Santo Gold

A participant is requesting a hardship withdrawal to purchase her principal residence. However, because she is purchasing the house via an auction, she does not know the amount needed. Also, if she does not "win" the auction, she would want to put the money back into the plan. #1 - Can a hardship be taken without knowing the specific amount of the hardship, as is this case? #2 - i'm guessing the answer is "No", but can she put the money back into the plan if the reason for the hardship goes away (i.e., she doesn't get the house)? Thanks

New client (for us) has a money purchase plan, effective since 1985, that they want to terminate and then start up a 401(k) plan. The MP document is out of compliance though. They have a standardized TRA prototype document signed in 1993, but nothing after that. No UCA, GUST, EGTRRA or other amendments since EGTRRA. The plan appears to be in compliance with all other matters. There are only 2 people in the plan. They will file via VCP to fix. A couple questions: #1 - The user fee is $750. Is there any fee in addition to this that can be imposed upon review? #2 - The VCP Application Guide on the IRS website seems to require an additional 5300 filing along with the application. Is there an exception for a standardized prototype plan that would not normally need a Det. Letter? Also, if a D-Letter is required with filing, its a 5307 that is used, not a 5300 correct? #3 - As the new document is drafted, what effective date should be used? Current date? First day of current plan year? Different effective date corresponding to all of the missed deadlines for amendments? #4 - Finally, we will request an acknowledgement letter back from the IRS. Other than receiving this back from the IRS, is there any "approval letter" from the IRS stating the the submission was successful and we can move on? As I said, the intention is to terminate this plan, and we can't terminate until the document is up-to-date. We want to move ahead with distributing the assets, but can't until we know the document is accepted. How long does this normally take and will the IRS send a letter of approval? Thanks for any comments

Thanks MJB. Could you clarify how a payment can be made from a plan for more than 5 years if the distribution must be paid to an IRA no later than 1 year after death? Or wait, is it that the distribution is rolled with 1 year after death, and then payments from the IRA can be spread over more than 5 years?

I have a similar situation that perhaps someone could comment on. Client did not file 5500's for the past 2 years and just realized it now. He was not aware of DFVCP and just last week filed the late forms as he normally would. The potential penalty for filing late would exceed the $1,500 DFVCP fee (small plan). Would anyone recommend filing them again through DFVCP right away. I think that is the way to go, but I am concerned as to whether the plan could be in "double jeopardy" of paying the $1,500, plus also having to pay additional late fees because of where the original filings were sent last week. Any comments are appreciated

When is the latest than a non-profit has to make an employer contribution (403(b) Plan) for the 2006 plan year? Is it 3/15 (unextended) like for profits or something else? Thanks

Non-spouse beneficiaries no longer have to take distribution of a participants account balance within 5 years. Is this correct and if so, was this part of PPA? Also, if true, is a plan amendment needed to allow for this? Does the answer change if this is a 403b rather than a DC plan? Thanks

3 sole props (no employees) decide to merge and form an LLC. 2 of them have their own 1-life 401k plans. They will all be equal owners (33%). Their intention is to "run" things as separately as possible, yet share employees, building space, etc. They also may want different contribution levels for themselves for retirement plan purposes. For example, the older owner wants to put away as much as he can, while the younger owner may want to fund his plan minimally. Can they maintain 3 separate plans, 1 for each of them, with different levels of funding? I assume the answer is no since when they become an LLC, I assume the sole prop are no longer in existence and hence, there is no sole prop income from which to fund the plan. However, could they set up a 401k with with separete classifications for the 3 owners, much like a new comp plan. Each classification is funded however much each owner wants to put in for himself. A 4th group would be all other employees. We would have to test for 401a4, but if they would pass, then this would work? Is there a better way to accomplish their goals?

Accounting for Roth 401k contributions must be separate from that of pre-tax elective deferrals, but do the actual contributions have to be in separate accounts? We have several Roth/401ks that are self-directed but pooled (don't ask:), and therefore all plan monies - roth, 401k, PS, match, etc - are held in 1 place. I believe that as long as their is separate accounting for all the different money types, that is sufficient. Also, Roth 401k contributions were initially set to expire when EGTRRA sunset in 2011. Was this obstacle for Roth 401k contributions removed when the other sunset provisions were eliminated last year?n Thanks

Company A and Company B are part of a controlled group, owned by 3 individuals. All 3 individuals have compensation from Company A and B. Both companies are part of Company A's 401k plan. There is also a management group (Company C) that has no employees, but consists only of the 3 owners. They have compensation from this entity as well. #1 Is it correct that all 3 company's are part of the controlled group? #2 Because Company C contains only HCEs, we would not necessarily have to include it for plan purposes (i.e, no chance of discrimination since they are all HCEs)? #3 If Company C is part of the CG, but is not part of the plan, would we omit compensation from Company C for plan purposes? #4 Is Company C compensation omitted for 415 compensation purposes? I believe the answers to the above are: Yes, Yes, Yes, I'm not sure. Thanks for any replys

An employee left one company to start her own business and had a loan in the first company's 401k plan. She immediately started a 401(k) plan with for the new company, and wants to roll the loan over. However, the first company had a repayment schedule based on monthly repayments, while the new company has twice a month payroll. We can recalculate the repayment schedule based on the different payroll frequency, but would that require a new promissory note as well?

On 1/1/07, 100% Owner of Company A buys 85% of Company B. Company A and B have roughly the same number of employees. Company A has a 401(k) plan, company B does not. For coverage testing, I believe the transition rules allow for the exclusion of Company B through the 2008 plan year. They have to be counted for testing in Company A's plan starting 1/1/09. Company A would like to allow Company B employees to make 401k contributions now in 2007, but would want to keep them out of the match and profit sharing until allocations until 1/1/2009. Can they pick and choose which plan components to have the transition period apply too, or is it all or nothing? Thanks

I don't know much about them but I will look into. You can transfer non-vested assets to another plan in a spin-off, even if they are unrelated employers?

