Spencer

thank you!

Client has recently hired new HR manager. She discovered that last year, a participant was allowed to withdraw 100% of her account balance although she never terminated employment. Plan allows in-service distributions at age 59.5, but participant was only 53. Hardships are not allowed. Loan are permitted, but only up to 50% of vested balance. What is the remedy for this? Retroactively amend plan allow in-service distributions at age 53? What if client prefers not to do that? Thanks for any suggestions!

Chip, that is how I originally prepared the form and they refused to process it.

Chip, I'm having the same problem. JH refuses to refund Excess Aggregate Contributions to the participant. As you said, their form doesn't even allow for it. And my JH rep just advised they do not have a workaround. As the above poster mentioned, I haven't had an ACP failure prior to this one in years, so this is my first experience with JH and this issue. I suppose our only option is refund to employer and employer refunds to participant.

Thank you! very helpful info.

I work with 401k plans, but I have a client who also has an ESOP. He has a participant who has requested a lump sum distribuion and has inquired about how to remit the 20% required federal income taxes. I thought I read somewhere that the 20% withholding was not required for ESOP distributions. Or was that just for dividends?

current tax deduction. Thanks for all the input. Does the DB plan have to be in place/signed prior to year end for 2012?

I work with DC plans so I need advice on whether a DB plan could be an option for client. Owner with $700,000+ in comp for 2012. Age 57 and it is a sole prop. Only other employee is his son, age 32. Owner wants to put away as much as possible. Concerns are that compensation may be not be anywhere near this in years to come. Would he be locked in contributions for several years? how long would IRS expect him to keep plan? Any thoughts? Thanks!

I work alone and I'd just like a second opinion (or more) on this. Is there a brother-sister controlled group in this situation? Son (over 21) owns 100% of Company A and 49% of Company B. Father owns zero percent of COmpany A and 49% of Company B. Other 2% of Company B owned by unrelated individuals. Thanks!

Employer offers High Deductible Insurance Plan with HSA. They are telling employee that he cannot participate because his wife has a VEBA. Can't find anything on this. Thoughts? Thanks!

Prospect who currently has an ERISA 403b and they want to change to a 401k. When/if they terminate the 403b, do they have to allow participants the option to take a lump sum distribution? They want everyone to rollover to the new 401k. Thanks!

totally agree on ADP. I am not a fan. We do the audit and had no idea things went down this way until the client received the IRS notice. Thanks for your comment on treating as documentation mistake.

in 2010, assets transferred from Principal to ADP. ADP established a new plan, filed 2011 5500 with new plan number 002, marked first return, zero beginning assets and showing a transfer to the plan on Sch H line 2l. The Adoption Agreement has an original effective date of 01/01/2010. There were no other changes to the company or the plan. Is there any reason that a new plan should have been started? btw, this is a large plan with an audit required. The problem now is that a final form 5500 for the original plan 001 was not filed. Client has received an IRS notice inquiring about 2010 return. I don't know if the Principal plan was actually terminated (doubt it). I don't think there are any successor plan issues because there were no distributions to participants. If I file a final 5500 for the original plan 001, we will have to go through DFVCP and it would cost $2000. any thoughts on how to fix this? Thanks!

I work for an accounting firm and we use ProSystem fx suite of programs for billing, time management and document retention. http://www.cchgroup.com/webapp/wcs/stores/...-_-prosystem+fx

Clients wants to contribute max for individual and family. HCE is the only one with a family. Is this discriminatory? or is it okay because it is offered to all? could the employer contribution be 100% of deductible for everyone and be okay? rather than a specified dollar amount? thanks!!

I have a participant who is 70.5, and a non-owner. He has terminated employment with his long-term employer and sponsor of his 401k account. But he has a part-time job now. Does the "still working" exception apply? Can he defer RMDs until he stops working entirely? or since he has terminated employment with the sponsor of the 401k, does he have to start? Thanks!

Not that it is any of your business, but this wasn't the only source with which I checked. I just usually post here first becuase I get quick responses. And then I can provide multiple sources backing up my advice to the partners. We have been able to convince them since I posted to make the SH contributions. Problem solved. Thanks, ERISAtoolkit.

I have a client who has six employees. They do not offer health insurance because they are so small. Four of the six are covered by their spouse's plan. For the remaining two employees, they want to reimburse them for the health insurance premiums they are paying up to $100 a month. Is this discriminatory? The other four are paying for insurance through their spouse's plan. One person at the client is arguing that anyone who can offer proof that they are paying for health insurance should get the reimbursement. Another only wants to pay the two who aren't covered by another policy. Any suggestions where to find guidance on such matters? HR matters I guess. THanks!

Employer A (or the financial institution) should prepare a 1099-R, code G, Direct Rollover and Rollover Contribution. Because it is a rollover, the taxable amount will be zero. NO.

Yes. I'm the only EB person at a CPA firm so sometimes I need a second opinion to convince them we're okay. Thank you!

I've written a letter stating the risks and possible consequences and I have it writing back from client that they are willing to accept risks. But Powers That Be here want to be sure we are covered. Thanks for your input.

Plan terminated in 2010. Partners do not want to make SH contributions for 2010 for themselves. They did not defer and did not realize that they still were required to deposit the SHNEC for themselves. Plan has two partners/HCEs and two non-HCEs. SHNEC was contributed for NHCEs. Other than advise them that this a violation of the terms of the written plan document and that they are risking disqualification, what is my responsibility? They seem willing to take this chance. Must I report this failure to contribute? Thanks!

Question 1 We are performing an audit for a large plan with loans. Participant with loan terminated employment in 2009, defaulted on loan in 2009, and was issued a 1099R for 2009. Participant did not receive a distribution of his remaining account balance so loan was not offset. Deemed distribution was not shown on the 2009 Form 5500. I know that the defaulted loan continues to be a plan asset as far as vesting, top heavy and qualification for future loans, but shouldn't it have been reflected on the 5500 for 2009? Question 2 Participant was rehired in 2010. Still never took distribution. TPA is now showing deemed distribution on the 2010 Form 2010. Does it matter that the 1099R was for 2009 and the deemed distribution is being shown on the 2010 Form 5500? Also, still no distributable event so shouldn't the defaulted loan still be on the books for vesting, top heavy and qualification for future loans? As always, thanks!

Monthly. TPA error. Sponsor is looking for guidance.

We are auditing a 401k plan. Plan document says Match is 100% up on first 5% for the month, and 50% up to 7% for the month. Notwithstanding preceeding sentence, a participant shall not be entitled to Match with respect to a month unless he is an Eligible Employee on the last day of the month. Just to clarify this not discretionary. For 2010, Match was calculated on annual basis. This benefits some participants and others were shorted. And some participants received match even though they were not eligible on the last day of the month. We advised client and TPA of error and recommended they revise calculation to comply with plan doc. They said "eh, we don't think it's big deal". So obviously, failure to comply with written terms of the plan document. This is an operational defect, right? And they are risking disqualification? For 2011, Match is being calculated on per payroll basis. argh!