Bird

I believe the above is the conclusion of the legal department, and not a conclusion in the regs. It certainly shouldn't be the latter, because the IRS doesn't agree. (And I don't see how one could leap to that conclusion from the preceding text!) From a recent Sal Tripodi seminar: in a Q&A session with the ABA on May 9, 2003, the IRS said that the cure period DOES apply to the last loan payment. Q&A 1. Oh, I see FundeK has already provided the cite and the text! Did the attorneys see that?! The sad thing is, they are wrong and they are the only ones getting paid here!

There is no default. The recordkeeper needs Prozac.

I find it best not to look for logic in such matters; there is none. You'll just give yourself a headache, or worse, realize that a significant percentage of your time is spent keeping track of stuff that has no significance to anyone, anywhere, ever, which then leads to wondering just how important your job is...never mind. We reconcile assets for EZ plans the same as we do for any other - we determine earnings from interest and dividends, realized gains (from beginning of year), unrealized gains (from BOY). Then we give 'em what it appears they want on the EZ- earnings plus realized gains, not unrealized gains (plus rollovers, etc. if applicable). The assets and net income don't reconcile, but that definitely doesn't matter.

I think, I say I THINK, that it's all deductible and the loss passes through. I seem to recall that one of the reasons an S-corp is used is that start-up losses are passed through. I'm pretty sure of it, actually, but hope to hear from someone with a little more certainty.

We've used Accudraft (volume submitter plans) for quite a few years and I would say we're reasonably happy. They are, or were, less expensive, so that's a plus. Their safe harbor language gives the flexibility to use the "maybe" notice followed by the "definitely" notice. The last time I checked, the Corbel document locks you in. I'd say it's easy to use. On the negative side, I've found that you have to push hard to get a direct answer to a question. Also, the document language seems to change, without notice. They've told me that any changes were either approved by the IRS (but I don't understand how you could have two different VS documents, with different language, relying on the same opinion letter) or just corrections of errors, which is permitted. Mmmm.

Any work we do on these types of plans is billed hourly, to the employer. I don't see how you could get money out of the participants' accounts, unless you are the custodian/trustee.

I agree with Jguazza on the accrual basis reporting - just report it as it is, a receivable. For cash basis reporting, I'd also report it as it happened - full distribution in '03, other income in '04. I would NOT worry about coordinating with the 1099-R. It's not like there's any cross-referencing going on, and on the slim chance that the plan is audited, you simply explain exactly what happened.

As Katherine noted, asking for a statement annual is just asking for trouble. We have participants sign an enrollment form, once, that includes this language (cobbled together from various sources; change as needed - this was from a 401(k) plan): 3. INVESTMENT ELECTION I will provide investment direction through the broker selected by the Trustee. 404© statement It is the trustees' intent that your opportunity to self-direct your investments complies with Section 404© of the Employee Retirement Income Security Act. This means that by directing the investment of your account balance, you assume responsibility for the investment performance of your account and absolve the plan fiduciary (generally, the trustees) of any liability for losses that may result from your exercise of control. By signing this authorization you: a. Acknowledge that you have received a Summary Plan Description. b. Authorize your employer to deduct from your compensation the amount stated in item 2. above. c. Authorize your trustee(s)/plan administrator to deposit your contributions in a brokerage account where you will self-direct the investments. d. Certify that you have the power and authority to establish this account and give the instructions stated herein, you release the Funds and their agents and representatives from all liability and agree to indemnify the same from any and all losses, damages, or costs for acting in good faith in accordance with the privileges selected herein. All terms shall be binding upon your heirs, representatives and assigns.

Yes, each HCE is limited to 1.25 X the NHCE average. There's also a 50% participation requirement. Comp is capped at $200,000, as indexed. It'll be defined in the plan document and would most likely include deferrals, for testing or allocation purposes.

We have the participant sign a statement indicating what type of vehicle (qualified plan, IRA, 403(b), 457) it came from, certifying that there are no after-tax monies, and acknowledging that the rolled-over funds are subject to plan provisions, such as distribution restrictions, and confirming that if self-directed, it will go into the same mix. If money is coming from a qualified plan, we get a statement from the distributing plan that it is intended to be qualified, and that it either has a FDL, is a standardized plan (I guess that could be expanded to non-standardized and VS), or doesn't have a FDL because ____________.

