Beltane

The notice is due by November 1st - is there a limit to how early it can be distributed? Thanks in advance!

Employer has maintained a traditional 401(k) plan for years but, due to downsizing, would like to terminate the 401(k) by resolution before 12/31/17 and, sometime in 2018, establish a SIMPLE IRA plan. [My understanding is contributions to a SIMPLE IRA cannot be made in the same calendar year as any 401(k) contributions and a SIMPLE IRA is not considered a 'successor plan'] My questions are: 1) Would all balances have to be distributed by 12/31/2017 to accomplish this? a) If the 401(k) trust accounts are not zeroed out until early in 2018, does this mean they would have to wait until 2019 to establish a SIMPLE IRA plan? b) if all distributions are made by 12/31/17 [final 5500 would then be for 2017], would the effective date of the SIMPLE then have to be no less than 60 days after the SIMPLE IRA notice is disseminated? My belief is, so long as no contributions to the 401(k) plan are made in 2018 then they may establish a SIMPLE IRA arrangement and commence contributions after a 60 day notice period. IRC 408(p)(2)(D) also mentions 'or benefits were accrued', but I believe this is in reference to DB plan accruals. Thanks to any responses.

Any document language restrictions which may govern its applicability? Depends on the provider I suppose - or is this another option to use in testing?

401(k) plan excludes bonuses from the definition of compensation for deferral purposes. Employer is considering adding a safe harbor match formula dollar for dollar up to 4% computed each semi monthly payroll period, and to make the matching contribution at the same time as deferrals are posted. In this case, is the definition of compensation for computing the safe harbor match the same as the definition for deferrals? I assume it would be, otherwise your matching contribution amounts would be greater than your deferral amounts for some employees. If this is true, the match would be less expensive than the 3% across the board non elective safe harbor type of contribution, since I assume that formula cannot exclude the bonuses. Assume both definitions of compensation meet 414(s).

Can't understand why a client wouldn't appreciate the better safe than sorry approach.

That's my question - don't want to cause confusion.

Maybe some do this as a practice - file 5558's as insurance, even if return may be posted on time. Thinking it may be a wise thing to do in case there are system problems, etc.

See 408(p)(5)(A)(I) - pretty sure its 30 days after year end.

Exactly Tom...it appears a one participant plan of a controlled group can file a 5500-EZ - in this case you still would insert the controlled group code in Section IV, question 9a. The benefit of doing this is the data is not made public, whereas a 5500-EZ would be published on the net. Strange difference. Thanks for confirming my recollection of the historical instructions.

What if we have a one participant plan that has a controlled group? For instance, owns an S corp and has self employed income and both sponsor the plan - Is this still a 'one participant plan'? Can you still file an EZ or must you file a 5500-SF? Or doesn't the controlled group existence matter?

5500-SF was filed for 2011, extension exists for 2012 calendar plan year - owner the only participant at beginning and end of 2012 - can a paper 5500-EZ now be filed for 2012? Will EBSA send a form letter asking for the 2012 SF return? Assets over $ 250,000.

Have a profit sharing plan, small number of participants, who participate in a pooled arrangement. The investment pool is managed by an RIA who went to cash for most of December, 2012 and didn't reinvest the funds until about January 15, 2013. Looking for confirmation on this, this being question 4i on the Schedule I regarding 'Did the plan at any time hold 20% or more of its assets in any single security..(etc)' should be answered Yes for the 2012 return AND the 2013 return. Everyone agree? If so, would it behoove us to attach an explanation? Thanks in advance.

In October of 2012 the IRS announced the definition of an HCE for 2013 remains unchanged at $ 115,000. So this implies the prior compensation limit for 2012 was also $ 115,000. And the amount for 2011, announced in Oct of 2010 I presume, was for 2011 $ 110,000. Fine... Now...as we sit here doing our 2012 plan year testing....our lookback year is 2011....so, ( I'm speaking in general here, ignore the top 20% issues, etc...) , anyone who had gross compensation over $ 110,000 in 2011 is in the HCE group when we test for 2012...Correct? Even if their compensation was much less than that in 2012....Correct? And, let's say hypothetically the IRS in October of 2013 raises this definition to $ 120,000....A year from now, when we're doing 2013 testing anyone with gross comp above $ 115,000 in 2012 will be an HCE in our 2013 testing....so we won't use the $ 120,000 level until 2015...when we're testing 2014 plan years. Confirmation and/or corrections would be really appreciated. I just don't like assuming everybody knows this when it's so easy to make this a systematic error. thanks.

Employer wants to amend a 401(k)/PS plan to allow for in-service withdrawals of profit sharing balances at age 50. However, the demographics would only allow 3 people to take advantage of this, 2 of which are HCE's...the remaining NHCE's would not have access to this benefit and the provision would fail the general non discrimination test (70%). The HCEs are ages 53 and 52, the NHCE over 50 is age 58. Seems it would be better to amend the definition of Normal Retirement Age to age 55 and allow these withdrawals upon attaining NRA - the 58 year old NHCE is really the one who needs the non hardship withdrawal. Comments anyone?

