Bird

I think I'd do the same. I suppose there's an argument that they aren't "participant" contributions and should be carried as a liability, but I don't think anyone cares.

I agree that you need to sit down with someone to review all of your options. Something to think about is taking all of the money from the plan and rolling it to an IRA, then taking it as needed for living expenses, including your mortgage payments. It would probably be a particularly bad idea to take a giant lump sum in one year just for the sake of paying off your mortgage; not only will you have the 10% penalty but ordinary income taxes as well, and you might very well push yourself into a higher tax bracket. If things get really bad and your husband can't find another job, and you bleed out small amounts next year, at least you won't be taking it out in a high tax bracket. And if things turn around and he gets a job, you won't have p*ssed away a ton of money in taxes and penalties. A 72(t) systematic distribution is a possibility but you have to commit to a long, regular payout. It's worth thinking about.

Did YOU say "duh" to ME? I don't claim to know that much about immigration laws and fortunately for me don't need to, but the point was that these are, or may be, valid ID "numbers" - it's just that some admin system doesn't like them. That's my sense of the real problem here, not the actual "legality" or "illegality" of the workers. I suppose there's some chance that your leap to conclude that they are not allowed to work in the US has merit, but based on the overall quality of your posts I'd have to say that is a remote chance. And as Mike Preston and Austin have noted, it really doesn't matter. They're entitled to plan benefits.

Try googling "individual taxpayer identification number" or look below*. A number beginning in "9" doesn't mean it is an invalid identification number, just that it's not a social security number. The numbers weren't rejected by the government, they were rejected by an admin system! Someone needs to check whether the plan excludes non-resident aliens without US source income, and whether or not they fall in this category, but this thread took a bad turn when it was assumed that these people were illegal. *An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN). It is a 9-digit number, beginning with the number "9", formatted like an SSN (NNN-NN-NNNN).

I'm not sure. I couldn't find anything that precludes a member of a controlled group from opening a SEP and not covering other members - yet logic does seem to imply that it shouldn't be possible, since only very limited exclusions are permitted and this would be an easy end-run. I couldn't find any prototypes that didn't automatically include all members of a controlled group.

I don't know; that's my point - it doesn't work. I'm also wondering how a participant who elected a direct R/O gets that accomplished.

Ditto. No

10/15 to count as 2006 annual additions, 12/31 to meet SH requirements.

That's my recollection too, plus insurance policies.

If these distributions are eligible for rollover, then they're subject to withholding. The taxable trust is not an IRA, so withholding would be required before any amounts could be sent to the taxable trust.

Sounds like withholding would be required. (Along with other impracticalities.) Has anyone in the world ever done this for a plan distribution?

I thought so too but I looked it up and it appears that the limit applies to each plan. It's the 402(g) limit that applies to the individual.

I think you're right.

No. If you look carefully at the definition of compensation for a self-employed, it almost certainly references Earned Income. If there are any employer contributions for the partner, they must be subtracted, as well as 1/2 of the self-employment taxes paid, Section 179 expenses, and unreimbursed partnership expenses the partner deducted personally. (OK, and oil and gas depletion, just for the record.)

If the W-2 shows $14,000 withheld, then I'd guess that the money was withheld and I'd treat $14,000 of the $28,000 that was deposited as a completion of the deferral. Then he'd lose $14,000 of the corporate contribution/deduction. That's a lot easier fix than deferrals that were withheld but not deposited, or (yuk) deferrals that showed on the W-2 but were never withheld. (I suppose if they were withheld but not deposited you might want to try to deposit them now, with an earnings fix, so you don't lose the corporate deduction on the profit sharing.) But I'd want to follow the money first to make sure I understood exactly what happened. Knowing whether or not the money was actually withheld is going to help narrow down the choices.

