MoShawn

I would think you would use the rates the participants elected/were defaulted to. Treat it as a failure to implement an election rather than a failure to give an opportunity to elect.

Does the document specify that match forfeitures must be used to reduce match, or just "employer contributions"?

FWIW, I always interpreted this portion: For purposes of the minimum required allocation set forth above, the percentage allocated to the Account of any Key Employee who is a Participant shall be equal to the ratio of the sum of the Employer contributions (excluding any Catch-Up Contributions) allocated on behalf of such Key Employee for the Plan Year divided by the 415 Compensation for such Key Employee for the Plan Year. To refer specifically to this statement: However, if (1) the sum of the Employer contributions allocated to the Participant's Account of each Key Employee for such Top-Heavy Plan Year is less than three percent (3%) of each Key Employee's 415 Compensation The entire first paragraph is describing how to arrive at the "minimum required allocation set forth above". This sentence clarifies that when doing part (1) you must include the deferrals of Key employees in determining whether or not a Key has exceeded 3% of compensation.

Present both options, with pros and cons. Get a decision in writing. I had a similar question recently. I just cannot get beyond the math. 0/0 does not = 0. As you said, it is imaginary math.

1) First distribution calendar year is 2013. He must receive the first RMD by 4/1/14. If he delays into 2014, he would need to take a second RMD by 12/31/14 for 2014. 2) No. You cannot mix RMD's from an IRA with a 401(k).

Yeah, yeah, call me paranoid...

Doh! Good case of adjusting the facts to protect the innocent, and in the process changing the situation entirely... Actually terminated at age 58, thus the interest in the exception.

I had a question relating to the age 55 exception come up just this morning. Participant age 60 terminates employment. Due to a testing failure, he receives $2,000 and a Form 1099-R with tax code 8. Subsequently, it is determined that the correction should only have been $1,500. Currently he has 1 Form 1099-R with a code 8 for $2,000. Assuming he does not return the money to the plan, we will amend the Form 1099-R to be code 8 for $1,500 and issue another with a code 2 for $500. Doesn't this represent the same tax position, either way? In both instances, $2,000 is includable in income and nothing is subject to the 10% early withdrawal penalty.

One of the express exceptions to the mid-year amendment rule for Safe Harbors is to add hardships, I believe.

I have also followed the path of using the 2012 ADP as a benchmark to correct, then going back and doing a true-up once the 2013 ADP is known.

I think a bit of both. We are going to try to convince them that 2 per semester is not unreasonable. I think I studied for 2-3 weeks at the most for the one I took this spring.

Unfortuntely, my company only allows 1 module at a time...one module down (dist & loans), three years to go...

Here is the situation: A money purchase pension plan failed to make contributions for 2008 for a participant due to a payroll coding error. This was discovered in 2012 and corrected according to EPCRS. Auditor is suggesting that we may need to file Schedule G, Part III for Nonexempt Transactions. Is this correct? I have never before heard of a Sch G being filed for a case of missed contributions.

I would still follow the process BG5150 stated before. Using the DOL VFCP calculator, you are looking at about $8.50 in lost earnings, which would be about $1 in excise tax on Form 5330. If you have a copy of Form 5330 (along with the check) and proof of deposit of the lost earnings you should be fine, even under DOL audit. Unless there are more details here that we haven't heard yet, I don't think there is any reason to do a full VFCP submission. The class exemption may get you out of the excise tax, but if that is only going to be $1 then why waste the man-hours.

Why not just deposit missed earnings and pay the excise tax on Form 5330? I wouldn't think VCP is necessary, and VFCP is voluntary. All it does is prove to the DOL that you corrected and gets you a no-action letter.

Many times you can import duplicate information into Relius that cannot be manually entered. For example, I have had employees leave one client and join another in our database. I could not manually enter the person into the new employer, but got an error message. I had to first go back and change the SSN of the original entry to a placeholder number, then enter the person into the new employer. However, if the person was simply imported from a payroll file, then Relius let the duplicate through without any problem.

I have to disagree: If the initial refinancing in 2010 was calculated and structured correctly, then the initial 5 year loan would be considered paid off and have no bearing on the current refinancing. There is another step to the calculation that masteff used. The $50,000 limit is reduced by the highest balance outstanding in the last 12 months, less the amount outstanding on the day of the new loan. In this instance that would be $50,000 - ($26,000 - $24,000) = $48,000. The other half of the limit would be the 50% of vested balance less current outstanding balance calculation. Again, in this instance that would be ($80,000 * 50%) - $24,000 = $16,000. The tricky part is that this could be reduced to an even lower amount if the term of the loan extends beyond the term of the loan being replaced. There is a special rule noted in the EOB Chapter 7, Sec. IX, Part C.3.c. about refinancing a principal residence loan. It implies that any additional money borrowed would disqualify the loan from a repayment period greater than 5 years. However, if the additional money also qualifies for the principal residence exception ... even Sal notes that it is not clear. You may need to do as the EOB says and look to the tracing rules of IRC 163(h)(3)(B) to see how the IRS would view it.

So I think what you are saying is: Ten individuals own the other entity 100%. The 10 owners of the other entity own 27% of an LLC and the other entity owns the other 73%. Do you attribute that 27% to the other entity based on the fact that it is the same 10 individuals. I would say no. The attribution rules that apply in a parent/sub circumstance are in regard to attribution from (1) options to purchase stock, (2) partnerships, and (3) estates or trusts. Absent one of these three circumstances, I would say you do not have a parent/sub controlled group.

Well, I finally got the numbers. The total that was missed for the three years was less than $650. As I said, the client determined that they wanted to make the QNEC as a goodwill gesture to the participant and given the small dollars amount involved, we're not inclined to fight them on it.

Any further thoughts on this? The client is determined that the proper correction is to provide to 2% pre-tax that was "missed" and leaving the 2% "extra" Roth alone.

BG has it right. The participant wanted 5% pre-tax and 3% Roth, but the employer changed it to 3% pre-tax and 5% Roth. I understand the source switch, and think that is the most proper way of correcting. What I'm not sure about is what happens on the personal taxes side of things. He presumably reported as Roth a portion of his contributions that should have been pre-tax. (I'm probably thinking too much about this. I've been accused of that in the past.)

Had a strange situation come up recently, and I'm stumped as to how to go about correcting. EE was deferring 5% pre-tax and 5% Roth. About 2 years ago, EE elected to reduce Roth to 3%. ER accidentally reduced pre-tax to 3%. ER now wants to correct by making a QNEC for the missing 2% pre-tax deferral. I'm not sure this is the right approach, as the deferrals in total were correct and any new money contributed would be an undue windfall for the participant. On the other hand, I see where some correction is needed since the participant has lost out on the pre-tax nature of the deferrals for the last 2 years.

See Treasury Reg. 1.414©-4(b)(3) Also, Derrin Watson's Who's the Employer book and website are very helpful.

Just guessing, but maybe they were an employee at one time in the past but not any longer? If not, then you have larger issues than an RMD.

Isn't that a one-time thing that must be done prior to becoming a participant?