Bird

I agree with WDIK. Freezing the plan as of some date in 2008 does nothing to affect the timing of the deposit of the 2007 contribution. And completing the 2007 deposit after the freeze date does nothing to affect the 2008 contribution, which is presumably $0.

The plan is terminated when the sponsor says it is, by resolution (corporation) or other written documentation. There is no requirement to submit for an IRS letter, but it's generally a good idea. If you submit, it's usually recommended to wait until the approval letter before distributing assets, but if you are confident that there can be adjustments to account balances, you might consider making earlier payouts. One particular reason for caution is forfeitures in the last 5 years...they seem to want to look at that closely and might want to vest up any participants who received less than 100% vesting in that time frame.

I'm sorry but your choice of words is a little troubling to me. Maybe I'm being picky but it's not a "could have" situation, it's "should have but didn't." So either they're going to fix the error or they're not. If it's fixable under SCP that's the way to do it; I think there is a limitation on how many years back you can go. I don't know if there are exceptions to the 404 and 415 limits when using the program.

I think for this set of circumstances you are on the right track. Usually, once you have more than a handful of employees, for one reason or another, a SIMPLE will have unexpected deficiencies relative to a qualified plan. As for "open enrollment," I don't like the term being applied to qualified plans. You have eligibility requirements and follow them. No "need" to allow everyone in at a particular time because it's just not part of the plan, and to allow it would mean you're not following the terms of the document (unless there is a special plan provision or amendment calling for it).

No. This is a problem that needs to be laid at the feet of the receiving institution. They screwed up in a royal manner - they say a document was signed and set up SEP accounts but can't find the document?! This needs to be un-done, but (from experience) I can tell you that they're likely to say that once the money is in the SEP accounts, they can't send it back anywhere without triggering a 1099-R (even if it is their fault). There might be a brief window where they might actually admit their mistake and un-do it as if it never happened, so someone needs to get after them right away.

No mandatory WH on non-spouse rollovers; Notice 2007-7. The document must permit the rollover, but not right away...can be done with the rest of the PPA restatement; clarified in Rev Proc 2007-44.

Isn't the onus on you to prove why these two unrelated matters should be treated the same? I happen to agree that they should be, but I don't know of any legal reason why, and would like to be educated.

Well, we're still not sure what that means. Was this a "group" allocation arrangement, where the plan sponsor had the option to make or not make contributions for a particular group or individual, or did they just decide to give everyone else a contribution and not themselves, terms of the document be damned? If the latter, then it is an error. I'll leave that to the correction experts. If the former, then there should have been a memorandum describing how much of the contribution was to be allocated to each group. My recollection is that the IRS never gave firm direction on when the memorandum had to be signed, although I remember some mumbling about "contemporaneous" with the contribution. So now you're in the unhappy position of either not having a memorandum at all, which means that the contributions were not definitely determinable, or if you have a memorandum, I don't see how it could be changed at this point. Any way you slice it, the answer is "no." (Unless, as noted above, there was an error if contributions were not allocated according to the terms of the document, and then there's some correction mechanism for that.)

jpod, I understand now what you were saying. I guess I have to let it go at hoping I never have a situation where the document wasn't drafted properly. Ultimately I don't think the loan can be distributed but I can't prove it.

jpod, I'm missing something. How can you say the loan is not transferable and also say it could be distributed? As a general rule, loans are from the plan and the participant's account is collateral. When a distributable event occurs, the collateral is claimed as an offset. It just can't be any other way - there is some concern being expressed for the beneficiary losing out on part of what he is supposedly entitled to, but think of the alternative - the bene gets the loan, and is taxed on it, and can't collect. That just can't happen.

Our loan policies have this clause: If a Participant has an outstanding balance remaining on a loan and the Participant (or the Participant's spouse or beneficiary) is entitled to a payment from the Trust Fund before the loan is repaid in full, the Trustee will offset at the time of distribution the unpaid loan balance (including accrued interest) from the total amount otherwise due. The individual loan agreements have something similar. I see what you're getting at; a beneficiary of the plan might prefer to receive a note rather than a reduced payment if s/he is not the beneficiary of the estate. I think the reason that can't happen is that the loan is not transferable to another party; it can only be between the participant and the plan.

