Bird

Archimage - yes, I have read that part but it's not relevant to my question. The instructions say that an R is not required if no benefits were paid other than BY the sponsor or administrator. Are you saying that REPORTING under the sponsor ID is equivalent to the employer PAYING the benefits? It's just that I thought this was applicable to other types of plans, e.g nonqualified plans where the 'er pays benefits directly. I could be wrong; I'm just trying to understand this better.

CMcCull, do you have any feedback? I think we'd like to know how this turns out. Also would be curious to see if the administrator can provide a cite in the plan showing that only the first $205,000 is matched.

Archimage, could you clarify? The instructions say that one of the conditions for not filing is "No benefits...were paid during the plan year other than by the plan sponsor or plan administrator." IMO, the plan, or plan and trust, is always a separate entity and the sponsor never pays benefits. I think it is possible to use the employer ID for REPORTing, but I don't think that's the same as PAYing. In any event, we always have a separate ID number for the plan and trust and file an R when benefits are paid, using that number or the payee's number (e.g. ins. co. or mutual fund co.) if applicable.

Oh heck, here it is: 59. In a 401(k) plan, does 401(a)(17) preclude the following: A. A earns $300,000 annually. He enrolls in 401(k) calendar year plan in August, after earning $175,000. He defers $10,000 in the balance of the year. B. A earns $300,000 annually. He participates in a calendar year 401(k) plan making monthly deferrals of a flat dollar amount of 1/12 of $10,000 in 1998, even though his pay exceeded $160,000 before he was done making elective deferrals. C. Same as 2, but deferrals are a percentage of pay (3.33333%). (IRS response) We believe that all three scenarios should be OK. This will be discussed additionally from the podium. Again, I understand that this doesn't specifically address matches but I can't see how you would treat them differently. Their inconsistency in allowing the deferrals but not matching is indeed bizarre as MWeddell noted.

If someone has approved plan language that limits comp to the FIRST $205,000, please share it with us; I for one would like to see how it is worded. I just looked it up in Sal Tripodi's book and he addresses this specifically and says that comp is not limited to the FIRST $205,000 (page 3.172 if anyone cares). Now, that discussion was specific to deferrals, not matches, but I don't see how it could be interpreted otherwise for matches. The references were to The EP/EO Bulletin published by the IRS Western Key District Office, Summer 1997 Issue, Q-2. and the IRS Q&A session (Q&A-59) at the 1999 ASPA conference. I have the ASPA conference Q&A and can type it out if you need it. Let me know.

KJohnson - thanks for the cites. The second one was, well, interesting.

Christine, unless there's more to it, the fact that only 30% of the participants were invested in the GIC doesn't mean it can't work. If they're all NHCEs the extra contributions can't be discriminatory; if there are some HCEs the contribution is subject to general testing which may or may not work or be worthwhile. Yes, you can have the employer just throw some money at them outside the plan. That's probably the best practical solution.

Forms- Ew, are you saying that's part of the new reg or has always been? My plans specifically say "may..." Not sure what a "cashout with restoration plan" is. Yes.

I'm not sure of the technical terms but I think you'd have to have a fiduciary breach of some sort to allow that kind of restorative payment. Otherwise it's a contribution. Treating it as a contribution might not be so bad, if they're all or mostly NHCEs you should pass the general test. Of course you need special document language to allow it; which can be problematic if you're using a prototype and can't make any changes without voiding the ability to rely on the prototype FDL.

Belgarath, thanks, that was a good analysis and I agree with your points. I thought it was interesting that they backed down on the "expenses can't be higher than income" issue and went with the comparability standard. I guess the document amendment deadline is an IRS issue, and I agree that it seems unreasonable to require one by 3/28/05. Mbozek - my thoughts exactly. Why bother?

