Bird

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.

I agree too; I didn't check the math, just the words.

You are correct.

I agree with ipod: I don't see anything in the answer to imply that you should only file for one year. The only thing I would add is to not give up if they still want to assess penalties after you send the letter. Send it again.

I don't think it matters. Unless I'm the one missing something... The non-spousal rollover was added to put non-spouse benes on the same footing they'd have been on had the money been in an IRA.

I think that should be in the document at the very least 30 days before the end of the plan year. Maybe earlier depending on how the plan and SH notice for the year are written.

The potential problem starts in 2008.

OK, so I looked it up. The prototype document says the SH notice will be deemed to be an amendment (no resolution requirement). Make of it what you will; it implies to me that the issue was known and resolved in this manner; maybe the IRS reviewer(s) let them slide a bit by not requiring a resolution/actual amendment, but it's not that they were too dumb to catch it, IMO. I am remembering a little bit more about this and I think some VS documents originally had this language. I recall that we had our plan sponsors sign the notice to lend more weight to it being a deemed amendment. And BTW I think Sungard is a great company. I just thought this deserved a comment.

The Accudraft language that was finally approved refers to a SH notice AND a written resolution, which is deemed to be an amendment. That's a perfectly acceptable solution, both from my standpoint as a practitioner and the law as I understand it. I don't remember all of the "GUST I" and "GUST II" permutations, and it is possible that some plans were approved with the notice language only, but I am pretty sure anyone who is using an Accudraft document today is getting the notice AND resolution language. Well, what I just said applies to VS plans. I'm not sure about prototypes so maybe I shouldn't comment, but the "we were too smart" defense doesn't quite fly, IMO.

winterhill, you are to be commended for trying to do this right and I truly respect your obsessing over it, really. But the reality is that the instructions are contradictory and unclear, and it doesn't make a &$*#ing bit of difference what you do. No one is checking your work. I find it easiest to include accrued contributions in the ending balances and to show total contributions "for" the year on the contributions line, even if contributed after the end of the year, as the form says. So that's what I do. Do what works for you and don't worry about it. I think the IRS assigned the 5500-EZ form to some kid out of school, probably a film major who couldn't get another job; if you think about this for very long you realize that this information is of no use whatsoever and they just feel like they have to collect data, even if they're not doing anything with it. Having said that, to the extent it matters (not at all) I disagree that there should be a difference between discretionary and required contribution reporting on this particular form. It just makes no sense to me.

I agree that you could un-do a termination. I don't think there's a cite or anything but as long as you haven't distributed assets it should be able to be undone. As noted, potential messiness with ADP/ACP testing and 100% vesting.

I just got a letter from John Hancock saying that they will be including a generic description of PD on their statements, starting...maybe on the 3rd or 4th Q statements; I forgot already. But a generic description doesn't do much, IMO.

I think you've pretty much settled on the right course of action but it might be worthwhile to clarify/correct a few things... Don't you accrue your contributions...deduct them in '06 even if paid in '07? JanetM: That's the FORM, not the instructions...or at least it's the brief description on the form. But I agree that they're describing accrual basis, and in your case you're not supposed to include the 2005 contributions deposited in 2006...but if you don't then they'll never be reported at all. But I don't think anyone really cares. The reporting does not reconcile (i.e. beginning balance plus net reported changes does not equal ending balance, because you're not supposed to show unrealized capital gains). Since they're not expecting the numbers to reconcile, I don't think you have to be too concerned about it.

I'd say you're basically correct on question 1. You've confused me a bit by saying "the recordkeeping is allocated for each participant based on the overall return of the trust fund, including taking into account transactions." Gains/losses and contributions are allocated, not recordkeeping, and "transactions" includes everything that happens in the account, but I think I agree. On point 2 - it depends. If the plan simply sets up a single account for each participant, without subaccounts, someone has to further break the account down into different sources, such as 401(k) and profit sharing, at least on paper. This is the situation when plans use individual brokerage accounts or other individual account that are not on a "platform." But many investment company recordkeepers will maintain detailed account information by source, and sometimes vesting, on a more comprehensive system or platform. Many insurance companies and mutual fund companies offer these systems.