I'm pretty sure the loan balance is taxed to the estate and the beneficiary gets a 1099-R for what she actually received. It's the only thing that makes sense, really.

It's not clear to me what you're contemplating. As noted, if errors were made, there are correction procedures to be followed. You can't just arbitrarily say you're throwing in more money this year to fix prior years (although it may boil down to that, in essence).

Yes. (The tax free death benefit went away quite a while ago.)

Yes, thanks. I didn't pay much attention at first since we prepare a (shorter) chart of our own but this is great!

Nope. Anything to do with the SIMPLE is invalidated if you set up another plan in the same year.

In the scenario you describe (loan made, weekly payments start 3 weeks later) is the initial amount amortized over 260 payments, or is some interest being added and then that amount amortized (I doubt it). If the loan schedule is set up with a regular 5 year schedule and the money just happens to come out a little early, it's not something I'd worry about.

There's a difference between investing new cash in a Roth and selling something else, paying a tax, and then investing in a Roth. I was just saying I wouldn't bother incurring a tax in order to make a tax-advantaged investment. It's not the end of the world to have some money in regular taxable accounts - remember that capital gains aren't taxed until the sale of the asset (and yes you figured out what I was saying about capital gains distributions from a mutual fund) - and at the extreme, aren't taxed at all if you hold the asset til death. Having said that, if you can sell something and pay no tax, go for it.

I wouldn't sell assets and incur a tax just for the sake of funding a Roth IRA. Use new money and if you don't have it, so be it. Maybe your dividends and capital gains are being reinvested and you can change that so they're paid in cash; then you'd have some "new" money to fund the IRA.

Well, rock my world, this is a different PLR and I believe mjb has found an acorn that is at least not totally irrelevant to this discussion. The PLR allows a spouse who was taking an irrevocable 5-year stream to do a rollover of the fourth year's distribution, after receiving 3 taxable distributions already. Presumably the 5th year would not be eligible for rollover. I note that the PLR specifically says it is using the 1987 proposed regs, not the 2002 regs for its basis. And we don't know how old the spouse is, which I think is important. But at least it is not utterly and completely irrelevant, as were prior citations.

I've read the new posts and for the record, (still) agreed with Masteff. To be fair, I think I said you couldn't do a rollover at all after using the five year rule, and yes, I suppose you could do a rollover, but the new IRA would carry with it the five year election - you can't use the five year rule and then convert to the life expectancy method. That's the gist of the discussion.

The PLR is irrelevant, which is no surprise. The PLAN had a 5-year rule, but under the regs RMDs weren't yet required (under age 70 1/2) so it was all eligible for rollover.

merlin, I don't think you're missing anything. Most of our small plans would be set up as safe harbor 401(k) plans, and in that case it wouldn't matter if he did 401(k) or 403(b) deferrals. This way he gets the deferral without the hassle.

I'm familiar with the arrangement and think you have an interesting viewpoint. If the insurance company is depositing money (more than it received from the prior investment company), and it's not a contribution, then what is it? It certainly is effectively a loan, whether it quite makes it to the point of being a direct or indirect loan and therefore a PT I'm not sure. But after I saw the first one of these many years ago, I couldn't help but be amused at how they are sold as doing the participants a big favor by eating the surrender charge. Yeah, right, they just pay for it over time (and then some, maybe) instead of all at once.

I don't think it's a news flash that IRA rollovers are permitted after age 70 1/2, and citing a 1982 revenue ruling, pre-dating the latest regs by some 20 years, is less than helpful. I continue to believe that if you invoke the 5-year rule (and keep in mind that there was never any evidence that the 5-year rule was invoked, directly or indirectly by plan operation) then any amounts distributed thereafter are not eligible for rollover because the 5 year rule says that all amounts must be distributed within 5 years. "Must be distributed" means they are required minimum distributions, ineligible for rollover. NOTE TO ANY POOR SOUL WHO HAS STUMBLED ACROSS THIS THREAD AND THINKS THEY WILL FIND A CONCLUSION - I may or may not respond to future posts; don't take a lack of response as concession to an opposing point of view. I can only say the same thing so many times and have reached that limit.