Bird

I think you did already. Hint: Worry less about the investment platforms. You can set up a plan with a third party administrator, let that person handle the compliance and reporting, and then go wherever want to place the investments, including Fidelity. If you do decide to put the investments with Fidelity, be very careful because they will think that you want them to set up a plan document. You don't - you just want them to hold the money. I think if you use the magic words "non-prototype account" they will understand.

You know just enough to get yourself into trouble if you try to do this yourself. I mean, you're on the right track as far as what you want to do, but IMO it's not possible for a layman to do the implementation. It sounds like Fidelity is selling you a packaged deal that would be appropriate for a company with some employees, but I think there are some features that you don't need at all (e.g. a "safe harbor" is a mandatory employer contribution that buys your way out of 401(k) testing...but if you have no employees there is no testing to worry about). I'd suggest that you look up "pension and profit sharing" in your local yellow pages, and/or ask your accountant for the name of a pension person, and then call one or two of those names and describe your situation and what you want to do. I'd hope that could find someone to do what you want a little more efficiently.

But only if the money is in individual annuities or custodial mutual fund accounts. My (very, very limited) experience makes me wonder where that PS money is...especially if subject to vesting.

Yup, 12 months to make the contribution and you still meet SH. Any contributions made after 30 later than the due date of the tax return are annual additions for 2007, not 2006. I agree that you can't fall back to ADP testing; plan is DQ'd if contribution is not made at all. But I think you could self-correct by making the contribution in 2008, with interest.

With 100+ participants?! That sounds like an unspeakable horror. Nevertheless, I see no reason for the auditor to have a problem with pro-rating assets and income.

Nothing like an open ended question. Well, a SEP is funded with employER contributions only, and a 401(k) permits employEE deferrals, so here are some that come to mind: Small business wants to make contributions for its employees, doesn't want to be bothered with processing deferrals, wants to save on admin fees, doesn't care about vesting. Business wants to make contributions for the prior year but didn't have a plan in place. One-person side business wants to set up a retirement plan and can maximum 401(k) contributions in another job.

I agree with Blinky - this is cut and dried. Your right to a lump sum option expires when you choose something else...or effectively choose something else by not responding.

In my opinion, if the employer says it will make a contribution, then it's an asset of the plan - a receivable. In a pooled account, that asset is indistinguishable from any other asset. I see no responsibility for the error associated with the TPA. Some caution is advisable, of course, but we don't know that the TPA didn't jump up and down and made the client swear on ten bibles that he really would be making the contribution, and warned him of these potential consequences for not doing it, and the client changed his mind anyway.

I'm not convinced it's such a big deal. If the contribution had indeed been completed, I can't imagine any kind of an examination that would compare the timing of distributions against the timing of contributions. As for the recordkeeping, I agree that the $400 can't be properly buried as a gain. I'd probably want the employer to make the contribution but might treat it as some kind of corrective measure rather than a contribution on my reports...or, a gain because at some point, for $400, you just need to make it go away.

I think you are correct - one 1099-R showing a rollover for the correct amount, and another showing the $400 as taxable. I think a letter to the participant saying $400 was not an eligible rollover would be appropriate (but not acknowledging that it's hers to keep). On the plan side, you have to figure out if you're going to bury it as a gain or have the employer put in $400 as a special contribution for her, or...? But I don't see a PT issue.

Still different entities with different tax ID #s? Yes, I'd continue with each plan as #001.

NBD. First, no one will take an annuity, second, on the remote chance someone does, you just buy one from an insurance company. FWIW- I don't like the idea of having the participants and spouse waive the QJSA; I see no basis for that offer. I don't understand the comment about the spin-off. You'd have to spin-off to somewhere, and that plan would have the same problem.

Yeah, I would just use G for the whole amount, including the loan.

If he didn't have wages then he's not entitled to anything in the MPP. Those contributions should be held and used against future contributions. Probably some messy cleanup with prior deductions. One of those situations where the more you think about it, the worse it gets.

I'd be very careful about forfeiting. What happens if you forfeit someone and reallocate, the plan terminates a few years later, and then the participant comes calling for his/her money a few years after that? It seems the government is encouraging and steering us towards forced IRA rollovers. I can't see why it wouldn't be prudent.

Austin, I think you need to have the automatic rollover provisions in the plan in order to use them; I'm not sure why you're assuming Kim does otherwise. We've done it with a couple of plans, but we're not ready to do this for everyone; it's going to require a better follow-up system than we have now.

