Santo Gold

the owner has a relative who wants to put him in an annuity and since the relative doesn't want anything to do with retirement plans, this is the solution they came up with. Get the larger deduction from depositing into a plan, but take ISW to move it to the relative to manage. We'll see how that works out in the long run, but right now I don't see why doing so would be any sort of violation.

A S-corp started a 401k plan in 2010. The owner is the only eligible particpant and has put ER contributions into the plan every year. He is currently age 52. The plan allows for inservice withdrawals after 5 years of service, which he now has. He wants to take an ISW of all his money in the plan (all ER dollars) and roll it into an IRA. He wants to maintain the 401k plan, make a nice deposit each year (around $20,000) and then each year take that as an ISW. It seems that this can take place per the document, Is there anything that would prevent him from continuing the plan in this manner? Thanks

Lou S - The purpose is for determining that particular owner's share of the non-owner employer contributions. If the ownership had not changed, then each owner would be responsible for 10% of the total non-owner employer contributions. But since there was a change, does that mean that (1) the 8 remaining owners are responsible for 12.5% of the contribution while the 2 owners that sold their shares are responsible for 0.00%? (2) All 10 owners are still responsible for 10% each (3), is the ownership for this purpose pro-rated based on how long and how much each owner "owned" throughout the year? You idea that it would be split equally among the 8 remaining partners seems to make sense. Maybe the sales agreement between the partners would address this. But if it does not, are we left with choosing whatever is reasonable?

We have a calendar year plan with 10 partners, and lets say all 10 have equal ownership in the business (10% each). The business entity is a partnership. A 3% safe harbor employer contribution exists; there is also an additional profit sharing contribution. On February 1st, two of the partners leave and their ownership shares are divided equally among the remaining 8 owners, such that 8 owners now own 12.5% of the business. At year end, for purposes of determining the total employer contribution, the self-employment calculation must be performed in order to determine the amount of contribution to the employees and the owners. The ownership percentage for each owner is a factor in this determination. How is this determined when the ownership changes in during the year? Thanks

The employer sponsors a plan that allows for davis bacon contributions. Recently, there has not been any davis bacon work, but the company has other non-DB projects for the employees. The company continues to compensate these employees at the DB prevailing wage, even though the work is not DB work. For purposes of the retirement plan, can the employer continue to "treat" these wages as DB wages, taking out fringes and making contributions to the plan? This doesn't sound right, but any comments are appreciated.

Thanks Lou - We were thinking about this more in terms for 2016 (there documents still needs restated and that would be a good time to put this in there).

We have a 401k plan with match (not a safe harbor) for a public library, with only 5 eligible employees, none of whom are close to being HCEs. The Library's director is over age 50 and will contribute the full elective deferral max of $24,000, including catch-up plus receives a match of around $2,000. Can the Library Board make an additional employer contribution for her, perhaps up to $33,000, without giving any additonal employer contribution to the other NHCEs? With no HCEs there would not appear to be any discrimination issues. The plan would have to be amended to allow for individual rate groups and this probably could not take effect until 2016, but once that is in place, would this fly? I think the idea is that she would go the Board and ask that her compensation be reduced by the $33,000, and the Board would then simply deposit that for her as a PS contribution. Thanks

The employer terminated a calendar year 401(k) plan, effective 12/31/14. They signed plan termination amendments, distributed plan termination notices to employees and stopped all EE and ER contributions so that no new contributions were made to the plan in 2015. No one has been paid out yet due to the plan termination. Over the past few months, the participants complained and now the employer is reconsideriong the plan termination and may want to restart the plan and forget about all that plan termination "stuff". Can the plan be restarted and if so, what issues are involved? It does not seem too difficult to restate the plan document to remove the plan termination amendment and its impact. And no one has been paid out which is good. But is a do-over really acceptable for this? How would we prepare year-end 2015 ADP testing if the participant did not have the opportunity to make contributions for 4-5 months out of the year (use only 7-8 months worth of compensation)? The plan is neiither top heavy nor a safe harbor and the ER does not want to put any ER dollars into the plan, so ER allocations basis is not an issue. Any thoughts, comments or ideas are appreciated.

Thanks Tom. If the plan document states that the safe harbor is conditional, is it your opnion then that if the proper steps are not followed each year (i.e., no amendment is signed and/or no notice is given), that the default is that the plan is not a safe harbor for the upcoming plan year? That would appear to be so in this document; there is language stating "for any plan year in which the employer has elected a safe harbor". I would interpret that to mean that the employer must proactively make the plan a safe harbor each year. To do nothing means no safe harbor. But is it required that with a conditional safe harbor, an amendment be executed each year, stating clearly whether there will/will not/possibly be a safe harbor for the upcoming plan year? About the notice points that you mentioned - since 2015 plan year is the year in question, the follow up notice is not really the problem, since that is not needed until later in 2015. And if there was no notice provided in 2014 about the 2015 safe harbor, is a followup notice even needed since nothing was announced prior to the plan year? Thanks

Document does state that the safe harbor is optional and that the notice must be given. It goes into detail about the safe harbor being optional and the employer needed to inform the participants 30-90 days before the plan year starts and then again 30 days before the plan year is over as to whether there will be a safe harbor contribution. But, they never distributed a notice 30-90 days prior to 2015. I think the operational failure that Lou S mentioned may be valid. But, I am thinking that the 3% is not required for 2015.

