Nassau

The client recently identified that they withheld elective deferrals from participants' 12/24/2010 payroll but never deposited the funds into their accounts as they should have. I've explained to the client that they should seek legal counsel to determine the most appropriate way to address this correction and have also forwarded them the prescribed correction VFCP procedures taken from our Q&A on timely deposits. The client has subsequently forwarded VGI a regular contrib. file with these previously deducted deferral amounts which rejected in our Recordkeeping System because the additional amounts in 2011 put participants' over the 402(g) limits. Questions: Q1. Since 2010 plan year has already passed, should these missing deferral amts. now be returned to the participants along with corrected W-2 tax forms for that tax year? Q2. If the answer to Q1 is "yes," should the client deposit (read as "fund") those unposted EE amounts into their QNEC source along with the associated earnings? Q3. If the answer to Q1 is "no," how should those EE deferral monies be posted to the participants' accounts without impacting prior year testing/tax related issues?

My client has received reclaimed match in the amount of $1,825.66 from a participant that received $2,022.67 as part of their termination distribution that was processed 05/03/2011. The amount received is less because it had been invested as a direct rollover to an IRA by the participant and was not worth the original investment of $2,022.67. The error was client caused and they handled the reclaim process, but they now want to know how to now make the plan whole. I know that the client will have to make up the difference owed but would the amount received be considered "adjusted for loss"? Do we have to do a separate calculation of the gain/loss of the original $2,022.67 paid out and if so what calculation options are available?

A plan that I am assigned to has a participant with no beneficiaries on file. There is currently a balance of $4 remaining. The daughter of the deceased participant has called in to ask how to distribute the money. As there are no beneficiaries, the money must rightfully go towards an estate however the daughter refuses to create an EIN number for a $4 balance. Question: If they will not create an EIN number, is there anything else that can be done to distribute this account? The plan also does not have the auto cashout process?

Can a plan with a discretionary match discriminate against a certain group of HCEs? My client may want to provide a match to all participants, including HCEs, except for their owners. Is that possible? This client is using a Protoype Preapproved Document.

What is an installment form? An installment form is the form of distribution that the participant has signed and sent to the Company to request a termination distribution.

Spousal consent is required when money is leaving the ABC Plan (MMP), but the plan's installment form did not have a section for spousal consent. Being new to the relationship I inquired with the client if there was a reason why there was not a spousal consent section on the plan's installment form. As a result the client told me that they do have participants provide a spousal consent wen a termination is requested which is generally when an installment would be elected. The client has asked if it was necessary to have a spousal consent provided again if a change is being made to the setup of installments which is usually why a participant would be sent/complete an installment form. Question: Do we need to get spousal consent again if any kind of change is being made to an installment payment setup? Any guidance would be helpful?

A Participant terminated from the ABC Plan on 2/28/2011 and rolled their money out of the ABC Plan into an IRA ($25,384.49). The non-vested money was then forfeited. The participant realized that they had an excess deferral in the amount of $786.02 and asked for the excess deferral to be distributed out of the ABC Plan but the plan does not provide for the distribution of excess deferrals. The participant took a distribution of $786.02 from the IRA as an excess deferral. The participant has subsequently been rehired in the ABC Plan and would like to have forfeiture reinstated. Typically, the entire amount withdrawn needs to be restored, even if the part has to make up that amount out-of pocket. Two questions arise: Question: Should the $786.02 be included in what is paid back to the ABC Plan in order to have the nonvested money reinstated?

Spousal consent is required when money is leaving the ABC Plan (MMP), but the plan's installment form did not have a section for spousal consent. Being new to the relationship I inquired with the client if there was a reason why there was not a spousal consent section on the plan's installment form. As a result the client told me that they do have participants provide a spousal consent wen a termination is requested which is generally when an installment would be elected. The client has asked if it was necessary to have a spousal consent provided again if a change is being made to the setup of installments which is usually why a participant would be sent/complete an installment form. I thought that we would want to get spousal consent if any kind of change is being made to an installment payment setup, but I wanted to see if anyone had any thoughts with respect to this matter.

My client ABC Company allows participants to make up missed contributions from the time missed during a military leave. While they do have a payroll process in place, the participant would like to send a check for the amount of the missed contributions. The participant is aware of the loss of the pre-tax benefit by doing so. Question - Is a participant permitted to make up the contributions to the 401k plan outside of payroll deferrals?

Participant DOB 1/11/1940, she turns 70.5 on 7/11/2010 and her required beginning date is 4/1/2011, the participant does not want to wait and decides to take her first RMD in 2010 and it is distributed to the participant on 9/30/2010. The participant dies on 1/27/11 before her required beginning date of 4/1/2011. Question - Should the 2011 RMD payment be calculated using the life expectancy of the deceased participant's or the beneficiary? Please note that the beneficary is the spouse.

My client ABC Company allows participants to make up missed contributions from the time missed during a military leave. While they do have a payroll process in place, the participant would like to send a check for the amount of the missed contributions. The participant is aware of the loss of the pre-tax benefit by doing so. Is a participant permitted to make up the contributions to the 401k plan outside of payroll deferrals?

