Below Ground

I was wondering if anyone else has ever run across this situation. Client firm is sold to a big firm. During the year the big firm revised the plan documents and moved the money to a different investment platform, shortly before the close of the year. Big firm refuses to provide us with new plan documents, and information about accounts on new platform. Problem is they demand that we do an annual valuation and prepare 5500. Requests for missing data are outright denied in writing, with person actually saying that since plan moved to a new platform we have no need of that information! Anyway, we are intending to simply do work with data held. Of course, "product" will be heavily caveated, and our file includes the numerous written requests and denials. Our written service agreement does say work is based on data submitted and the client is responsible to provide us with all data. I find this situation too surreal. Is this something we should report to the feds? Anyone have any suggestions? Thanks!

To muddy the waters, what if you are doing the test for 2009 and a person had > 5% in 2007 but 0% in 2008 (lookback year) and 2009? Oh, I say 6, since data used and analysis is for the "determination period" which is 2008.

Thanks Jim. I got that today too!

Thanks.

WDIK - So "status" is pending and I should just sit tight? BG5150 - Hold hell? Please not that! Mr. Rigby - I suspect that is up to the reader.

Thanks to all. I was really freaking out about this. It seems that I did so for no reason. Again, thanks.

Oh, I found some stuff. Here's one very interesting item I found.... Q37: If a plan sponsor pays a third-party service provider on the plan's behalf and seeks reimbursement from the plan, should the Schedule C reflect a direct payment from the plan to the service provider and not a payment to the employer? Yes. When a plan sponsor pays a plan third-party service provider and then seeks reimbursement from the plan, the Schedule C for the plan should reflect a direct payment from the plan to the service provider. In this regard, direct compensation is defined in the instructions for purposes of Schedule C as ”[p]ayments made directly by the plan for services rendered to the plan or because of a person's position with the plan” and excludes ”[p]ayments made by the plan sponsor, which are not reimbursed by the plan . . . .” The Department notes that if the plan sponsor pays a service provider directly, and does not seek reimbursement from the plan, such payment does not need to be reported on the Schedule C. So, if my fee is paid by the Plan Sponsor and there is no reimbursement from the fund, no reporting applies?

I am usually pretty good with keeping up to date. On occassion, one slips by. The new Schedule C snuck up and bit me hard! Client pays me $1,000. Money does NOT come from trust assets. This fee must now be reported on Schedule C? Suppose that a client pays me $3,000 for services. In addition, for processing distributions I get $100 from trust assets. These both need to be reported on Schedule C? Am I right in concluding that getting any direct compensation requires that indirect compensation must be reported on Schedule C? What is the criteria that determines what is reportable indirect compensation? Where can I find details about the reporting to the client about indirect compensation that exempts this compensation from Schedule C? What about compensation that is already reported on Schedule A? Do I need to again report the broker's commisions on Schedule C? Sorry about imbedding so many questions, but I really was caught napping on this one.

We are told that EFAST2 eliminated the SSA with the 5500, BUT the SSA must still be file if conditions are "right". Everywhere I look the instructions direct you to the IRS website for details. I find nothing. I can't even find where the form should be mailed. Since I have an amended 2007 Form to file, this issue has come front and center Am I looking in the wrong place, or is dementia finally setting in? Any direction would be appreciated!

Net return is reported on 2(b)(10) of Schedule H. This includes both changes in share price and dividends.

Lorengo - I am quite certain that a distribution must be made. I believe the correction that you are suggesting would represent a forfeiture of vested monies, which is not permissable. How else would you account for these monies? While I could be wrong, I am 99.99999% certain that the Excess Deferral must be paid out no later than the following plan year end.

You definitely do not have 2 filings. You do have a funding standard up to the date amended. Beyond that I do not recall any place to note the conversion. On another note, was a 204(h) Notice done?

As solution, you may wish to delineate between owners by ownership, or service, or something (not age) that is different. If needed, you can always make each person their own group.

Keep in mind that the 50% is at the time of the loan. With this in mind, I must agree with jims. Is this the first year of the plan? As a direct reply, I think you would need to "call" a portion of the loan to reflect that monies that are not qualified under the plan were used for the loan. Just a thought.

I failed to fully read the OP. Sorry. BG5150 is correct. The SHN satisfies the THM, so then allocated the PS as if the Plan was not TH.

