TPA Bob

Need to check the terms of the plan but under IRS rules max 25% deductible contribution would be: 7500 for employee (25% of 30k) 49k for owner (25% of 196k) because under 401©(2) the contribution for the owner must be subtracted from his 245k earned income from SE Isn't his earned income, after taking into account the retirement plan deductions, se tax adjustment, etc. in excess of 245,000? Then you reduce the earned income to the maximum allowed by law 245,000, and that amount is used ultimately to determine the 404 deduction limit (25% of 245,000)?

Now curious how all perceive the following that has been presented to me, a DC plan with discretionary ER contribution only. A self employed individual has earned income in excess of 1,000,000. The SE income will be the maximum under compensation rules, 245,000. The SE also has an eligible employee who earns 30,000. Would the overall tax deduction limit be 68,750 ((245,000 + 30,000) * .25)? The allocation to the SE would be limited to 49,000 under 415. The allocation to the EE could be up to 19,750 assuming the Plan allows amounts in excess of the maximum permissible amount to be allocated to other participants. The 49,000 would be deducted on page 1 of the SE Form 1040 and the 19,750 deducted on Schedule C. Any thoughts.

We prepare tax returns as well. You will not be able to use the tax software to calculate the tax deduction amount if you have other employees who are participants and the allocation is integrated or cross tested. I have to explain this all the time. My way to understand is 404 determines the limit of the contribution but does not govern how the contribution will be allocated.

The client is assuming that the Participant has doctored this document as well.

Participant received a plan loan and provided the Plan Sponsor with the required documents including spousal consent which was notarized. Now appears that the consent and notarized was a fraud. Participant's spouse is now asking questions. What should be done to protect the Plan Sponsor and what should they do regarding the made up paperwork? Many thanks.

Thanks for the input.

A 401(k) Plan has an in-service distribution option at 59-1/2. HCE receives an in-service distribution during 2010 and is only age 57. Sources distributed are 401(k), Safe Harbor QNEC, and Profit Sharing (non elective contribution). The distribution was rolled over to an IRA and then converted to a Roth. Any thoughts on how this can be corrected? I have looked at Rev Proc 2008-50 and do not see this situation. Many thanks in advance for thoughts.

We are preparing a Form 5500-SF for a Plan that has its assets at Principal Investments. Principal has provided us with their version of Schedule A, C, D, and H. From this I was going to pull information for entering information Line 8f (Administrative Service Providers (salaries, fees, commissions) and Line 10e (Were any fees or commissions paid to any brokers......by an insurance carrier.......) The only disclosure involving fees on the information supplied by Principal above was the commissions and referral fee paid the broker on Schedule A. Schedule C has no fees disclosed and Schedule H has no fees broken out in the expense section. Assuming Principal provides some disclosure to the Plan Sponsor which may explain why Schedule C blank, I guess. But why wouldn't the Plan be required to answer on Schedule H the fees paid to Principal and the broker? Many thanks.

With respect to my favorite comic strip of all time. Lone_Ranger.pdf

I should have pointed out that once the loan is paid back the Plan will terminate and distribute to the two participants. Probably makes no difference - does appear to be a qualification issue that would require a filing with IRS or DOL (in addition to the excise tax). The thought was they would be willing to pay the excise tax to avoid taxation of a distribution.

Plan with two participants, husband and wife. Had prior participants but have all been paid out. Assets in Plan about 1,100,000. Plan loans $200,000 to husband for 6 weeks (until construction loan approved on vacation home in Mexico), is repaid with fmv interest. Other than the excise tax for the prohibited transaction, any other repercussions to be concerned with? I do not think the loan proceeds are considered a distribution that makes it taxable. Is this a qualification issue?

We administered a plan that terminated this year with final distributions processed in September 2010. We received a letter this week from a participant's attorney returning the check (a net check after tax withholding) explaining the participant is currently going through a divorce and to reinstate the balance. We contacted the investment platform and they will not do anything as the account has been closed. We contacted the plan sponsor and they were not aware of the divorce proceedings until after the distribution was processed. I feel like we need to return the check to the attorney and say too bad, consider this disposition as part of the total disposition of the parties, but am curious if someone might think differently. All responses greatly appreciated.

My staff tells me that WC resubmits every three hours until either filing accepted or filing stopped. We have been instructed not to resubmit until we get a filing stopped. All of the Planbooks referred to above eventually were accepted without us doing anything.

Webclient submission failed We have transmitted several Planbooks successfully. However, we have 3 Planbooks with a filing status of Submission Failed. I understand Webclient resubmits these, but after 6 attempts throughout the night by Webclient all 3 Planbooks still have a status of Submission Failed. Now in attempting to retrieve the Planbooks to republish them, they are grayed out and we get a response of “grid rows that are grayed out are Not Retrievable”. Relius has not responded to Incident Requests.