Something else I found in my notes is that the committee report for this section of PPA makes reference to integration in both DB and DC plans - just a general description, not proving anything, but the fact that there's nothing definitive saying NOT to include PD language for DCs is enough for me to take the cautious approach that we'll include it. I think it's no stretch to say that Congress didn't have a clue what it was adopting with this provision and it's a result of some staffer having a bug up his or her butt about PD. What it accomplishes, I don't know.

Austin, I carried that argument (to another forum) and got nowhere, but I think you're right (I know, you don't care about whether it's right or wrong). I think if it got as far as court, yes, it would be determined to be good faith compliance. But I'd rather not get to that point if I can spit out something, however lame and weak, that an auditor could look at and check off on their checklist and move on to the next bit of irrelevance. I think the chances of ANY kind of enforcement on this issue are pretty remote, certainly for this year, but if you start down that slope where do you stop? (Rhetorical question, no need to reply!)

I think you're right on all counts. We had one of these earlier and pretty much considered it "no harm no foul" as long as she pulled the money out, or at least as long as we reported it properly on the 1099-Rs and told her to pull it out. To be honest, we didn't consider and/or didn't bother with advising the custodian that it wasn't all eligible for R/O for 5498 purposes. I've found IRA custodians to be pretty inflexible when it comes to reporting and I'm not sure that they would pay attention to correspondence saying "BTW, not all of that rollover was eligible." I think the primary purpose of the form is to confirm that a reported rollover on a 1099-R occurred; I'm not quite sure what, if anything, happens if the 5498 amount is greater than the 1099-R, but I think it would be easy enough to explain if needed.

Ditto. I'm getting the feeling that the DOL will eventually say that it's not necessary but for now I think it s/b included.

I'd be curious to know "where is the money?" He took a $50,000 paycheck in January and "now wants to make a 401k deferral..." Does he even know how much? I'd bet that this case boils down to the owner not understanding that deferrals must be withheld from his paycheck (as noted by Jim Chad), and little or nothing to do with a deposit deadline. That is, in all likelihood, a red herring.

I believe that investment firms that recordkeep loans record interest and payments on a daily basis so that they're never in synch with the amortization schedule, and then adjust it so the loan is paid off with the last payment as long as it's "close." I don't know what they use for "close" but I bet it's more than $5 and I think it's fine. We usually apply payments as called for on the amortization schedule and don't have this issue, but occasionally they get a bit "off." If it's a tiny amount like that we'll just adjust the interest on the last payment, effectively writing it off but it's very, ah, subtle.

I don't remember the source but I'm confident that a SARSEP (which is a form of a SEP) knocks them out. This is language that I had in a newsletter; I'm sure I lifted it from an IRS publication of some sort: An eligible employer plan includes: any qualified pension, profit-sharing, or stock bonus plan which includes an exempt trust, a qualified annuity plan, a simplified employee pension, and any simple retirement account (i.e., any SIMPLE IRA).

Thanks for the reply. If I understand, you are protecting the board by naming a title (e.g. CEO, or President) or appointing the CEO to name an administrator. Maybe it's my small plan bias, or maybe that has nothing to do with it, but that doesn't do much for me.

Yes, you need to subtract Sec 179 expenses. To be precise, you should be asking for the 179 expense actually claimed on the partner's individual return since it could be different. You're also supposed to subtract unreimbursed partnership expenses deducted by the individual taxpayer/partner on Schedule E.

I don't mind admitting that my volume submitter plans say the employer is the named fiduciary. Maybe I'm just part of the ignorant mass, but would you mind telling us what alternative(s) you suggest?

I'm with krijowri on this one. QDROphile, maybe I'm dense but I missed your point completely. I get this: "Good practice is more important than deep pockets. You pay dearly for deep pockets." and agree completely, but the next post mystifies me.