BG5150

Someone in my office said the current rules say that the SAR must be distributed before the 5500 is e-filed by the sponsor. Is that true? If so, what regs changed?

Ask around on LinkedIn. I'm sure you'll hear about a bunch there in the myriad retirement plan groups.

I have an owner who defaulted on a loan a few years back. My recollection says that this is a PT--we cannot just do a regular default and have him taxed on the remaining balance. Where does the code address loans to owners and the consequences of default? Company is C Corp.

I have a client that has a former owner (50%) still paid via K-1. They say he is a "contract" partner, and shares no part of capital nor profits. Would I consider this person a former key? Can/should he be paid on a K-1? The K instructions say its for people who share in the profits or the capital.

Silly question, maybe, but is the Profit Sharing discretionary or is it a stated formula in the document? This is a great example as to why it is not a great idea to "pre-fund" profit sharing. If you feel the need to amortize the PS cost over the year, put the money in a separate account and then move it all to the PSP trust after the year is out.

Assuming the vested account balance you list does not include the loan, here are my calculations: Account Balance: 15,850 (after loan is paid off) Outstanding loan: 4,150 Total Balance: 20,000 50% of total account balance: 10,000 Minus outstanding loan: 10,000 - 4,150 = 5,850 Available loan: 5,850 Some providers consider the loan when they give your balance. Be sure you are using the right numbers.

So there are no footnotes or anything? (except for large-plan filers) Just prepare it with the same opening balance, put a note in the file and move on?

Yay. It's been a while since I've done a "manual" calc of an excess.

I agree w/ K2. For PLAN purposes, it has to be done by the end of the next plan year. For the company's TAX purposes, it has to be done by the time they file their tax return. If the deposit is made after the tax deadline, it is deductible in the year it was made. However, I think you may want to check 415. The firm has 30 days after the taxes are due to deposit the funds so that the amounts count toward 415 for the previous year. If made after that 45 day period, it counts in current year. (Treas. Reg. §1.415©-1(b)(6)(i)(B))

My document provider is telling me that if the plan has a $1,000 threshold for mandatory cashouts, I must include the participant's rollover account in the determination. I was under the assumption that if after calculating the balance to be under the threshold (be it $5,000 or $1,000), any mandatory cashout (or auto-rollover) would include the participant's rollover account. they referred me to Notice 2005-05 which deals with auto rollovers. I don't see anything in there that would contradict my thoughts on the matter. Any other insight?

One of the companies I work on has a non-equity partner who made $350,000 on his K-1. Is he considered a key employee? I am assuming that the 350k is more than 5% of the profits.

I come up with 6,397.32 Testing comp: 106,800 Deferral: 12,000 ADP: 11.24 NHCE ADP: 3.25 To pass test, HCE max: 5.25 Difference, 5.99% 5.99% * 106,800 = 6,397.32 That leaves 5,602.68 in the test. 5602.68/106800 = 0.525

In the past, a plan's 5500 was produced using a cash basis. They are now our client. We generally do the forms on an accrual basis for our clients. If we change it to accrual, how do we go about it? Small plan filer. Just adjust in other income what's necessary? Any thing else? Is there a footnote somewhere?

Have you tried using gross comp?

What does this mean? Not stock or property?

In a plan that uses the safe harbor basis in determining hardships, the above is not applicable. Whether the invoice is paid or open not withstanding, in a safe harbor situation, I could have a million dollars in cash sitting on my kitchen counter, but I'd still be able to take money out of the plan to pay for funeral expenses.

Does the plan use the "Safe Harbor" method for determining hardships? If yes, all you need is a bill from the funeral parlor, and make sure no other distributions or loans were available under all plans of the employer. That's it. No statement saying there are no other resources needed.

Are you getting 8 different answers?

The new regs don't overlap with Schedule c, do they? The new regs are just about the disclosures that must be given from time to time to the sponsor or participants. I would say you have to put it on the C, but not have to put it int he disclosure statements.

Check the plan document. I used to work with one that had a provision that if there was an hours or last day rule for an allocation and even a dollar was contributed before year-end, then the hours or last day rule was considered waived for that year.

If you never file an 8955-SSA ever, they'll never know. Just sayin'

The prior poster said the amount might be too much because you mentioned a down payment of $200,000. Given the document provisions you stated, I see nothing that would preclude giving this person the loan. Unless there is something in the underlying document that hasn't been shared with the group.

I don't think the "minimum" down payment makes a difference here. He is purchasing a principal residence. He could pay for the house entirely via a hardship (or in this case a loan). There's nothing that says he must only take a little bit and have a mortgage on the rest...

Forgetting about the amount for a moment...the terms of the plan say that a loan can be granted for any of the "safe harbor" hardship reasons only. Does the loan program also restrict the amounts like a hardship? Read the plan carefully to see what exactly the conditions are. If the guy can produce paperwork that says the down payment for a house is $X and he puts in writing he intends for this to be his principal residence, he has satisfied the safe harbor reason criterion. Done. Now, he's limited in how much he can take. Unless the loan program or plan say he cannot take more than the need, he is generally limited to the $50,000/50% rule. Done. Because the "safe harbor" rules are being referenced, and if granting a loan can be extrapolated to being tantamount to a hardship that's paid back, it doesn't matter if they guy has a million bucks in the bank. Safe harbor rules don't care. And neither should you. Let me ask this: if he asked for a loan for funeral expenses for his mother, would you be asking if he had money in the bank to first cover it?

I've always done my Top Heavy calcs on a cash basis, with the exception of the first year. In the case of the initial year, we use receivables. The EOB suggests that deferrals that are within the 7 business days safe harbor that have not been deposited before the determination date do not have to be counted (because they don't HAVE to be in the trust until some time the next year). Deferrals that are "late" should be counted.