Bird

Kathy, I don't want to drag this out but I disagree. The bottom line is that retirement plan savings gets a special tax break, and the RMD rules are there to assure that deferred income is recognized and taxes are paid in a "timely" manner. There's nothing in the RMD rules that says the RMD has to be spent. If anyone is worried about long-term retirement security they can simply invest the money outside the plan. And I remain puzzled about how they "need" the money but have put off taking it until the last minute.

Reduce SEI by 50% of the SE tax. The maximum contribution is effectively 20% of the resulting number, but I would prefer not to call it a "20% limit." The limit is 25% of compensation.

Kathy, maybe you can explain since I've never understood this line of thinking. What's the problem to this solution? If someone hasn't taken a distribution by now, I think it's a fair assumption that they don't need the money. So they take the distribution, and if they want to, can invest it outside the plan. Amen

I don't think you can reimburse the employer for expenses and not have it be considered a reversion. I don't have a cite but, well, that's what I thought. Having said that, the other choice isn't pleasant - try to reallocate, but incur significant fees that make you end up chasing your tail, especially if you spill into the next year. Kevin C. raises good questions about the source of the forfeitures too. As I've noted elsewhere, the IRS seems to start with the premise that anyone terminated in the last five years should be 100% vested. That's not necessarily true, but it's something to keep in mind. Sorry, this is not much help.

Try Colonial Surety. http://www.colonialsurety.com/

Me neither. I would just repeat the assertion that a 5500 is not required until they accept it.

Now that you mention it, something about that sounds vaguely familiar but...I guess I have to say I just don't know.

I think for most of the people participating here, VS is the way to go because of the flexibility that it offers. And the check-the-box style VS has the added advantage of being at least somewhat comprehensible to a layman. But I think in another part of the world, prototypes have an advantage - the sponsor can amend them and just tell the adopting employers that it's been amended, without having to get said adopting employers to take any action. So the turnkey operations, and lower forms of life such as Fidelity that offer free plans in order to capture assets, are able to keep all of their plans qualified for interim amendments by making an amendment and doing a mass mailing.

And that section is...? I'm not aware of a requirement that says you have to continue filing a 5500 if you ever filed one. And I'm positive that we had a client who went from 5500 to 5500-EZ filing and I don't remember a problem with it, although it was before the EFAST system. Just a thought - you might want to consider amending the 2004 return and marking it "final" to indicate that future returns aren't required. Of course that will cause some static since the assets aren't zeroed out, and then they filed again in 2006, but I'm just trying to think outside the box. Another thought - if I were the client, and now realized that not only did I pay someone to do something that wasn't required, but that doing so has me embroiled in this mess, I would be very upset. What a horrific waste.

Benefits from an annuity or insurance contract should follow the terms of the plan, which means the plan beneficiary is ultimately the beneficiary of any proceeds. But the annuity beneficiary designation should be the plan (trust), so the plan can receive the proceeds and pay them according to the plan beneficiary designation. There are several reasons for this, one being that the plan terms almost certainly dictate it, but on a practical level, you don't want to have to change the policy beneficiary designation every time a participants changes his or her plan beneficiary.

I dunno, would it really be the end of the world to apply for a new one and then say "oops" if the old one turns up? There's a pretty good chance the old one was deactivated anyway, since it was rarely or never used.

No. Notice 2008-30.

Well, well, it seems that DST has seen fit to modify their files again - this time removing the line feed so that all the data is strung together in one cell. AF is trying to get an answer from DST, and as usual they are unresponsive so I figured I'd post it here to see if anyone knows more about it. (I understand that Relius doesn't support AF so any response from Relius would be above and beyond the call.) And of course MFS is now Hartford so anyone reading this for the first time may find the prior references to MFS confusing.

That's a tough one, but I'd say the partners have no income for any pay period except the last one of the year. I would definitely not use a draw as compensation. We never, ever do p/r match w/o true-ups, but I remember one of the requirements for doing so is that you must make the deposit by the end of the following quarter. That might prove problematic for the partners as you may not have their self employment income by then.

There you go! Thanks for finding it.

