BG5150

Plan doc says participant can defer up to 100% of comp. Compensation for plan purposes is 415 Comp. But as we all know, certain taxes are taken before the 401(k) can be deferred. So, if I make $5,000 this pay period and I want 100% of my pay deferred. But, $350 is withheld for various taxes (like Soc Sec). Now my check is only $4,650. ER deposits $4,650. But my compensation is $5,000. My SPD says 100% of comp, which is 415(c) comp, no exclusions. Where does it say that $350 cannot be put into the 401(k) plan? I understand the logistics, but cannot reconcile the semantics.

What is the ownership structure? C-corp? S-corp? Partnership? Sole prop? Don't forget, owners' comp gets reduced by their share of the Employers contribution to the staff as well as reduced by the ER contribution to themselves. So if this is a partnership or sole prop (I will sexist-ly assume the husband is the owner here), the husbands comp will be lower than $290k if he gets more than $10k in ER money. (And if the wife is W2, the comp will be lower by her contribution) . So the 25% of comp is a moving target. At least, that is how I understand the rules.

AND, the original loan amount must be repaid by the end of 5 years from the original. For example, old loan $5,000 over 5 years. After 3 years, $3,500 balance left. Refinance for additional $5,000 for 5 more years. The amortization schedule must have the original $3,500 paid off within 2 years (or, by 5 years after original) Or, at least that is how I understand the rules.

But where does it say that they can force to an IRA if a participant is not lost, just unresponsive.

Right. So, in this case, they don't need a bill, at this moment, from the funeral home.

Plan terminated. MOST of the assets paid out. One recalcitrant participant keeping brokerage account open, and not heeding calls to distribute the account. About $50k in there. Participant is NOT lost. She still works for the company. In fact, she answers the phone! Can the plan administrator still force her out? What is the cite?

Did you call Relius?

I didn't think documentation was needed up front any more. Just must be able to produce it under audit.

The OP said there are currently no employees. Would you have the doctor and spouse establish the plan then have to wait to participate?

Isn't there a simple payroll software program out there that can do this? I bet there's even an app. Something like Intuit? Does Quickbooks do that? Even if the cost was $1,000 for the year, wouldn't it be worth it if the spouse could get $10,000 into the 401(k) piece of the plan?

What is the penalty if this situation isn't kosher?

Ah. Noted.

The default withholding for RMDs (and any other distribution that is not eligible for direct rollover treatment) is 10%. The participant can opt out of the withholding, or change it to something else by completing a Form W4-P.

DOL doesn't audit. They investigate. Sounds more sinister.

Remember the withholding requirements of the RMD. You MUST withhold 10% UNLESS the participant elects otherwise.

In this case, the owner, plan sponsor, plan administrator, fiduciary and trustee are all the same person. Turns out, we have a form that our firm used in the past. It seems to touch on all the requirements to be a qualified disclaimer noted above. I do not know if the form was ever looked at by a lawyer, though.

*thirded

Well, I guess the plan doc DOES say the Employer "intends" to comply with 404(c). (Similar language in the SPD.)

Good idea. What about it being notarized?

They must get the contribution. Isn't there a cash, or cash-equivalent fund in there somewhere? If not, maybe the Trustee should think about adding one.

Why? The document says there must be an Employer contribution? It doesn't say it has to be a match or non-elective?

Can participant accounts be protected under 404(c) when the only investment vehicle is brokerage accounts and the Trustees offer no suggested funds to satisfy the requirement of diverse asset classes available?

Plan requires 2 years of service to be eligible for the PS component. Therefore 100% vesting required. Plan is 401(k) Plan. If the Employer does not want to make a Profit Sharing contribution, but a TH is required, can the TH contribution be on a vesting schedule?

From the folks who sponsor our doc: [quote] As long as the original beneficiary has not taken control of the account they may be able to disclaim the account. If they disclaim they are treated as if they predeceased the participant. The account would then go to the next named beneficiaries. In the XXXXXX PPA document the order of beneficiaries is (1) spouse then (2) children and then (3) other heirs/estate at plan administrator discretion. Slightly different in PostPPA. In order to be a qualified disclaimer: - Must be made within 9 months of the participant's death - Must be done in writing and be irrevocable - Beneficiary cannot have taken control of the account. This generally means they have not taken any distributions (except RMDs), changes investment options, or the like. If they have taken a distribution they can disclaim the remainder of the account but not the amount distributed. Once the account has been disclaimed the former beneficiary cannot have any control of who gets the assets - it has to follow the beneficiary form (if applicable) or the default under the plan documents. [/quote]

I looked in the BPD and I didn't see anything. But it's late on a Friday afternoon. I sent Datair an e-mail. I hope they can help. On Monday. Have a great weekend everyone!