Employer A has a 401(k) Plan that includes a 2/20 graded vesting schedule for PS contributions. Some of the owners of Employer A are planning on leaving the company, and starting Employer B. Employer B plans on having its own 401k plan, but wants to count service from Employer A for those employees who leave Employer A to join Employer B. This appears to be an amicable separation, so far so good. Employer B's document can be drafted to count this service with Employer A. But it is expected that some of the employees who switch from A to B will not be fully vested in their account balance in Employer A's 401(k) Plan. What both employers would like is for none of the employees who are transferring to have a forfeiture. Rather, they can move their entire account balance over to Employer B's plan, and continue to vest in it. So if an employee has a $10,000 account balance in Employer A's plan, but is only 60% vested, the entire $10,000 can be moved to Employer B's plan, and the employee would still be 60% vested. Can this be done? I suspect the answer is No, because if for example that same employee terminated employment with Employer B, still at 60% vesting, it doesn't seem right that the non-vested portion would now go to Employer B's participant, when it should go to Employer A people. Would you agree? Finally, if the above ownership was slightly different and the owners of Employer A also had common ownership control of Employer B. Would the above transfer of the non-vested amounts now be acceptable? Thanks

On the SAR, there is mention of the cost for additional copies of the report, both per page and per report. Is there a maximum dollar amount that cannot be exceeded for both of these costs (e.g., $0.25/page, $5.00/report)? Thanks

Are trustees or other fiduciaries of 403(b) plans required to have fidelity bond coverage? Thanks

Doctor is 100% owner of a small office, of which only he and his wife are employees and his compensation is around 120,000. They maintain a 401k plan. The doctor is also a minority owner (25%) in another office of doctors. This office also has a 401k plan. The doctors compensation is around $175,000 from this practice. For 415 purposes, can the doctor achieve $45,000 in allocations from each business or does the $45,000 apply to him in total, combined from both plans? Thanks

A small 401k plan had 1 payout (rollover) in 2006. By accident, our office and the accountant separetely prepared identical 1099-R's, which the owner/Plan administrator promptly filed both copies with the IRS and sent both versions to the former participants. Can anyone advise on how to fix this? If we file an amended 1099-R showing $0.00, I'm concerned that might wipe out both 1099s. To do nothing would make it seem that there were 2 distributions. Since this was a rollover with no taxable event, is it best to just do nothing? Thanks

In trying to figure out a way for some owners to maximize their annual additions, I came up with the idea of using employee contributions to get there. I would appreciate any comments if what I have is way off base. Company has 9 employees, with 2 owners (brothers), plus 5 more lineal family members, for a total of 7 HCEs, with 2 non-related NHCEs. Plan is a Roth 401(k) 3% safe harbor. No other contributions so far. New Comp. won't work in this plan if we try to favor the 2 owners. Everyone has elected to make Roth contributions rather than pre-tax 401(k). What if the plan allowed for both Roth and after-tax employee contributions? The 2 owners (with comp of $225,000) make $15,500 in Roth contributions, get $6750 in s/harbor contribution, and a contribution of $22,750 in after-tax employee contributions, getting them to $45,000 in 2007. If none of the other 5 HCEs make after-tax employee contributions, the 401(m) HCE ACR would only be 2.89%. If the 2 NHCEs were to put in on average 1.45% after-tax (but not Roth) or if the company put in a 1.45% QNEC for NHCEs only, then 401(m) passes (1.45 *2= 2.90%). Granted this is a pretty narrow set of circumstances, but does this work as well as it seems to work? The owners, who already favor after-tax plan money (compared to pre-tax) can hit $45,000 by either making a small QNEC or possibly no additional ER contribution if the NHCEs put in a small EE contribution. Is there any difference tax-wise between after-tax employee contributions and Roth contributions? Am I correct in that both contributions go in after-tax, earnings grow tax-free, and both are not subject to income tax upon distribution? I know there are some differences regarding when and how withdrawals are made.

If a participant wants to take a loan in February, is there a specified amount of time when the loan repayments must begin? The participant wants to start repayments in June and the loan procedures are silent on this. Thanks

That sounds reasonable, but after reading the 945 instructions, it states that form 945 should not be filed for years in which there is no tax withholding.

Form 945 has been filed for a plan in the past due to taxes withheld from distributions. However, no distributions took place in 2006. Should a 945 showing $0 still be filed? Thanks

The father-in-law of the owner is currently employed and is over 70-1/2. Is it necessary that he receive a minimum distribution as long as he stays employed? Thanks

For a plan to test otherwise excludable employees separately in a 401(k) test, is it necessry for that to be stated in the plan document? Thanks

A 401(k) Plan (no safe harbor) has a 1000 hours/last day rule for match contributions. There are 2 HCEs and that out of 10 NHCE participants, 2 terminate with more than 500 hours during the year. However, the employer makes no match contribution for the year. Is the 410(b) test for the 401(m) contributions automatically satisfied since since no one received a contribution? Or, does the test still need to be performed, with an 80% result, because of the 2 terminees? Thanks

Employer of an existing 401(k) plan wants amend to the plan to provide for a 3% safe harbor for 2007 even though it is now late December, 2006. The answer is usually (always?) "No", but does the answer change to "Yes" if the plan currently uses a current year ADP testing method, in which case they would have until 12/31 to amend the plan? Thanks