I think I get it. If you processed a RMD in January, it would be pro-rated, and if the participant took a lump sum in December it would be part rollover and part tax-free but none of the second distribution would actually be taxable. But if he doesn't take the RMD previously, the system forces the RMD out first as a pro-rata distribution following the above scenario, even if it happens at the same time. Off the top of my head, a distribution can still qualify as a "lump-sum" distribution if taken in one year, so I'm pretty sure that the 1099-R should NOT reflect a pro-ration of taxable and non-taxable amounts in either scenario. All is well with a pro-rata allocation until the moment that ALL of the money is taken out; at that point all the money previously withdrawn retroactively becomes a lump sum and is taxed differently (not pro-rated). I can see where a highly automated system would want to do it with the RMD pro-rated, but the fact that the system is highly automated doesn't make it right. Someone should sit down with a typewriter and do the 1099-R manually if the system can't do it right.

I think it was correct to do prior "systematic" distributions on a pro rata basis and it is also correct now, when a lump sum total distribution is taken, to treat some or all of the post-tax recovery of basis as an RMD. Forget about the RMD for a second. If a participant takes a lump sum and has after-tax money in the plan, he can roll over the pre-tax and take the after-tax in cash; there's no doubt about that, right? Now inject the RMD back into the equation; he has to take "x" and if he's receiving "x+y" then he's satisfied the RMD. It doesn't matter that "x" isn't taxable. There's no requirement that RMDs be taxable.

So 5500s were filed prior to 2006; that's the only year that's late? First, see if the sponsor had an extension for her personal return; a business extension can be used for a plan return and since she's a sole prop she = her business. Other than that, I don't think you have much choice but to file under the late filer program; $750 max penalty for one year. I don't think a TSL works anymore except for EZs.

Have you asked your current financial institution if they have a record of your total contributions? I think that information has to pass along with the money when you transfer from one place to another.

The account must be titled "xxx xxxxx as beneficiary of yyy yyyy." How to make the check payable is up to the receiving custodian, typically payable to the investment company with some reference to the account holder. I think the payout requirements are up to the account holder (beneficiary). If they tell the new custodian how the money is to be paid out (over life or within 5 years) I imagine the custodian will help them to comply, but I don't think the distributing plan has any specific duty to provide such info.

Thanks for responding. I agree that that could happen, but I should have been more specific; I was wondering how an NHCE could not be able to make catchups if needed if a similarly situated HCE has a specific limit.

Mike, I'm not relying on or looking at what Sal wrote. I'm just looking at the regs, in particular the cites that Tom has quoted and explained very nicely; I recognize that there is some apparent contradiction ("you can't provide lower limits to catch-up eligibles" but at the same time "a plan could provide a lower limit for HCEs"). I think it's clear that they just don't want some provision that would keep an NHCE from using a catchup if it is needed. mjb, if you're going to insist on answers to your questions, maybe you should answer mine first: how is an NHCE going to be harmed by limiting HCEs?

mjb, your argument seems to hinge on the presumption that allowing HCEs to use catchups before NHCEs might otherwise use them somehow violates universal availability. I see nothing in the regs that supports that. The fact is that the NHCEs can still use catchups if they "need" them, e.g. by exceeding the 402(g) limit. As I noted earlier, if you can come up with a scenario where an NHCE won't be able to use catchups if they are needed because of an employer-imposed limit on HCEs, then you might have something. But I don't think anyone except you cares if an NHCE's $10,000 contribution doesn't consist of any catchups, while a similarly-situated HCE has $1,000 of catchups.

In the one or two instances where someone wanted more than 20%, we had them put the election in writing, but did not use a W-4P. I think it should be in writing, not necessarily on W-4P, but no, I don't think there is any enforcement. The only time it would come up is if someone (a distributee) complained, and if they asked for it, even if just verbally, they shouldn't have reason to complain.

Thanks, mjb, for the quote from the preamble; I was concerned about Belgarath's cite but I think that the preamble explains what it means - "you can't limit catch-up opportunities for catch-up eligible participants by imposing an employer limit." I disagree with your conclusion that "forcing" NHCEs to use up their 402(g) limit before making catchups is a problem. Is there a scenario where NHCEs could contribute less because of it? I don't think that imposing an employer limit on HCEs, which allows (or requires) them to start using catch-ups sooner than an NHCE, means that catch-ups are not universally available. The NHCE can still do catch-ups if s/he exceeds the 402(g) limit or some other limit.