401(k) Plan that has a conditional 3% safe harbor language in the plan document. The employer had the 2015 plan year notice prepared in November, 2014, stating that the employer WOULD make the 3% safe harbor for the 2015 plan year. But, the employer never distributed the notice. Now, in April, 2015, the employer would like to not make the 3% safe harbor fr 2015. Since the notice was never distributed, and the plan document allows for a conditional safe harbor, is the employer still on the hook for the 3% safe harbor for 2015? Thanks

no, we have no voice (and do not want one) in the selection of mutual funds. But why would it be a PT to kick the extra money back to the plan sponsor? Once the money is out of the plan and is "legitimately" paid to the TPA, we can do whatever we want with it, right? And if we agree to pay it back to the plan sponsor.....why is that a PT?

We receive revenue sharing from mutual fund company that we use to offset against our TPA fees to the plan sponsor. We have not yet been in a position where our fees are less than our revenue sharing for the year, but that will likely change for a few clients soon. Is it acceptable for us as the TPA to take whatever excess in revenue sharing exists at year end and write a check back to the plan sponsor? We prefer not to simply keep a "credit" on our books for any excess. Are there any other acceptable ways to handle this?

Thanks, I will look further, but my thinking was that they probably could not simply get the EE assets without their consent.

The subject line is really the question. The employee has signed a letter of confession stating that she stole money from the company. The theft did not involve the plan assets in any way. this is a small 6 life 401k plan. I do not think that the ER can encumber or in any other way get to her 401k assets regardless of the theft. Not sure how much was stolen, but he is pretty sure she does not have nearly enough money outside of the plan to repay so he is looking at the 401k to get some of his money back.

A SIMPLE-IRA plan covers only owner and spouse (no other EEs). They have been depositing $$$ into the plan for several years. It was just now discovered that their W-2s were not reflecting the contributions they made to the plan. Is there any problem with the SIMPLE as a result of this? I think any corrections would involve revised W-2's and amended tax filings for all those years, which would presumably result in a nice retoractive refund. But the SIMPLE would not need to be fixed or corrected, is that right? Thanks - Mike

JPOD: This plan says first day "coinciding", but I do not think that answers the question. Because it really comes down to when the eligibility is satisfied, July 1 or July 2. If the eligibility period is detemined to end on July 2, then the coinciding date is not until next January 1st. I will check with the document provider, but I was hoping for something more concrete that is in the document and not just take the document provider at their word. Thanks to all for your replies.

We have a 401(k) plan with eligibility of age 21, One year of service (1000 hours). Plan entry is 1/1 and 7/1. Initial eligibility starts from date of hire. This applies to all contributions in the plan. A participant was hired on 7/2/2012 who was over age 21, still employed, and worked more than 1000 hours easily (is full time). Does she enter the plan on 7/1/13 or 1/1/14? The eligibility period in the document states: "means a 12 consecutive month period beginning with an Employee's Employment Commencement Date and each anniversary thereof". Would you say that the employee satisfies the One Year of Service on July 1, 2013 or July 2, 2013? I think the 12 month period ends on July 1, 2013 in which case I would put her in on 7/1/13. But reading the above document language, the "anniversary date thereof" would (to me) mean the initial eligibility period ends July 2, 2013, which puts her in the plan January 1, 2014. But if this is correct, doesn't that really make the eligibility period one year plus one day? Is that really what is intended? Thanks

One of the plan's HCEs received a much larger match than he should have. The plan year is now over. (1) By definition, is this excess considered an "excess contribution"? I do not think so, as that term applies to employee 401(k) contributions that need to be returned due to a failed 401k test. Is their an official term that describes this type of contribution violation? (2) Does the match simply come out of that HCE's account and is used for future employer contributions? (3) Does the excess amount still count in the HCEs ACP test, as well as in the 401a4 testing (cross-tested PS allocation in the plan)? Thanks

We have a small 403(b) plan that covers non-resident aliens. An individual worked for the business, entered the plan, has an account balance in the plan, and has now left. The individual is resident of the Israel but not the USA and the owner does not believe she has a SS number. How can we pay this individual out if they have no SS#? Any comments are appreciated.

However, since the EZ is not filed online, would you say these instructions still apply? If so, then it seems we need to file a 5500 online for a plan that normally would only file a simple EZ form. Does this sound correct?

Right, you can file SF online instead of EZ on paper. But in this case, where we need to file a bunch of late years, could/should we do those online (SF)? I think we could just use the 2012 5500-S/F for all years. Is there anything wrong about filing in this manner?

I am filing 7 late 5500 EZ forms for a client back to the mid 00's. There is no DFVC for these so we are intend to file late and beg for mercy. Since we are filing these en masse this month (10/2013), should these be sent to Ogden, UT with a letter of reasonable cause, or should they be filed online at DOL website? Would it make sense to file these online on a 5500-SF, indicating an 1 participant plan? Thanks

Not 1, but 2 participants in a small 401k plan have loans. Both now say they cannot continue to make the repayments and want to stop. They say that they will pay whatever penalties are involved, tax consequences, etc. Both are under age 50. Can they just simply stop the loan repayments taken from their pay? Is that an option, they request through the Plan Administrator that the loan repayments cease? Thanks

Company A sponsors a SIMPLE-IRA. Company A owns 51% of Company B. Owner A (no ownership in Company A) owns the rest of Company B (49%). Company B is an LLC. Company B participates in Company A's SIMPLE Owner A does not receive a W-2 from Company A or Company B, but does receive LLC payments that is declared as income. Can Owner A participate in the SIMPLE-IRA without W-2 income? If Owner A cannot participate in the SIMPLE and since no controlled group exists, can Company B start a separate plan (maybe a SIMPLE, maybe a 401(k)) that the owner can participate in? If so, does Owner A have to wait until the current plan year ends (2013) before starting a new plan? Thanks for any replies