Bird

I guess it might come down to facts and circumstances. If you set up a plan on Dec 31, it seems unlikely that you wouldn't fund it. And keep in mind that if you don't make regular and recurring contributions to a PS plan it is considered to be terminated.

I agree with you.

Is this a theoretical discussion? We routinely prepare loan schedules based around payroll dates, and if it happens to get processed, say a week ahead of time, it's not a concern. I'm not sure how or why you wind up with a receipt of funds 30 days before the inception date on a schedule. I think I could make a case for date of receipt, if I had to.

If the merger paperwork said the plans were merged on 1/1, then there is a one day year needing a return(s). I'm not sure anyone cares though, and if the auditor signs off on the merger effectively being 12/31, that might provide enough cover to go ahead and do it. I agree that physical movement of the assets is not necessary for a plan to cease to exist. FWIW the software problem may be related to the following contradictions: The TPA of the employer, hoping to make the 2015 audit of 5 of the plans that are merging the final audit of the plan (in a sense trying to avoid a one day audit for 2016), has indicated that the assets "merged" on 1-1-16. The TPA, in filling out the 2015 Form 5500, is maintaining that this is the final return for the old plans, and is trying to show, on Schedule H, the assets as of 12/31/15, with a liability "due to new plan" in the same amount, thus zeroing out the assets as of the end of the plan year.

Generally, when the plan has a J&S option.

You'll need a list of beneficiaries with certification that it is correct, or a copy of the trust. Wait until it happens. Reg 1.401(a)(9)-4, Q-6

You're not talking about forcing participants to self-direct; you already have that, but presumably there is a default under the existing platform for those who don't make an election. So, you, the idiot sponsor, or someone else, needs to figure out what to do with accounts for participants who do not make an election. You can not, literally, force someone to direct their account. What is proposed is not a good idea, to understate the case. Sponsors think that if they let everyone do whatever they want, they avoid liability. Not so.

Agreed. "Everybody is doing it" because withholding is easier/better* than making quarterly payments, and the IRS does not seem to care. *I thought it was convenience but I also believe that payroll withholding is treated as being done throughout the year, even if it is all done on a Dec 31 paycheck, whereas quarterly payments must be pro-rated.

Agreed. Probably not what was intended; you don't see many 2 year eligibility plans but the intent is probably to have 2 "eligibility years" based on anniversary of hire date. The language about switching to the plan year was probably meant to happen after the second eligibility year. The existing language is generally used with a 1 year eligibility period. As I see it, if this is a calendar year plan, a full-time employee hired on Dec 14, 2015 enters Jan 1, 2016 - one year of service on Dec 15, 2016 (for the "employment" year), and another Dec 31, 2016 (for the plan year, after the switch). Retroactive to Jan 1 means entry on Jan 1, 2016...half a month after hire.

I think you have to be consistent with the way the self-employed individual reports his taxes. In this case, simply use the Schedule C bottom line, which includes the 2014 contributions deducted in 2015. It was not how I was taught, or rather, learned how to do this. I think any description will say to do it in this order: get preliminary Schedule C profit without employer contributions for employees calculate employee contributions, subtract them to get the net/final Schedule C profit calculate the SE tax calculate the owner's contribution (Some of these are interdependent/circular but it can be done.) Some accountants think they know everything, or don't want to wait for the final employee contributions, or whatever, and can't be bothered with step 2.

Sounds like this should be figured out and fixed by the TPA, but I'm guessing it's some large/gigantic firm, possibly a payroll company, and so it is easier to fix it yourself, right...? The world sucks that way. Anyway, yes it sounds like an asset needs to be adjusted, but that doesn't make sense, if the reported assets tie out to actual assets. You might find an adjustment buried in the gain or loss. We are a TPA (and we make sure things reconcile, properly, before we prepare a 5500) and often see recordkeepers fix, for example, a contribution error by showing one end as a distribution and the other end as a gain...or whatever, there are lots of permutations on this theme.

I think the practical way to do this is to use a share class that carves out all but the basic management expenses, and then bill all other expenses directly. I'm pretty familiar with the American Funds, so I'll use Income Fund of America as an example. R-4 share expenses look like this: Management fees 0.22% 12b-1 fees 0.25% Other expenses 0.15 Total 0.62 If you use the R-6 share class, the 12b-1 fees go away, and Other drops to .06, so the total is 0.28%. The advisor (has to be an RIA not just commissioned) can still get 0.25%, and since "Other" includes some sub-TPA fees and recordkeeping costs, those can also be billed separately. This works in RecordKeeper Direct and PlanPremier TPA. Remarkable how low the actual "Management" part of the overall fees is.

Ah, thanks, now I see that the example in the FAQs is actually correct; I wasn't reading it carefully enough. However, the example in the regs remains on point, and I still do not see how a deemed distribution could/should occur AFTER the end of the cure period.

I agree...except for this confusing statement: "The document does not require employment on a quarterly entry date." I'm not sure if I've ever seen something to that effect; taken literally, it seems to mean you can enter the plan even if you are not employed? That would imply plan entry on Jan 1 2016, the first entry date after reaching age 21. Period. Rehire means nothing because he is already a participant. But that doesn't make sense.

