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Recently several of our clients received notification from the recordkeeper about Unrelated Business Income Tax on certain investments held within the brokerage account. If UBTI taxable income is $1,000 or more, the Plan will need file form 990-T and pay the tax. Question - What all of a sudden is this an issue. Trying to figure out why the recordkeeper is just know sending out notices about the UBTI and the potential for tax. Has something changed that now Retirement Plans are no exempt from this Tax??? Thanks

Participant filed for bankruptcy in 2015. Now he wants to take a loan from the 401(k) Plan. Any reason preventing him from taking the loan? Since a loan is not a taxable event, am I correct in thinking the loan amount is not subject to creditors? Does the fact he filed bankrupt impact his ability to take a loan???

401(k) participant directed plan allows participants to have a Self Directed Brokerage Account with the custodian. Question; Does the Trust file the 990 T for any Unrealed business taxable income (UBTI) resulting from all self directed brokerage accounts. For example ther are 75 SDBA, and 5 have UBTI, are the accounts aggregated and one 990T is filed? If the taxation is in excess of $1,000 who pays tax? the Plan or the participants whose accounts were reported? Never worked with UBTI before, and the particiapnts/administrator are getting letters from the platform about these investments and potential taxation. thanks

Plan is terminating effective 2/29/2016. The Plan offered a GIC investment. As a result of the termination, participants invested in the GIC will be charged and early withdrawal charge. Can the Employer pay this fee? There are only 8 out of 45 participants in the GIC that will be subject to the Surrender Charge. If the Employer pays the cost, and the fee is treated as a contribution, to these 8 participants, does the plan need to pass 410(b) as it relates to this contribution. If so, it will no pass coverage.

New client. To discourage participants from taking loans, they charge an interest rate of 12%. Why they did not remove the loan provision if they wanted to discourage loans is unclear. There are several loans outstanding at 12%. No way the Plan Sponsor can support this rate based on the local lending institutions. To complicate matters, our client has acquired this company under a stock purchase and effective 3/1 our client will be the new Plan Sponsor. Does the current employer need to redo the loans at an interest commensurate with the lending institutions. After the stock purchase does our client become responsible for the interest set by the prior Plan Sponsor. Any guidance would be appreciated. Happy Friday to all.

Employer A sponsors a 401(k) Safe Harbor Plan. Employer A is looking at aquiring Employer B. Employer B maintains a Cash Balance and Profit Sharing Plan. 1. Cash Balance Plan will be terminated prior to the acquisistion Question - If Employer A wants to merge Employer B's Profit Sharing Plan into their Safe Harbor 401(k) Plan, can this be done at any time, or can the merger only take place on the first day of the plan year, since one is safe harbor and the other is not. If they do merge the plans, am I correct in saying the Employer A's Trsutees and Plan Administrator will assume all fiduciary responsiblities for Employer B's Plan. Therefore, the s"sins" of Employer B's plan become Employer A's responsibility??

Employer A has set up an office in a different state. Due to payroll tax issues, they will use a PEO to handle payroll for the employees in the different state. The PEO issues the paychecks each pay period. The W-2 will show the PEO's name and EIN The 401(k) plan excludes Leased Employees. Am I correct in saying the employees covered under the PEO are NOT leased employees and therefore are eligible to join the plan after meeting the eligibility requirement? If they are eligible to participant, what changes need to be made to the document to show these employees are covered? The bundled platform, told the client to ask their attorney for guidance with PEO issue.. The client is an attorney and asked us their Investment Manager!!! Seems to me, employees under the PEO belong to the employer and therefore since the employer is not using the PEO's retirement plan, they are covered under the existing plan. Thoughts Thanks

Payroll provided stopped the deferral at $18,000. However, the participant is over 50 and had changed his deferral percentage in June 2015 so that by the time the last payroll of 2015 he would have deferred the max. Payroll issue has been corrected so going forward deferrals will continue for participants catch up eligible. the fist payroll since hitting the 402(g) limit there was no withholding. The employer has set up the catch up contribution to begin with the next payroll check. Client is concerned about missing the withholding the first payroll following the $18,000 limit. Am I correct in saying Rev Proc 2015-28 provides relief to the employer since the error was brought to their attention by the participant and the employer implemented the withholding to start the next payroll period?? No QNEC is required. Since this is a 3% Non Elective Safe Harbor, no match is required to be made. This is not an auto enrollment plan. thoughts??

Plan will be entering Blackout 11/23/2015 and exiting Blackout 12/13/2015 - Changing Platforms. Enrollment for new particiapnts is 12/1/2015. Platforms said the participants will not be able to enroll until the plan exits blackout. This means the participants will miss 1 - 2 payrolls and not be able to defer. Any issue with this. Does the Blackout "protect" the plan from not enrolling the participants until the middle of the month??

Company A will acquire company B on Nov 1. This will be controlled group. Company B does not have a plan. The will join Company As plan. Even though Company B does not have a plan, can Company A use the transitional rule and bring the participants into the Plan 1/1/2016. Company B participants would not be include in any 2015 testing. Thoughts??

I have a client who is putting together their compliance book for 2016. There has been a turnover in HR and he wanted to clearly define all the important dates. for the HR Administrator and Plan Administrator. That was the reason for my question. The client wanted to detail all crucial dates so everyone involved in the plan understands the important due dates. He wanted to be sure if 12/31 was the deadline, they would take steps to be sure everything was done by 12/31. If they had until January 2, he wanted to know that. The push to get done is because if the correction for the failed ADP Test is 12/31 ( no extension to the date) and it is not done, then the employer has a qualification issue. I did not want the client to assume he had until the next business day to correct the failed test. Just trying to be proactive. Sorry the question made you chuckle......

