Santo Gold

Participant age 49 has both 403(b) and after-tax (non-Roth) ee money in a 403(b) plan. She has left employment and now wants to roll the money from old employer to new employer. New employer will accept the 403(b) and employer money, but not the after-tax. What can she do with the after-tax money? She doesn't need the money right now and does not really want to take a cash distribution. A roth IRA might be a good fit. But she would be taxed on her after-tax plan earnings, correct? I'm not sure how much we are talking about, but lets say the earnigns amount to $2,000 and that her overall after-tax account has $10,000. So if she rolls to a Roth IRA, She rolls the entire $10,000, but is taxed on $2,000? In other words, she has to pay tax on money that she really will not get her hands on? That's a little tough. Is the alternative to roll $8,000, take $2,000 in cash and pay tax on the $2,000, but you now have money for the tax (because you are taking $2,000 in cash)? Finally, due to her age, is there a 10% early distribution tax and if so, how does putting money in the Roth affect that? If she put the entire $10,000 into the Roth, would she avoid the 10% tax? If she took $2,000 in cash, is only that portion subject to 10%? Is nothing subject to the 10% because it is after-tax regardless of what she does with the after-tax monies? Thanks for any comments.

Sieve - that is informative, but can you clarify by what is meant by "climbing aboard by 10/31/2011"? Does the 10/31 deadline apply to plan sponsors who apply for a determination letter for their specific plan, or is this more, for example, for a TPA firm that uses a Corbel document but has the document in their name? If the latter, what is it that must be signed, sealed and delivered by 10/31? Thanks

We have a larger employer who has well over 500 employees and who sponsors a 403(b) Plan. However, about 80% of those employees have less than 1000 hours. Since 1000 hours is roughly the difference between being over/under 20 hours/week, is it safe to say that the employer could simply exclude all of these individuals from the plan, even the employee 403(b) contribution? I assume that when these individuals are hired, a determination has to be made (and applied consistently) as to whether the individual will be over/under 20 hours/week in order to determine if they are in the plan. Is this how it is handled? Thanks

A participant in a 403(b) plan passed away some time ago. We obtained the death certificate and the spouse is listed (Mrs. A). However, we have a copy of the enrollment form from when the individual first enrolled in the plan (many years ago) and a different individual is listed as beneficiary (we're not sure but it appears to be his first wife, we'll call her Mrs. B). Is this as clear cut as I think it is? Unless Mrs. A signed a waiver of beneficiary form, she is the rightful beneficiary, no questions asked, correct? Mrs. B may be listed as the beneficiary and may have been his spouse at one time. But that automatically goes away when he married Mrs. A? Do you see any reason why we should not pay out Mrs. A? Thanks

50 life 403(b) plan with 2 HCEs. They failed the ACP test pretty badly and both HCEs will need to take distributions of the excess match contributions. But the match is a 100% fully vested match. If this were a 401(k) plan, I could test the match together with 401(k) contributions in the ADP test and maybe get a combined passing result. Is that option available with the 403(b)? Since there is no ADP test for a 403(b) test, I simply combine the 403(b) elective deferrals with the fully vested match. Now the match is not subject to testing and voila, no 401(m) test or problems. I'm sure this won't fly but was hoping someone could confirm one way or the other.

Since there are no owners in a non-profit organization, No one is forced to take an RMD after 70-1/2, as long as they are still working, correct? This would include the Executive Director who makes well over $150,000? Thanks

I am looking at an employer who maintained both an MP and a PS plan, effective back in the early 1980's. The last plan document that they have signed has an IRS advisory letter from 1985 (Pre-TRA!). We want to update the documents and then go through VCP. Do you see any problem using VCP given how long its been since their last document? Also, can we make the jump from these 1985 document to current in 1 step (using up-to-date EGTRRA documents) or will we have to have an updated TRA document, then an updated GUST document, and then finally the EGTRRA document? Thanks

I'm not sure what the accountant means. My contact at the company initially emailed me as follows: "Our auditor has stated that we need to fill them [501c3 forms] out not only for our 401k but also our short term disability and our life insurance policies." This organization has been around for many years and have had the 401k plan for 13 years. I hope they are not just now pondering if they are in fact a 501c3 organization. As mbozek recommended, I went back to check with what exactly the accountant is trying to say but have not heard back yet.

