Bird

I think everything you suggested is fine.

Wow. I find that pretty extreme. How can they segregate the assets if they don't have them?! Remember, the money went to the participants (and some to tax withholding, I would guess); it's not like the employer is holding anything here.

I wasn't commenting on the percentage of LLCs taxed as partnerships vs corps, but yes, I think the norm is to be taxed as a partnership. I don't know why you would bother setting up a limited liability company and then go through the hassle of having it taxed as a corporation; why not just set up a corporation and get limited liability directly?

The new (non-spouse) rollovers to IRAs must be done by direct transfer, not paid in cash, and I imagine the custodian is confusing this with the spousal rollover rules. Another mistake by an investment firm. Add it to the list.

I'm guessing that by "income allocations" you mean profits, which implies that it's taxed as a partnership, which means the answer is no contributions are allowed.

I agree with #1 being most technically accurate.

Apparently a fair number of LLCs taxed as partnerships are incorrectly paying their members on W-2s. In that case I say "It ain't right but it's your accountant's problem not mine" and use the W-2 plus the profits, adjusting the profits for 1/2 SE tax and member contributions.

As long as the employees don't care, I'd just make it up in the next payroll and move on with my life.

Interesting. I guess there's nothing that says you can't do it, that I know of. It's always fun to ask the agent what happens if the insured does not die while in the plan. Let's say he's 70 and wants to take all the money from the plan; he can't do a rollover of the insurance so he takes the policy in kind; it's a qualified distribution so no tax. He dies a few years later and it's as if he bought it outside the plan in the first place. I suppose there's some potential small advantage if he does die while it's in the plan but that would be true of any investment, such as a mutual fund.

IRS Letter Ruling 200450057 allowed a widow to roll over her husband's PS plan proceeds into an IRA in his name with herself as the bene; the primary purpose was to allow her to avoid the 10% penalty on premature distributions that would have applied had she rolled into her own IRA (I thought there was a reg on this but can't do better than the PLR for now). WRT your last question, a spouse doesn't have to choose the 5 year or life expectancy method if the participant dies before the RBD; they simply must take RMDs by te later of the year following the participant's death, or the year the participant would have turned 70 1/2. If death occurs after the RBD, the spouse can roll over or take annual RMDs.

It was deposited in 2007 for 2006? I'd move it to a forfeiture account, hold it there until you know the 2007 profit sharing contributions, and use it as part of the 2007 contribution. The 2006 contribution is reduced accordingly. (Depending on the allocation formula, though, removing this as a 2006 contribution might change the allocations for others.) Or, if the business return is already finalized with the total contribution being "too high" by that amount, you could take it from that participant's account and reallocate it to the others. I'm assuming that you have segregated accounts; if not, then it's just a paper change as to who gets what.

The first issue that needs to be resolved is "what did this participant elect to defer for 2006?" That election should have been made before his/her income was earned. i.e. 12/31/06. If you have an election saying $15,000, and $10,000 was deposited, then $5,000 needs to be deposited and if that's the case I agree that it's a late deposit. Whether the DOL cares about late deposits for self-employeds or not, I don't know. I have my self-employeds make an election (of a dollar amount, not a percentage of pay) by Dec 31 and make them put the money in in early Jan, to avoid this issue. I can't say I have great success in getting my clients do what I tell them, but so far they've listened on this issue. This has come up before and someone usually argues that you can't make the contribution until you know what their income is. That may be true (if it's a percentage of pay) but I don't see how that voids the clear language concerning late deposits. As noted, I'm not sure the DOL cares.

I'd say that not making a discretionary contribution by the deadline means that there was no contribution, no matter what may have been "declared." The actual deadline is another matter. I know it is the (extended) tax return due date for deduction purposes, I think it is 30 days after that for annual additions determination, and I think it is the end of the following year for top-heavy and safe harbor purposes (neither of which apply under the facts presented, so I don't think Dec 31 is relevant).