Gannuscio, you can keep talking to the lackeys at the call center, or you can poke yourself in the eye with a sharp stick - same result. You'll probably get different answers every time you call. Heck, most people here are experts and we are disagreeing. (Although I have yet to see a credible answer as to why it should be deemed in 2014..."practical" is not credible, IMO.) I don't have a better way to handle it, but be prepared to spend a lot of time on it. You need to move up the chain somehow to someone who understands a bit about the Code and Regulations, and give them the cite for Reg. Section 1.72(p)-1, Q&A-10(a), and ask them how they square their reporting with what the reg says. (Don't refer to the FAQs which support 2014 taxation.) I guess the other option is to duke it out with the IRS and try to prove that the 1099 is wrong; that might actually be your best bet. I am chuckling when I think of Charles Schwab trying to correct a 1099 issued for 2014 and then issue one for 2013...never gonna happen. If something isn't right when it goes into their system, it's nearly impossible to fix.

I understand about the maximum cure period. My point, maybe lost by being too wordy, is that the IRS FAQs were wrong, IMO. They referenced the regs which do not support the conclusion in the FAQs (default end of June/deemed distribution end of Sept - that's...weird). As far as "practically speaking" I don't believe the systems limitations of recordkeepers should dictate taxation. The example in the reg is pretty clear about this being a 2013 taxable event. Good luck Gannuscio!

We would have defaulted this loan in 2013. Something about the IRS description didn't seem right and I researched it...I think 2013 is right but someone please correct me if I'm wrong. (Assuming the maximum grace period "end of the quarter following the missed payment.") The IRS description from the original post... "For example, if the quarterly payments were due March 31, June 30, September 30 and December 31, and the participant made the March payment but missed the June payment, the loan would be in default as of the end of June, and the loan would be treated as a distribution at the end of September. " ...comes from Retirement Plans FAQs regarding Loans (I don't get the part about defaulting at the end of June and being treated as a distribution at the end of September. That doesn't make sense.) It references Reg. Section 1.72(p)-1, Q&A-10(a), which includes this example: Example. (i) On August 1, 2002, a participant has a nonforfeitable account balance of $45,000 and borrows $20,000 from a plan to be repaid over 5 years in level monthly installments due at the end of each month. After making all monthly payments due through July 31, 2003, the participant fails to make the payment due on August 31, 2003 or any other monthly payments due thereafter. The plan administrator allows a three-month cure period. (ii) As a result of the failure to satisfy the requirement that the loan be repaid in level installments pursuant to section 72(p)(2)©, the participant has a deemed distribution on November 30, 2003, which is the last day of the three-month cure period for the August 31, 2003 installment. The amount of the deemed distribution is $17,157, which is the outstanding balance on the loan at November 30, 2003. Alternatively, if the plan administrator had allowed a cure period through the end of the next calendar quarter, there would be a deemed distribution on December 31, 2003 equal to $17,282, which is the outstanding balance of the loan at December 31, 2003. In this example, the default and the deemed distribution occur on the same day, November 30, 2003. In fact they go on to say that if the plan used a cure period of the end of the following quarter, the deemed distribution would be on December 31, 2003. This lines up almost perfectly with the original poster's situation (replace "2003" with "2013").

I agree. With the caveat that when life insurance is in a plan, you never know...

I'm not qualified to give an answer but if you are an ERPA then I think you have some obligation to prepare the 1099. You can't force them to file. I think ASPPA ethics would say the same thing. Having said that, there are times when I've said something along the lines of "You are the Plan Administrator and I am just here to assist you in performing your duties. This is what you should do. Now you tell me exactly what to do or not do and oh by the way sign this statement telling me what to do or not do." (Just thought I'd take a stab at actually answering your question . Although I am prone to answer questions that haven't been asked like everyone else.)

I'd first consider the possibility that it's simply an error. I guess it is possible to have some kind of theoretical negative CSV but it's also possible their computer wasn't programmed to handle that specific situation. The loan could arise as an automatic premium loan, where the premium is paid by borrowing from the plan itself. I hope that the money didn't go out somewhere else and you don't know about that. Definitely get all details. Start with the agent; make him earn the (probably) $50K to $100K commissions.

Prior discussion. I'd definitely get a new number. If you are applying online, try changing the name slightly by abbreviating, or not, so the computer can't match the names perfectly. Worst case you might have to call and talk to a human, ugh, and explain that software, probably including theirs, won't take that number.

Yes. But the answer to the CPA's Q is "no."

The catch up has to be a deferral contribution, so no.

I think it's a cutback and you just can't do it (for existing participants). I think you could change it with a caveat "but for participants as of xx/xx/16..." and they will eventually either get to the higher threshold or leave the plan and get paid and thereby go away. It's a nuisance but leaving it as is is worse...it might be the best way to eventually get consistency.

...and we have to include an electronic copy of the comparative chart of investment options... ...and say how many are index funds. They can't legislate so they are just going to wear us down until they get what they want.