John Feldt ERPA CPC QPA

I have heard actuaries respond differently to the "waiver" issue. 1. Some say that amendments can be taken into account for funding purposes, but a majority owner signing a piece of paper to forego receipt of benefits is not an amendment and thus cannot affect the plan's minimum funding requirement. 2. Another EA stated that the execution of the "forego receipt of benefits" papers have changed the accrued benefits and thus can affect minimum funding, especially if the papers were signed before the plan's valuation date. I would lean heavily into #1 above and stay away from #2. However, the actuary has to sign the B, so if they say a minimum contribution is required, you'll need to address that with the client. If they accept the waiver as affecting the plan's minimum, it's their signature on the B.

Thanks - that means any employer that had less than 100 employees receiving $5,000 or more in compensation in the prior year are a small employer, and can ignore the 105% portion of the 415 calculation. Nice.

And remember that small plans don't use the 3rd calc on 105%. I have an Enrolled Actuary asking for a citation to support that last comment. Where is that found?

Perhaps a good place to start would be to contact the firm that sent you the documents. If they created the documents, they should be able to help you (probably). Also, you should have received a document in 2001 or 2002 for your signature, do you know what happened to that package? Maybe a little background will help here. The assets of these plans are considered "tax-qualified" - because a tax-deduction was allowed for the contributions and the earnings are not taxed within the plan (or still deferred if rolled over to an IRA or other tax-qualified arrangement). When benefits are eventually paid out, only then will the amounts paid be subject to income tax. In order to qualify for these tax deductions and tax-deferred benefits, the plan must be in writing - we call that the plan document. In order for the plan to keep its tax-qualified status, it must (generally) also operate according to its plan document. Ongoing, the goal is to keep the plan's assets from all becoming taxable, to avoid having the plan sponsor lose any of its tax deductions, and to avoid any sanctions or fines (disqualification). Because of this tax-deferred status, our tax code (the laws passed by our elected officials in Congress) and its regulations (the Treasury Department's interpretation of those laws) and all of the other official guidance from Washington, require employers sponsoring these plans to jump through hoops (adopt amendments) almost every year. Then, every 5 or 6 years, you are generally required to completely restate the plan's document again to obtain an official opinion letter saying that the written plan language is still qualified. Technically, if you think you have adopted perfect amendments each year and if you are comfortable with the uncertainty that even one word in your plan document could subject your entire plan to potential disqualification if audited by the IRS, then you would not have to restate, because you are not required to have an IRS opinion letter. Perhaps you are also not required to sky dive with a parachute. Or, perhaps you are not required to measure the thickness of the river's ice before ice skating there. Okay, perhaps comparing potential death to the potential threat of sanctions and taxes is a bit extreme. you get the idea. Now, personally, I prefer to have protection from the mafia IRS by restating the document to gain reliance on their opinion letter (or reliance letter). Let's assume you did adopt/restate your plan in 2002, but only missed the recent April 30, 2010 deadline. The IRS fixit program, EPCRS (Employee Plans Compliance Resolution System), has a sale on now where you can pay half the filing fee if your error is fixed by April 30, 2011. They don't really call it a sale, but it's explained in section 12.03 of Revenue Procedure 2008-50. Since your restatement deadline was April 30, 2010, the Rev Proc indicates that the usual $750 fee is a mere $375 if you fix it within 12 months of its intial deadline (per plan). The cost to prepare and file the application to the IRS will likely cost much more than that for a qualified plan professional to assemble it all for you. You'll have to decide if that cost, when compared to the potential cost of disqualifying the plan, is worth it. Hope that helps!

File based on EIN if you want a D letter and they did not elect to be covered by ERISA.

Correct, and you can ignore salary deferrals.

Great - thanks!

Nice. Is this written such that it only has teeth for profit sharing plans, or do you think it also would apply to a money purchase plan, a target plan, or how about a Defined Benefit plan? Edited to clarify: I mean Rev. Rul. 72-509

Here's 1.401-1(a)(2) A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees and which is established and maintained by an employer— (i) In the case of a pension plan, to provide for the livelihood of the employees or their beneficiaries after the retirement of such employees through the payment of benefits determined without regard to profits (see paragraph (b)(1)(i) of this section); (ii) In the case of a profit-sharing plan, to enable employees or their beneficiaries to participate in the profits of the employer's trade or business, or in the profits of an affiliated employer who is entitled to deduct his contributions to the plan under section 404(a)(3)(B), pursuant to a definite formula for allocating the contributions and for distributing the funds accumulated under the plan (see paragraph (b)(1)(ii) of this section); and (iii) In the case of a stock bonus plan, to provide employees or their beneficiaries benefits similar to those of profit-sharing plans, except that such benefits are distributable in stock of the employer, and that the contributions by the employer are not necessarily dependent upon profits. If the employer's contributions are dependent upon profits, the plan may enable employees or their beneficiaries to participate not only in the profits of the employer, but also in the profits of an affiliated employer who is entitled to deduct his contributions to the plan under section 404(a)(3)(B) (see paragraph (b)(1)(iii) of this section). I emphasized the communication to participants, but I do not see the phrase "by year-end" - where is that cite found?

