Bird

I said "If you're going to reject it the basis should be inability to repay, not inability to pay through payroll deduction." And I respect that there is in fact a basis for denying the loan for inability to pay. Additional comments were about being practical. I understand where you're coming from.

I'll be contrary and disagree, at least partially. I get the part about requiring payments thru payroll deduction. But I don't think you can say "well I'm not giving you a loan because the policy says payments are thru payroll deduction and your pay won't cover it." Our policy says "...your loan will be approved if the Plan Administrator determines you have the ability to repay the loan, the loan is adequately secured and the loan meets the other requirements set out below." If you're going to reject it the basis should be inability to repay, not inability to pay through payroll deduction. It might seem trivial but I see a difference. And I would approve it anyway. I do not see the IRS hassling over this at all. At least he has some pay and maybe there is a chance of increased hours or some other way of getting payment. But that's just me.

It's probably all about how the account(s) was/were set up in the first place. There's "right" and there's what is in their system. Might be able to convince them they fubar'd it in the first place but they might want to "re-paper" it all. Good luck...

It's included on the 5500, pretty much as if it hadn't defaulted. I don't remember all of the details but I think the instructions are pretty clear.

Yeah. I just do my best to try to get them to do it "right" but they're always more interested in getting the numbers in (any numbers) and moving on. I try to do my end of it correctly and figure the deductions are not my problem.

I think either the P.S. where you consider them 2014 contributions, or a plan amendment would work. I know you could adopt a new SEP for 2015 and even amend one now to, say, change eligibility.

I'd say the SEP contribution was very clearly an employer discretionary-type contribution. The fix would be to make equivalent percentage contributions for the employees, to the SEP. If there are different eligibility requirements for the SEP and 401(k), then...well, top heavy issues come to mind, if nothing else. I don't see how the money could be moved to the 401(k) as if it were a contribution, of any kind, but especially not as an employee contribution. And I don't see how she could now make a 401(k) (employee) contribution, unless she had an election in place on 12/31/15. I don't know if the IRS would see it differently in a VCP submission.

I don't think there are any "requirements" about correcting such an error, but it's your choice as to whether you want to explain it ahead of time or take the money out and then explain it later when the (now angry/upset) participants ask what happened.

Yes, it is eligible comp, and yes, it is reduced for 1/2 of FICA. ...assuming that's how it is reported, as my rule of thumb is that if someone is paying self-employment taxes on the income, it is earned income (as opposed to passive which would not be eligible as retirement plan comp). Generally, if it's going on a Schedule C, and that's where commissions would normally go, the bottom line is self-employment income.

I (still) say no. There was an old thread on this and somebody named Bird had a convincing argument; last word and no rebuttals.

I say use the 14A number. I'm pretty sure there is no direct deduction for the things you mention on the 1040.

Ah, I see. I could go either way; the right thing is to file amended returns. If it's a matter of making the accountant look bad and then billing for the amended returns, well, as I like to say, they are just numbers on a piece of paper that will ultimately change some government statistical average by a penny. (Yes there are limits to that bad attitude.)

I have to ask why it is being removed from the tax return. It's an asset of the plan, isn't it?

This report is...interesting, I think, if you are into political maneuvering. How the Committee on Homeland Security and Governmental Affairs has input on this I don't know. I just read the exec summary. http://benefitslink.com/m/url.cgi?n=26313&p=1456335090 THE LABOR DEPARTMENT’S FIDUCIARY RULE: HOW A FLAWED PROCESS COULD HURT RETIREMENT SAVERS A Majority Staff Report of the Committee on Homeland Security and Governmental Affairs United States Senate Senator Ron Johnson, Chairman

I think that we have more than enough rules to prevent egregious offenses and if one "pending" HCE enters a year early because he was an NHCE at the time, that is indeed ok. If you told me that there were 20 employees and they only waived eligibility for this one person, where others would have otherwise been eligible if prior service had been credited, then I might think differently. But if they are just counting prior service, and he's the only one who had any, then I don't see the harm or any issue. If they had acquired the company a year earlier, and applied the service requirement, it seems that he and all other employees would wind up entering at the same time as what will actually happen.