My opinion is that it is a waste of time, at best. I think the argument for doing it is "it can't hurt." I'm not so sure. The way I see it, they are not going to follow up on each and every return that indicated there were late deferrals. We've had more than just a couple and I only know of one that prompted a follow up, which was dealt with in about the time it would have taken to prepare the schedule. So I'd prefer to deal with the 1 out of 5 or whatever the ratio is, after the fact, than prepare each and every one. Also, I don't want to do anything that will gum up their delicate system. I have to think that a non-barcoded attachment is going to cause problems; maybe not directly related but I can just see another schedule getting messed up because of the monkey wrench. And finally, my (limited) experience with the DOL is that they are, to be polite, not reasonable. I won't voluntarily give them anything, innocent as it may appear, that I don't have to. Call me paranoid, but that's how I see it. I think the DOL guidance was strictly aimed at Schedule H filers and people are reading too much into it for I filings. FWIW.

Like DP, we generally let the clients use a single brokerage account and we maintain separate sources on our system with pro-rata allocations. But, I agree you don't have to if the provisions were the same and you keep annuity options for the PS plan. (But, sooner or later, the client's going to want to add hardships or something that can only be done with PS money - that's why we try to keep 'em separate, even if "it doesn't matter.")

I think you have to read the document to see if deferrals reduce compensation; probably not. You reduce earned income by 1/2 of the FICA tax.

Yes, I meant offset; sorry.

If you treated the loan as a deemed distribution in October, she would still have 60 days to roll the taxable amount into her IRA. No different, from her standpoint, from keeping the plan open and repaying the loan to the plan before distribution.

The penalty is on the earnings. You can withdraw your original investment and pay no taxes or penalty.

We use Comserv: alias@comserv-inc.com If you don't already have a client number, write to them and tell them you want to set up an account to search for lost individuals. It costs $25 per successful search. They find probably 90% of the people we're looking for. The client pays the search fee in our shop.

Sounds like it was the Employer, not the Plan, that stopped withholding. Catchups are determined after-the-fact, not elected. I'm not sure the Plan has to say anything more than that they are permitted. I think catchups should be matched unless specifically excluded by the document.

My best guess for box 7 would be 1 or 7. Note that the instructions to box 8 say not to use boxes 1 or 2a. (Next time tell 'em to roll to an IRA and buy the annuity within the IRA!)

I agree. Scratch my earlier comment about not reporting it. (But it's not a rollover!)

rlb is right, the plan could be written so the QJSA only kicks in if an annuity is elected. But that doesn't solve the problem of getting waivers. Let's be practical. If a participant wants an annuity, he can do an IRA rollover and annuitize the IRA. I wouldn't be concerned about keeping annuity options in the plan just in case someone wants one.

We handled one of these about a year and a half ago; filed all the returns and got the penalties waived. The return asks for beginning of year assets and I would think they would have some validation built in to assure that it's not a first filing if assets are over $100,000, but you never know. If you have two plans, each under $100,000...hmmmm, I seriously doubt that they coordinate the two beginning balances. I was going to go on a minor rant about it being an ethical challenge, but it's not like you're preparing fraudulent returns.

Because it's not an IRA, so it's not a rollover. I believe it's a 403(a) annuity, which is then taxed under section 72. It has pretty much the same effect, but, well, it's different. I think it has something to do with the transfer of responsibilities from the plan to the insurance company but I'm stretching myself pretty thin. I think these were more common, maybe even commonplace, way back before IRA rollovers were allowed, but even I'm not that old to remember.

I think it's a "benefit payment" for 5500 reporting purposes (Schedule H has a separate line - 2(e)(2); I think it gets buried in 2e of Schedule I). But it's not a "distribution" for 1099-R reporting purposes. It's taxed as (ultimately) distributed from the contract and reported by the insurance company.

You need to back up and first determine if the broker is giving you accurate information. The broker's mindset is to close the case; he probably went to someone else who said "here's a prototype document; get it filled out and get the money." He may or may not have been told that the client HAS to use the prototype, but to him, you are merely an irritating obstacle in closing the case and if he thinks that telling you that you have to use the prototype moves him towards the close, he will say it. Be firm, speak slowly, use small words: "we...want...to...use...our...own...document" Having said that, there is still some possibility that the brokerage firm DOES insist on using its own document. If that's the case, you have to decide if you can use it and/or whether you have to adjust your pricing. But you can't have two documents, unless you want two plans.