Richard Anderson

Plan Sponsor signed a resolution to terminate a 401(k) back in 2003. Every year since 2003 the Form 5500 has had the yes box checked for "Has a resolution to terminate the plan been adopted during the plan year or any prior year?". No distributions from the plan have ever been made. I assume that the 2003 resolution to terminate is no longer valid. Any reason the yes box should not be checked going forward?

It is too late (after 9/15) for the corp to adopt a SEP for 2011. It is not too late for a self employed entity to adopt for for 2011. The SEP would use only earned income from the Sole-proprietorship for the 2011 contribution.

Background: For first half of 2011 entity was sole-proprietorship. Incorporated for last half of 2011. Question: Is there any reason why the sole-proprietorship can't adopt a SEP for the 2011 year, based on the earned income of the Sole- proprietor for the first half of 2011? Adoption to take place between now and 10/15/12. Once the company incorporated in last half of 2011, no further income was generated or services rendered to the sole-proprietorship. Did the sole-proprietorship cease to exist when the company was incorporated in 2011, therefore is unable to adopt in 2012? If it makes any difference, once incorporated, no further services were performed for the sole-proprietorship, neither in 2011, nor in 2012. When does a sole-proprietorship cease to exist?

If Avaneesh Bhagat thinks that an employer corrective contribution is not necessary; what is the correction? Submit, do nothing as a correction and move on?

We have a situation very similar to this one, so I will continue with this thread rather than starting a new one. We have a 401(k) plan that allows for in-service distributions, but they allowed an under 59 1/2 participant to take an in-service distribution of his 401(k) source money. Participant has spent the $35,000 distribution and can not repay. We want to correct this through EPCRS. Is there any chance the IRS would call this failure anything other than "Overpayment"? I don't see what else it could be. The plan has not had any employer contributions for several years and the employer does not want to put the $35,000 back into the plan, as no employer contributions are being done. On EPCRS submission, If we propose that the participant repay the Overpayment using a repayment schedule; does anyone think that might fly?

It seems from the wording 6.06(3) that when the Overpayment is returned to the plan, whether returned by the participant or returned by the employer, the returned Overpayment goes into an unallocated account, used to reduce future contributions. In this case, of an improper distribution of a participant directed account, the return by the participant of the funds to an unallocated account seems to defy logic. So, my question is, if the participant returns any or all of the impermissable distribution of his own account (the exact amount distributed = 100% of his account), should that amount returned by the participant be put back into the participant's own account or into an unallocated account? "The Overpayment, adjusted for earnings at the plan's earnings rate to the date of the repayment, is to be placed in an unallocated account, as described in section 6.06(2), to be used to reduce employer contributions (other than elective deferrals) in the current year and succeeding year(s) (or if the amount would have been allocated to other eligible employees who were in the plan for the year of the failure if the failure had not occurred, then that amount is reallocated to the other eligible employees in accordance with the plan's allocation formula)."

When testing using compensation less deferrals, are 401(k) ROTH deferrals excluded from compensation? I would think they would be included in compensation since they are post-tax deferrals.

I forgot to add some information. Employee 8 has more than 5% ownership and has 3-month more service than employee 9. Employee 9 has 4.5% ownership. If I can somehow get employee 9 as the 8th one in the top paid group, then employee 8 will be HCE because of ownership. Also, all employees are counted for the top paid group count. Employer has not hired any new employees in the last two years. I wish I could get 20% to equal 8.1 employees, but no luck there. I'm at exactly 8.

Plan elects top paid group HCE definition. 20% equals exactly 8 HCEs. So, rounding up or down is not an option. Employees 8 and 9 have the exact same compensation ($125,000). So how do I choose between employee 8 or 9 as to which is HCE and which is NHCE? Would it be possible to have both employee 8 and 9 in the HCE group, even though the top paid group is only 8 employees?

Everyone was paid out by the end of 2010.

Can an employer start a new 401(k) plan now, and give safe harbor notice at the same time that the plan is effective? The employer previously had a 401(k) plan that was terminated in 2009 or 2010. Employer has not had a pension plan in effect between the termination of the prior 401(k) plan and now. They want to start a new 401(k) before the end of this year and to have safe harbor matching for the short plan year (from now until 12/31/2012). Is the old 401(k) plan that terminated in 2009 or 2010 considered at all in determining when the "new" safe harbor 401(k) plan can be established and when employees must be given notice?

