Below Ground

I really wish there was some cite related to this. I did find in the 2011 Draft Audit Guide by the AICPA that Schedule H accounting may have different results than the Financial Statements of the Accountant's Opinion, and some other vague statements. I have also had at least 4 different CPA's say the auditor is total wrong, and this is an item for the "statement of reconciliation for Financial Statements to Form 5500". So no one knows of anything like that? This whole situation is going sour real fast, with the accountant questioning things like was top heavy testing done? (Stuff like that was in a report we issued last April. ADP/ACP in January.) Was it done right? Our position is that the Schedule H should reflect actual plan operation. It appears the account's position is if the Schedule H is not GAAP then it is wrong, and suggesting otherwise is incompetence. Oh well, I know we are doing the job right.

The Plan is very specific and does NOT include the 2014 payroll date. The accountant keeps saying that under accrual accounting it must be included because part of the period is related to 2013, even though it is all 2014 income for Form W-2. That is not in dispute. Also, we are not going to change our valuation or testing, as that is not being questioned. The accountant agrees that our work on those issues, and data used, is correct. The issue is exclusively what values are reported on Schedule H. My real concern is that our work, and W-2 Forms, will not tie into values being reported on Form 5500. My experience is that an auditor from the IRS or DOL always wants values to tie into W-2 values. If not, the audit by the IRS/DOL becomes a major headache. So I am I right that there is nothing that support our desire to have the 5500 values coordinate with the actual operation of the Plan?

I totally agree ESOP Guy. Normally changes are issues of classification of an asset, or defining income to be mutual fund earnings versus realized and unrealized depreciation. Stuff that I am kind of like "who cares", but this creates a serious problem. Every audit that I have every been involved in during my 30 years always looks to have 5500, testing, allocations, etc... tie together. For a calendar year plan the auditor ALWAYS wants to see values tie into W-2 values (assuming those are values used). What method should be used to divide that payroll into 2013 vs 2014. Can we just cut in half? Look at Hours for the periods? To me this seems to be opening up Pandora's Box in so many stupid meaningless ways. I guess my frustration is showing itself.

I understand the issue of using Post Year Compensation, but I thought (mistakenly?) that there was a Rev. Rul. or something that said when a payroll period cross over a year then you use the year the pay date falls in, subject to Plan terms on Post Year Compensation. The position of this accountant is not related to the Post Year Compensation issue. Instead, she wants to prorate the deferral from that payroll period and divide between the 2 years. She is not claim this to be related to Compensation, but it is "required under accrual accounting"????? I have been looking through old notes and stuff, and can't find what says that you do not do (not required) this proration between years. My problem is that is I use her values, deferral values on Form 5500 will not coordinate with testing or any other aspect of plan operation.

Testing was done using Form W-2 amounts. Curiously, this Plan was recently audit by both DOL and IRS. Outside of some deposit timing issues, the audits were clean. Compensation for both allocations and testing using the 414(s) W-2 Definition determined over plan year period (calendar). Plan terms explicitly excluding "Post Year Compensation".

We are having difficulties with an accountant on Accountant's Opinion and Schedule H for calendar year 2013 plan year. Basically, the last payroll date with contributions was 12/20/2013. These deferrals were physically deposited in early January. (Question is not on deposit timing.) These deferral were reported on 2013 W-2 Forms. Obviously, these contributions are reported on the 2013 Schedule H, which we prepare on an accrual basis. That is not the problem. We have a payroll period the runs from 12/23/2013 to 1/3/2014. These contributions will be reported on 2014 Form W-2. It is this period that we are having trouble with the accountant. Accountant believes that since a portion of this pay period was in 2013, we must include on 2013 Schedule H! As I recall from ASPPA Exams, ect.. this was long settled as you use the amounts for the year in which Form W-2 records these contribution. In effect, none of this period is reported in 2013. Reporting is in 2014. Does anyone have a cite or reference that I can use for this purpose? Thanks in advance for assistance!

Helpful link => http://www.tparesources.com/index.php/public/newsstand/ppa-document-restatement-fees-survey-results-in

Thank you very, very much.

Thanks to all. GMK, do I read this right in that if she rolls to her own account under the Plan, RMDs before she is 70.5 are not needed? I was under the impression that she must continue RMDs using the factor for her age. As noted, she is a little over 60; almost 61. She is the Owner's spouse and she is also a participant under the same Plan as an employee of the firm. Owner did take full RMD before he died in 2014, so nothing more for 2014 is due. Thanks for clarification Mr. Rigby.