I believe that eligibility criteria must be applied uniformly to all employees; that is, at the end of the year you will have an eligibility requirement of employment in (0,1,2 or 3) prior years and you will determine who is eligible for the year and make contributions accordingly. That is, I don't see any way to make eligibility changes effective on a date during the year applying only to participants hired after that date. The only tweaking to the prior years of employment is to disregard "service" when compensation is below $450 ($500 in 2007). (Unless something with partial years or months could be done in a prototype?)

austin3515, I agree with you that the FAB doesn't say the supplemental notice has to be given before the "regular" benefit statement. John Hancock said that but I see nothing to support it.

If there's no MP money then there are no spousal rights, period, end of story. As I noted below, I think the IRS commented on this (but I could be wrong); if I can come up with it I'll re-post. No promises. Sorry but I disagree with this 100%. If spousal consent is not needed and you make it a requirement you are impinging on the participant's rights. Suppose the spouse won't consent, or perhaps puts a price tag on the consent? For something that's NOT required?!

True but now the participant has the ability to take a distribution, while living, without the spouse's consent. I think that's the situation J Simmons is referring to. It's a cutback to the spouse, maybe in a non-technical sense, but definitely permitted.

My recollection is that the when the IRS issued the regs they said they recognized that this was an issue but effectively said "oh well." That is, the spouse's rights are eliminated and that's the end of it; the spouse has no recourse.

No, sorry but that doesn't make sense. You get one $15,500 limit so using the SIMPLE for some of it instead of the 401(k) doesn't result in any net advantage. If you're talking about cash flow then I suppose it might make a difference in the short run but at the end of the day (year) it won't make a bit of difference. In fact, using a SIMPLE instead of a SEP will result in lower net deductions: 401(k) - $10,500 SIMPLE - $4,000 (no you can't do 100% because of self-employment taxes but this is close enough) Total - $15,500 401(k) - $15,500 SEP - $800 (20% of $4,000 = 25% of net $3,200; no you can't quite do that much; see above) Total - $16,300 Do what you want but a SIMPLE is not going to increase your tax savings, and it's a PITA.

If you don't mind, I'd like to go back to this fork in the road. You won't be able to because...? I just don't see the sense in going through the hassle of setting up a SIMPLE if you can accomplish the same thing by upping your 401(k) contributions.

That's important. If you max out on the 401(k), then you can't do anything in a SIMPLE because as an individual, you get one combined deferral limit of $15,500. That leaves the SEP. Your maximum contribution is 25% of net earned income after taking the contribution into account, which is approximately 20% of net before the contribution...you have to make an adjustment for half of your self-employment taxes, and it's going to be exactly 20% after that adjustment.

I just got and read their e-mail and I think they're handling it appropriately wrt both vesting and the other requirements; they're modifying their statements to include investment principles, reference to DOL website, limitations on exchanges, etc. They are understandably NOT doing anything about permitted disparity or floor-offset commentary. One thing that caught my eye is that if use "multiple documents" (i.e. we issue a separate statement on permitted disparity), that's ok, but we're supposed to notify the participants BEFORE they get the quarterly statement. Which means we're under a little more time pressure than I originally thought to get out our "supplementary" statements or whatever you want to call them.

I agree (with John Hancock) that vesting info can be provided once per year, and that the first time it would be necessary to do so would be by 2/15/08 for 2007. But vesting is the only thing that can be done once a year and it's not clear to me if John Hancock will be covering all the other yada-yada in their statements, which might mean that some sort of supplementary quarterly statement will be required.

That date is fixed; i.e. doesn't change each year. I think it goes all the way back to TRA '86 and the significance was that you had to be 50 before Jan 1, 1986.

You already have a means of "prolonging" the distribution - following the terms of the plan. I don't see the need to do anything more. I'm not saying that you shouldn't apply for a DL but that's a different issue.