This is the first 5310 submission that I have done and have a few questions. Included with the 5310 submission will be the restated Volume Submitter EGTRRA defined benefit document that the client will be adopting in the next few days. If we want a determination letter for the EGTRRA document, do we need to separately submit a Form 5307, or will the 5310 submission include a DL on the document. So my question basically is, do I submit both 5307 and 5310, or is the 5310 all that is needed? Also, the 5310 asks for the plan termination date. Can that be a date after the Form 5310 is submitted, such as 6 months from now?

The gateway is not itself a nondiscrimination test, but a prerequisite in order to be able to show nondiscrimination through cross-testing. If a plan uses general testing on a contributions basis (not cross testing), is the gateway a requirement?

Participant is age 73 on termination of employment on July 09. Elects not to take minimum distribution for 2009. Participant is rehired as part-time on May 2010. Does the rehire stop required minimum distributions? If no, is the 2010 minimum due 12/31/10 or 4/2011?

There will be no issue of amending or changing match mid year. No prior matching contributions in the plan. We just want to make sure that adding a matching contribution with accrual requirements (last day for sure, maybe hours) will not cause the plan to lose ADP safe harbor status.

This is the first time that we have a plan that is going to be adding matching to the safe harbor non-elective. If accrual requirements (hours or last day) are added to the matching contribution does that negate the ADP safe harbor? Or does it just require that ACP testing must be done?

Would you use the code for pre-approved plan in either (or both) of the following cases: 1. Plan has adopted a Volume Submitter document, but has special language that makes it not a word for word adoption. The special language is not extensive, if that makes a difference. The plan will not be submitted for a determination letter. 2. Same as above, but the plan has been submitted and has received a determination letter.

Prior to 2009 a 501©(3) company had two 403(b) plans. The first plan established has always been salary reduction only (Plan 1). When the employer decided to make matching contributions, a second plan was established (Plan 2). A Form 5500 has been filed each year for the second plan. None has ever been filed for the first plan as it has been considered a non-ERISA plan. In 2009 a new plan document was adopted that merged the two plans into one. However, the plan assets are still seperated. The custodian of the assets (same custodian for both, but still under seperate contracts) says that they do not have records avalable for the assets in the first plan and that the assets in that plan are not required to be reported on the 2009 Form 5500. Therefore, they will be supplying information only for the second plan, and will not provide information on the salary reduction only plan. My question: Is what the custodian saying correct? In other words, even though there is now only one plan, the accounts attributable to the original salary deferral only accounts are not reportable on the 2009 Form 5500? Plan has about 150 participants.

Thanks Andy, All non-owner employees terminated prior to 2009 and received distributions before 2009, so as of 1/1/09 there were no non-owners participants. In the past when a plan was filing a 5500EZ and then switched to Form 5500, the Form 5500 needed to be marked as the first return filed. When switching from Form 5500 to 5500EZ, should the last From 5500 be marked as "final"?

Two of our clients had employees in the past, but now the plans cover only the owners(s). Plans are either sole-proprietor or partnership. All previous filings have been small plan Form 5500. All previous participants, other than owners, are terminated and their plan assets distributed. Since the plans now are considered "one-participant" plans, can we switch to filing 5500EZ? If the answer is yes: Is a "final" Form 5500 required before filing the first 5500EZ? Thanks.

What year was the first year that the limit went from 100,000 to 250,000 for filing Form 5500 EZ?

So is that a yes or a no? I thought that several years ago the IRS was saying that it could be a cut back of benefits because amending the testing method after the beginning of the plan year could change who gets and the amount of any QNECS allocated, if testing failed. Are they still taking that position, or are they allowing testing amendments to be done by the end of the year of the change?

Plan has been currect year testing from 2005 - 2009. Would like to amend to prior year testing for ADP and ACP. Can the 2010 testing be amended now, or would that have to have been done by 12/31/09? Thanks.

Thanks Effen, Sounds like a better way.

Does anyone see a problem with the following definition of compensation, that will be in cash balnce plan. The definition will apply only to the sole proprietor owner. Any other employees would of course have the normal definition of comp. Definition of comp for owner only = Only compensation in excess of $100,000.