I agree with Austin's first post; I don't see where he misread anything. Yes, the final 401(k) regs amendment needs to be reviewed, and that should give the final answer because this kind of change falls under the discretionary amendment concept introduced in Rev Proc 2005-66 - any changes need to be made before the end of the year.

Done. Well, I didn't read everything, but here's something that backs up my point: "ERISA provides a functional definition of fiduciary; that is, the functions that a person performs determine fiduciary status, even if the person is not a named fiduciary. Stated briefly, a broker, or any other person, is a fiduciary to the extent that (1) he or she exercises discretionary authority or control over the management of the plan, or any authority or control over plan assets; (2) he or she exercises discretionary authority or control over plan administration; or (3) he or she renders investment advice for a fee or other compensation. [ERISA §3(21)(A)] When brokers become fiduciaries, it is usually because they have rendered investment advice. As pointed out in our earlier columns, courts have found that, when the relationship between brokers and plans have gone beyond the typical commercial relationship of a salesperson and a customer, and has involved advice about the suitability of the investments for the particular plan, the salesperson can become a fiduciary. [see, e.g., Thomas, Head & Griesen v. Buster, 24 F.3d 1114 (9th Cir. 1994)]" Note the italicized text. He's not getting paid for the investment advice, that's an ancillary freebie (or at least that should be his argument). He's getting paid sales commissions. I'm not saying he's squeaky clean, but I'm not so sure that there really is a problem. Admittedly, I didn't read every word of every article and if there's something elsewhere that says it doesn't matter if he doesn't get paid for the advice I don't mind being enlightened.

padmin, your frankness is appreciated. I think the reality is that many, if not most, plan sponsors, especially small plan sponsors, look to their brokers for practical investment "advice" although the broker is getting paid a commission for sales, not a fee for "investment advice." It's not uncommon for brokers to provide "sample" investment policy statements that are adopted verbatim, and for them to "suggest" certain funds for inclusion in the plan or for selection by individual participants. The cautious ones will toe this line carefully, not-so-cautious ones will cross it occasionally, and I suppose there are some bold ones who will hold themselves out as "investment advisers" even if they're getting paid as brokers. In this case, if we start with RIA's last comment about providing advice to plan participants, I seriously doubt that there will be any traction on that, unless the broker is independently acting to make investment transactions without any input from the participant(s), or is making written recommendations. As far as the first point about advice to the committee, etc., I'd want to know more details (don't take that literally) but I'm not sure there's a problem. The broker might be acting a lot like a fiduciary, but he's not getting paid to provide investment advice, and I think that will go a long way in support of his "case" that the distinction is a "nuance." I think a fair question, RIA, is to ask what is your role?

I think that's how I'd do it (short year test in the non-SH plan and then SH contributions from the point of merger). I'm not aware of any official guidance.

If I understand the concept, company A spins off a new plan that it sponsors, then terminates it. If you're doing any kind of nondiscrimination testing for company A, wouldn't you have to look at both plans when you do it? I'm not sure, if you vest employees who are already terminated, how you run that testing, and whether it really could be a problem, so I am just going off the top of my head. But it just seems unlikely that if you couldn't vest a group of employees because of discrimination problems, that you could get around it by carving them into a separate plan and then effectively doing the same thing.

I'm not sure what a "spin-off termination" is but I guess you're saying that these participants would be spun off into a temporary plan which is then terminated? Sounds like a lot of trouble and I don't think it gets around the (assumed) discrimination issue.

You might consider a spinoff of the accounts of those participants - transfer the entire balances, including non-vested amounts, from the old plan to the new plan. You might also be able to do what you suggest - make special contributions - but it would require an amendment and then contributions would be subject to the general test (as well as 415, 402(g)).

I just realized I was assuming this was a SIMPLE IRA and other posters might be assuming it is a SIMPLE 401(k), so some of the apparently conflicting answers might all be correct.

To be precise, you can't have a SIMPLE in a year when the employer has any other plan. So while it's generally not advisable to start a 401(k), it can be done but it invalidates the SIMPLE contributions. I believe SIMPLE deferrals must be recharacterized as "regular" IRA contributions, subject to IRA limitations. Presumably W-2s would reflect the deferrals as regular taxable wages. I guess employer contributions would be tacked on to wages too, although since payroll taxes weren't withheld I don't know how that is resolved. Messy at best.