After posting late last night I have looked and Code Section 401© for definition of self employed. "The term self-employed individual means, with respect to any taxable year, an individual who has earned income...... and to the extent provided in regulations prescribed by the Secretary, such term also includes......(ii) an individual who has been a self-employed individual within the meaning of the preceding sentence for any prior taxable year". This definition would make it appear that, if the payments are treated as earned income, he would qualify as self employed and could sponsor a plan.

Am working with an independent sales person who worked primarily with one Company for over 30 years. Received commission income that was reported to him on Form 1099-Misc. Company established a NQDC for its independent sales force years ago. My client retired triggering the NQDC payments to him. Will be paid approx 250,000 a year for 5 years. He wants to establish a defined benefit plan to shelter most if not all of the income. I think if he was an employee of the Company and retired this income would be not be considered 415 income. Because he is self employed anyone have an opinion on whether he could set up a db plan? Thanks to all in advance.

When the planbook is published without attachments, the planbook shows up on Webclient with a paperclip attachment. It has a description of "Explanation of Reasonable Cause". I have attached the report. We have a call into Relius but do now know when will get a response. We had this happen on the two 5500s published yesterday. Anyone have a clue? EFAST_attachments.pdf

Started Something Why did the cookie go to the hospital? He felt crumby. A dog walks into a bar limping. Bartender asks what he wants. "I'm looking for the fella who shot my pa." What happened when the cow tried to jump over a barbed wire fence? Udder destruction. What did the chimpanzee say when his sister had a baby? Well, I'll be a monkey's uncle. A termite walks into a bar and says, "Is the bar tender here?" They arrested the monkey for throwing feces. His charge? Turd debris assault Did you hear about the butcher who backed into his meat grinder & got a little behind in his work? This mushroom walks into a bar and starts hitting on this woman. She, of course, turns him down. Not willing, to give up, he pleads with her, "C'mon lady, I'm a fun guy." What would you get if you crossed a mole with a porcupine? A tunnel that leaks. What would you get if you crossed a donkey with an owl? A smart ass which knows it all. If you pushed your own naked clone off the top of a tall building, would it be: A) murder? B) suicide? or C) simply making an obscene clone fall? An invisible man marries an invisible woman. The kids were nothing to look at either. Q: Why do Eskimos wash their clothes in Tide? A: Because it's too cold out tide

Thanks Tom for your time on this.

Which gets me back to the question of amendment. The Plan I am looking at now has two groups - HCEs and NHCEs. Discretionary contributions are allowed for each group and allocated within the group on a pro rata basis. Given this, I do not see when you can trigger a retroactive amendment to bring someone into the NHCE group. I guess what I mean, if the employer says we will contribute maximum up to the 415 limit to the HCE group and the gateway minimum to the NHCE, and if the plan does not pass but would pass if I add one other employee to the NHCE group, am I ok to amend? Or do I have to add to the NHCE allocation or reduce the HCE allocation until it passes. My reading of the reg - seems that the reason you do not pass is irrevelant. "......or may grant accruals or allocations to individuals who did not benefit under the plan during the plan year being corrected." I would understand a corrective amendment if my contribution rate was fixed in the document but here it is discretionary.

If you are failing the 401(a)(4) general test with the allocation you want, the answer may vary depending on what the document says. Does your document say the allocation must satisfy 401(a)(4)? From a long discussion of this last year, I gather most documents to not require satisfaction of 401(a)(4). The document we use does require it. An -11(g) amendment can not reduce benefits. The terms of the plan will determine what those protected benefits are. The document we are working with does not require satisfaction of 401(a)(4). So where does this leave me? Can I amend?

Just so I understand. If I am providing the HCEs with a non elective contribution to max out their contributions at the 415 limit, and if I am only providing the NHCEs with the gateway minimum, and I do not pass any safe harbor tests under 401(a)(4), but I would pass if I added an employee who had not met eligibility for the Plan Year in question, I can amend the plan retroactively to bring this NHCE employee into the Plan to pass discrimination? As opposed to increasing the contribution to the NHCE group.

We provide tpa services for a number of plans that have individual brokerage accounts. When we process a taxable distribution we have withholding that needs to be paid into the federal government. We have had issues with the trust federal tax id being disallowed after a couple of years of non-use. We are considering having the deposit made using the Plan Sponsor's tax id and filing Form 945 and 1099-R using same. Anyone have a concern doing this?

Any updates anyone can share. We are currently going to leave Part VI blank. Thanks.

Thanks.