Bird

Yes, it's in EPCRS. The last day of the correction period is the last day of the second plan year following the plan year in which the failure occurred. So you can still fix 2003 in 2005 (you have to add interest).

There's something in the new 401(k) regs about (prohibiting) pre-funding. I thought there was something else, like a notice that described a specific fact pattern, but I can't find it. But...since this is a SIMPLE it doesn't apply?

I agree that he needs a bond. How serious it is not to have one may depend... There's the general requirement to have a bond, and the requirement that the plan be audited if the bond is inadequate. The general requirement isn't a big concern to me; I think the typical response to not having a bond if uncovered on IRS audit is "you'd better get one." That is, I don't have a problem truthfully answering Sch I 4e "No" (the plan isn't covered). (I should say I wouldn't have a problem because I honestly can't think of anyone who doesn't have a bond at all.) But 4k asks if you are claiming a waiver of the CPA audit. I'm not willing to answer "yes" if we haven't satisfied the conditions, and I'm not willing to answer "no" and not attach the audit as required. But, he might meet the conditions for a waiver if the plan is self-directed. If it's not self-directed by documentation, you might argue that it is effectively so since no one else has an account. But I wouldn't stick my neck out too far for some chump who doesn't take my word for it and spend a few hundred bucks, at most, for a 3 year bond.

We used to use a formula like this before the IRS gave pretty clear blessing to using groups. But in this case I think I'd want to rename it from "super-integrated" to "barely over-integrated" or "just a teensy bit over permitted disparity integrated" or something like that.

There was a fairly recent IRS directive about pre-funding contributions, e.g. matching contributions, before the comp and deferrals on which the match is based are earned - you can't. I don't remember the format in which it came, nor do I remember if it specifically addressed partnerships, where money is effectively earned on the last day of the year. For now I'll hope someone else chimes in but if there's no response in a couple of days bump it and I'll see if I can find it.

Agree. I get this all the time from brokers. If it helps, I just coincidentally came across this paragraph in Tax Facts (end of para 233): Stretch IRA. The term "stretch IRA" does not appear in the Internal Revenue Code, but simply describes, in popular usage, the practice of IRA distribution planning that successfully permits the beneficiaries (e.g. surviving spouse and child of the owner) to receive distributions over their individual life expectancies under the foregoing rules, and the requirements for separate accounts.

If they are checks related to individual policies and for the benefit of particular participants, you might be able to just endorse the checks to them or their IRAs...I can see a problem if you have lump sums though (withholding). I guess I'd ask if it is really such a problem to keep the account open? Either that or you could open a checking account and make a bank unhappy.

No requirement to fund during the year; I'd suggest waiting until after the end of year to let the dust settle.

Good grief, don't we have enough to do without keeping track of what people do with their money after they get it! No, you simply report what happened - a taxable cash distribution, subject to withholding. If they do a rollover later, they will report it as such (and the recipient IRA is supposed to file a form, 5498 I think, reporting the rollover, so the IRS should be able to confirm it...it can happen over two calendar years; I don't know if the "missing" 5498, which will be filed for the second calendar year, will trigger an IRS inquiry, but it's legit).

http://benefitslink.com/boards/index.php?a...indpost&p=89114 I think this is what you want, or at least it's a starting point. If the link doesn't work do a search in this forum for "Cigna's 2004 information."

No clue as to what point you are making. I think I have responded to Chris' posts directly. A partner can make deferral contributions as long as he has earned income, even if he does not get a W-2 (which he shouldn't get anyway). If you think otherwise, please explain why. THIS partner has no earned income and therefore can't make a deferral contribution because his limit is $0. Excuse me while I poke myself in the eye with a sharp stick and save the trouble of future discussion on this topic.

