legort69

Participant terminates with a 401k loan. The principal balance is $5,000. They have a default and offset. Plan allows grace period of 90 days to repay the loan in full. They do not pay off the loan during the grace period and they do not take a termination withdrawal. My question is whether you would report $5,000 on the 1099R or would the 1099R also include accrued interest income? Appreciate it.

If the 2012 5500 audit for a multiple employer plan is complete, and one of the plan adopters declares a 2012 employer contribution after its audit is finalized, can the employer deduction be included on the 2013 5500 even if the employer takes the deduction for 2012, or must the employer deduction be the same year for the 5500 and the corporate tax year? (assume both calendar year). The Plan Administrator did not want to go through the hassle of appending the audit report.

We have a safe harbor plan in which some participants are making dollar amount deferral elections instead of an allocation percentage of comp. Their pay fluctuates each pay period and the employer is submitting a safe match each pay period. However, the employer is not adjusting the match to that period's compensation. The SHM is the same amount each pay period just like the deferral. The plan does not have a true up provision. For those that contribute a dollar amount deferral election, it would appear that they should be receiving the match = to 4% (enhanced and assumed that their deferral => 4% comp) of that periods comp, regardless of the fact that the deferral amount is the same. Am I correct or am I missing something?

most of our plans submit the safe harbor match on a per pay period. At times, the higher paid EEs receive a safe match > limit, because they continue to defer on comp > IRS comp limit. When this occurs, I forfeit the excess safe harbor match. I believe that it would be reasonable to apply the forfeited excess against a future safe harbor.

A plan is NOT top heavy 2009 but funds a pro rata profit share in 2010 for 2009. The plan IS to heavy for 2010 as of 12/31/09. Is there any way to include the 2009 ps that was funded in Jan 2010 as an offset employer contribution when determining the 2010 top heavy profit share due? Assume no 415 limit issue. Thank you for your input.

thank you! the Attorney NOW agrees with how I tested the plan and this helped.

Plan is prior year tested. Owners started company a few years ago. They start a plan during 2010. First year they elect to use the current year test method. All non-HCEs are eligible and newly hired during 2010. None have met the statutory minimum requirement for 2010. For 2010, I test the HCEs (owners) against the statutory NHCEs. Since there are no 2010 statutory NHCEs, the ADP test is deemed to pass for 2010. No real issue there. The total 2010 NHCE group averaged 5.14%, but non have met the statutory minimum requirement. {During 2011, only one of those 2010 NHCEs met the statutory minimum requirement on 7/1/11.} My question is for 2011 testing, when I am now using the prior year test method. Can I say that since there are no statutory EEs during 2010, then the test is deemed to pass for 2011? Or, do I have to use the 5.14% rate? Or did i miss the boat entirely? Thanks for any assistance and citations on this. I'm up against an ERISA attorney.

If a roth portion of lets say $1000 is refunded and earnings are $80, I believe that the taxable portion is included as income in the year of the excess contribution (at least for 2007). Does anyone agree or disagree.

Company A had a 401(k) plan that was top heavy and discontinued contributions to the plan last year. Owners of Company A are also 66% owners of Company B. Company B now wants to start a 401(k) plan. The employees of Company A started to work for Company B right away. Would Company A and Company B's plans have to be aggregated for top heavy? Are the balances of Company A even considered in the top heavy ratio? Also, both companies plans would be in the same multiple employer plan.

This is more of a grievance. I have plans in which the HCEs would be able to contribute more to a Traditional IRA than they can to the 401k plan. I think the rules need to change such that an HCE should at least be able to contribute the IRA maximum limit to their 401k without concern that a portion of it is going to be refunded. Thus, lets assume the IRA limit is 4k for 2005. I have an HCE who contributed 5k and the test results indicate a refund of 3k - all EE. I say, let the HCE keep at least 4k in the plan and refund only the 1k (5k - 4k). Does anyone see a problem with that?

If you use the in-service wihtdrawal provision to repay the loan, then this is considered to be an offset, not a deemed distribution. That is why I still think it is code 7. If you are over 59.5 then you do not have to repay the loan, then how could it be a deemed distribution, whereby the loan stays on the books and is required to be repaid?

i was under the impression that after 59.5, the loan deemed distribution is a loan offset because it is not required to be paid back and reduced the participant's accrued benefit, hence code 7, not L. No?

If a participant takes a withdrawal from a mutual fund that charges a back-end- load, or CDSC charge from the participants account, in order for the fund co. to recoup its investment costs, would you recommend reporting this charge on Schedule C - Form 5500 under the Fund Co. EIN, or do you have any other suggestions on disclosure or if it is even reflected on the C at all? Also, how would you disclose on the Schedule H? As other fees, contract fees etc?

