Santo Gold

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

Company A is owned by Mr. X (40%), Mr. Y (40%) and Mr. Z (20%) Company A owns 50% of several other companies. The other 50% ownership of these other companies are comprised of individuals or organizations not affiliated with Mr. X, Y or Z. Given this, then there shoud not be any controlled groups between Co A, X,Y,or Z, and these other companies, correct? Thanks very much.

Any comments are appreciated. 1) Participant took a loan from 401k plan 10 years ago, but plan did not allow for loans at that time (plan does allow for loans now). The participant has been making repayments the whole time. ** Since discovered now (2013), does the original loan amount (plus loan interest) become taxable to the participant in 2013 and considered a deemed distribution? ** Should the participant continue to repay the loan and if so, how is the repayment amount classified if the entire loan amount is taxable in 2013? ** Is this an VCP fixable violation? ** The loan repayments were established with a baloon payment, which is wrong. But since the loan should not have been allowed in the first place, what impact is there? 2) [Different participant, same plan] After a loan policy was adopted, the participant has taken 3 loans, all of which are still outstanding. Loan policy allows for only 1 loan at a time. All loan payments are current. ** Are the second and third loans an operation failure, considered to be deemed distribution and taxable now in 2013? ** Fixable through VCP? Thanks

I have a client with a 401(k) plan who is interested in making an in-plan Roth conversion. Just was hoping to confirm some issues involved with that: (1) The plan has to be amended to allow for Roth contributions (2) The participant has not yet made Roth contributions but can still have an in-plan conversion (3) Any existing account balances attributable to 401(k), QMAC, QNEC, or Safe harbor contributions cannot be converted until at least age 59-1/2 and must be eligible rollover assets. (4) Any amounts other than the above can be converted, but only if they are otherwise eligible for distribution (including in-service withdrawals) and are eligible rollover assets. (5) Any amounts that are converted to Roth must remain in the plan for at least 5 years; otherwise, the earnings will be subject to taxation. I also had a related question: (A) Does the answer for #5 change depending on whether the distribution is a rollover or a lump sum cash distribution? Thanks for any replies

MWedell: Thanks. Regarding the retro amendment, is that something that they would submit, via VCP? And if accepted, then there really is no "consequence" as far as having to make distributions of the after-tax monies? Is this something that is likely to be acceptable? Thanks

Got a mess with this one. Going back 15+ years, the plan has allowed after-tax contributions but the plan document has not allowed for it. A mix of HCEs and NHCEs. Am I correct that the only way to resolve is to payout these amounts plus the earnings? The earnings are taxable but is there any penalty. Also, would this appear to be a VCP filing? Wishful thinking, but there is no permissible retroactive amendment that can be used to allow the contributions to stay in the plan is there? Thanks

A 73 year old (non-key) participant passed away. She was still employed at the time of her death and was not taking RMDs. Her surviving spouse does not want to take her 401(k) money out of the plan right now. What time frame do we have in regard to paying the money out? I am not sure yet as to the age of the spouse (who is the beneficiary). Thanks

Nothing right now....they inquired about using our firm last Fall and then nothing. Now we got this call this week. Just trying to help out for now.

The investment accounts for the plan are all brokerage accounts and they do not receive much in the way of admin services from the brokerage office. They have had someone at their office preparing the 5500, maintaining the plan document, and trying to do the admin. Very likely that lots of admin issues are being missed (although it does not sound like they have a closet full of failed 401k tests or 415 limit violations or anything like that). I'm assuming this is the first cash distribution that they have had to handle, leading to the 20% withholding.

I advised to set up electronically, but I do not know the mechanics of doing that to advise on specifics. I assume they remit payroll taxes electronically, but that is being pulled from a business account when it is transmitted to the IRS. Would they have to establish a plan checking account just for this one distribution, deposit the 20% into that account, and then transmit that to the IRS? Seems like overkill for very small plans. What is the penalty for being late?

Small PS plan, making a cash distribution in January, 2013, for a participant who has terminated employment. 20% withheld will total $1,500. Client is not set up to remit 20% electronically. Is the only other option that he sit on this $1,500 until next January, 2014 and then remit it with Form 945? Thanks

Got it. Thanks

The elective deferral limit for 2012 (under age 50) is $17,500. That is across all plans, correct? So if an individual had the ability to participate in both a 401k and a 403b plan, the most she could deposit in 2012 is $17,500 total, not $17,500 to each plan, correct? Thanks

What is your relationship to the plan/plan sponsor? Where are the remaining assets and who is the trustee/custodian? The DOL program is certainly an option, but a "qualified termination administrator" would have to be appointed, and there are specific requirements as to who/what can be one. Have you searched for the participant/have any information about the participant? Our firm was the TPA. They have a 403(b) plan. Large insurance company has the remaining assets in an individual account for the remaining participant. I know the name of the lone remaining participant and could contact him (I should be able to get his address), but I don't see how he could do anything.