OK, I'll try again. First, a partner is not precluded from contributing to a plan just because he does not have "W-2" income. If he has compensation, i.e. partnership profits, he can contribute. I hope there's no disagreement on that. If a partner has satisfied the eligibility requirements, he is an eligible participant, whether he has compensation or not. However, his maximum contribution is $0. There is a big difference between allowing an ineligible participant to contribute and allowing an eligible participant to contribute too much.

Good idea to submit as a Q&A. I tend to get fuzzy on a lot of things, but I do have it pretty well burned in the gray matter that the 3% SHNEC satisfies the requirements. I just did a search on google and found several places that agree, but with no cites. After thinking and researching it some more, I think the reasoning is: The "and" really means "and if the plan has matching contributions" because 401(k)(12), which is cited in 416(g)(4)(H), includes both the SH Match and the 3% SHNEC, and 401(m)(11) talks about safe harbor matches, including optional matches. So the TH exemption is met if you have a plan that consists "solely" of a required contribution (SHNEC or SH match) "and" another type of contribution that is really optional - either the SH match that is an one way to satisfy the ADP requirements, and/or the true optional match that still satisfies ACP. (Pretty much exactly what R Butler said - sorry to repeat.)

Mbozek, I don't know if you're responding to my last past and thinking that I said THIS partner can defer - he can't, as you note, due to 415 limitations. In other words, as I said before (in my very first post), he is an eligible participant but he is limited to $0. My postings since then have simply been asking why anyone thinks this guy is ineligible. (Except for the last one, which is addressed below.) GBurns - consider my last post withdrawn and replaced with this: "I will respond to your latest question when you reply as to why you think this partner is ineligible."

If it's taxed as a partnership, yes.

Does the CPA give any reasoning as to why the partner would be ineligible? What is it with this unsubstantiated "ineligible" theory that it keeps coming up?

That's a really good question, because I remembered that being an issue (but not the details) but was too lazy too look it up...and now I see that the cite I gave does specifically say "matching" contributions. My recollection is that if you follow the cite, the requirements that must be satisfied include the 3% SH nonelective contributions, and that the word "matching" is superfluous - extraneous might be a better word - and that it wasn't intended to be so limited, and I think the IRS confirmed this, but I can't remember how. Maybe someone else can confirm this - or rebut it. I've been wrong before. Ah, I see Archimage has already replied. Thanks...

That's right...provided there are no other contributions. I don't know that you need a cite other than Code Sec 416(g)(4)(H) as amended by EGTRRA 613(d).

He do it the same way any other partner do it - by writing a check.

I don't see any reason for a partner to be ineligible, unless the plan has (what I would consider to be) odd language.

First, determine if the deferrals really were ineligible. The real issue is determining compensation. It's not proper to pay a partner through the payroll system and give him a W-2 but I'm sure the accountant will tell you that it's common practice and the IRS doesn't care. So, I think you need to net out the W-2 and the partnership loss (the implication is that there is a loss). If there's a net negative compensation (or small positive comp that is less than the deferrals), then in fact the deferrals exceed the 415 limit and you process a refund under that basis.

We make the deferral and safe harbor provisions effective later in the year, with 30 days notice. I don't think you can do the notice 60 days after the effective date. There's additional guidance in Notice 2000-3; not necessarily on point to this question buy if you're doing research that needs to be on your list.

Yes, we had one recently. They asked for the ADP test and we gave them the SH notice and everything was happy.

That's my point; I don't see the problem, especially for a TPA who isn't an attorney, CPA, or actuary, but even for those professionals I don't see the changes as a threat.

Any other thoughts on this? Here are my comments: 1) They list "best practices" which are aspirational and mostly common sense, IMO. 2) They give requirements for "covered opinions" with a lot of definitions that put me to sleep, but include a caveat that says "A covered opinion does not include...(B) written advice...that - (1) concerns the qualification of a qualified plan..." (I don't think the stuff I edited out - about listed transactions and transactions where the principal purpose is avoidance or evasion - applies, but I'm no expert...) As a TPA, I don't see this as a threat, but I'm interested in other opinions.