Our fees just went up! (didn't think so, thanks.)

On all direct billings to clients (who are invoiced at least once a year) a statement such as this has always been disclosed: "Compensation disclosure: Our TPA firm receives compensation from XYZ Mutual Fund Company to provide administrative services for your plan. For the quarter ended April 30, 2012 this amount was $ XXX.XX". I suppose this does not meet the 408b2 disclosure requirement??

http://www.irs.gov/pub/irs-tege/early_distributions.pdf according to this link it does, just looking for confirmation if anyone has experience on this. Thanks.

Six years have passed since the answer to this was posted - is the answer still valid? Have an employee who was eligible in 2008 and 2009, went on workmans comp in 2010 has under $ 5,000 in compensation in 2010, according to this post she is still eligible. The 5304-SIMPLE is silent on rehires, although I did see American Fund's document states a former participant is eligible upon rehire - no reference to the 5 year lookback previously posted. Can anyone provide a site for this? Don't see it addressed in the regs or the Code (IRC 408). Thank you!

Business and qualified plans are merging. New Trustee decides to move other plan's assets [a few million $$] to an investment house who happens to be a client of the business the Trustee owns, even though the new funds have much higher expenses - Trustee is trying to recipricate business relationships. Is this a prohibited transaction, or at least a Trustee liability issue, since the decision is being made to benefit her business rather than to act on behalf of the participant's best interests? No due diligence was involved in this decision. Any authority or other sites on similar issues appreciated.

We have a plan that over the years a number of separated participants have left their balances as is. The participants currently are not charged any adminstration fees, nada, so it currently is a good deal for those terminated, investments are sound and inexpensive - that's why they have not moved the balances. Now the plan is getting close to the 100 participant level issue on having to have an audit expense and file as a large plan on the 5500 for 2008. Given the language of FAB 2003-3, it appears a terminated vested participant account maintenance fee can be charged. If we do not implement such a change, we run the risk of significantly increasing the annual adminstration fees for the employer via the audit requirement. They have the option of rolling the assets to an IRA with the same custodian, same share class, and the only expense the IRA would have is a $ 10 setup fee and $ 10 annual maintenance fee [standard for IRA's]. Does anyone see a problem with implementing an annual fee, payable in December to the TPA, against terminated participants, say of $ 20 each, amend the SPD [document allows for it, no amendment needed] with an SMM well ahead of time, and giving terminated participants plenty of notice intially to make arrangments to get their balances transferred out?

Sponsors of SIMPLE IRA's must either make a matching contribution or a 2% nonelective contribution on behalf of all eligible participants. IRC 408(p)(2)(B)(ii) caps considered compensation for the 2% nonelective at $220,000 [for 2006]. The matching contribution is anywhere from 1% to 3% [the 'applicable percentage] of total gross compensation for those who contribute. It doesn't look like the 401(a)(17) cap applies when computing the match amount, as opposed to computing the non elective amount. Is this correct? So, if an owner had gross comp of $ 300,000, a nonelective contribution of 2% would limit the [2006] contribution to 2% of 220,000, or $4,400. But if the 3% match was applicable for the year, the matching contribution, if the above thinking is correct, would be 3% of $300,000, or $9,000. ??

Disaggregation only determines who can be separated when you split the test under 401(k)(3)(f). Once you have your 1 year of service/21 years of age group, you use compensation and elective deferrals for the entire plan year for that group. In your example, John would fall into the main group, and his ADP for the year would be his total plan year deferrals divided by his total plan year compensation.

Thank you, from what I've seen it is the normal practice to allow participants to defer on their last paycheck - after all, that last paycheck meets the document's definition of 'compensation' for computing accrued benefits. I'm convinced, herein, they should be included and, on audit, the W-2's would tie to the ADP test.

The CDSC is not a plan expense, its part of the intrinsic value of the investments. If you use forfeitures to pay for the CDSC, the CDSC will vary from participant to participant in dollar terms, whereby plan expenses are either earmarked [e.g., loan origination fees], or, for fees required by ERISA, allocated across the board equally in percentage or dollar terms. The incurrance of the CDSC is not an ERISA required expense like a form 5500 return filing is. Forfeitures cannot be used to pay for earmarked expenses, and non earmarked expenses must be ERISA required expenses.

Not in a direct dollar for dollar sense. The plan document should address the allocation and use of forfeitures. Typically, forfeitures are reallocated as an additional employer contribution, used to reduce an employer contribution or to play plan ADMINISTRATIVE expenses. The CDSC cannot be paid for by the employer without being treated as an employer contribution, thus, any aggregate contribution amount would have to be allocated as such, rather than allocated to pay CDSC charges. Payment by the employer to pay individual CDSC charges would probably not, in this case, be considered a 'restorative payment' under IRS Rev Ruling 2002-45. Typically, your HCE's would have a higher CDSC charge in dollar terms, thus I think you can see the discrimination possibility here if they are reimbursed more than your non highs. So I would say the answer to this question is no.