Below Ground

The auditor has indicated that Box 5 should be used. That, of course, fails to address the 125 Contributions which must be added back. My question was on the exclusion of taxable group term life premiums. What problems could that create? In some of my research, it seemed to indicate that this exclusion was correct for both 3401(a) Wages and 414(s) Compensation. I was hoping that some one would be kind enough to share his or her opinion on this matter. Getting a second opinion is usually prudent. I disagree that the only thing that matter is the auditor's opinion. I have seen a number of instances where an auditor was not correct, or not correctly applying the related regs. Regardless, I believe that I should review all research available (which includes the postings of this community), allowing for the best response to the auditor's concerns. An example of where an auditor may not be correctly approaching an issue? We know that Box 5 does not include 125 Contributions. The Plan clearly states that these monies are included (see original post). Use of Box 5 alone would be incorrect. Thank you for your comment. I infer from that you are suggesting a more "reactive strategy" for dealing with the auditor. I agree that sometimes, and quite possibly this time, that is the best choice. Even still, I would like to be prepared for all potential problems.

Background: Plan document holds that Compensation means Section 3401(a) Wages and all other payments employer must furnish statement under IRC 6041(d), 6051(a)(3) and 6052. In addition, Compensation is adjusted to include any deferrals under 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 403(b), 457(b) and 414(h)(2). Lastly, the Plan does allow testing (including ADP and ACP) to use 414(s) Compensation. Potential Problem: Compensation furnished by client is Medicare Wages (Box 5), increase by contributions for health insurance and disability (both presumed to be under 125), and reduce by the value of taxable (>50K coverage) group term life premium. Is this reduction a problem? Circumstances: Plan under audit and IRS Agent wants to know why Compensation used for Testing was not "Box 5 Value". I believe that the compensation used is fine under IRC 414(s), but is there a problem with other aspects of Plan (e.g. profit sharing allocation)? Thanks for your input!

Having a little experience with similar situtions, a few questions. Did they give out an SPD? Does she have documentation on her claims about money being contributed to her account? Does she have an employment contract that addresses the contributions? Does she have a written review that addresses the contributions? I can tell you that documentation, or lack thereof, is very important. I'm sure we all know of a person who might say they were told something and deserve money, when no such statement was ever made. (He said She said...) Regardless of how honest "she" claims to be, can she prove that she was told these things? That will be critical. Basically, the terms of the plan are the terms of the plan. They can not be changed or superseded (normally) by verbal or written agreements that are contrary. While she may have a "case" on other issues (failure to provide SPD), I don't believe she has a case with the plan's vesting.

Beautiful! Thanks!

In the past it was permissable to restate a money purchase plan "into" a profit sharing plan. My questions are: (1) is that still allowed, and (2) what special issues need to be addressed? I know that "accured benefit" under the MPP must be provided for, and a "204(h) Notice" must be done. Alternatively, a merger and consolidation can be done, but a "direct conversion" by restatement would be cleaner, cheaper, and easier. Comments? Thanks!

Lori, Thanks for your reply. I note that since these funds are held in accounts that the participant controls the investment, there is no reporting of cost. Also since many of these funds under a PSA are "mirror funds" of mutual funds, I think they would be lumped together regardless of DFE application. Again, thanks for your reply. I guess I am frustrated about "paperwork reduction".

I think I posted this at a bad time (late Friday), so to get it active again, I am making this "reply". Anyway, any insight on OP would be greatly appreciated. Thanks!

Is this a controlled group or affiliated service group? What are you trying to do that you have concerns about a prohibited transaction? Knowing what you want to do might help someone (me) understand your question better.

Plan is using a "group annuity contract" to provide for individual self-directed accounts. Insurer is a DFE, so each "fund" has a plan number. As I understand, each fund (with value) is reported on Schedule D. When completing Schedule H must you again list each fund separately as an "Asset Held for Investment" or can you simply group PSA values together (like loans or self directed brokerage accounts) for this reporting? Also... How does use of a "DFE Fund" reduce Schedule H reporting? What is the logic of Schedule D, anyway? It has always seemed to be a waste of paper to me. Thanks!

Bart, I recommend that you BURN materials; preferably immediately after use. But be positive. Use the event like a company picnic. Marshmellos, hot dogs, hamburgers, brats. Do it all!

In support of Janet's comment, anytime you have a provision that allows for taking money out, you can be 95% certain that some person will figure out how to use for a purpose that is not as intended. Is your Plan for retirement, or something else. If the latter is true, then there you have it!

Thanks Mr. Burns!

What is the typical plan serviced? Size and type have a huge impact. Also, what service are you providing. Are you recordkeeping, reconciling member accounts, testing and forms? What you are doing also must factor in. If you can respond to those questions, I can give you my two cents, which is probably not even worth that.

I stand corrected! I guess I learned something new today. Thanks on the Safe Harbor Question. I ended up taking the safe route and recommended that they kick in the money to make up the 3%. They actually decided to do even more, maxing out Integration. Alls well that ends well.

Tom, does quoting the Nondiscrimination Answer Book help? I found "compensation must be based on a plan year, but may be limited to the portion of the plan year during which the employee was a participant in the plan" for purposes of nondiscrimination testing. I even found some other interesting stuff, but I refrain for brevity sake. Anyway, does this help? Have a nice day!

Thank you too!

Thank you Peter! I could find nothing in my research.

We service a plan that is in a "border state". Participant wants to name mother (citizen of Mexico) who lives in Mexico as beneficiary. Are there any problems with this? Am I correct in saying that payments will be subject to 30% withholding if the death benefit is actually paid? Lastly, what should be used for beneficiary designation form that requires the beneficiary's social security number? Mother does not have a social security number, obviously.

Oh my!

Thank you Janet.

One can only hope.

If Form 8905 was signed saying the employer intended to adopt the Volume Submitter of Document Vendor XYZ, does that mean that the employer must adopt the Volume Plan of XYZ? Could the employer instead adopt the Volume Plan of Document Vendor ABC? Oh yeah, employer was previously using the prototype of NOP. Thanks.

I work exclusively with qualified plans, and have NO desire to branch out into SERPs. Even so, I am constantly being asked about these plans. While I do have some knowledge from related work (i.e. CEBS Study Materials), I would like to have a simple summary of what this type of plan is and how it works so that I can say "this is what...". Following that, I would then like to be able to say "contact... if you want more since I don't work with them". Anyway, does anyone know where I might get that nice, simple summary so I can at least say "this is what....". It would really be nice if I could also fax something to those people as response to their questions. Basically, I do have a desire to support the people asking the question, but I don't care to be the expert. I just want to be able to send the person in the right direction. Thanks.

And he sings too? Now you are just messing with my head. Of course, Pittsburgh is a very nice city. Too bad about the Red Wings.

Understand the "projects on the desk". Thank you again for your help.