12AX7

My understanding of the rule is to prevent plan sponsors from having frequent access to potentially large amounts of funds that normally would stay in the plan until age 59 1/2. Therefore, the "penalty" is to prohibit a new plan startup no earlier than 1 year from the date of final distribution from the plan. I would think that your 401 (k)(10) violation occurred when the new plan was adopted, unless you consider this a chicken or egg question. I'll guess that the path to correcting this situation is to get rid of the new plan. You may want to have the client discuss this further with an ERISA attorney and review facts and circumstances and decide on a path to correction.

For compensation over the (a)(17) limit (after all deductions), this has no effect. For comp under the limit, there is some effect, sometimes minimal *if* this change is in effect for 2010. Relius could have simply stated that for 2010, you will calculate plan comp in the same manner as 2009 (period). Does it seem that Relius is hedging a little on this?

I have read this at least 10 times this morning. There seems to be too much informatioin not related to the calculation of plan comp if this does not change for 2010. Why mention software limitations as well if there is no change?

Regarding termination of the SIMPLE IRA, I was also not clear on the issue and contacted IRS. I was lead to the IRS' Employee Plan News (Summer 2009/Volume 9) and here's what it says about termination of a plan: If you choose to terminate your SIMPLE IRA plan, notify the financial institution that you chose to handle the SIMPLE IRA plan that you will not be making contributions for the next calendar year and that you want to terminate the contract or agreement with it. You must also notify your employees within a reasonable time before their 60-day election period that you are discontinuing the SIMPLE IRA plan. You do not need to give any notice to the IRS that the SIMPLE IRA plan has been terminated. I know there is nothing in the Regs regarding termination of a SIMPLE IRA, however I abided by the advice provided in the newsletter. Gary, I would appreciate your thoughts on this. Thanks.

So, if Cross-testing does not work for a particular year, then allocate perhaps using permitted disparity and the plan passes without further testing?

A 25% owner of a company sells his shares in 2010 and becomes an "independent contractor". He performs his services at the company he sold to the other shareholders. The company performs real estate appraisals. The former owner happily does his job at his same desk and now wants to start an Owner's 401 (k) Plan for 2010. He has no W-2 income for 2010 from the company, just 1099 income. Does this appear to be an Affiliated Service Group for 2010? It seems to be a classic example, unless it can be argued that the real estate appraisal company is not an FSO or he would not be an HCE of the company he sold in 2010 because he had no W-2 income for 2010. I appreciate any thoughts on this matter.

Does a Section 125 Premium Only Plan require an amendment for the Patient Protection and Affordable Care Act and the Health Care and Eduction Reconciliation Act of 2010? More specifically, I'm looking at the inclusion of a child or an employee that hasn't attained age 27 in 2010.

Would it be possible to get an irrevocable waiver before this employee becomes eligible? It appears on the surface this employee would be agreeable to not have coverage in the plan, but that would knock him out from all future plans of this employer as well. I've seen plans that have employees excluded by name (with a a favorable DL), but I never felt really comfortable with that arrangement even though the non-discriminatory classification test was not an issue. I've never had a client that could not come up with a class that I could not exclude, but sometimes that takes a little more thinking on the client's part to figure out exactly what it is. Never had a problem come IRS audit time (yet).

When a small traditional (k) becomes TH, it may be time to examine if a SH match plan makes sense.

If these individuals are getting a W-2, then they are certainly not sole props. With regard to compensation, you'll need to refer to the plan document. It had been suggested in the prior thread (maybe by me) that plan comp would include 1099 earnings. There's some great valuable info in the prior thread. If you're not sure about the definition of comp in your document, speak to your document provider.

Scuba, you posted a similar question not long ago, so I'm not sure if this is a different situation or not: http://benefitslink.com/boards/index.php?showtopic=46819 Are these "employees" receiving W-2 and 1099 income from the employer? I'm not convinced right now that they are sole props.

I meant pre-tax deferral. I do know the difference, but didn't know to proof my copy before posting. Thanks for the reply.

The Q & A provides an example where the plan could be amended to allow in-plan Roth conversions for pre-tax accounts at age 59 1/2, without otherwise permitting a distribution of these amounts from the plan. I'm interpreting that this would also apply to sources other than a pre-tax account (e.g. match, profit sharing). I would think that the Notice would be more explicit if the intention is to limit a conversion only option to the pre-tax account.

I don't see an issue with having predecessor service recognized in each plan. I wouldn't necessarily suggest converting to a multiple-employer plan if this were not a common occurance.

He called because he knew the management company had a plan and thought he could enroll. Sometimes the line between employer/employee is a little blurred. I will approach the association and make recommendations to adopt a plan.

I hope this gets explained correctly, but I'll give it my best shot. I have a client with a 401 (k) Plan. The other day I get a call from "an employee" of my client that wants to enroll in the plan and I cannot locate this guy on the plan's census. This client manages real estate properties and the "employee" actually gets paid from a condo association of the property that is managed by the client. His paycheck comes from the association, but he is managed by my client as part of the agreement with the association. There is no employee leasing agreement. There are no related group issues. It appears to me that this individual is an employee of the condo association, but I need to be reassured of that fact. Should there be any other questions that I need to ask my client, or is it clear that he is not an employee of my client.

I'm also just a pension guy that likes to answer a few questions here when I get the chance. I realize now this is more than a black and white situation. Thanks.

I hear you. Thanks.

This has worked for me in the past. It may just take some persistence.

Specifically the question is regarding an estate that is worth less than $500,000. The value of the estate is likely to decrease as well. Would there be any advantage to creating a bypass trust for this situation? I appreciate any general thoughts on the matter.

It's just a general estate planning question regarding bypass trusts. I wasn't looking for specific tax advice.

Does anyone know of a message board where general questions of this nature can be asked, unless someone would be willing to tackle the question here?

That's what I thought. Thanks.

Non-PBGC DB Plan is overfunded for 2010, so no contribution will be made. Deduction limit for DC is 25% of covered comp, correct? Want to make sure I'm reading 404(a)(7) correctly.

$85,000 loan? If a participant loan, I hope that's the total between two participants and no participant's loan exceeded $50,000. We all know the drill.