Bird

Yes, they said a few years ago that they would be stepping up audits of plans term'd w/o DLs. We have NOT seen evidence of that; in fact, we had an audit of a plan that term'd WITH a DL. An absurd waste of time.

I think the Walmartization, or commoditization, or whatever you want to call it, of the recordkeeping aspect of administration has been a great thing for our shop, a very small local/regional TPA firm. We have lots of options to tap into investment companies' recordkeeping systems, as well as systems of other companies that specialize in recordkeeping, so we can provide first-rate internet/800 access for participants and sponsors, while still doing what we do best, hands-on admin/consulting/compliance work.

Yes, I think the sponsor can suspend 401(k) contributions and re-start them later.

We've faxed in corrections/changes and it seems to have worked. I'm not at the office now but I think the list of offices and fax numbers is on the SS-4 directions. If I recall correctly, it says to send the change to the office that issued the SS-4; well, we get our numbers over the internet now but I've sent the changes to the "local" office.

Now it makes a little more sense - the broker is picking up the ticket charges, so those are not sponsor or participant fees. I still think it doesn't work - inevitably, he's going to want to discourage trades that cost him more than the commissions, and it's not a good situation, especially when there are so many other options that work so much better.

mjb, What are you saying here, that we could use $40,000 if we want to, because the IRS will always like having more HCEs?

It's just a bad fit - he only has square pegs for a round hole. I do have some small plans with self-directed brokerage accounts, and they can work OK, but it's not my preference. And with those trading fees it sounds (nearly) impossible to make it work. But if he's bound and determined to do it that way, he might just hold the deposits in the cash account until it's worthwhile to make purchases, or maybe instead of splitting each deposit 4 ways, buy fund A one month, fund B the next, etc. But then I'd want the participant investment elections to say "deposit my money in the cash account and I'll give further instructions" (and then have them give further instructions as outline above) instead of "25% fund A, 25% fund B..." At the end of the day it's a really awful way to run a plan, and your admin fees should accordingly be much higher, so the whole thing collapses of its own weight. I'd tell him it's simply not an option.

I agree. Separate accounting means that you have to be able to identify which part of a physical account is the Roth part, but you don't have to have physically separate accounts - at least I hope not. I think they made it clear that you can't send all the gains to the Roth account...

Major props to MP for persisting on this. It's one thing to throw out opinions - which may differ - but to insist that regs don't mean what they say (or is the nut saying that it's cheating to cite regs?) is seriously misguided. Preston wins this hands down on reasoning, grammar, spelling, and politeness.

OK, I have to admit I grabbed an old set of instructions. But still, the only place it says a participant must be reported is where it describes a terminated participant with deferred vested benefits. If I didn't report a participant under Code D I'd sure argue that I didn't have to. FWIW - not much.

I don't think so. A literal reading, I think, says you must report participants entitled to deferred vested benefits, and may use the SSA to revise prior information. FWIW

No. You do get the Relius stern Uncle Sam face though. :angry:

Agree. We only report the number "required" as per the instructions. So sometimes we have a "0" but still file an SSA (with one or more "D"s).

I believe taxpayers will be allowed to convert without an AGI limit starting in 2010 (i.e. it's "permanent" for whatever that's worth) but spreading the tax over two years will only be effective for 2010 conversions.

