Alex Daisy

Line 14, code A. If the accountant followed the instructions, the guaranteed payments are taken into account when computing line 14, code A so you do not add them to that number to arrive at net earnings from self-employment. I assume this partner wants to make deferrals based on earned income for the prior year? Remember that he still had to have his deferral election in place before the compensation became available to him (i.e. the last day of the year). Laura: What if the Guaranteed Payment amount is positive, but Line 14, code A, which includes the guaranteed payment, is negative. Can they defer based on the Guaranteed Payment amount , even thought Line 14, code A is negative?

A partner of a Company that sponsors a 401(k) Plan would like to make elective deferrals into the Plan. Where on a Schedule K-1 do I find the partners Net Earnings from Self Imployment? What about the Guaranteed Payments on the K-1. Can this be used towards calculating Net Earnings from Self Imployment? Any help would be greatly appeciated.

Am I correct to say that in order for LLC Partners in a company to contribute to a 401(k) Plan they must have earned income on their K-1? Eleven employees invested money into our company and therefore changed their status from employee to LLC member. Those members now rather than getting a salary or income from the company are receiving guaranteed payments. Rather than receiving W-2’s they will receive K-1’s. The company will have a net loss this year so on their K-1’s for this year they will show their portion of the companies loss (which will be nominal) and it will also have their guaranteed payments. Just to be clear the guaranteed payments will far exceed the apportioned company loss on their K-1’s. All this being said I just wanted to confirm that it is okay for both the employees as well as the LLC members to participate in the 401K plan. There will be no profit though as the company will lose money this year. Is their Guaranteed Payments considered profit?

A Plan erronously deposited 401(k) employee deferrals into a few particicpants accounts and shorted other participants. The over contributions will be removed from the affected participants accounts with earnings, but what is the correct way to handle the participants who were shorted?

What do you mean by this? If there was only one participant receiving an allocation, how is it "New Comparability"? The Plan Document calls for a New Comparability allocation, but since only the owner was employed at the end of 2008, they were the only participant who received a P/S Contribution. However, I now know that I have to include the other employee who was a plan participant during 2008 but was terminated during the year with more than 500 hours, in order to pass the 410 (b) Coverage test.

Yes, there was one HNCE who was already in the Plan for 2008, and worked over 500 hours, and terminated before the end of the year and did not get a Profit Sharing Contributution. The P/S allocation was done via New Comparability. Am I correct to say that this person should get a P/S contribution in order to Pass the 410(b) minimum coverage test?

I am working on a very small plan where there is a last day requirement in order to be eligible to receive a Profit Sharing Contribution. The owner of the company was the only eligible employee at the end of 2008, and wants to allocate the entire $10,000 profit sharing contribution to herself. Will I run into any coverage issues? What type of testing is required on the Profit Sharing Contribution. Thanks in Advance for the assistance.

I agree, but the participant agrees those are the rules for a traditional 401k but with the roth it is different due to it being after tax dollars… Any help here?

A participant is still working with the company and has not met the age requirmenmt for an in service distribution. They want to Rollover their account from the 401k into a Roth IRA , becauase they think Roth IRA offers better investment selections. Is this Allowed?

A Plan Used $60,000 in forfeitures to Fund part of the Employer Contribution in 2008. Where do I account for this on the 5500?

A client had a payroll on 12/31/2008, but the check was paid on 1/2/09. Does the employee deferrals counts towards the 2008 or 2009 402(g) limits and will they show up on the 2008 or 2009 W-2 for the Employee?

According to the Plan Document, a participant will become 100% vested upon Plan Termination or upon discontinued contributions to the Plan. The company plans to terminate the Plan in 2010, but the Plan is not making any further contributions for 2009. When do the participants become 100% vested? When the official Plan Termination paperwork is signed or when the contributions stop? Also, Who becomes 100% Vested? Only employee who are active at the date of Plan Termination, or all participants with account balances, even those who are termintaed and not employed by the company?

I have a Plan Document that was Amended and Restated as of 1/1/2006. The vesting on the ER Match and Profit Sharing Contribution was a 7 Year Graded Vesting Schedule. When was the Plan required to go to a 6 year graded Vesting Schedule?