Unfortunate situation. A small non-profit ran into major financial problems last year. Everyone was let go. The exec director was the last one left. He was in the process of "turning out the lights" when he passed away earlier this summer. He managed to pay everyone out of the plan except one person. I've tried everything to contact someone to see who can close this out. No one answers the phone there. A few other numbers I've called result in un-retuned messages or "don't know what you are talking about" replies. The few people I have reached with some knowledge of the matter have nothing to do with it, do not want anything to do with it, and have no idea who I could contact. They missed their 10/15/2012 5500 deadline as well. Any ideas on how to proceed are appreciated. I know very little of the DOL orphan plan program. Is that something I could/should initiate? Keep in mind that the 1 individual left in the plan has around $11,000. If this is an orphan plan, will the DOL take any fees out of this individuals account to pay for all remaining plan fees and will those fees be steep? If so, I feel bad for this guy, who would have to have his account decreased simply because he is the last man left. Thanks

Calendar year 403(b) plan. What timing deadlines exist for the non-profit plan sponsor in regard to depositing the employer contribution. For example, for the 2011 plan year, when would the 2011 employer contribution be due? Unlike for-profit contributions, the only file Form 990 and I do not believe that there is a deductibility issue.

An HCE from a large corporation is retiring (he is age 65). He has around $1M in the corporations 401k plan. $900K is pre-tax money. The other $100K is after-tax (but not Roth) money. Can he roll the after-tax money into a Roth IRA? Thanks

They'd like to and that may be in the cards.

Owner of a small business has run into some major legal trouble. Company is going to go through bankruptcy, likely will be dissolved. Owner is likely to be sued as well. He has already taken steps to terminate the companies 401(k) Plan and many employees have already been let go. (1) The plan expenses are paid from the plan assets. Knowing the condition that the company is in, the accountant and the TPA want paid immediately for 2012 and 2013 work before anyone is paid out. The owner (who is close to age 70) has the largest account balance and wants to roll his money out of the plan. However, the brokerage firm where his (and all participants) assets are held is not willing to release all of his money for the rollover because of the fees that the CPA/TPA want up front. They want to prohibit him from rollover over $20,000 of his balance in order to cover these fees. Can they do that? Isn't that the trustees decision? Is there a cut and dry answer to this? I believe they have an institutional trustee, not individual trustees. (2) Same owner has some rental income, separate from the above business. In order to have some income sheltered from creditors, he wants to be able to defer some of that rental income into a new retirement plan, that would cover just him and maybe his wife. Right now he has been declaring that rental income on his personal tax return via schedule C. Could he set up a new business entity based solely on his rental income, and in turn establish a profit sharing plan in which he can deposit up to 25% of this income?Seems OK to me. (3) If #2 above is OK, could he roll his account balance from the plan in #1 above into this plan, allowing that to be sheltered from creditors as well? (4) If he could establish a plan like in #2 above, and if he could somehow have his wife eligible to be in this plan, could she roll any unrelated IRAs she has into this plan? Her goal would be to shelter some of her IRA money from creditors as well? Thanks for any comments. They obviously will have legal help on this but I wanted to see if any of the above are possible solutions.

Plan failed their 2011 match-only ACP test (but not their ADP test). One HCE is affected. Do they receive a distribution of the excess or is the money treated as a forfeiture (individual is 100% vested). Thanks

1) The loan clearly is in default, and that does make it a taxable "deemed" distribution; 2) Depsite the fact that the it is a "deemed" distribution for tax purposes, the loan itself remains an asset of the plan, and is considered an existing loan for all plan purposes (so, for example, if the plan only allows for one outstanding loan at a time, he is considered as still having a loan outstanding). Theoretically, he is still obligated to repay the loan, although as a practical matter, most don't. If he does, the repayment isn't technically considered "after tax" but more appropriately, he would have a tax basis in his account equal to the amount repayed that was previously taxed as a result of the "deemed" distribution. Tracking that is the issue, and many recordkeepers are deficient in that regards; 3) Not necessarily. It depends on when the tax consequences are to hit (2011 or 2012). Read the provisions of 2008-50. If it remains as an asset to the plan, does that mean that the loan is still added as a plan asset for 5500 reporting purposes? That would seem odd, continuing to report it as a an asset, since if it is already reported as a distribution. If correct, would you show the loan amount or the loan plus unpaid earnings as the asset amount?