BG5150

yes, testing is required.

I would certainly put it in writing. Even if the people were at the meeting where they were told verbally. What's to stop an HCE from later coming back tot he company and stating that the company did not execute her salary deferral election correctly? It's there on paper she wanted 6%. Where does it say that she had to be cut back to 5%? I don't think "we mentioned it to her in a meeting" will cut it. I wouldn't think you would have to send a memo to all the HCE's showing all the other HCE reductions (if any). Individual memos would be fine. Dealing w/ HCEs I don't think it would have to be uniform. But then, you'd have to think about employee morale.

I don't recommend my clients sign a paper copy of the 5500; I tell them they must do it. Says so right in the instructions. And, because we are not filing electronically this year, all our clients must sign them. We are asking for signed copies for our records. Not sure about future years.

If someone chose to take an RMD for 2009, the latest they could have taken it is April 1, 2010 (for those taking their first one). The 60-day window is long over.

Austin, what other disclosures in the SAR might be needed?

We just went with "Hurricane Irene" which would seem sufficient.

Is there any guidance as to what constitutes a mistake of fact? I've always fallen on the conservative side of the argument, but always wondered what the standards are.

What's to stop a person from saying: "Just don't take deferrals from my bonus." Could that be interpreted as a (temporary) change in election to 0% and then another election to return to x% or $x, whatever was in place before? As long as everyone is given the opportunity to that.

My line is "I work with 401(k) plans." That's usually enough to end the conversation, or, at least, to move it in another direction. Sometimes people will ask me what to do with their money, and I create a pregnant pause with " I really don't deal with the financial stuff. We just make sure the companies are following all the rules. It sounds a lot more exciting than it really is." Quiet, followed by "So, how 'bout them Giants..."

I have kind of an ancillary question to this thread: If someone is supposed to complete a W4-P in order do opt out of taxes, or to add to the taxes taken, is it a viable replacement to pose the question on the distribution form itself? I've seen numerous carriers give the option of "0%, 10% or other" in a section of the request form. Is that ok?

If he turned 70 1/2 this year, his RMD for 2011 is based on his account balance in the (old) plan as of 12/31/10. Any distribution (from the old plan) in 2011, even if it was January 2 and before he was 70 1/2, would first have to be considered an RMD.

We found out today that there was a 401(k) deferral deposit that was not made at all from 2009. After the amounts are paid to the plan and the interest allocated, we need to file Form 5330 for the late amount. From what I understand, I will have to file THREE forms, one for each tax year. But, the form says that the form is due "by the last day of the 7th month after the end of the tax year of the employer (or other person who must file the form). So, are the 2009 & 2010 forms LATE? The instructions say there is a penalty on the unpaid tax. But you might not have to if "you can show that the failure to pay on time was due to reasonable cause." Is "we didn't know about this until today" a "reasonable cause"?

The employer may have told his staff that there was a "discretionary match." But what does the document say. What the employer says and what the document says aren't always in harmony.

I wouldn't say they are not in the 2011 test. You are using the NHCE ADP for 2010. You compare that with the HCE ADP for 2011. If someone was an HCE in 2010, but not for 2011, then he or she will be part of the NHCE group for the 2012 test. Everyone's ADR is used once and only once.

Revised filings back to 2002 with PN 001?

For what it's worth, Relius prorates around the 15th of a month. I did a proration for August just recently, and it seemed that with a compensation year ending Aug 15, it used 142,917. But with a date of August 16 it was 163,333.

I believe that only applies to the first three months of the plan year. From the EOB: So, the participant can himself make up the missed deferrals, but only for the first three months, and only if there are nine months left in the plan year.

Yes. Attribution under Sec. 318 applies.

Was that 5% election the first one the person ever made? If so, then I would say as soon as administratively feasible after you receive the election. If the person had initially elected zero and now wants 5%, I'd say wait until the next change period.

I have a plan that had some people defer early. I am planning on distributing those deferrals & earnings. Does the under 59 1/2 penalty tax apply?

And, if anything, it is a revenue GAIN for the IRS (using forfs for SH, QNEC), as Employers deduct less.

The software we use to prepare the 5330 will not accept cents. When I put in 3 bucks as the amount in questions, it shows zero tax. I know this doesn't necessarily mean that there is no tax due. But 23 cents? C'mon.

This doesn't sound like a mistake of fact, but merely a mistake. I would correct the accounts, adjusting for earnings, and placing the funds in the plan's suspense account to be used to offset future contributions. Note, these are not forfeitures, so they cannot be used to pay plan expenses.

The instructions say to give someone an Entry Code of "D" if they have been paid out or if their balances have been transferred to another plan. Also, it says to "d"elete someone if they have begun to receive benefits from the plan. I have two questions: 1. Would this include someone who is taking RMDs from a 401(k) plan? 2. Would this include someone who had a $50,000 balance and merely took a $15,000 partial distribution from a 401(k) plan? On a side note: I also see that you are supposed to put the person's name on the form "exactly as it appears on the participant's social security card." How are we to know? I have plenty of participants with the name of Timmy O'Brien or Peggy Swanson. Is that really a big deal?

I came up with (what I thought was) a good example. Say you take a loan for $10,000. You go to the bank with the check, and cash it for singles, just to see what 10,000 bills look like. You don't spend it on anything, just look at it, maybe take pictures with it, or whatever. Then, a day or two later, you put it back in the bank, and write a check to pay off the loan for $10,100. So, now, you have only used $100 of your money (after-tax money). At the end of the day, you have only been taxed already on that interest payment. Therefore, the principal payment is NOT taxed twice.