SheilaD

Another option might be to contact the participant and explain that either he/she can pay back the 30K and continue getting monthly payments, or pay back the 16K and stop all monthly payments.

Any thoughts on this? S

I have a borderline top heavy plan that is thinking of going to a safe harbor match only for 2010. This plan hovers in and out of top heavy. They have the following idea. In November, 2009 notice goes to all employees about the safe harbor match; In February, 2010 we prepare the top heavy calc as of 12/31/2009; If the plan is top heavy all goes on as planned. If the plan is not top heavy they (with proper notice) stop the top heavy match and revert to ADP/ACP testing. They would fund the match up to that point. So far - I'm with them -- but they are talking about applying this procedure year after year. I'm wondering if there is a problem with this. Too frequent changing of method?, Too many amendments (assuming they keep bouncing in and out of top heavy?). Also, I have researched the following on The ERISA Outline book but would like any contrary opinions: a) You cannot exclude statutory ineligibles from the safe harbor match and maintain the exemption from top heavy (deferral eligibility is immediate); b) You can exclude certain HCE's - even if not key - from the safe harbor match. Thanks for any and all thoughts S

When we have special reports we usually pay relius to format it. However, I've never sent them something as ambitious as your projects sounds.

Sorry -- I don't see any way to avoid the audit.

I think that if you are using accrued to date you need "real" account balances. Don't you need the accurate year end balances anyway for forms and top heavy analysis? S.

You are required to electronically deposit the 1099 withholding if your 2008 withholding for that plan exceeded 200,000 or you were required to electronically deposit in 2008.

Are A and B in a controlled group? If so I would think you would treat it as a related rollover.

Yes you can pay plan premiums for the insured participants account. Just make sure that over the life of the plan the total of all premiums paid is less then 25% (50% for whole life) of all contributions and forfeitures paid to that participant.

I might argue that if the funding notice is required - there are no participants to distribute it to.

Anyone at the IRS/DOL even THINKING

Through the years I've seen many OOPS (and plain wrongheadedness) cause failure to withhold on distributions that should have had withholding. I've never had the IRS come back and "complain". (So far -- knock on wood).

Is an HSA considered to be a type of cafeteria plan? If so this should help. I'm not very familiar with HSA's so I don't know if this will help. TREATISE, PENSION-ANSWER-BOOK, Q 3:7 How is compensation defined for purposes of determining who is an HCE? How is compensation defined for purposes of determining who is an HCE? The definition of compensation is the same as is used for purposes of the annual addition limitation applicable to defined contribution plans (see Q 6:41). This means that elective or salary reduction contributions to a 401(k) plan (see Qs 27:12, 33:30), a cafeteria plan, a simplified employee pension (SEP; see Q 32:1), a SIMPLE IRA plan (see Q 33:9), 403 (b) plan (see Q 35:1), or a qualified transportation fringe benefit plan are included. Only compensation received by an employee during the look-back year (see Q 3:10) is considered in determining whether the employee is an HCE (see Q 3:3). Compensation is not annualized for purposes of determining an employee's compensation in the look-back year. [i.R.C. §§ 414(q)(4), 415©(3); Temp. Treas. Reg. § 1.414(q)-1T, Q&A-13; IRS Notice 97-45, 1997-2 C.B. 296]

Unless the document somewhere says "for purposes of this section only a Highly Compensated Employee is defined as ..... base pay only" I agree that they are not following the terms of the plan. If the client is going in that direction, I'd suggest amending the plan to read "participants whose base pay exceeds...." rather then creating confusion by using a term that is defined differently in a different place. But this will only change the future limits/match. They will still have to fix the prior year(s).

directly to our clients with instructions for them to attach it to form 5500. This is new (or rather old -- if you've been in the business a few years and remember when the IRS would send back a stamped copy of the 5558.). The 5558 form still says the extension is automatically approved. Anyone else getting these or no anything about this seeming policy change? Thanks

I agree with you and would show it as a plan expense.

It seems logical that 412 minimum funding would not apply -- but failure to make that contribution could be construed as failing to follow the plan document? I have a feeling that I will not find an absolute answer on this - but it might relieve my client of penalties to switch to the profit sharing with a fixed formula as long as EVENTUALLY they make their contribution. Their cash flow is so dependent upon the state and federal government sending in their portion of the budget timely. Thank you.

I'm afraid I have no answer -- just an additional question. I have a non-profit customer who has a money purchase plan with a tiered formula. Some of their funding is public and they have always said that they must have a fixed formula in the plan in order to do their budget. If they put a line item that says discretionary Profit Sharing it will be cut in the funding talks. Last year, due to the late reimbursement by the state of New York they failed to meet minimum funding. The IRS is waiving most of the penalty, given the situation, but now a question has come up. Can they in fact have a Profit sharing plan with a fixed formula? If so, what are the penalties for failure to contribute timely? I wasn't even sure they could have the fixed formula so hadn't researched this yet. Do you have a determination letter on your PSP with a fixed formula? Thanks for your thoughts.

cool -- thanks sheila

Thanks for your answer. I was trying to avoid the reverse polish notation of the HP12C if possible.

At my advanced age, I am reluctantly being push at the EA exams. I'm confused by the calculator requirements. Can anyone suggest a calculator that they would recommend as acceptable? thank you.

Ask not what you are missing -- but rather what they have missed. I think this is just another issue that was not clearly thought out.

As long as you have any benefit for a non owner/spouse you must file a 5500. In the year following the year in which the terminated person is paid out I believe you could switch to an EZ. The way the instructions read - once you are an EZ you will only have to file in those years that your assets exceed 250,000.

I believe you are still stuck with the top heavy minimum. The DB plan being frozen merely reduces the minimum from 5% to 3%.

For each partner: 1) Their share of Total partnership income (before deferral) is reduced by their share of the cost for any non-partner employees. 2) Then the self-employed SS/Medicare tax is subtracted. 3) The remaining income is divided into compensation, 4% safe harbor and profit sharing (if desired) such that: a) Deferral Plus safe harbor plus Profit sharing do not exceed 415 and b) Safe harbor for all employees plus profit sharing for all employees does not exceed 25% of compensation for all employees including the partnership income reduced by safe harbor and profit sharing. This may be an iterative calculation depending on the situation. Note that partner deferral does not reduce partner's net income for the 25% of compensation test or non-discrimination testing if applicable. Having re-read this -- it might be easier to illustrate with real numbers.