My reading of the question and instructions is that you are supposed to report the highest value. No, we don't track it, so I would report the highest known value. In your case, that would be the beginning of the year, since the end was $0. A random number would provide just as much USEFUL information, but that's another issue.

We use Accudraft for most of our documents, and the language is as you described - you need a resolution each year to use the nonelective safe harbor, and of course you have to give the notice. That's the way it should be, IMO, to give the sponsor the flexibility to issue a maybe notice before the beginning of the year, and the "definitely" notice 30 days before the end of the year, with a resolution adopted at that time. (The flexibility being, of course, that they could issue a "definitely NOT" notice then, instead.) We have one Corbel plan and the safe harbor election is permanent; you would have to amend the plan, presumably before the beginning of the year, to remove the safe harbor. The notice is always required.

When you get the answer, please let us know how the client was able to go through an attorney and still avoid attorney fees.

Agreed that it's probably technically correct to go back and allocate for prior years. If the plan permits forfeitures to be used to pay expenses, could you accrue enough expenses to get rid of the excess for those years and pay them this year? Just a thought.

IRANewbie- I'm a registered representative, and am posting my name and investment firm at the bottom because I think I have to disclose that whenever I even think about investments, but let me make it clear I am not soliciting business, just sharing information. What your broker said is at least partially accurate, but misleading...at best. You can buy a Vanguard fund through him, and you'll probably pay 1% per year. But that's a charge that he (his firm) assesses against your account, not Vanguard. You can call Vanguard directly and open a mutual fund account directly with them and pay no commission whatsoever; that's there reason for being (no sales charges). (As an aside, you will always pay some expenses when you buy any mutual fund, these are basic operating and management expenses, and they can vary widely. Vanguard is known for having low expense ratios, especially with their index funds.) I happen to like the American Funds, a lot, and I use them almost exclusively. They are also known for having low operating expenses. However, you will pay something (extra) to get into their funds, either directly (an up-front commission of probably 5.75% if you buy A shares) or indirectly (higher annual expenses of about .75% per year for 8 years. If you want to buy Vanguard funds you don't need a broker or Ameritrade; you just deal directly with Vanguard. If you feel like you don't need a broker then that's probably the way to go. Ed Snyder Investments offered through Univest Investments, Inc.

Rev. Rul 96-47 Good cite; I'll modify my answer to say, yes, he HAS to allow them to self-direct.

If you hold onto the Roth IRA for 5 years, then it appears that there would be no difference, tax-wise, between that and a 529. Both would be tax-free. At the end of the day, the tax impact is probably not such a big deal anyway, unless you're really socking away a lot of money and making large gains... Probably a much bigger factor is the impact on fincancial aid. I think the Roth IRA gets the edge there, as retirement plan assets are generally excluded from aid calculations. 529 plans are considered to be assets of the owner (typically the parent); I think that 6% or something like that is considered available for college, so this approach could cost you a little bit in aid.

I wouldn't say that the trustee HAS to permit them to continue to self-direct, although I think it's dumb not to. That is, it's not a discrimination issue, since that is "tested" separately for all terminees, so unless there are term'd HCEs who are allowed to self-direct, it's OK. But then the trustee is responsible for investing the accounts in a prudent manner, and investing in an interest-bearing account probably isn't, unless distribution is imminent. I see nothing to gain by taking these participants out of self-direction. If it's a fee issue, then as noted, they can charge them (with proper disclosure in the SPD).

Sorry, "too late" was a poor choice of words. "Impossible" since the plan didn't permit deferrals in the year ending 9/30/03, and, presumably, didn't have any provisions for QNECs either.

Sounds good to me.

No; you'd be mixing the prior year's deemed NHCE ADP of 3% with a current year QNEC. The prior year's is "deemed" because, well, there is none and it's too late to make a QNEC.

I think insurance should be included, just like any other asset. I've seen it excluded (and premiums were deducted as "expenses") but I don't think it's right.

Prior to the guidance, the only fees we would charge a participant directly were for loans, and that was in the SPD. As we start to charge for other fees we will prepare SMMs or new SPDs.

I don't think there are published rules for this. In your case, where the term is less than a year, I'd just calculate each month separately and add them up.

TBob - good point. Somehow I missed that he was term'd. Ugh; not much hope.