Sounds like you got it. Good luck.

Ah, I get it. As others have noted, it is no problem to have a "whatever we say" allocation "formula" in the types of documents we (the pension community) use. I doubt you'll find it in an E-Trade or similar document. So...you either pay someone to provide pension services, including documents, or you try to find a document that lets you do what you want, or you just say "screw it, pro rata is close enough."

It could be considered a couple of different ways. If he is eligible for in-service distributions, then yeah, they could be just that, albeit probably with failures to provide notices, to properly have the money paid to him and (it sounds like) failure to withhold. This raises questions about who prepared the 1099-R, at least for me...did they just think it was SOP so this will likely continue, or did they scold and berate him for being ignorant and/or simply a jerk, and explain that this wasn't really a "fix" but the best way to report it...? If he's not eligible for an in-service distribution then yes, it's a PT of some kind. Not my area of expertise on how to fix that.

Because we see a lot of confused non-pension people wander in here and butcher terminology, and because it seems a bit odd (to me) that they would split income 90/10 and have something specific in their partnership agreement about splitting retirement plan contributions 50/50...I can see splitting "profits" 50/50 after taking guaranteed payments but "profits" and "profit sharing contributions" are two different things. The term "profit sharing" should have been banned from our lexicon a long time ago, since plan contributions are no longer dependent upon profits. But I'll take your word for it that you know what you are doing and trying to do, and others have pointed out the problems with limitations, so sorry for creating a distraction.

Backing up a little, and sensing that something might be a bit "off" - do they want to split "profit sharing" (i.e. optional plan contributions) 50/50, or do they want to split "profits" (business profits after draws and expenses) 50/50? I'm a bit curious and skeptical about a business agreement that specifies how plan contributions are to be allocated. Especially for husband and wife. I agree that any plan contributions under the existing plan should be allocated pro-rata on income.

Honestly, I think you have to figure out what should have happened, and recreate records to bring things forward to today and there shouldn't really be any questions. Either he got paid fully and isn't owed money, or he didn't get paid fully and is owed money. When you say he "...was paid out his benefits in full from other assets" what do you mean? He got his share of the "side fund"? Or...and I'm getting this vague sense...the initial purchase was FUBAR'd and never taken from "his" assets so the policy was just another commingled asset? If the latter, and IF the policy cash surrender value was included in the value of all assets when they were split, then it's simple - it stayed in the plan and belongs to the remaining participant. Should probably be surrendered, unless he has health issues, then the cash is just another asset of the plan - as the insurance policy is now. But I'm making some assumptions...

At some point logic has to prevail. Yes.

Agreed. Definitely not a protected benefit. I don't think you could technically do it retroactively, but if no one has exercised that right, it becomes words on a piece of paper. (Having said that, I think I'd have a special prospective effective date just to be clean.)

I believe that you can amend a SEP from 1 to 3 years without regard for whether someone participated previously. (FWIW when you say "distribution" did you mean "contribution"? To me "distribution" is money going out of a plan. It doesn't matter.)

Let's agree that any discussion on this is a waste of time. Trying to read anything into it is silly; they basically blew it and admitted it and we should move on. When we first got the forms, I made a bad decision and said we (our office) would be good boys and girls and answer the Qs, unless it was a final return. Then some of the questions were causing questions to be raised about how to answer them and I realized it was an utter and complete waste of time and said we would NOT do it any more. Then the announcement came saying don't answer them. And...just being obsessive, if the instructions read as ASPPA says they read... IRS Compliance Questions. New Lines 10j, 14c, 14d, and new Part IX (IRS Compliance Questions) were added to this Form for purposes of satisfying the reporting requirements of section 6058 of the Code. The IRS has decided not to require plan sponsors to complete this question for the 2015 plan year and plan sponsors should skip this question when completing the form. ...how could they change from referring to "Compliance Questions" to "question" (no "s")? It's sloppy. Maybe I'm just in a bad mood from dealing with moronic brokers but it irritates me.