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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.....

501© adopts a 457(b) Plan - employee contribution only. We know discover the doctors who are deferring are not employed by the Plan Sponsor, but a wholly owned subsidiary. Problem is the wholly owned subsidiary is a for profit organization. Does the plan return the deferrals and income to the doctors ( taxable for 2015) since they were never eligible to begin with. Suggestions on how to correct this matter would be greatly appreciated. Thanks

company A sold a portion of the entity to an unrelated company, this will not be a controlled group. the new company will keep the EIN and name. The only difference is the ownership. 1. Is there a time frame when the new company must transfer assets to their plan ( current the new employer does not have a plan) 2. can't the new company be a participating employer - Multiple Employer Plan 3. Can the 18 month transitional rule be used in this case, giving the new employer time to set up a plan and transfer the assets?? thanks

3% Maybe Safe Harbor Plan. The employer wants to notify participants today that the plan will not be safe harbor for 2015. Any issue with this notifciation at this time? Since the decision was made not to be Safe Harbor, can the employer amend the plan mid year and change the default cash out provision. Thanks

Is an IRA protected from Malpractice claim if the IRA account and owner live in Massachusetts?

Plan allows safe harbor hardship. The participant is in the process of building a primary residence. Can he request a hardship for the building of the home. Does the "purchase of a primary residence include building a home? Thanks

Employer maintains a Simple IRA for 2015. Effective 3/1/2015 the employer will be acquired by Company B. Company B maintains a 401(k) Plan. Employer has not "ownership" in Company B. Can Company B terminated the Simple IRA effective 3/1/2015 and begin participating in Company B's 401(k) Plan? if so, the contributions made to the Simple IRA are counted towards the 402(g) limit, correct. Thanks

Participant Directed 401(k) Plan. When you read 404© it does not specifically say education meetings are required. Fiduciaries must provide the participants with the investment information to make an informed decision. Does ERISA require the employer conduct education meetings? Not sure why they wouldn't... I am looking for any regulation that requires education. Thanks

if only the IRS would give large plan filers the same guidance they gave to small filers ( 7 days) life would be so much easier. Client is putting together their Committee Procedures and wants to state that deferrals will be transmitted between the 3rd and 7th business day following the date the funds were withheld. The plan has over 100 participants. I like the 3 days, but wondered if the IRS or DOL would take issue waiting 7 days. Also if the actual transmittal date fluctuates some times 3 days, sometimes 7 days, if that would raise a concern from the DOL. Thoughts Thanks

403(b) allows rollovers. The participant is over the age of 701/2 and still employed, so she is not taking RMDs from the 403(b) Plan. However, she does take RMDs from her IRA. Is there any restriction preventing the participant from transferring the IRA to the 403(b). Going forward (2016) the participant would not be required to take any RMD from the Plan as long as she is employed. Thereby eliminating the IRA RMD. Thoughts

Employer purchased Company B. Company B terminated their plan prior to the sale and some of the participants rolled their distributions to the new employer's plan. The new employer does not allow Roth contribuitons, however Company B did allow Roth Contributions. When the rollovers were done to the new plan the Roth Accounts moved along with the pre tax account. According to the TPA, the Roth transfers would be considered a frozen source until the new plan was amendmed to allow roth contributions. I thought in order to transfer a roth account from one employer's plan to another, the new plan had to offer Roth contributions to begin with. What am I missing???

ok, need some help, I just read an article titled Inactive 401(k) accounts need greater protections. The article states the following: current law also allows employers to force out account iwth more than $5,000 . For example, a plan can force out an account balance of $20,000 if less than $5,000 is attributable to contributions from the employer. I am asusming what the author is referring to is if the account balance is made up of $16,000 Rollover money and $4,000 employee/employer contributions, the plan could disregard the rollover account when determining if the balance can forced out. do you agree??? Thanks

what is client had a 403(b) plan - deferrals only. could they add voluntary contributions? Since this is a non ERISA plan, would it get a pass on the ACP testing of the voluntary contribution??

