Kimberly S

Will all of the 401(k) plan assets be distributed before the restatement deadline?

Since the right to an in-service distribution at a particular age is a protected benefit that is not supposed to be removed and leaving it in is apparently what the client intended anyway, I think you have a terrific case to call it a scrivener's error.

Depending on how the documents are written they might be eligible both ways.

If the docment does not allow Roth deferrals, they cannot be accepted into the plan. Just like if you have a profit sharing plan with no deferrals, it cannot start accepting deferrals until after the amendment allowing them is signed.

How did the CPA file the return without the client signing it or knowing about it?

If they payer is required to make electronic deposits, there could be a problem with mailing a check. It's been almost a decade since I dealt with those rules, so you'll need to get the details of who is required to file electronically from someone who is up to date on those details.

If the assets were not fully distributed within 12 months of the termination resolution, the plan was NOT terminated.

I think Jim was asking if it would also pass 410(b) and 401(a)(4) after the reclassification.

Last day of the following plan year.

We forfeit in this situation and the gains or losses go with the forfeiture. I don't have a cite for this, but would rephrase the question to where is the cite to allow a distribution? Since the participant was not entitled to the match in the first place, he or she should not receive a distribution of it.

If the document has immediate eligibilty for deferrals, why would you stop them based on not meeting the criteria to receive an employer contribution?

If the S corp. income is on a W-2 it can be counted for plan purposes. If it's investment income, it cannot.

I'm not sure how responsive it will be based on the questions asked. It appears to be strictly a statistical analysis of the types of corrections being done. There was no opportunity to comment about what would make the process work better.

It's in a file called ERISA forms. Our system administrator has saved it to our network drive, so I'm not sure where to direct you.

Would it not also be a cut back issue, since any HCE who has worked during the year has alreay earned the right to that benefit?

Because no tax is paid. Also the tax return connenction relates to deductibility of the contribution. If you have no taxable income, there is no deduction, so the deadline could be different. Do you consider the 5500 a tax return?

Typically the deadline to make a deductible employer discretionary contribution is the due date, plus extensions, of the employer's tax return. If the employer is a nonprofit that does not file a tax return, and has no corresponding deduction, what is the deadline?

I'm trying to assist a small employer with his vesting calculation for a terminated employee who is threatening to sue. The employee had paid disability leave in 2 non-consecutive years. The payment came from a State of California disability fund with which I am unfamiliar. Can any of you west coast readers fill me in on whether this fund would be one that qualifies under DOL Reg 2530.200b-2(a)(2)(ii) that does not count toward hours of service?

The document requires all participants to receive the SH match.

Until last week we did not know there was a SEP and we have no information about who did or didnot receive contributions in any given year. We're wondering also, but we don't intend to ask. The deferral election is dated 2005 and shows $18,000 which matches the 2005 402(g) limit plus catch up. We don't know if there is a later election revoking this one. There was no 2005 deposit. The 2006 deposit was a lesser amount. The 2007 was $20,500 and the first 2008 deposit was an odd amount that doesn't appear to tie to anything. The 5500s are prepared on a cash basis, so presumably any correction will impact only the current year. I'm leaning toward sending the employer a letter describing the circumstances in which he would be permitted to make a withdrawal, pointing out the discrepancy in the safe harbor match for the years in question, and reminding him that a withdrawal without a distributable event AND failing to follow the plan terms when allocating the SH match are both potentially disqualifying events.

That would save him money and trouble. Of course, his purpose for the separate plan may be to grant himself a larger benefit than he gives the employees of the S corporation. Then, because they are a controlled group, he has to test them together anyway and will likely fail.

The trustee is indeed the 100% owner. He is totally ignorant of the subject -- wasn't even able to tell me if he received a W-2 or not without consulting his CPA. The CPA is who is supposedly pushing for distribution, although I'm hearing all of this through the business owner's bookkeeper who says she is responsible for erroneously depositing the funds to the wrong account. We have on file a deferral election for a dollar amount that is different than any of the annual totals that has ever been deposited. Two of the three deposits they want back were made within the last 12 months. We have already concluded that the one from 2006 must stay in the plan, although it could, perhaps, be forfeited. I forgot to mention earlier that this is a safe harbor matching plan and they deposited safe harbor match for everyone EXCEPT the owner in 2006 and 2007. The 2008 has not yet been calculated for anyone. The document calls for the match to be made for all participants. As TPA we have two goals -- to avoid becoming a fiduciary and to avoid any subsequent liability for failing to tell the trustee he might be doing something he shouldn't. Clearly there is some sort of error here. I guess the question is how to keep them out of trouble without becoming a fiduciary.

Just received a call from a plan sponsor. It seems that the 100% owner of this LLC has deposited funds as salary deferrals for himself in 2006, 2007 and 2008. He now wants all of those deposits refunded before October 15 because they were supposed to be deposited to his SEP, not the 401(k) plan. It sounds fishy to me. Anyone care to share thoughts about what sort of documentation we should request of the employer before processing a refund?

Employee contribution accounts are reconciled on an annual basis when the investment statements for the pooled funds to which they are deposited are received. Yes, those are documents that they should reasonably expect us to provide, but we cannot provide them before someone tells us that they are needed and such details as the loan amount, repayment terms and interest rate. That the trustee or employer has chosen to distribute the funds before handling the necessary paperwork may be a breach of fiduciary duty, but it is relatively common with small plans and not within the control of the TPA.

George, It's not a matter of not knowing how to do accounting. When the TPA does not have direct access to the aseets and only sees statements once a year, often several months after the end of the year, it is easy for a loan to have been taken or a payment missed more than a year before the TPA learns about it. In a perfect world, the client would be in regular contact with the TPA before and during the process, but the reality is that they aren't always. I've spoken to clients about loans who said they wondered when we were going to send them the payment information -- even though they never told us about the loan.