Can someone tell me who i should report on this line? The instructions read "Include any individual who terminated employment during this plan year, whether or not he or she (a) incurred a break in service, (b) received an irrevocable commitment from an insurance company to pay all the benefits to which he or she is entitled under the plan, and/or © received a cash distribution or deemed cash distribution of his or her nonforfeitable accrued benefit. Multiemployer plans and multiple-employer plans that are collectively bargained do not have to complete line 7h." Do I include anyone who terminated in 2008 and is not 100% vested? What if they were paid out also in 2008, do I include them? Any guidance is greatly appreciated.

We are filing on the accrual basis, and the Auditor is insisiting that since the financial statements are accrual basis , we should pick up the 2008 ADP Refunds as a payable as of December 31, 2008. I just want to do it the correct way. Is there any standard here?

A Participant joined the Plan in the middle of 2008, and already made $15,500 in Employee Deferrals with his previous Employer's Plan. The he made Employee contributions of $9,000 into his new company's Plan for the remainder on 2008. This was caught at the beginning on 2009, and a refund was processed in 2009 becuase they went over the 402(g) limit. My question is how do I account for this on Scheudle I? Do I include the $9,000 in Employee Deferrals even thought it was not supposed to go into the Plan and refund to the participant in 2009? The money was invetsed and is showing up as part of the 12/31/2008 balance in the Trust. Do I need to deduct the $9,000 from the ending marking value to report on Schedule I? Any help would be greatly appreciated.

A 401(k) Plan has a participant that terminated in 2005 and they still have an account balance as of 12/31/08. My question is where to report them on Form 5500. Line 7b or 7c 7b = Retired or seperated participants receiving benefits 7c = Other retired or seperated participants entitled to future benefits. I am thinking since they have not requested a distribution yet, they are entitled to future benefits and should be reported on line 7c. Is this corrrect?

How can Foefeited Safe Harbor Employer Contributions be used for Employee Salary Deferrals? Is that Possible?

A Company decided to stop the Safe Harbor Match Contribution effective 5/1/2009 (proper notice was given), but mistakenly submitted contributions for the 5/1/09 and 5/8/09 payrolls that include the Employer Safe Harbor Contribution. What is the correct way to handle getting the Employer Safe Harbor contributions out of the participants accounts? Can it go back to the Employer or does it have to stay in the Plan in a Forfeiture account? The company wants the money returned to them, and not left in the Plan as a Forfeiture.

I am doing a 2008 402(g) refund now and need to calculate the Earnings. Are the earnings calculated thru the date of distribution? Can someone give me an example on how the earnings are calculated? Does Gap Earnings need to be calculated?

A 401(k) Plan currently has a 6 year graded vesting schedule for the Profit Sharing Contribution. The Plan Sponsor wants to amend the Plan to read "Employees hired prior to and including 12/31/06 are 100% vested in the Profit Sharing Plan". Is this allowed?

A Plan Sponsor recently swithced payroll companies and just realized that they did not do the 401k contributions for February and March 2009. They made these deposits into the trust yesterday. I am looking for Guidance on how to calculate interest on the late deposits. Any help would be greatly appreciated. ALEX

Due to the economy, a company can no longer make the Safe Harbor Match Contribution effective 5/1/09. The 30 day notice was given to all participants. Are the Safe Harbor Match Contributions that were given from 1/1/09 to 4/30/09 100 % vested?

Can you Pick and Chose which Otherwise Excludable Employees to exclude and which to excluded? For example, exclude only the Otheriwse Excludable Employees who did not defer, and include the ones who did defer?

The employee in question is a HNCE. I was reading an article from McKay Hochman that says I must include the HNCE even if the statutory entry date has not yet been reached. (see below). I think this is contrary to the Otheriwse Excludable concept. In the situation where an NHCE participant is making elective deferrals after meeting a less than one year eligibility requirement and then satisfies the statutory age and 1 year of service requirement before the plan year end, they are included in the ADP or ACP test even if the NHCE’s statutory entry date has not yet been reached. The following examples will illustrate this point: Example 1 A plan has immediate eligibility for deferral and match. An NHCE is hired on November 1, 2009 and begins making elective deferrals and is matched as of hire date. That NHCE is not in the 2009 calendar year tests because they are in the “otherwise excludable” group. However, because they have satisfied the one year and age 21 requirements by the end of the 2010 plan year, they are in the 2010 ADP and ACP tests. This is true even though the statutory entry date would not have been met until January 1, 2011.