Dennis Povloski

Plan is a traditional defined benefit plan. Plan has 4 participants who elected annuity forms of payment, and are receiving their payments from the plan trust. The plan is going to terminate through a standard termination with the PBGC. Can the participants already in pay status make new elections on plan termination if they want to, for example, get a lump sum from the plan. Let's assume that the plan will be fully funded and can pay out 100% of all benefits due. TAG says that 401(a)(9) allows for a change of election upon plan termination, and I just wanted to double, triple, quadruple check with the community as well. Thanks!

Got a question from an accountant who has a client that is the 100% owner of a single member LLC taxed as a sole proprietorship. The LLC is the sponsor of a solo-401k plan and files Form 5500-EZ. The owner of the LLC now sits on a board of directors, and the board of directors will only pay director fees to the individual, not his LLC. So the director fees are going to be reported on a separate schedule C. My instinct tells me that his sole proprietorship should become a participating employer to the plan if he wants to use the director fees as the basis for contributions. If he does have the sole proprietorship become a participating employer, does that somehow ruin the ability to file a Form 5500-EZ? It's the same person, just with two separate business entities that he is the 100% owner of, so I can't imagine that it would, but I can't find anything that specifically addresses this. Thanks!

Profit Sharing Plan has a last day rule for allocations. Employer wanted to make a flat 3% contribution to all employees, so he plugged a formula into payroll and contributed 3% to each participant every pay period (so that he wouldn't get a large lump sum contribution due at the end of the year). A participant terminated during the year, and therefore didn't meet the allocation requirement to receive the profit sharing contribution. The profit sharing was paid out with his distribution. The employer was not able to recover the excess distribution, so he will make a contribution to put the plan back in the place that it would have been, had the error not occurred. As I understand it, the employer can deduct the corrective contribution in the year that it is made. My question: Is the original contribution made to the employee that didn't meet the allocation requirements deductible? It seems to me that it's kind of double dipping if he deducts the contribution to the participant and also deducts the corrective contribution. Thanks all!

Plan has always filed as a small plan. On 1/1/2016, enough new participants entered to bring the participant count above 120. The plan merged into a larger plan on 3/31/2016. I'm preparing the final 5500 for the short year. Is an audit Required for my final short year 5500, or will it be covered under the acquiring plan's audit when they file their 2016 5500? I see the option to delay an audit in a short plan year, but this is also a final return for the old plan.

Profit sharing only, 100% participant directed brokerage accounts.

Wasn't sure where to post a question like this.... One of my clients received a packet concerning settlement of a class action suit against one of the stocks in their plan. The plan consists of individual participant directed brokerage accounts. Does the trustee have any responsibility for responding to the settlement claim? Because it is in a participant directed account, does the responsibility shift to the participant?

Box 12, code W indicates HSA contributions. As I'm learning about this, it looks like these contributions can be made through employee deferral via section 125, or they can be employer contributions. What I can't seem to tell is if the amounts were withheld through employee deferral, are they already included in either Box 1 or Box 5 of the W-2? Our definition of comp is W-2 including all types of deferral, and in this particular case, everything else is already included in Box 5...I'm not sure if I need to add these code W amounts in, or if they're already included in Box 5. Any help is greatly appreciated! Thanks!

If a participant has a pre-tax deferral balance and a Roth deferral balance in his 401k plan account and is required to take an RMD, can the participant choose to take the Roth money first? Assuming that the funds have been in there for 5 year and is a qualified distribution, there would be no tax due on the Roth balance, right?

For 2014, plan sponsor has a profit sharing plan (no 401k component) that is combined with a cash balance plan. Top Heavy test is above 60%, so the plans must provide the top heavy minimum in 2015 (5% provided in the profit sharing plan). Without consulting the TPA, the client opens up a separate 401(k) plan with safe harbor match effective 1/15/2015. No other contributions besides deferrals and safe harbor in this plan. The 401k, of course, has no eligibility requirements and immediate entry. So all employees come in on day 1. Key employees participate in the 401k, profit sharing and cash balance. In my reading, the required aggregation group consists of all plans of the employer in the determination year, which would be 2014. Since the 401(k) didn't exist in 2014, is there any way that I can get out of providing the 2015 top heavy minimums to people that are just participants in the 401k plan. These people haven't entered the profit sharing plan or the cash balance plan. Maybe this doesn't matter since the required aggregation group tells us how to determine top heavy, but doesn't necessary tell us who gets the top heavy minimum. I think the answer is that all the non-keys in all the plans need to get top heavy in 2015, but I'm grasping at straws....

If you have a takeover plan, that has many previously terminated, deferred vested participants, but you have no idea that they were ever properly reported on the form 8955-SSA, what is your philosophy on reporting them? Assume they were reported correctly and not report until they get paid out with code D? Report them with Code B just to make sure they're in the system? Something else? Thanks! Dennis

Wasn't sure where to post this one, so started in this forum.... The 1563 attribution rules have an exception for spousal attribution if certain conditions are met. Husband owns 100% of his own business Wife owns 60% of her family business (her siblings are the other two owners) Husband works in and manages the wife's family business. He is deemed to own her shares for sure. The wife has nothing to do with the husband's business, and her business is completely separate from the his business (no common customers, products, services, no income going back and forth, etc.). Is the wife deemed to own shares in the husband's business? I'm not sure if attribution exception is blown for one spouse, if that means it's also blown for the other spouse... Thanks!

The plan sponsor read an article about whether or not an employee should take the lump sum if offered one. So we were discussing some pros and cons (the biggest being that if he paid out lump sums, his funded status would go down the toilet). The article was written in a way that made it sound like employers were offering lump sums to save a buck and provide employees with a less valuable retirement benefit, so the author made it sound like the annuity was generally the way to go from the employees perspective. In the end, even if they could offer lump sums, it wouldn't make sense for this particular plan to drain it's investments to pay them out.

That's the piece I was missing. Thanks all!

A defined benefit plan that was frozen in 2001 currently doesn't have a lump sum feature. The AFTAP is 63%. I seem to recall that there is an exception to the restriction on paying out lump sums under 436 if the plan was frozen before 2005. If that's true, can this plan be amended to add a lump sum optional form, and then start paying out lump sums? Or would that somehow be considered an amendment increasing benefits and therefore not permitted? Any other ways something like this could blow up? Thanks!

I've never dealt with deemed IRAs inside a plan. If the plan allows for deemed Roth IRAs, is it possible to roll a Roth IRA into the deemed Roth IRA within the plan? I know that you can't roll a Roth IRA into a 401k plan, so if the participant wants to consolidate assets. Would allowing the plan to set up a deemed Roth IRA allow him to roll his money into the investment platform if the platform can recordkeep the Roth IRA separately?