Bird

Michael, a couple of things... FYI, you can't download a Form 5500-EZ from the internet and use it. You have to order a special form with drop-out ink; ordering instructions are on the sample form that you can download. You'll find completing the form kind of a pain but not impossible. And, just FYI, you will have to (I guess I should say you're supposed to) file a final 5500-EZ when you finally terminate the 401(k) plan, even if assets never exceed $250K. I think that rule is widely ignored. I started out thinking you were wrong about needing to aggregate the IRAs for conversion tax purposes, but now I think you're right...a conversion is just a variation on a taxable distribution and you do have consider after tax monies. I never much liked non-deductible IRAs anyway...

You might have to hit me over the head, but I'm not sure there's a problem, at least the way we are doing restatements as instructed by our document provider - we just restate effective the first day of the current year, and whatever provisions had to be effective earlier for EGTRRA have those effective dates buried in the document. I don't think the interim restatement and change of plan type matter; it's the same plan and the provisions that have to be retroactive are indeed retroactive back through the restatement and change of plan type. Or did I misunderstand?

Yes, plan accounts are protected from general creditors, except I believe the feds can make a claim for taxes. But I think your client might have been reacting to this: nutcase (For those who don't want to bother, some idiot wants to have the government confiscate all private retirement plan accounts and convert them to a Guaranteed Retirement Annuity. And the headline could lead one to believe that she was taken seriously by the House Committee on Education and Labor.) I'm sure we'll be seeing changes but not this one.

We combine the notices - all the "maybe" stuff comes first and at the end we add this: SUPPLEMENTAL NOTICE TO EMPLOYEES This notice applies to the plan named above for the (current) plan year ending December 31, 2008. Your employer WILL contribute 3% of compensation for all eligible participants. This contribution will be 100% vested as soon as it is made.

Agree. No doubt whatsoever.

Based on the change in facts, it appears that this is a pooled account; the original post led me to believe there were both segregated and pooled accounts. In this new scenario, once the contribution is made, it becomes part of the trust and there's no point in identifying that "the contribution" had a loss. It's totally irrelevant. The trust had a loss of $8,000 and it is appropriate to allocate it to all participants, if an interim val is done. It also appears that there is an overcontribution of $5,000.

I agree. $10,000 contribution to, and $3,500 loss in, a "pooled" account. $6,500 would be transferred to the participant's segregated account.

Ok, I stand corrected. Thanks.

I think you might be overthinking this. She's one of the 7 siblings, so (if the siblings are the default beneficiary) she should disclaim all of it and get her 1/7 under the default. Otherwise she gets 1/7th plus 1/7th of 6/7ths.

If backed into a corner I think I would argue that the income is earned ratably over the year, but I'd rather not. I think I'd figure out a way to terminate the plan on 12/31 and avoid that issue. Freeze it on 11/1 or whatever.

If they are obsessed with Pub 560 then they ought to keep reading...under Compensation, "Other options," all three choices pretty clearly involve actual payments made - either subject to WH, or W-2, or SS. They don't necessarily have those choices in a SIMPLE, but I think it's enough to get them over it.

Are you asking if the comp "earned" after 12/21, paid in 2009, has to be included as comp for the SIMPLE? And the prototype sponsor is saying "yes?" I think it is pretty well established that the pay date is relevant and nothing else. That is, comp is going to be W-2 comp.

Yes, partners can (generally) make deferrals from guaranteed payments, if they are considered part of their self-employment income, which I think they typically are. And if a net loss results after the allocation of profits, they would have to get refunds. We have partners elect a dollar amount, not percent, to avoid the question of how much they want to contribute.

I saw another chart that had IRA limits and they are unchanged. You would have thought that the $5,000 would increase to $5,500, just like the catch-up limit, but apparently the indexing on the IRAs starts this year, and the rounding keeps it at $5,000, but the catch-up rounding started in 2007 and rounds to $5,500 this year. I haven't seen an official release yet but believe that is correct (IRA limits = $5,000 / $1,000).

In case anyone doesn't know what that means in dollar terms...I happen to have actual fiscal 2003 numbers on my desk: "the deficit" as reported was $375 billion. But there was an off-budget surplus, mostly from SS, of $161 billion. That means that the on-budget deficit was $536 billion. That means that for regular operations of the federal government, it spent $536 billion more than it took in. It's unfortunate that these numbers are kind of difficult to find, and unfortunate that the press doesn't report them when the government issues its statements about the deficit. I'm not quite sure why you would zero in on that. There were surpluses, even to the point that the operating budget was balanced or at least close to it.

Amen. Adjust future deposits and move on.

I don't believe trustees are under any obligation to map funds. If they say, in effect, "we're starting over and if you don't make an affirmative elective you're going into the default" then that is ok. The discussion to this point seems to assume that mapping is required or assumed and I don't think that's the case. I think the focus should be on how how the change was made and the notices that were given.

Thanks...I guess I should go back and uncapitalize "Visa" but that would take all the fun out of this...

We've been blissfully ignorant of non-resident alien issues for the most part, but have to deal with it now. The plan is pretty clear that non-resident aliens are excluded from participation if their only income is from non-US sources, or some such language; I don't have it handy. I have a US company that has an employee working here on a Visa, and they noted that he is excluded because he's a non-resident alien. I don't think he is excluded, based on the fact that the compensation is from a regular US company. But I just thought I'd check to make sure I'm not missing anything that the rest of the world thinks is obvious. (Of course, it's a takeover, and of course, his employment date is several years ago...)

They are participants and a regular 5500 is required.

Well, I remember chiding an accountant for using the social, within the last couple of years. It was the least of their worries and I never got too involved so I can't say for sure if it ever caused a problem. In any event it's not fatal.

Ha...ha. As WDIK notes, the answer is "yes." But I don't think anything is going to happen if they don't get a number and you use the Social on the 5500-EZ. I've certainly seen it done.

I agree. The transferor administered the plan while it was active and should sign.

Thanks for the clarification Sheila, that's exactly what I was thinking of, but haven't done DBs in so long I couldn't remember the terminology.

I believe that applies to fully insured plans. Note that they are only considered "allocated" if they provide a specified benefit.