You may not count the 3% Safe Harbor Nonelective Contribution toward the "base allocation" of an integrated formula. It is a separate an distinct contribution allocation.

It depends. Is this church electing to have their plan subject to ERISA? What does the document say? It is very possible that the church doesn't even need to contribute to related participants. It may have sounded simple, but it may not be. For example, you could have a plan document that uses language like a new comparability plan that has each person being his/her allocation group. If testing is not applicable (most like the case), whatever was contributed is what the allocation is. Now, if you don't even have a document...

For some reason, I am drawing a blank. Is the 10% penalty based on the contribution adjusted for allocable income, or the contribution only? In my OP I said on the contribution only value. Was I right?

Chris, Keep in mind the differences between Excess Deferral (over 402g) and Excess Contribution (ADP/ACP). Your 2 conclusions were correct for Excess Contribution, but not for Excess Deferrals. See my OP for details.

Thanks for your comments. Hope this helps others as much as me.

Sorry BG. That is what I meant. Guess I wasn't clear, so thanks for making that clear.

This posting hopes to get a quick refresher for myself and others on the "primary issues" of returning Excess Deferrals and Excess Contributions. I am posting below my understanding on rules that would apply to 2009 Contributions that would be returned in 2010. Thanks for any and all comments. Excess Contributions (and Excess Aggregate Contributions) are monies that need to be returned given failure of ADP / ACP Testing; assuming that recharacterization, catch-up, and QNEC/QMAC is not applicable. In all cases, the participant is taxed on net value of contribution value plus/minus allocable investment return in the year of receipt. A Form 1099R is used to report this income (2010). If paid after 2 1/2 months from the plan year end, a 10% excise penalty tax applies. This tax is based on the contribution value, and is paid via Form 5330 within 15 months of plan year end. Excess Deferrals are computed on the calendar year, and result from exceeding the IRC 402(g) Limit of that calendar year. If paid before the April 15th that follows the close of that calendar year, the deferral amount is taxed in the year of deferral and the allocable income is paid in the year of receipt. A 1099R is only used for the allocable income, since the Excess Deferral would be picked up as taxable on the person's 1040. If paid after April 15th, the contribution value is taxed in both the year of deferral and the year of receipt. This is done by including the contribution value on the 1099 that was used for the allocable income. GAP Income applies to neither. Again, thanks for your comments.

I am unsure that with a Non-ERISA Plan you really have a problem that requires a VCP Filing. I would first get the documents signed ASAP. Then I would carefully review whether you even have a problem. I seem to recall that the restatement deadline was different for these types of sponsors. I will try to look this up, but you may want to contact your document vendor with this question. I know the vendor I use is "first rate" on issues like this.

I personally think this problem is not limited to pensions, public or otherwise. Consider "cash for clunkers". A benevolent government will give me $$$ for that piece of junk that is rotting out behind the barn. Where does the money come from? From the government of course, silly! Let's cover another 30 million for health care, reduce costs, lower taxes, etc... How? Why the government will pay for it, of course. Silly me. We need to reduce our carbon foot print! Hey, I know. Make energy more expensive. Those people who said the changes to healthcare would kill Grandma were wrong. Let's freeze her to death. Turn that thermostat down to 32. When I was a kid my Dad taught me there is no free lunch. Dad must have been wrong since Uncle Sam can just print more money and buy us all some lunch, right? Inflation? Didn't Al Gore say that more inflation in our tires would save the planet? Hey, combine the issues. Print more money and have better tire pressure and save gas, and.... John Lennon would be proud! Oh, I feel so smart today.

Just as a note from the "peanut gallery". Lund really needs to find someone to work directly with his issues. If I hear him right, his wife is, or could be on payroll, and he is limited to $15K with a DB, and for some strange reason he has this SEP which he doesn't think has impact. May I suggest that if the DBP is "tapped out", leave it alone. Pay your wife enough so that you can both do maximum deferrals (16.5K or 22K) EACH, with another 25% on top from employer contribution under the 401(k) Plan. Oh, and lest I forget, that SEP could be a ticking time bomb. Of course, whether or not this is right depends upon the details; hence, the need to talk to someone who knows what he/she is doing in this area of expertise; discussing the specific of his situation.