Having read a number of posts on this topic, I find myself still confused. Any help would be greatly appreciated. Business owner is well over 70.5. Has been taking RMD for a few years. He dies. Spouse is only 60. She is the sole beneficiary. From what I have read she must continue on with RMDs, but using the factor for her age. It also seems that she can rollover the monies in the same plan (she is in the same plan with the owner), but she must take RMDs from her rollover account. Lastly, what is the impact of rollong to an IRA?

Whether this issue has any validity would depend upon what the person has in their account. Losses could make cost basis more than account value so using earnings would not be a benefit. Of course their is no employer contribution then being able to access those monies would have no impact, since they don't exist. So when dealing with a low value account, withholding could perhaps be an issue? I do note that the value was small earlier.

Both suggestion are good ideas, normally. I am talking about a person who want his/her total deferral account (hardship is big enough, and earnings not involved), who looked at the value of his/her account and thinks they can get that. They whine about no earnings, and then explode over the 20%! Isn't "funny" that a person with $1299.57 in his/her account will scream about every little things while a person with $250K takes it all in stride. Come to think of it, it makes perfect sense!

So this is correct, you can't take a Hardship since you must first exhaust other types of distributions first? To My 2 Cents. Of course it will be taxable either way. The concern is on how much money does the person get in hand right now. Looking long term, you are 100% right. No difference. Short term there is definitely a difference. If person needs $1,000 right now, then getting $800 is not enough. We all know that people frequently don't make the best choices, and when you tell them that they can't have what they want, a huge tantrum may follow. If I have to say no, I want to be sure that is the correct answer.

Perhaps I missed a change in the law. Received a letter from a representative of a major "fund house" which says: "If the plan allows for In-service Distributions and the person is over age 59 1/2, we will have to follow the IRS guidelines and process as an In-service Distribution rather then a Hardship; meaning the mandatory 20% federal withholding would apply." I missed something because I know of no IRS guideline that says there is a maximum age for Hardships, or a guideline that says a post 59 1/2 Distribution must be an In-Service Distributions, not a Hardship. So funeral expenses for a spouse of such person would not be qualified as a Hardship???? Is this right? If it is, please identify where I might find these IRS guidelines.

Jpod. Thanks for your reply BUT the original post said "cost to setup an estate would eat up the $800 or so due as a death benefit". Not $6,000. There was a subsequent post on a similar situation using $6,000 but the intended focus of this thread was a situation with a small sum. Speecifically, what do you do when the benefit is a small sum that does not justify the expense of setiing up an estate. But thanks for your reply.

Mom has been notified. No fiance. We have a Mom and 2 sisters. Bank will not accept check or open account for Estate. We asked Mom to get a notarized statement from the two sisters to say they agree that Mom should get the money. No word as of yet. Gonna try the BG5150 suggestion.

Thanks Bird. You are always a great resource!

How would the Investment Comparative Chart be designed for a Plan that only uses Self Directed Brokerage Accounts?

Go to http://www.erpaexam.org/erpaexam/FAQs/Practice_as_an_ERPA/erpaexam/FAQ-Practice.aspx?hkey=ac261822-74fa-4d2c-a2a8-38a6e8b778ad This is the FAQ Page on this. What I find confusing is the renewal cycle based on SSN, but our cards say when the enrollment expires. Oh well...

24 hours per year (average) with 16 minimum. Right?

In order... 1) Nothing I can think of. 2) Employees without a doubt. You are no longer one of them. Remember that. 3) Flexibility 4) Yes 5) Keep continuing education as a priority. Also, sharpen up on marketing/communication skills. Finally maintain an ethical standard from which you will not deviate. Some people think that as business owner you can do whatever you want. Well, never forget that there is right and wrong, and doing wrong can cost you a lot of money!

I wrote my own which tracks workflow, deadlines, comments, specials projects and reminders. Does not track time spent. Still, seeing the costs noted, I am satisfied with that deficiency.

If you are using this system/service for faxes, be very careful. We have a fairly good system, but the internet fex is horrible. Faxes are difficult to do, and average wait to recieve the fax is 2 hours. Just horrible.

If I am reading this right, I do not believe you deduct deferrals to determine 415 Compensation. Or do you mean employee deferrals (not deferrals of the partners) were $22,000. In that case you would. There is a worksheet in Publication 560, I believe, that you need to look at since there was several changes made above what you noted.