For those of us still working, I have a question, a recent article in the Wall Street Journal talked about "pumping up your IRA". While I can follow all the data and logic presented in the article, I have a question. Client has a 401(k) Plan - participants can defer pre or Roth. There is a match of 100% up to 6% of compensation. According to the article, participants who defer the max ( $18,000/$24,000) could make an after tax contribution (assuming plan allows for voluntary contributions) and as long as the total allocation does not exceed $52,000/$57,000) they are all set. The article is addressing the ability to roll the voluntary account over to a Roth IRA and all the tax savings afforded to the Roth IRA. Here is my question- most plans removed the voluntary contributions since they needed to satisfy the ACP test. Is this condition still applicable?? While the article made it sound great to add voluntary contributions, and my client is ready to jump all over this, I think, the crucial issue of ACP testing was eliminated from the article. thanks and happy new year.

I do not know the thinking behind terminating the plan instead of the new LLC adotping the plan. Client is very vague. Assume they are set on terminating the plna and then having the new LLC set up a new plan, any issues with this. While not a "spin off" it just seems as of there would be an issue terminating one 401(k) and startng up another. The owners are the same, just an LLC vs a Corporation

Corporation maintains a 401(k) Plan. The Plan Sponsor called and stated they were going to terminate the 401(k) Plan.. They set up an LLC and this new company would sponsor a plan. Plan Sponsor is fixed on terminating the plan and setting up a new plan. Not sure why they will not have the LLC adotp the plan, but that is not an option. Terminating the plan and then starting up a new plan under the LLC just seems "fishy" and screams something is wrong with this picture. Are there any issues here???

Sorry meant to say 100% of the first 3% and 50% of the next 4% Does adding the second part cause this to fall outside of an enhanced match

Employer would like to make the following Safe Harbor Match... 100% of the first 3% 50% of the next 2% 1. in the aggregate better than the basic match Does the 50% of the next 2 cause this to fail as an enhanced match because it is an escalating formula?? So confused??? Thanks

during the 2013 5500 audit, it was discovered the platform used the wrong compensation to allocate the profit sharing contribution. The platform will correct the allocation and deposit the "lost" income. This means some participants will get an additional deposit and some will have a portion of the contribution removed. The question is does the client HAVE to notify the participants of the error. While it may be advisable to let the participants know what happened, want to know it it is required. Thanks

the employer maintains a 401(k) with a permitted disparity profit sharing allocation. For the 2013 Plan Year a Profit Sharing Contribution was made, however, the recordkeeper used the wrong compensation. This resulted in some participants receiving to much of an allocation, while others did not receive enough. The platform has recommended pulling the excess dollar amount from each participant and allocating it to the participants who received the incorrect amount. Then using the DOL calculator, calculate the "lost" income to make the participant whole. Does this correction process seem ok. To me, the entire transaction should be reversed and the shares purchased for the incorrect deposit pulled from EVERYONE's account. If the cashed raised due to the sale of the shares is less than the actual contribution, then the employer would need to contribute the difference. Then the correct amount is allocated to all participants. If the sale of the shares was greater than the contribution amount, the excess is allocated pro rata to all participants. Then the employer would use the DOL calculator to determine the lost income from the date the deposit was originally made to the date the correction was made. Thoughts

Employer terminated 401(k) Plan and he rolled his account balance to his DB Plan in March 2014. At the time of the roller the participant had not attained the age of 70 1/2 ( turned 70 1/2 in Sept 2014). Participant's first RMD from the DB plan is 4/1/2015, however, he has elected to take first payment in 2014 to avoid two payments in 2015. since the 401(k) was rolled before he attained 70 1/2 I am trying to determine when does the rollover get included in calculating the RMD. My thought is the rollover get included when calculating the 2015 RDM. Thoughts

QDRO was presented to the Plan Sponsor. This was valid QDRO and was submitted to the platform to segregate the account for the alternate payee. The alternate payee then took a distribution and rolled the funds to an IRA. The participant is stating there is a law that the ex's attorney needs proof of how he (alternate payee) took the monies and present this to the court and to the participant's attorney. I have never heard of such a requirement. Once the QDRO is issued by the court, no proof of payment must be provided to the court. Am I missing something here? The alternate payee could print the transaction information from website if necessary, but the plan has no right to release this info do they???