Bird

Not for 2016. Yes for 2017. Does not have to work 12 months.

There is a theoretical case to be made for having a single pooled account. Practically speaking, I don't think I've seen it net out to be "better" than self-direction. But in no way would I call it imprudent.

You said "payroll" was run so I assume the business is a corporation. If so, the money was withheld and simply not deposited. I see no issue here other than a late deposit and would correct it accordingly. If that's not the case and it is a self-employed individual, that's a little different. But maybe not...if I had a good election in place, I might be inclined to follow the election and treat this as a late deposit issue. But I'm not sure the IRS would agree.

If you want to get philosophical about it, there really shouldn't be any difference between qualified retirement money and any other money. Someone who was never covered by a "retirement plan" could still save money "for retirement" - does that deserve less protection? The environment has changed an awful lot since ERISA, and some lines are blurry and some are sharp, and they shouldn't always be the way they are. Anyway, yes I think there are a fair number of people with non-retirement assets.

I think it is common, especially, as noted, for free documents. And I wouldn't just look the other way. Failure to follow the terms of the doc is a DQ event. And/or it might make it an individually designed document - I think I saw one once where it said if all assets weren't with XYZ co, that XYZ was no longer the sponsor. Somehow I think there are prototype SEPs with more flexibility but I'm not sure.

It really depends on what your document allows. We have choices in ours (Ft William, below) and generally allow extended payouts, but some plans don't want to be bothered with that. Payment upon Participant's Death Distributions on account of the death of the Participant shall be made in accordance with the following: a. [ ] Pay entire Account balance by end of fifth year for all Beneficiaries in accordance with Sections 7.02(b)(1)(A) and 7.02(b)(2)(A) only b. [ ] Pay entire Account balance no later than the 60th day following the end of Plan Year in which the Participant dies c. [ ] Allow extended payments for all beneficiaries in accordance with Sections 7.02(b)(1)(A), (B) and © and 7.02(b)(2)(A) and (B) d. [ ] Pay entire Account balance by end of fifth year for Beneficiaries in accordance with Sections 7.02(b)(1)(A) and 7.02(b)(2)(A) and allow extended payments in accordance with Sections 7.02(b)(1)(B) and © and 7.02(b)(2)(B) only if the Participant's spouse is the Participant's sole primary Beneficiary e. [ ] Other:

We did some interim vals earlier this year because the market was down. I don't have a hard and fast rule but if the assets leaving are more than 10% of total assets I'd think about it. When assets are down, ballpark the cost of the val (if paid by the plan, or even if not, just for a point of reference) and compare it to the savings (to the other participants) of not making the terminee share in the losses). We rarely if ever to an interim val when the market is up. I'll tell the participant - it's your choice: take the money now based on 12/31 values last year, or take your chances on the market continuing to go up or at least staying where it is. In an ideal world, you anticipate the large distributions and raise cash before the end of the year so that it doesn't matter. But the world is not ideal and sometimes they come out of nowhere.

I agree with this. And other comments for that matter; it depends on how things are structured. But also depends on who is providing the answer. Had a client receiving severance pay and they wouldn't let her take her money out of the plan because they said she was still employed, so we said "OK then she wants to make 401(k) contributions." Then they said she couldn't because...she wasn't employed. It took a couple of years for them to grasp the absurdity of it all and they released it.

That's great - "We have a problem - we can't stop ourselves from deleting inactive EINs. We solve the problem by requiring entities to put it on a meaningless piece of paper so it is used." Classic.

I say their contributions are based on their individual earnings, so 3 get nothing and the terminated one gets something. Of course that should come out of his own pocket which makes things interesting when he is terminated.

Mmmm. My OCD made me spend about 20 minutes looking at the new Qs, then at old Schedule Ps to see if we always had separate EINs for those plans on a platform where we had no reason to have one, other than for the sake of putting it on the Schedule P - we did always have separate EINs. I wouldn't go getting EINs now. They might really mean the payor's EIN (a la Schedule R). I can't imagine they want to be giving out EINs that aren't going to be used.

Oh brother, thanks for the info.

Me too. Have done it.

I agree with rcline. You are conditioning eligibility on contributing. I can't say for sure if it is discriminatory or definitely determinable or would take the plan out of prototype/volume submitter status; it is, at the very least, weird and awkward. Does it make all that much difference if you let everyone employed on 11/1 participate, and those who elect not to contribute just don't contribute? You can limit changes in contribution amounts to once a quarter or whatever.

I wouldn't worry about it. That is, I would not formally terminate it nor file a return.

Loans from insurance policies can go on indefinitely. An insurance loan can effectively be a withdrawal...in a non-qualified plan situation, it's no big deal. Ha. It's not my case but I'll say no, just based on the cloud of incompetence that I recognize from experience. I wouldn't be surprised if it's not even in the name of the plan...