Prior posts are on target...your accountant is flat-out wrong, and it's probably too late to do anything for 2008. To clarify one point a bit - the starting point for "compensation" for plan purposes is your "self-employment income." That's typically going to be your profits, or at least pretty close (there are some non-"earned" items that need to be adjusted out but that's probably not relevant here). If you took draws of $100,000, and your profits are $110,000, then $110,000 is your self-employment income - the draws are just advances and don't affect your tax picture. If you took draws of $100,000 and your profits are $80,000, then $80,000 is your self-employment income - again, the draws are irrelevant to your tax picture. There are further adjustments for self-employment taxes paid, and also for any company contributions made to the retirement plan, but for the moment let's ignore that. Yes, you can make 401(k) contributions from this income, but 401(k) contributions are subject to a a non-discrimination test, and if you and your partner are the only ones contributing in 2008, which at this point is the likely scenario, you'd have to take most or all of the money back as taxable income. There is one thing that might be possible for 2008 - if you and your partner started the business in a prior year, say 2007, and your employees started in 2008, you could establish a Simplified Employee Plan and have an eligibility requirement that only includes in 2008 contributions those who were employed in a prior year (2007). The limit is 25% of compensation (roughly 20% of your profits). It can be established as late as your tax return due date in 2009. Finally, you mention "employees/contractors." True independent contractors are not employees and wouldn't be in a plan that you sponsor...but a lot of people are mis-classifying employees as independent contractors. OK, one more thing - do yourself a favor and don't think you can set up a 401(k) plan directly with Fidelity and have it work right. Contact a local third party administrator, and ask what kind of fees they would charge for handling a plan of your size. If you are scared away by the fees, then just forget about having a plan. You really need someone who knows what they are doing.

I think you're right to raise the question. There's no official guidance that I know of that says the RMD is the lesser of the calculated amount or the total value of the account when distributed. So, what to do? I guess distribute it in-kind and forget about it, but there's no assurance that complies with the RMD rules.

If you are simply facing the need to provide an RMD, I don't believe that you have to initiate an annuity form of distribution. Just pay the RMD.

They did say about two weeks ago that they were considering an extension or a remedial amendment program, but I'm not aware* of anything since then. *And my knowledge is limited; I just happened to remember seeing this. I try to stay away from 403(b)s.

Yes, let it go. As you note, there's not much you can do about it now. I've never seen any direct penalty for failing to withhold - I think the participant could, if he wanted to to, bring an action against the trustee for failing to withhold, but then the trustee would be able to say "fine, please return the excess funds so we can pay the withholding."

If you are talking about an EGTRRA restatement, then you can generally make the effective date for the restatement current, but the individual provisions will have earlier effective dates hard-coded. But you need to check with your document provider to be sure. Otherwise, I'd say the answer is "no."

I agree it's not a slam dunk and think it's probably an uphill battle given the facts. And if you file for a DL on a 5310, you have to provide information on those who term'd in the last 5 years, and my experience is that they follow up and ask for more information (to the extent that they will actually challenge you about 1 random person who quit 3 years ago without full vesting). That doesn't mean they're right, but it's probably best to address it sooner rather than later with some kind of a submission, either a 5310 (and not pay anyone until you get a letter) or, as Sieve suggests, a direct request for a partial termination ruling on a 5300. Or just bite the bullet and give the full vesting (and I think you should be able to allocate losses to the unvested portion...although I'm guessing that part of the valuation problem is that losses weren't allocated to the unvested portions that were paid already...sounds like a perfect storm of bad timing).

Assuming you're doing the return on an accrual basis, and I don't think the question would arise if not, then I would include the contribution as a receivable...making another assumption that the contribution has been allocated in some way, shape or form "to" 2007. You're only allowed to count it as an annual addition if the contribution is made within 30 days of the tax return due date, and it sounds like that was missed. But I think it could still be allocated based on 2007 compensation, so it would be "for" 2007 even if some important deadlines were missed. And if it was a safe harbor contribution, then that is "due" for safe harbor purposes by 12/31. And yes, the corporate return should be amended to not claim the deduction. But it sounds like the CPA wants to play audit roulette. So it all depends. And, FWIW, if the check was written and in the trustee's hands on 10/15, but simply not deposited, then all is well, although the IRS might give you a hard time about it on audit.

The first statement says the plan was not terminated, so the only thing that can be done is to terminate it now. You need a 204(h) notice telling the participants in advance, for starters.

Kevin, I'd guess that there is no layer of indirect expense or compensation on this account versus an IRA account. Ameritrade is absorbing the costs for providing the document, which means that it is being spread among all shareholders. While I have reasons to object to them providing documents, hidden costs is not among them.