Is a TPA required to prepare a Form 5498 for a traditional IRA Rollover into a 401k plan? I ask this because I am becoming aware that we have participants who make this request with their IRA Custodian but the Custodian will only issue the check directly to the participant - unless a TOA request is made in advance (in this case it was not). I gather that the participant will have a taxable event and no 5498 to offset the timely rollover into the 401k. Thanks for your response.

Thanks for your reply, I thought the 5498 had something to do with it, but I just wanted to be certain.

Is it the responsibility of the TPA to change the 1099R for the IRS Code and taxable distribution amounts if the participant elects to rollover the funds at a future date? Example, If a participant receives 8,000 of a 10,000 distribution, and elects to rollover the 8k within the 60 days, does the TPA provide 2 1099Rs, one to show the rollover of 8k and one to show 2k as taxable and include 2k taxes withheld? Or does the participant need only work it out with the IRS on their own? What if the participant rolls over after the end of the year and within the 60 days?

Thats a question that I would like to know, too. The CDSC charges, or back end sales charges occur in some mutual funds when the funds are redeemed before the fund company can cover its costs in paying the brokers etc. I've wondered if the charges need to be disclosed also on the Schedule C or are they just other expenses on the H or netted against gains? Any takers?

We adminstrate the tax withholding checks for our plans in the following manner. 1) Send tax checks to client to deposit under their TIN or plan trust TIN. Drawback: Clients get the check and don't deposit the check timely, don't know what do do with the check, put the check in a drawer, you get the drift. (If a separate trust TIN was not set up and they are supposed to be remitting checks via EFTPA and semiweekly, then you can see the impending disaster here). Because we prepare the 1099Rs, I have to confirm with each company that they made the deposits and address any outstanding tax deposits and that can be very time consuming in January. 2) Make the deposit for them under the plan Trust EIN and charge for this service, and prepare the 945. I spoke with an IRS agent a few years back who audits plans etc and, to paraphrase the gentlemen.."We don't really care what TIN is used so long as the 945s match the 1099Rs for tax withholding." So I thought about this and was wondering if we could just use our own company TIN to make all the deposits and issue the 1099Rs under. Other than adminstrative penalty exposure, what downside would there be for doing this? I see it as simplying the adminstration of the 1099Rs/945s etc.

If applying the prior year method for ADP/ACP testing, if a plan gives a match during 2002, skips the match for 2003, and recommences the match for 2004, does that imply that any match received by the HCEs is going to automatically fail the test if they receive an allocation?. Sounds unfair to me for the HCEs. I tested a plan and I shifted to pass, but was not sure if thats the only way without going current.

A corporation with a 401k plan makes EFTPS payments for their payroll on a semiweekly payroll schedule. They have a 401k plan with a separate EIN for the Trust and make the 20% tax withholdings under that EIN. The question I have is do the payments for the plan trust have to comply with the deposit schedule of the corporation, or can they make the tax deposits on a monthly schedule (assuming they qualify for monthly)? Thanks for your responses.

Thanks, your response helped. I am relatively new to the Benefit Site as far as taking advantage of its historical archive searches so I didnt even know to look there and it wasnt a matter of being lazy, just a little inexperienced. I will know better for the next time.

Hopefully I don't sound stupid with this question, but I just want to be sure. Lets say a client moves their plan from one TPA/custodian to another. Assets are transferred etc. We also provide the client with a new plan document, and call it a restated plan of the original. Thus, I assume no change in plan number, plan effective date or change to the continuing 5500 etc.. Is this how it works? Thanks

I believe that code L is for deemed distribution only and that you add the 1 to indicate penalty. A code L1 for deemed distribution is the correct code when a participant is still employed and does not repay the loan and is not yet 59 1/2. If you are using a code 7, then the inference is that the participant is age > 59 1/2 and may qualify for a distribution and does not necessarily have to repay the loan. In that case you only need to report the loan as a code 7 which is a loan offset and not a deemed sitiuation. That is how I understand it to be.

A participant files for bankruptcy and has a 401k loan. Are loan repayments disallowed in the bankruptcy and loan is defaulted - deemed distributed (taxable as income and penalty) or something other than the above?

I have a client who wants to know if a participant with a 401k loan and is in default as he is out of work on Workers Comp (and cannot be fired), whether there are any provisions or regulations to prevent issuing a 1099R for the outstanding loan balance at the end of 2004. I believe that for military leave, the loan cannot be defaulted, but thats a separate issue. The participant was having loan payments deducted from their paycheck which there are not currently receiving. He did not make alternate arrangements in repaying the loan. Happy New Years!