Here is my take on this, please let me know if I'm missing anything- The court case involves a SIMPLE IRA. As noted, the Code specifically says that SIMPLE IRA contributions must be deposited not later than 30 days after the close of the month in which they were withheld, and since a partner's earnings are determined as of 12/31, that means they must be withheld by 12/31 and deposited by Jan 30. Since it's in the Code, failure to deposit by that date means it's not deductible, and in fact the court concluded exactly that. In no way does Notice 98-4 say anything that would allow a longer time period; it notes that SIMPLE IRA deferrals are generally subject to Title I and therefore subject to the "reasonably segregated" standard, but adds: "in no event later than the 30-day deadline..." I don't believe that there's any room for an exception just because you don't know the partner's income. I concluded a long time ago, for SIMPLE IRAs and well as 401(k)s (but it's not as important; see below), that you simply don't allow a partner or sole proprietor to elect a percentage of pay; you force them to elect a dollar amount. In the (unlikely) case that they don't have enough income to justify the contribution, you'd have to do a refund. I don't buy into any argument that says you get extra time just because you can't determine income. The Code says 30 days, period; tough nuts. References have been made to the "as soon as reasonably able to segregate / 15 day" standard. But that comes from DOL regs and does not affect deductibility, just DOL "issues" ("harassment" might be appropriate but that's off-topic). So, I believe that you could make a self-employed 401(k) deferral contribution (but not a SIMPLE IRA deferral contribution) as late as the due date of the tax return and deduct it, and I think the IRS agrees. However, then you have a DOL issue with "late" contributions. Presumably, you should fix it by adding interest. Again, I tell my clients that they have to elect a $ amount, not a percentage, so there's no excuse to not put the money in. In short, there are two different issues - 1) deductibility, 2) timely depositing under DOL regs.

Unless the plan specifically says that term'd participants only control their vested balances (and I doubt it does), then I don't like it. As long as they ultimately take their money and forfeit the non-vested piece, no, it won't make a difference in what they (the term'd participants) get, but of course if someone is rehired their reinstated account would be different than it otherwise would have been. I agree that it's a "not following the terms of the document" issue. In cases like this, it makes you wonder what they're trying to accomplish. Sounds to me like it makes things more difficult, not less.

The new info, while still a little sketchy, leads me to agree with the others that this is likely a PT.

I'm not sure it's a PT issue as much as it is "what will the fund company allow?" In my experience, they are pretty restrictive - the retirement plan account will only count towards aggregation if the investor in the other account(s) is the trustee, and there are no other participants. (I'm talking about sales charge breakpoints - not sure if we're on the same page.)

They can start a 401(k) in the same year the SEP exists; in fact, they can have both going forward (but probably don't want to). Just remember that 415 limits apply to all contributions. Also, the SEP needs to be "run" on a full year. So just because they made quarterly contributions (presumably based on the quarter's compensations) doesn't mean that the contributions were right. Allocations need to be calc'd on the full year's pay and adjustments made if necessary.

Yes, any 2006 contribution starts the 5-year clock as of 1/1/06. Yeah, that is, if Roth provisions are extended beyond their sunset date...

I think it's OK; a merger is really a continuation of both plans as one after the point of merger. I'd issue a revised safe harbor notice to be on the safe side, and of course you want to make sure that exactly the same people get exactly the same contributions they would have otherwise received. Having said that, I'd push hard(er) to merge as of 12/31. It's a LOT easier (at least the way we run our typical plan).

It's still calculated as a lifetime RMD in 2006, so you use the uniform lifetime table (19.5). If it hasn't been paid out yet, then it's paid to her beneficiary. What happens next year depends on what may or may not happen before Sept 30, 2007, the day the designated beneficiary is determined. Let's just say the easiest thing is if the husband rolls over the remaining balance before 12/31/06, then it becomes part of his account for purposes of determining his 2007 RMDs. Not sure about the additional question but I think the answer is "no."

Observation: pip did a nice job of anticipating by including the parenthetical in his question:

Yes. That is, I have an opinion, which is "no."

This piqued my curiousity so I did a little research; my initial thought was that Norris did not apply, but it seems that this situation is actually pretty much what Norris itself was about. And the majority opinion essentially said "tough nuts if you can't find an annuity provider willing to offer sex-neutral annuities." Which is silly, because if a plan offers LSs and sex-neutral annuities, a male who wants an annuity will take the lump sum and buy an annuity outside the plan, perhaps from the same insurance company on a male-based table, which will pay a hgher benefit. The insurance company will realize this and price the "sex-neutral" table as a female table. My solution would be to offer the retiree a lump sum or an annuity, where the annuity rates are based on assumptions (sex-neutral of course; well, it could be a male or a female table as long as you use the same one for both) and explain that if you go out on the market as an individual you can probably find a better rate. So she does a rollover to an IRA which pays an immediate annuity. For plan purposes, she was offered a lump sum and a sex-neutral annuity, so you're OK.