December 31, 2016 falls on a Saturday., Will Plan Sponsors have until January 3, 2017 to process corrective distributions for 2016, correct 2015 failed ADP/ACP with a QNEC, Amend for Safe Harbor, Amend for Discretionary Changes implemented during 2015? Or is the IRS' position, the deadline is the day in which if falls 12/31/2016 and NOT the next business day. Thanks

Large Plan The Investment Manager is paid by the Employer NOT the Plan. The Investment Manager was paid over $5,000. This is an RIA so NO revenue sharing is taken by the investment manager. the auditors say the Investment Manager must be shown on the Schedule C. I say no way. They do not receive any direct or indirect comp from the plan and are not required to be reported on the schedule C. Thoughts?? Thanks

Employer established a 457(b) plan ( non governmental) in 2013. The TPA who drafted the document did not prepare the exemption statement to be filed with the DOL. Question: Does the employer file under the DFVC for 2013 and 2014? If so, do they pay $1,500 and then each each file the 5500? I thought I read, that the employer could file the exemption know and pay $750. Therefore going forward no 5500s are required. Thanks

Question, Can a participant receive a hardship distribution ( safe harbor hardship used) to pay for a Special Education Certificate Program. This is an 18 CE course that will ultimately be applied towards a masters. Thanks

Company A sponsors a 401(k) Plan. Company B is a related participating employer. Effective August 8th, Company B will no longer be a related employer. The 401(k) platform has recommended, that Company B be removed as a related employer and an amendment drafted to have them participate in the plan as an unrelated employer. The Platform does not want to loose the assets of Company B. While Company A is not opposed to this recommendation, they want to be aware of any risk to the plan if they allow Company B to be a unrelated employer. There will be no controlled group issue as of the spinoff date. I realize Company A who sponsors the plan is responsible for any for any action of Company B that causes the plan to be "disqualified" or other actions i.e.. late deferrals, What other issues to you find when unrelated employers participate in the plan?

Plan allows loans from Roth Account. Participant terminates employment before the loan is paid in full. Participant is 591/2 and 5 years since first participated in Roth. The Roth loan balance is $10,000. Am I correct in saying the defaulted loan (now a deemed distribution) is not a "qualified distribution" therefore, the portion of the loan balance attributable to earnings is taxable income. For example: Loan Balance $10,000 Portion attributable to deferrals $8,000 Portion attributable to income $2,000 - taxable income Thanks

Employer wants to allocate the profit sharing contribution as follows: 1. Less than 10 years of servive $0 2. 10 years but less than 15 years $1,500 3. 15 years but less than 20 years $2,000 4, 20 years but less than 25 years $2,500 5. 25 years or more $3,000 Plan is not Top Heavy Plan will pass coverage. Are there any issues with the allocation formula. Client isa willing to submit for IRS determination letter. Thanks

Employer wants to allocate a profit sharing based on the following schedule: Less than 10 years $0 10 years to 15 years $1,500 15 years to 20 years $2,000 20 years to 25 years $2,500 25 years and more $3,000 Plan is not TH. Plan will pass coverage Issues with this allocation??? Sounds to good to be true. Need to know if I am missing something.

The Plan document states the Safe Harbor Match will be 100% of the first 4% and 50% of the next 2%. This is the amount the Employer contributes each pay period. The Safe Harbor Notice generated by the TPA and distributed to the participants states the Safe Harbor Match is 100% of the first 6% of compensation. What happens in this case? Participants were provided incorrect information. Some of which may have made their deferral election based on receiving a match of 100% of 6%. Does the plan document govern and the employer just needs to provide an amended safe harbor notice? Thanks for your input.

one more question. Assume the participant is going to rollover the core investments, tax and stock as a distribution. In this case: $36,000 is Rolled to an IRA $64,000 is a cash Payment $200,000 ( $ 80,000 cost basis) stock distriubted to the participant. Is the Cost basis subject to 20% withholdng or the value of the stock at the time it is transferred to the participant. Thanks

thanks for the response Assume, the after tax was in the ESOP. Participant has 400 shares Value $200,000 Cost Basis is $80,000 If the $64,000 after tax is applied to the cost basis what does this mean. I am assuming the value in the after tax is reduced by $64,000 But where does the $64,000 go? Is it paying taxes? If so, the amount is much more than the particpant woul need to pay in taxes. Tryin got get my head wraped around the math. If I read one more article on ESOPs I think my head is going to explode. Thanks

This is a KSOP Plan. The after tax was invested in the core investments. Only Employer Match is made to the ESOP. None of the After Tax was used to acquire ESOP Shares

Plan requires all employer match contributions be made to the ESOP. Participants can contribute pre and after tax to the core investments. The participant has contributed a total of $64,000 after tax to his account. Participant is retiring and will take a distribution. Shares will be transferred to the participant. Cost Basis for the Shareis $80,000. Recordkeeper stated the particiapnt could use the After Tax contribution to further reduce the cost basis - would now be $16,000. Question: If the after tax is used to off set the cost basis, where does it go?? The recordkeeper stated it pays the taxes. Then stated the particiapnt would receive a 1099R for the $16,000 cost basis and have to pay taxes on this. This does not make sense, why would you pay $64,000 in taxes and no where get credit for the payment. What am I missing here!!! Thanks

the current 457(b) plan is compliant with 409A. Since the participants were not allowed to defer into the plan ( the entity that empolys them is a for profit organization), can it be as simple as returning the funds and income and having the participant claim the payment as income in 2015?? To me 409A does not apply to these employees since they were never eliigible to participant in the plan.....