Bird

Just stop paying the premiums. Future premiums will be paid by automatic premium loan. (Check with the company but it's hard to imagine that's not in the contract.) As an alternative...I'm not sure exactly what the problem is with paying from the deposit admin contract, but maybe an annual premium could be deducted manually. I agree with your assessment of the problem with the employer paying the premium. And no, the employee can't pay it.

Yes, Schedule R is required for distributions, including rollovers.

How about defaulting it in 2007 as a compromise? That 1099-R would be due the end of this month. I think the "correct" answer is to do it in 2006 but...that would be a nightmare for everyone involved. Accrue interest through 1/1/2007 so if the plan is audited you can say "see, the participant had more taxable income so there was no benefit to him by deferring the default by one year."

Not to me, if I'm the TPA. To the payroll department or p/r company maybe. Why do I care? If he is allowed to, and does, specify exactly which parts of comp he wants money withheld from, then I don't think the definition of comp matters. As far as the form goes, I think a regular form would be fine, with a written addition "don't withhold from overtime pay." Someone who doesn't add that note gets money withheld on all pay. Someone who does, gets it done that way forever or until he changes it.

Well, I don't think the concept of a bonus 2 1/2 months after the end of the plan year is relevant to a self-employed person. But, from a tax standpoint, it is possible to complete the deposit of 2007 deferrals now, if they were properly elected before the end of 2007. The DOL would care about the timeliness of the deposits if it were an ERISA plan.

I don't see this as such an unusual or onerous request, and I'm not so sure why there seems to be an implication that a document wouldn't permit it. I'd guess it is pretty standard; here is text from one of our plans: Deferral Percentage: For each contribution period, a Participant may elect that up to 100% of his or her Compensation received during the contribution period be withheld as an Elective Deferral. Elective Deferrals may be made in whole percentages of Compensation or in specific dollar amounts as designated by the Participant. The Administrator will have the right to direct that such percentages of Compensation be rounded to the next highest or lowest dollar. Furthermore, on a uniform nondiscriminatory basis, the Administrator may permit a Participant to identify separate components of the Participant's Compensation (such as base salary, bonuses, etc.) and to specify that a different percentage (or dollar amount) apply to each such component. If I'm getting a regular paycheck, and want to reach a certain amount, like, say, $15,500 in a year, I might have a fixed amount taken out each pay so that I get to that total over the course of the year. And if I got a separate check for overtime, well, why should I be forced to have money taken out of that (or be forced to make a new election every time a check is cut)?

Good question and good answer. It just came up in our office. I'll try to expand a bit. If you have 10 NHCEs and 1 HCE, and everyone gets a SHNE, you pass 410(b) coverage at 100%. For nondiscrimination under 401(a)(4), if not everyone who got the SHNE got the PS, then it's not a uniform allocation and you can't rely on it being a 401(a)(4) safe harbor uniform allocation. Let's assume the HCE and 7 NHCEs got PS. You can run a general test on the combined contributions, and if you used the maximum permitted disparity in your PS formula, and imputed permitted disparity in your testing, the rate group for the HCE will wind up at 70% and you will pass on a general test basis. The problem we ran into was that our PD formula used 5.4% and 81% of the TWB, and when we imputed PD in the general test, using 5.7%, the HCE's adjusted allocation rate was a bit higher than the NHCEs' and it didn't pass the general test (if that doesn't sound right I'd like to hear comments). But, as noted, you can restructure under 401(a)(4), which looks back to 410(b) for coverage - the 3 NHCEs who got SH only are in one group; no HCEs so it passes coverage. The other group has everyone who got both contributions, and it includes 70% of the NHCEs, so it passes coverage. And the formula of the combined SH plus PS meets the permitted disparity safe harbor, so all is well.

I think you are right, with the key words being "if" and "and." It's probably not applicable. No

I don't have experience with CPI so I can't answer the questions directly. But the fact that some funds show up on the list of funds with short-term redemption fees might mean that they used to be offered and are still in some "old" plans but aren't offered in new plans. Comparing expenses of funds in plans and factoring in other expenses can be very difficult. If your plan is large enough, it appears that some of the "load" funds might be offered at net asset value, effectively waiving the load. And note that many of the funds (including those from "no load" families) might be offered in varying share classes, with varying expenses. So you need to look at the exact funds being offered, in the exact share class, and the expenses associated with that share class in order to make an informed decision.

Not quite sure what you're getting at, but the IRS has made it clear that refunds of contributions to the employer are only supposed to occur due to a "mistake of fact." What's less clear (or maybe some of us prefer to think of it as not clear because it is somewhat restrictive) is exactly what is a "mistake of fact." I seem to recall the example given is a wrong date of birth, leading to a contribution that is too much, implying a DB situation. I think a conservative approach might extend this to the incorrect inclusion in a plan of an employee where a wrong date of birth or hire was provided, but strictly speaking, this should only apply to a money purchase or fixed match formula (since an optional contribution that is "too much" can simply be reallocated among other participants). Taking this to a logical conclusion, a plan with a fixed match as well as profit sharing that put in "too much" for the match should treat the excess as profit sharing. A less-conservative position, probably followed by a fair number of TPAs (keeping in mind that anyone can call themselves a TPA), is to simply allow refunds of any money that was later determined to be "too much." The couple of plans I've seen handled by ADP have followed this approach.

Update: I got an e-mail this morning from American Funds that DST is going back to the old file format, as of today.

Tell your Relius support person you need a file called TRIMFILE.EXE. There is an extra column (or two) in the "improved" files and this utility will strip it out without corrupting the file format. (You can't edit .DAT files in any editor I know of...Notepad, Wordpad, Excel...without corrupting it.) I guess they need to talk more...your experience is like mine. When I called to follow up on this, I was told that there was an extra column (I knew that) and if I could just get rid of it everything would be ok. But it took a while for my support person to realize that they had a fix, and had had it for while.

