Bird

"stated period" - "authorized period" - where do you come up with this stuff? And not taking the reductions at all would be fine? Let's compare it to your solution, which was...?

They agreed to the salary reduction for the deferrals, didn't they? So now the money is actually being deducted from their paycheck. A little late, maybe. I dunno. But I haven't heard of a better solution that would have less exposure. And this doesn't involve amending any tax returns. I would NOT just "let it go" - i.e. have the company and/or p/r company eat the contributions - then the co. would be under-reporting taxable income for the employees.

And a nonqualified distribution would be subject to proportionate taxation. Cowards like me will not permit Roth loans.

Like I said before, the employees owe the money to the company. It is clearer and simpler every time I look at it. It's not even a plan issue - the W-2s were right, the plan got the money, but there was a screw-up in the withholding that should be treated as a loan(s) from employer to employee.

This is a good one (chuckle). Two possibilities come to mind - Void the whole thing. Change the W-2s (I assume they reflected the phantom deferrals). The big problem is that the money is in the plan, and I don't like the idea of taking it out, or trying to convert it to profit sharing contributions. Bad idea; forget it. Treat the phantom deferrals as loans from the company to the participants. Re-pay the loans by deducting the money from their paycheck(s) now (or let them write checks to the company). I like it - that's exactly what happened. Of course, if someone terminated, you're SOL, except for asking for repayment. I think I should get a prize...

I think the 945 is considered a variety of the 941, and that's why they referred you to the 941 penalties section. I think you're right, it only applies if the tax being paid late, so they're aren't any penalties.

In the instructions (under Reminders, page 1) - 945 instructions - it says to correct a prior year's filing by showing it on the current year's 945 and filing a 941c with it. That doesn't tell us how to correct a 2005 filing now, but I think I would re-file a 2005 945 with the 941c and see what happens.

Yes, they are so far maintaining their position that they are due by the end of the 2006 plan year. We're going to wait as long as possible (based on experience and the level of discontent in the industry that we hope will lead to a change of heart).

As described, there is no 404© protection. But then again "1" investment "option" is nonsensical. You mean that the participants have no choice in their investments? That's not necessarily a problem...unless the trustee is being told that he has 404© protection.

There's no doubt that you could simply adopt a new SEP with the new eligibility requirements, and do it as late as the due date for filing the business tax return. Unless someone can prove otherwise, I'd lean towards allowing an amendment in that same time frame.

OK, I found at least one source that says we start in 2007...I guess I need to get out more (or less).

What about this question? I thought we had to calculate gap earnings starting with refunds processed in 2006...

Yes, it's required.

Glad to help; I know I missed it the first time around. I was a little miffed when I told them about it and they said they already knew...seems like something that's worth a heads-up from them.

I would do it as you suggest. I guess the technically correct fix would be to re-do the prior 1099s and then report the (extra) amount for the current year, but that's such a headache (for the spouse moreso than for the plan) that it just ain't right.

JanetM, look at them carefully. If you check "Ratio % test" it prints the check next to "Average Benefits Test" and vice versa. They told us it was a known bug and it would be fixed, but didn't say when.

I think the question was for a new plan in 2005, so you'd look back at 2004 for anyone making more than $90,000 (or a 5% owner). The fact that there was no plan in existence in 2004 doesn't matter.

Kickback- A return of a percentage of a sum of money already received, typically as a result of pressure, coercion, or a secret agreement. I don't think this is a kickback. The DOL is very concerned about disclosure, and this TPA is disclosing the 12(b)-1 fees, to the point of wanting to refund them in some fashion. The DOL wants sponsors to be able to make informed decisions; the sponsor must weigh the total costs to itself and to the participants when making a decision on a service provider and/or investment provider. So...if the TPA quotes a price of "$X" and says it will pass along any revenue sharing, and does it by reducing its fees, I don't have a problem with that. If anyone can provide a cite or example of why that's wrong, please educate me. (I don't like the idea of placing the money in the forfeiture account to reduce the match - it's not a forfeiture. If it's going directly from the TPA to the plan I don't see how it can be anything but a gain. I'm not really comfortable with that anyway.) Now, if the sponsor winds up making money; that is, the revenue sharing exceeds the fees and is actually enriched by the existence of the plan, then I think that's a problem (and might in fact be accurately termed a kickback). My $.02.

I'd be comfortable allocating it to all participants (but not the guy who got the distribution earlier) in the ratio that they were hit with actual surrender charges; it's essentially a gain. B is going to recover it over time, so the participants might as well get the benefit of the one-time drop-in.

In theory you could amend it, but I think it's actually more efficient, and safer, to restate it.

These are on our list of post-GUST amendments: EGTRRA amendment RMD amendment Automatic rollover amendment ...and yes, I think you would need something for the 401(k) regs this year, but I haven't seen anything yet.

No, it's not allowed...I think difficult questions like this might be part of the reason.

We usually ask the insurance company for this information and use what they give us. Having said that, the calculation is (face amount - cash value [i.e. "at risk" portion of policy]) X table 2001 rate. There is no adjustment for the first $50,000. There is no tax evasion; this simply reflects the fact that the participant is receiving a current economic benefit from the plan...as if he had pulled out enough to buy a term policy outside the plan.

I believe that increase is effective 7/1/06. I agree that it will have an effect on the number of filings. Frankly, I've always thought the real value of an FDL on termination was pretty low, but it made everyone feel better so we've always recommended it and generally the client agreed. Now, I will be less reluctant to say "ok" to the client who doesn't want to do it.

No they can't do anything for 2005. Period. I'm not sure I undertand the second part, but if an employee contributes more than 3% of pay, then the employer match (if that's what is elected) will be 3% of pay. It doesn't matter when the money went in.