What is the cite that supports this SPD deadline?

Austin, your memory is correct if you are testing for an A-Org ASG. In order to be an A-Org ASG, the First Service Organization (FSO) must be a professional service organization if it is incorporated. However, in the example provided, could the B-Org rules could apply? Is at least 10% of the B-Org is owned by HCEs of the FSO? Of course, that assumes there is a service organization in the first place. Assuming the service provided is not in the list of service fields (health, law, eningeering, architecture, accounting, actuarial science, performing arts, consulting, or insurance), then does an FSO exist? Is a sales organization considered a service organization? Consulting, under Treasury Regulations 1.448-1T-(e)(4)(iv), does not include sales. Capital is not considered as a material income producing factor if the business income is derived primarily from fees or commissions for personal services. So, is sales a personal service? To me this means that retailers and wholesalers are not service organizations.

Right, 8821 allows talk and info exchange, but you need a 2848 to allow representation: "Form 8821 does not authorize your appointee to advocate your position with respect to the federal tax laws; to execute waivers, consents, or closing agreements; or to otherwise represent you before the IRS. If you want to authorize an individual to represent you, use Form 2848, Power of Attorney and Declaration of Representative."

For SunGard, don't you get 50% discounts? (I think you're using their software, right?)

I think SunGard webinars and conferences are ERPA approved and ASPPA's conferences and webcasts too. If you already attend some of those, there's a bunch of credits right there.

I think that the Form 8821 allows you (and anyone in your company) to talk to the IRS and "help" with an IRS audit/exam. The 8821 names your company. However, under the Form 8821, you do not have the authority to represent your client on their behalf to the IRS. This could be a problem if the IRS tries to impose a sanction - you really won't be able to help them to negotiate with the IRS if that occurs.

An existing 401(k) profit sharing plan defines its normal retirement age as 65. They want to add a Defined Benefit plan, and its retirement age would be 62 or if later 5 years. The plans are tested together for 401(a)(4) testing. Can the testing age be age 62 (or if later 5 years)? Or is an amendment needed first to the 401(k) plan's NRD?

"Does the combined limit apply if I have one employee in the DB and the 401(k) deferral, but NOT the PSP and Match?" No. 404(a)(7)©Paragraph not to apply in certain cases: ...404(a)(7)©(ii)Elective deferrals. If, in connection with 1 or more defined contribution plans and 1 or more defined benefit plans, no amounts (other than elective deferrals (as defined in section 402(g)(3))) are contributed to any of the defined contribution plans for the taxable year, then subparagraph (A) shall not apply with respect to any of such defined contribution plans and defined benefit plans. "Does the combined limit apply if I have one employee in the DB and the 401(k) Deferral and Match, but NOT the PSP?" Yes, but maybe no. If the total employer contribution for the PSP/Match does not exceed 6% of eligible compensation, then 404(a)(7) does not apply: 404(a)(7)©(iii)Limitation. In the case of employer contributions to 1 or more defined contribution plans 404(a)(7)©(iii)(I) if such contributions do not exceed 6 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, this paragraph shall not apply to such contributions or to employer contributions to the defined benefit plans to which this paragraph would otherwise apply by reason of contributions to the defined contribution plans, ...

Kevin's right, EA means enrolled agent, not enrolled actuary. So even if they finalize this discount, you may still be on the hook for the full $64.25, at least until retiring from preparing tax returns. This was only proposed, so be sure to properly discount the info until final word is given on the discount.

The owner of a business just hired his step-daughter. She has not been adopted by the owner (original parents both still have rights). So far, this looks like a NHCE. However, the business owner (100% ownership) lives in a community property state (Wisconsin). So, due to community property law, I think the spouse of the business owner is considered to directly own 50% of the business (even though there is no actual direct ownership of any company stock certificates by the spouse). If that is correct, then this would make the step-daughter a HCE? Agree? Disagree?

This example assumes compensation is at least $49,000 due to the 415© limit (100% of compensation).

Thanks. We also listened in on that forum, and we have already submitted the VCP application. By the time the IRS picks it up for review, perhaps a new Rev Proc will have been issued! 'will have been' is that present-past future tense?

That's exactly it! Thank you very much. A search for 'church' did me no good in there! "The due date for filing the employer’s tax return in the case of a tax exempt employer that is not required to file a Form 990 series return is the 15th day of the 10th month after the end of the employer’s tax year (treating the calendar year as the tax year if the employer does not have a tax year)."

And what of Poledra?

Thank you, O Sorcerer, Old Wolf and Ancient One.

Does anyone have any inside information on how soon we might see guidance for In-Plan Roth conversions?