My take is that this was not a plan loan at all, or I'll temper that a bit and say it may not be. Insurance, in my opinion, should be considered just another asset of the plan, with some unique characteristics. One of them is that if the plan is otherwise pooled, any insurance is effectively self-directed/segregated. That may or may not be relevant but the point is that premiums, loans or other transactions involving the insurance "account" should be considered transfers between accounts. So you have money coming out of the insurance policy and going to a participant. The "coming out" part is a transfer out of the policy, and (to my way of thinking) you first have an effective transfer to a "side fund" (old admin terminology for everything not insurance) and then...ah, here is the question. It's either a loan, or a distribution. Of course there was no paperwork either way, and the consequences (ultimately) are the same - taxable income. How to treat it might depend on whether loans were permitted, what shred of paperwork might exist, etc. What you do have is an unfortunate mess, probably created by the agent in setting up the policy ownership correctly, and the insurance company, for being sloppy and letting it happen and then allowing the loan. None of which is surprising. (I may be complicating the situation by creating a phantom step but I don't feel like re-typing. I guess you could boil it down to either a loan or a distribution, directly from the policy. But adding the intermediate step helps, I think, to prevent the line of thought that there could or should be direct dealings with the insurance company and participants.)

Boy do I hate seeing the term "Open Enrollment" applied to 401(k) plans. I would be curious to see how what you described is written into the plan document (I don't think it is). I've seen new plans that said if you are employed on a certain date, that you participate immediately, but new hires after that date must satisfy some eligibility requirements. It sounds like you are describing something where new hires have 30 days to sign up otherwise they have to wait? An employee becomes a "Participant" when they satisfy eligibility and reach their entry date. They may elect not to contribute, but they are still a participant - that is, being a participant and contributing to the plan are two different things. A plan may only allow you to change your deferral election every so often (quarterly or semi-annually e.g.) and that may be what you are describing, but to answer your question, no I don't think a plan can waive 401k eligibility requirements temporarily, and for those who do not elect to defer require they wait until they do satisfy eligibility?

I think you should, yes. Partners of course shouldn't receive W-2 income but "everyone does it" so I think you just do what seems logical.

There are IRS instructions somewhere, I don't remember where, that say you must have a separate EIN for a business if you sponsor a retirement plan. The LLC is disregarded for tax purposes but that's the entity that is operating the business and sponsoring the plan, so I'd get a tax id for that entity.

From mutual funds? 2b(2)© I think...

A trust (or probably more commonly a "plan and trust") is a separate entity and should have a separate ID number for reporting purposes.* If you're looking for a specific cite, I don't think you're going to find one - it's like asking if an individual who owns an unincorporated business and an incorporated business needs separate ID numbers; there's no need for the IRS to publish guidance that specific. *If there is not going to be any reporting by the trust, then we don't bother - e.g. a plan on a recordkeeping platform will typically have distribution reporting done by the recordkeeper. If the investment firms are handling distribution reporting, then maybe what they suggest is ok (but I doubt that's the case). I do seem to recall that a plan may use the sponsor EIN for tax reporting...I don't have a cite. But running the risk of getting payroll withholding and distribution withholding mixed up, and (I believe) subjecting the plan to the timing requirements based on dollars withheld for payroll is simply stupid. I learned long ago not to use advice from TD Ameritrade and Schwab and their ilk, and in fact to proactively anticipate bad advice and head it off at the pass.

I am positive I have seen that here, and whomever posted it had a convincing argument so I believed it (that filing on time invalidated an extension). But, while poking around trying to confirm that, I found this bottom of page 2 says: An application for extension that meets these four requirements in valid, even if the return is filed on or before the original due date of the return. That is, the application for extension is not invalidated under the regulations merely because the extension ultimately proved to be unnecessary. I don't claim any expertise but this is convincing. It was more about taxes and penalties than contributions, so maybe that makes a difference, but I don't see why. And frankly, it is very, very difficult to imagine a scenario where you show the IRS an extension and they say "oh no, you filed on time" (finger wagging).

I think there would be a problem if it isn't marked as final, yes. The question is, do they want to terminate it or keep it "open" for potential new employees?

OK, I had a call from an accountant and my first response was "well, if a client asked me I would tell them to ask their accountant." That being said, here is the scenario/question: A partnership sponsors a SH 401k. It is a pooled plan. Contributions made by 4/15 are greater than the employer contributions for employees. They need to go on extension to fund the remaining contributions. No problem for the federal return, but it would take "2 hours" to prepare the state extension(s) - multiple states I guess? Wants to know if it is ok to not extend the state returns. I said that I thought the deduction would tie to the timing - if the deduction is taken on the K-1, then the K-1 might have to be extended, and if the deduction is taken on the 1040(s), then the 1040(s) would have to be extended. Of course deductions are taken on both. An argument could be made that the first contributions were for the employees, and were funded by 4/15 so the partnership return wouldn't have to be extended. But to be safe, it should be. I thought the 1040s would definitely need to be extended. (She said that she never thought of it that way and typically would NOT extend the 1040...but then I think she was actually talking about an S corp so that makes sense.) Sorry for the long post - any thoughts?