I agree with you. "Back in the day" (before 1987, I think, and no I don't have much first-hand knowledge) participants were permitted to throw in a 6% after-tax contribution to plans that didn't otherwise permit employee contributions, and it didn't count against 415 or other limits - a freebie. They changed the law (in TRA 86, I'm pretty sure) to say that these counted just like any other contributions, and were to be tested under ACP as well, so anyone in their right mind stopped. I think it's worthwhile to ask the HCEs why they think they would benefit and then you'll be able to dissuade them from this quaint notion that there's some benefit here. And don't forget to tell them about your extra fees for keeping track of this new source, and the pro-rata taxation when the money comes out.

True, but wouldn't they be doing the 1099-R then? If there is such an agreement with a financial institution, then their name, ID, etc is used. If not it is the plan itself.

That's what we've been doing - "Other" "Employer Plan" and "Individual." It is the individual acting as trustee who is getting the number. Works like a charm. Yes. We're told they stopped; I'm not sure.

It absolutely has to be included; it's in the plan. And, if more money is deposited later, it highlights the silliness of excluding receivables from TH determination, as the regs were widely misinterpreted to say for a long time. (i.e. you would have to allocate the $120K, do the TH calc, then allocate the rest of the contribution...it's not impossible but it raises questions about whether the first part should be treated as the only contribution or just a pro-rata share of the total).

I'm not sure anyone here can help you, but I don't like to see any questions completely ignored, so here goes. These are questions for your accountant, or "an" accountant if you don't have one...but I don't see how you can pay a bonus now for 2007, nor do I see how you can defer money out of a bonus if you have not made an election to make a deferral before 12/31, as your unedited post implied you wanted to do. There's no particular limit to a bonus vs. regular pay, as long as pay is reasonable - again, a question for an accountant. The general answer to reporting compensation is that Box 1 of a W-2, Federal taxable income, shows net taxable income (after 401(k) deferrals) and the other boxes for SS and medicare will show the gross - subject to certain limits and other adjustments probably not relevant to this discussion.

Thanks for the feedback. As you noted, American Funds doesn't have a contract with Relius, so Relius isn't supporting any fixes for that platform. But, there was a fix for the MFS files, and that still works on the AF files, so at least we have a workaround for now. I've urged AF to step up and contract with Relius.

Back to the original question I believe the answer is "no." I don't believe the fact that the determination year was a SH year has any relevance. As far as determining top heavy, there was a thread (or threads) on including receivables. I have it in my head that the IRS has stated that you DO include receivables, despite the language in the regs that appears to say otherwise. I'll leave it to you (or others) to research it, but I thought it was worth throwing out there.

Thank you both. This information is different from what I have been told by Relius and AF. Razmatazz, if MFS has had DST correct the problem, and we are using the MFS import for AF files, shouldn't that have taken care of it? Or is it possible DST is generating different reports for MFS than they are for AF?

If your husband's account is still in his name, you can probably take some or all of it directly as a death distribution (hardship is not needed). Whether you can take a partial distribution now or you have to take it all at once is up to the terms of the plan. There are no early distribution penalties for a distribution on account of the participant's death, but distributions are generally going to be subject to ordinary income taxation. You could roll over his money to your own account or to an IRA, but you probably don't want to do that if you're going to need it, because if you roll it over and then take it from your own account before age 59 1/2 it WILL be subject to the early distribution penalty (10%). Having said all that, if you already rolled it over to your own account, then you might be entitled to a distribution from your account on account of hardship, or maybe on account of your termination of employment. You're really going to have to talk to the plan administrator (likely the employer) about when and how you can take your money. Good luck. I may have tried to say too much, or not enough, so if anything is unclear feel free to write back.

I can't believe no one else is having this problem, but it appears that the .DAT files generated under American Funds' Recordkeeper Direct platform (identical to the MFS platform, so that's the Relius interface we use) have been modified by the company that maintains the recordkeeping platform, DST. The new files do not import to Relius because they have an extra column. I have (very unhappily) tried modifying the files in Excel, Notepad and Wordpad, and something about the structure is changing and they can't be cleaned up. Relius is aware of the problem, American Funds is aware of the problem, and the only answer I am getting is that DST has to fix it, and is working on it, but I can get no word on when - a day, a month or a year from now. Does anyone else have any insight on this?

I'm not sure that a named beneficiary can disclaim plan benefits (I don't think so, unless the plan permits it), but I'm sure the beneficiary can NOT reassign the benefits to someone of his or her choosing. If it's not a giant amount, the named bene may want to simply accept the proceeds, keep enough to pay the taxes, and then gift the rest to the children. Anyone can give anyone else up to $12,000 without any estate or gift tax consequences.

I agree with your reasoning. The employee is the participant, and the trustee is the trustee, and holds title to the assets for the benefit of the participant. The participant can name his trust as beneficiary but has no rights to re-title the assets. If he persists, ask him where you should send the bill for further research.

Karen- A SARSEP is just a vehicle to get money into an IRA - so what you have is an IRA account. You can leave it right where it is, or you can roll it into another IRA (at a new investment company if you wish), or you can roll it into the new 401(k) plan. You might very well pay a sales charge to roll it into the new plan, or pay higher annual expenses - or not, there's no way to know without digging into the details. But if a broker is involved, s/he is getting paid, and that is coming from the accounts in some way or another. Unless the 401(k) plan has a lot of money in it, and the investment company is giving the plan very low expenses as a result, I doubt there's an advantage to rolling your money into the plan.