I have a non-profit that sponsors a 401(k) plan. They have had over 100 participants for several years and have had the independent audit for the 5500 prepared for those years as well. This year, the accountant has told the employer that they will also need to have their "501©(3)" forms completed not only for the 401(k) plan, but also for the company's life insurance and short-term disability policies. Any idea what this means? I went to irs.gov and did not see any forms labeled as 501©(3) forms. Maybe the accountant means that they need to file 5500's for insurance and disability policies, but why would he include the 401k plan in that phrasing when he knows that is already being filed every year? Any advice is appreciated.

Thanks for all the replies. I didn't realize that math teachers accept "there is no answer" as an answer Just my faulty recollection that you could always solve for X. But you cannot obviously. Maybe thats why they call it "X"?

Either I am missing something very obvious or I've discovered a new unsolveable math problem.....I'm pretty certain I know which statement is true. Helping my son with some middle school math and came across this simple one: Solve for x: 3(4x-2) = 12x start by multipling whats in the parenthesis by 3 12x - 6 = 12x then subtract 12x from each side -6 = 0x You see the problem: Can't divide by zero by zero to get x by itself. I can't remember if these type of problems are common in algebra but my recollection is that you should be able to solve for x in any simple algebra problem. Plus I doubt that Holt Pre-Algebra wanted to spring an undefined answer on the students (and their parents). Any thoughts?

FYI - In-Service Withdrawals are not permitted in the plan. I'm not sure how I can effectively explain to the client what the real problem is here. No one got paid out incorrectly, no one has gained or lost any money as a result of the commingling. To explain that we will need to go back to 1998 and basically recreate each year's financial activity, at a cost of $$$ for no apparant purpose will not likely be understood. "Because the IRS says so" seems to be the only real reason here.

I got my first look at a 403(b) plan with around 90 participants. The plan has been in existence since 1998. It allows for 403(b) and non-elective/profit sharing contributions (match not allowed). The asset report from the mutual fund company shows that the EE and ER money has been commingled. There is no separate accounting of how much of any given participant's account balance is EE and how much is ER. The good news is that the PS contribution is 100% vested, so there should not be any distribution problems for terminees or retirees. Regardless of the 100% vesting, the requirement is that the plan has to account for EE and ER contributions separately, even in 403(b) Plans, correct? (1) Any suggestions on what the next steps should be? Do we need to go all the way back to 1998 and start the accounting process at that point? (2) Is this something to resolve through VCP? What kind of penalties or fines do you think would be involved? (3) If the records are not available back to 1998, do we just start with when the records are good and sort of grandfather the assets before that time as a EE/ER account, or something just to distinguish when the bad recordkeeping ended? Thanks for any advice!

We've been handed an owner-only MP and PS plan. Both were effective in 2003. Nobody can find the plan documents back to then. Actually, nobody can find any documents period, amendments or otherwise. Owner knows he has to go through VCP. Just wanted to see how to handle since we have no plan documents at all: (1) Should we go back and draft a GUST document which would have been in effect in 2003, call that the original document, and let VCP know that this document provides the link back to the when the plan was effective? or (2) Just draft the new EGTRRA document and call attention to all the amendments that were missed but are now included in this new document? I cannot determine if filing a GUST document is necessary. If it existed, of course we would include it. But if as part of VCP we are going back to the plan's inception and acknowledging that there was no document even back then, do we need to go through the motions of adoption a GUST document at the same time as adopting the EGTRRA document? Also, the fee is $750. But do you think this would be eligible for the non-amended discount of $375? Finally, would you file both plans together or separately? Thanks