Internal Revenue Code (IRC) Section 402© provides rules applicable to rollovers. With limited exceptions, an eligible rollover distribution is any distribution of all or any portion of the balance to the credit of an employee in a qualified trust paid to the employee in an eligible rollover distribution. A qualified trust is defined under IRC Section 401(a) as a trust created or organized in the United States. Foreign pension plans are not governed by the U.S. Tax Code therefore they cannot be classified as qualified trusts. Accordingly, amounts from these (i.e.,foreign pension) plans cannot be rolled over to a U.S. retirement plan or any qualified trust account.

When someone takes a hardship withdrawal and the plan has other related plans at the current trustee and recordkeeper, should the participant be suspended from making contributions to the other plans at that recordkeeper/trustee? What if one of the other plans is a nonqualified plan?

Can someone point me to the Code or Regulations that permits ESOP dividends to be taken and all distributions, other than hardship distributions prior to a hardship withdrawal for a plan that is following the non safe harbor criteria?

When a client overfunds a wire (contributions to much money to the Recordkeeper and Trustee) or participants are taken out of the payroll file and money is left over, is the client permitted to ask the Recordkeeper/Trustee to move the money to the forfeiture account? or must the Recordkeeper/Trustee return the money to the client? Question - Is moving the money to the forfeiture account a violation of the exclusive benefit rule? Should the overfunded amounts be returned to the client? Please state the Code/Regulation? Please note, the excess money was never placed into the participants' accounts and is truly the client's money.

When a client overfunds a wire (contributions to much money to the Recordkeeper and Trustee) or participants are taken out of the payroll file and money is left over, is the client permitted to ask the Recordkeeper/Trustee to move the money to the forfeiture account? or must the Recordkeeper/Trustee return the money to the client? Question - Is moving the money to the forfeiture account a violation of the exclusive benefit rule? Should the overfunded amounts be returned to the client? Please state the Code/Regulation? Please note, the excess money was never placed into the participants' accounts and is truly the client's money.

I just received a question from the client, who is on our Volume Submitter Plan document, regarding the FICA max ($106,800) and the IRS Annual Compensation Limit ($245,000). They are currently an integrated plan. They want to know if it is possible to freeze those limits at what they are now, or do they have to let those limits continue to rise as the government raises their rates? Is there a way to amend their current VS document to include this change, if it is possible? Or would they need to create a custom plan document to accomodate a limit freeze? I f it is possible, are their testing implications?

The ABC Plan has a participant contributing to the plan who lives in Puerto Rico. (The client does not have a Puerto Rico plan). The PR resident has contributed $16,500 year to date. The client contacted me to determine if this participant should only have contributed the maximum based on the Puerto Rico limits or if the participant can contribute the 402g limit. The plan document does not address this or exclude this participant from eligibility. I have two questions: 1) Does the plan need to be dually qualified to let a resident of Puerto Rico contribute? 2) If he can contribute, is he subject to the PR limits?

A participant has requested a hardship withdrawal for the purchase of a primary residence. However, he included in the documentation for the sale of his current residence as well. He is asking for the hardship withdrawal to cover his closing costs on the sale of his current home (the sale price is near the current loan balance, so he must bring money to the closing to cover all costs). He is also asking for the closing costs on the new primary residence. The purchase of the new residence appears to be dependent on the sale of the current residence. Question - Would the closing costs on the current residence that is being sold be allowable under the safe harbor hardship rules?

We processed an RMD for a trust for the ABC Plan. The deceased died after RBD. In determining the factor for the RMD do we use the decedents age or the age of the oldest bene? The deceased was born in 1924 and one of the bene's in the trust was born 1917.

An RMD was processed for a trust for the ABC Plan. The deceased died after RBD. In determining the factor for the RMD do we use the decedents age or the age of the oldest bene? The deceased was born in 1924 and one of the bene's in the trust was born 1917

Client is seeking to lower their in-service withdrawal to age 40 with 2-yrs of service in order for a participant to make a Roth In-Plan conversion. Question - Is the lowering of the age to 40 plus years of service requirement a possibility? Client email: What we are looking for, is a Roth conversion-only for the profit sharing balances. We are thinking something like at age 40 with 2 years participation one can convert to “Roth profit-sharing conversion”. If you have something like this, I would like to see what the amendment looks like.

A participant has requested a hardship withdrawal for the purchase of a primary residence. However, he included in the documentation for the sale of his current residence as well. He is asking for the hardship withdrawal to cover his closing costs on the sale of his current home (the sale price is near the current loan balance, so he must bring money to the closing to cover all costs). He is also asking for the closing costs on the new primary residence. The purchase of the new residence appears to be dependent on the sale of the current residence. Question - Would the closing costs on the current residence that is being sold be allowable under the safe harbor hardship rules?

Is it a requirement that a Plan must deplete their forfeiture account by year-end? Please site the Code or Regulations that references this information. Thanks

I have a client, who has a non-spouse beneficiary who is also in the same 401k. The non-spouse beneficiary would like to rollover a portion of the decedent's account into an (Education Savings Account) ESA. Is this allowable? I cannot find anything on the IRS' website or in any regulatory briefs that talks about whether or not a 401k can be rolled over into an ESA. Please provide the Code or Regulation where this is permitted or not permitted. Thanks