Santo Gold

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?

I don't deal with many plan loans, let alone ones that are as blatantly wrong as this one. Any advice is appreciated. Small 401(k) plan. One of the owners took a $9,000 loan in January, 2011. Never paid any of it back. When asked about it now, he really had no answer. He doesn't think he can now pay it back and would prefer to simply be taxed on it. He is age 65. (1) Can he simply not pay it back, pay taxes on the $9,000 (plus the loan interest)? (2) As long as he is employed, doesn't he have to pay this back? Even if he is subject to taxes, he is still required to pay it back, right? And if he does, that makes it an after-tax contribution, in a plan that does not allow for after-tax contributions. Problem? (3) Correction has to go through EPCRS as well, I believe. Any comments on the above are welcome. Thanks

BG5150 is correct, it is a 100% up to the first 4%, plus 50% on the next 2%. They might consider amending to the basic SH match effective 10/1 (which is the BOY). Thanks for all replies.

Can a plan sponsor amend out of a safe harbor match? They currently have a dollar-for-dollar up to 4% plus 50% on next two percent match formula. PYE is 9/30. For the 10/1/2012 plan year, can they either lower this to only the basic s/h match or possibly amend the s/h out of the plan entirely? Thanks

Thanks to all for the replies. Just learned that the beneficiaries are NOT minors (one is age 27 and the other is 30). So, do they have the option to rollover their portion of the account balance or is it required that they take the distribution in cash? Thanks

(1) A 401(k) Plan offers participants the option of (a) not self-directling their contributions, in which case the deposits are made to a pooled account and directed by the trusteees, or (b) self-directed into a mutual fund account menu. Do the 404(a) participant disclosure regs apply to those in (a) above? No fees are being deducted from the pooled account but I assume that there are still asset fees. That would trigger the notice, correct? (2) Who provides the notice on brokerage accounts? For example, if a plan has 20 participants and everyone has a Schwab account, Does Schwab provide the 404(a) notice? Would it detail every dollar spent on trades or other purchases or would the notice simply be one stating what the fees are if trades are made? Thanks

An owner of a small 401k plan passed away. He was age 55. Divorced from his spouse so he named his 2 children as beneficiary. If both are under age 18, what distribution options are there? Can they legally make a decision in regard to this matter? Do they have the opportunity to have the account rolled over to an IRA? If one is under 18 and the other over 18 (assumed that they are 50/50 beneficiaries) we can treat 1 beneficiary different from the other, correct? To make things more interesting, the deceased participant had an outstanding loan in the plan, total still outstanding of $18,000. How does that factor into the mix? Thanks for any comments.

The IRS has rules regarding which 403(b) accounts "must" be included as part of the plan for compliance purposes. These are different from the DOL's rules on which participant accounts must be included on a Form 5500; where transition relief is a big factor when there aren't any additional deferrals being made to the contracts after 2008. Of course they are, given there are few exceptions to the universal availability rules on deferrals. Not now. A 'termination' is followed by a full distribution of assets within 12 months. 403(b) plans have historically had problems terminating because of this provision. Also, there is still some back and forth on distributing the accounts for several brokerage accounts under 403(b)(7) where the IRS rules allowing the employer to distribute the contract isn't necessarily supported by the state laws governing the brokerage accounts. I am not sure where this has evolved, but it appears to be a non-issue since the plan is not terminated. You're not going to move a participant's contract to a new provider without the participant's consent. Remember, the IRS has rules on which plans must be considered as part of the plan for compliance purposes. These contracts will likely continue as part of the new plan and will not move until the particpiant actually makes an election. Good Luck! Thank you for the in-depth reply. Unfortunately, it appears that they do not have much in the way of options. They cannot terminate the old plans and they cannot merge the old ones into the new one. Is there no way to get rid of a 403(b) plan? The assets are held with a large insurance/investment provider. One of their reps was suggesting having the assets converted into paid up annuities, which (somehow) would be beneficial. Do you know anything about why this would/would not work? Thanks

An employer has 2 "old" 403(b) plans. Both plans have around 60 participants with account balances but no new contributions have been made into the plan for years. I believe it was frozen to not allow new participants/deposits about 5+ years ago. The same employer sponsors a new 403(b) plan with different investments. I believe all employees are eligible to participate in this new plan. Can the employer terminate the two old plans and allow the participants to either (1) roll their balances into the new plan (2) take their account as a cash distribution, or (3) leave their account where it is but turn it into an IRA. Alternatively, can the ER merge these 2 old plans into the new plan, moving all the old money into the new plan without participant consent? Thanks

Thanks very much.

Controlled group exists between Company A and B Company A now wants to purchase Company B. Company A owned by Mr. X, Mr. Y, and Mr. Z. Company B also owned equally X, Y and Z. Can Company A, as part of the buy out, offer a non-qualified deferred compensation plan to Mr. X only, and not to Y and Z? Thanks for any replies

Last year, and the plan sponsor received a QDRO for a participant, who also happened to be the owner. QDRO was adhered to but incurred some significant legal expenses in handling the QDRO, which was paid from the plan. the assets are pooled so everyone was affected by this expense. The owner realizes now that wasn't really the best way to handle the expenses and wants to deposit the amount of the expenses into the plan from an employer account. (1) Can the employer do this? (2) if so, is it correct that the ER cannot make a deposit and treat it as an ER contribution for deductibility purposes (o/wise it woudl have to be allocated as an ER contribution) (3) Can the ER deposit the amount into the plan and claim it as a business expense? (4) If "No" to 2 and 3 above, can ER simply deposit the amount to make up for the expense and not take any expense/deduction for the deposit? thanks

4/17 it is. Thanks for all comments

We have a 6/30/2011 403(b) plan that was put on extension. The 5500 was completed over a week ago but the exec. director did not tell us that he would be out of the country and unavailable all last week through 4/16. He returns 4/17. We filed a 5558 back January. Not realizing that the extension period could go through until 4/17, we filed it with a requested extension deadline of 4/16. However, they received a confirmation back from the IRS, but it stated that the extension was good until 4/17. Given that it would be almost impossible for it to be signed today anyways, would you agree that we are OK filing this on 4/17? Thanks

We had an adopting ER of a plan take effect 1/1/2011. There are two 5% owners of the adopting ER, but they have no ownership in the plan sponsor's business. Are they Key/HCE in the plan? I think the answer is yes. But, since they have no ownership in the plan sponsor, maybe not? Thanks

Life insurance allowed in 403(b) plans? Does it matter whether it is an ERISA or non-ERISA plan? I thought the 2009 403(b) regs prohibited life insurance in these plans. Thanks

Answers: 1 Its permissible if the adoption agreement for the plan permits adoption of a discretionary formula. 2. Its valid as long it is not discriminatory in favor of HCEs under the rules of 401(a)(4). Always permissible as long as only NHCEs receive the additonal contribution. 3. see #2. If answer is no then employer can pay $5,000 bonus as W-2 income which employees can contribute as elective contribution to 403b plan or to a 457b plan. But there would be a problem if we did write the formula into the document and in a year in which an HCE were to receive this contribution, the plan would fail 401(a)($). Sure, the HCE could bonus the amount in via payroll reduction as you suggest, but the document still calls for this individual to receive a $5,000 ER contribution. I don't think we could simply not give the HCE the $5,000 while giving the $5,000 to however many NHCEs are eligible. That would violate the plan document, wouldn't it?