An owner of a small business has as employees, himself, his wife and an assistant. He also has about a dozen CBA employees. The owner is also a union member. The owner pays into the unions multi-employer plans for the union members, which includes himself. This includes both a union DB and DC Plan. In the meantime, the owner establishes a 401(k) Plan for himself, wife and assistant, but excludes non-owner CBA employees. Question #1: Can he achieve $49,000 (under age 50) in the company's plan? Or does the $49,000 limit include the contributions from both the company plan and the union DC plan. Question #2: Does the union DB plan affect his $49,000 limit? Thanks

Yep, open to 403(b) plans, but must be done electronically.

Are 403(b) plans eligible for the DFVC program? Thanks

A participant has several pre-tax IRA's outside of the plan that he wants to roll over into the company's 401k plan. The 401k plan allows for Roth contributions. Assuming we amend it to allow for Roth conversions, can he do what he wants to do? That is, rollover over the IRA into the plan, converting them to Roth dollars at the same time? Thanks for any advice.

Small company started an "owner-only" 401k plan. Problem was that there was an eligible employee not covered, maybe more. There is the owner, owner's wife, a part-timer and a full-timer. So he could have kept out the p/t (if less than 100o hours) and the owner's wife. But then again, if the document never said that, that might not work anyways. But the F/T looks like she had to be in regardless. What is the fix here? The plan has only been around 3 years and the owner has only put in no more than $10,000 401(k) money into the plan. No other money in the plan. He could go back and bring the F/T in, with ER contributions, earnings, etc. But he would be on the hook for 3 years of missed 5500's, correct (he's never filed since it was 1-life & under $250K). That's a $1,500 DFVC filing. Then there is a VCP filing to bring the F/T. Plus the ER contrbutions for 3 years, plus earnings. And assuming the document (if there is one) doesn't exclude the owner's wife or have a 1000/1 Year wait to get into the plan, he might have to do the same for the other 2 people. Who know, maybe another VCP filing for a missing document? I haven't seen all of the workings on this yet, but some/most/all of the above will be true and if so, its going to cost him a lot of money to fix. But, he only has $10,000 in the plan. Is it better/cheaper to have the plan DQ'd, have what's in there now taxable to him, and re-file his tax returns for the past 3 years? Is there a way to guess/quantify what plan DQ might cost him? Thanks for any comments.

If a participant is laid off (with the understanding that they will return to work at some point in 2011) as opposed to having terminated employment, are they still on the hook for ongoing loan payments? I'm sure the answer is yes, but what I mean is this: Participant has about another year to go on loan repayments and her balance is around $800. She is being laid off on 12/31/10. Her last loan repayment via payroll is also on 12/31/10. Since she will be laid off, she was hoping she could lower her repayments to something more managagable while she is out. Is this allowed? Probably not, right? If the plan allowed for more than 1 loan at a time, could she take an additional loan out, spread the payments out over 5 years, and repay that loan with smaller payments?

I'm paraphrasing here so no jokes if this is to simple or stupid of a question: Financial advisor has an RIA agreement with the trustees and plan sponsor as the 401k plan advisor. He is now being told that due to this relationship, that he cannot use that foothold with the plan to approach the participants with an investment relationship outside the plan. Agree/Disagree? Thanks

It's not me unfortunately, but it is apparantly an accurate description of a possible new client of mine.

Compensation is not capped when using the match in a SIMPLE IRA. So, if the participant is age 50 and has compensation of $466,666.66, he could defer $11,500 plus $2,500 in catch up and be at 3% of pay for deferrals. Would the match be $11,500 or $14,000? Thanks

In a SIMPLE IRA plan that allows for catch-up contributions and the employer contribution is in the form of a matching contribution, are catch-up contributions matched: (1) all of the time (2) none of the time (3) at the discretion of the plan sponsor Thanks

Thanks David. That's a pretty good link and confirms that the early retirement cannot be eliminated. Do you think they could eliminate it for new participants and preserve it for the existing participants?