in your situation. As far as the tax ID number - I believe it is perfectly ok to run the tax deposit through the employer's bank account for the physical routing of the money, but you should still use the plan ID number for reporting...but it will probably "work" to just use the corporate ID, with the Form 945. All the employer payroll stuff goes on a 941 and I don't think they'll get mixed up. I guess that means you'd use the corporate ID # for the 1099-R too. Like I said, it's not "right" but it will probably "work." (Having said all that, I recently learned that one of clients - the kind that complains about his fees - ignored our instructions and instead did what his accountant told him, he mingled the plan tax WH in with his employer p/r money. I told him that the accountant could do the plan reporting, since it was his idea - which means that about a year from now, they're going to come whining to us about an IRS notice of too much or too little money deposited.)

I (still) don't think it's a 415 violation, but I don't think the egregious error reasoning applies since that refers to the dollar limit. © a defined contribution plan where a contribution is made on behalf of a highly compensated employee that is several times greater than the dollar limit set forth in § 415©.

I think that is correct; (in that situation) it's not a 415 violation. Nor is it a 402(g) violation; that's just a dollar limit. But I don't think it is doable, since the plan would have a (max) 100% of pay deferral limit that would apply, even to catch-ups. So it creates an interesting reporting situation - I think the plan just disgorges the money and the participant doesn't report it as a deduction on the front end or as a taxable distribution on the back end.

I lean towards it being a minor modification, but I also think that if your VS document comes from a major provider, that there is probably an option to cap forceouts at $1,000 (or some other number). Keep looking and/or contact the provider and explain what you're trying to do. In other words, the automatic rollover language is required boilerplate stuff, but there is or should be another place to cap forceouts.

Twinky, I think there is a lot of confusion related to notice requirements when you are using the safe harbor, and discontinuing one during the year, but this is a different situation and there simply is no guidance. And I don't know that there has to be - IMO, the original notice doesn't obligate the sponsor to do anything until the first of the year is reached, then you have to deal with the "removing a safe harbor during the year" rules. But I don't think it's such a big deal to issue a new "oops" notice superseding the first one, as long as it is done before the beginning of the year and the plan is amended before the beginning of the year. You could argue that it is "safe" to give a new 30 day notice suspending the safe harbor, but you (I) could also argue that the notice has no effect until January 1, and that a new 30 day notice is making things worse, because there was no obligation to provide SH contributions on Dec 30 or whatever day you actually issue the notice.

I think it depends on the degree of the error. If the account is titled as some kind of qualified retirement plan account but the name is just messed up, fix it and move on. If it wound up in an IRA, that's not so easy to fix - the custodian will want to do some reporting on the "distribution" when the money goes out, even if it was a mistake in the first place, and as noted, that might take more action.

Sounds like Stromboli to me. I cheat and use a pizza dough from the supermarket. And mozzarella instead of provolone, but whatever you like, it's good.

Phrased another way: If they are required minimum distributions then it's not her call to stop them. And if they weren't required minimum distributions then they were just plain old distributions, permitted by the document, I hope, and she can do what she wants.

Some pre-approved GUST documents have language that says the plan "may" force out. Whether that was something that slipped through on the IRS approval process or what I don't know, but I think any EGTRRA documents will have to specify exactly when money will be forced out.

Yes, thanks. Sorry for the distraction.

I often take a more practical approach than some here, but (so far?) I haven't taken over a "plan" without a document. I wouldn't know where to begin to write the plan provisions.

Definitely 415 and not 402(g). Isn't there a 6% limit?

The more money that is involved, the more likely it is that a special valuation date (other than the last day of the year) is needed. If someone is entitled to $1,000 out of $1.5 million, and the total account goes down to $850K, I wouldn't bother. If someone is entitled to $250,000, I would. You do have to consider the meaning of the "uniform and nondiscriminatory" clause because you might be setting a precedent for large increases in asset values as well as decreases.

I take it back (the "keep looking" part). I'm sticking my head in the sand (or snow).

Bump. This is still unresolved; it seems the format was changed sometime in October. I guess hardly anyone (noone?) is trying to import files at this time of year and hasn't had the same problem, but I guess that will change come Jan 1. Unless I'm just crazy? Has no one else in the whole pension world tried to import an AF dat file since November 1?

I thought they said there weren't any. I did a quick review and couldn't find anything to confirm that; will keep looking.

I don't think there was a question about transferring/distributing/rolling the assets. Odds are this is a controlled group or an affiliated service group, the LLC is added an an adopting employer, and then later the plan is restated with the LLC as the primary sponsor. But someone has to pin down that CG/ASG issue.

I've heard people throw around the term "Schedule C" when they really mean that the person will have self-employment income (as in getting a K-1 as a partner). I don't know if that's the case here but there's enough misinformation and inconsistency here to suspect it.

Whoa. If he's a partner, he's a partner, not an independent contractor. There should be no need for anything special.