K2retire

From the perspective of a TPA, the big advantage is that the owners will now have W-2 income instead of having to do the self employed calculation to figure out their compensation. From the owners' perspective, they have greater liability protection than under a partnership.

I'm not positive it is the fault of the TPA -- this client seems to have selective hearing and memory.

Working with a prospective new client. They are expanding their business to include a location on tribal property. They have been advised by their current TPA that the employees of the tribal location cannot be included in their existing plan. I am aware of various special rules for plans offered by tribal governments, but I've never heard of not being able to include employees of a private employer in a plan just because the work site happens to be on tribal property. Where can I find more information about this?

We are TPA for a client whose 5330 excise tax came to 23 cents. We normally would not file, but the auditor for the 5500 required us to do it.

Has their fidelity bond carrier been contacted yet?

Similar question -- company sponsored an ESOP, but terminated it. Business owner rolls his part into an IRA. Some years later, he rolls the IRA into a new 401(k) plan of the same company. I would have believed that to be a related rollover, but the reply to the OP implies otherwise.

I've always heard that IRS auditors don't want employees who are owners to be treated any differently than other employees. On that basis, it seems like you should pay up and file it.

For more specifics about your plan, ask for a copy of the Summary Plan Description. It will explain who is entitled to what.

If your accountant is comfortable preparing the 5500s and calculating your contributions, perhaps you need an ERISA attorney to draft the document and keep it up to date instead of a TPA.

The withholding rules are one of the best examples of how our tax regulations do not make sense! We have mandatory 20% withholding on many types of distributions, although we do not have a 20% tax bracket. For people under age 59 1/2 who will owe the 10% tax penalty, have you ever heard of anyone getting a plan distribution whose marginal tax rate was only 10%? So we annoy people by withholding in the first place, then for most of them, we don't withhold nearly enough to cover the actual tax bill so they owe even more when they file their tax returns. But we make an exception and don't require withholding from hardship distributions. The people who have money management skills such that they need a hardship distribution are more likely to figure out the tax consequences of that distribution than the general public. Right? Off my soap box for now....

According to the popular press the third leg of personal savings is non-existant for most Americans. So by "government logic" killing employer plans and Social Security will level the wobbling stool again.

Agreed!

They want to limit comp for both deferrals (I have no idea why) and match (presumably to save a few bucks). They don't usually do a PS contribution, but they would also want to limit comp for that purpose if they did. Since they are dealing with a very small population, I proposed simply eliminating that job classification from the plan entirely. They thought that would be a morale issue. Why they don't think excluding the major portion of someone's pay is a morale issue escapes me.

In this case they are expecting commissions to be significant for the individuals who receive them. The non-commission income is minimum wage, but they expect several of the commissioned employees to have enough commission to become HCEs. They are counting on the fact that it is only 3 or 4 employees out of 100 or so in the plan to make the average work for the test. (I agree it is a bad idea!) So in years when they don't pass, how do you fix the fact that those people should have been allowed to defer on that income?

Client would like to exclude commissions from plan comp. At least in the first year, all of the newly hired employees who earn commissions are NHCEs. So we're using 100% of the HCE compensation and the NHCE compensation can not be lower by more than a "de minimus" amount. The client seems to think that a 5% difference is acceptable. That seems high to me. Since I understand that the regs don't address this, does anyone have any experience with what auditors have accepted?

With so many grandparents becoming the primary care givers for their grandchildren, not considering them "immediate family" when they need assistance is an unfortunate turn of events!

At this point, I have decided not to do anything until we learn how many of these people have elections on file with the employer that were never forwarded to the investment guys because they elected not to defer. (No sense panicking prematurely!) Unfortunately, the auditor seems to be very inexperienced, so even a tip to her is unlikely to produce any results. The population of participants who should be corrected, if any, should be nearly identical for both years. So they are more likely to notice it with next year's audit when they see the correction for this year. When I was hired, the President of this group indicated that he was relying on me to let them know if there were things that they were doing that ought to be changed. He has reminded me of that several times. If it becomes necessary to pursue this further, that is the opening I plan to use to bring it up jointly to the President and VP. And yes, learning to accept that which I cannot change is a life long goal/challenge of mine!

I work for the TPA division of a company that has a number of other functions. The TPA division is part of the retirement plan and wealth management group that includes both broker/dealer affiliations and RIAs. Although I report directly to the president of the retirement/wealth mgmt. group, the VP of the group is certainly in a position of higher authority than I am within the company. I'm posting my question here rather than ASPPA message board because I don't want my name identified with the question. Recently one of the VP's plans discovered that they have not been operating in accordance with the provisions of a two amendments, one effective 1-1-2011 adding QACA, the other effective 7-1-2010 adding automatic enrollment. Both amendments specifically called for automatically enrolling any participant who had not completed a contrary election. The investment house that began handling the enrollment forms for them at the time of the 7-1-2010 amendment coded the amendment wrong and only enrolled new people. The client is looking to see how many enrollment forms they have on file from before the investment folks took over this responsibility. The investment house has identified up to 90 participants for whom they have no election on file. This is a large plan, in the midst of a 2010 audit for their 5500. The auditor has not noticed this, nor asked any questions about the automatic enrollment process yet. I have been instructed by the VP that this is his plan, and I am not to say anything to the client, nor the compliance staff that reviews my work about the 2010 error. He intends to correct only the error for 2011. I'm looking for something stronger than my own opinion or my possible issues with violating ASPPA's code of ethics, to explain to this VP why he can't just pretend he doesn't know about this.

Who knows -- the anesthesia might be helpful!

True -- but it likely would have been she gets half of the cash after the RMD, plus half of what is left.

Nearly every plan sponsor who has asked how to terminate their plan has said they wanted to pay out terminated people before adopting a plan termination resolution when they heard they would have to fully vest everyone. I'm sure that is exactly what the IRS reps are trying to prevent. The fiduciary breach question is a good one!

How about leaving out the "mistress" part but saying that the distribution was made pursuant to a request under the power of attorney. Unless the power of attorney says it is only valid if the person is incompetent, compentence of the participant is probably not an issue.

You are correct: the plan must be established by December 31 AND you cannot make a contribution in any year when you do not have a profit, nor can the contribution be more than your net profit. Because you are self employed you have until your self employment income has been determined to make the deposit for the year. The IRS considers the plan to be established when the legal documents creating it are signed. Most fund companies consider the plan to be established when you make your first deposit. Since you have the ability to control how the income is reported between the two of you, you could establish the plan now for one of you and make sure that one has a profit for the year. The next year, you could do the same for the other spouse. Once the plan has been established, that December 31 deadline is no longer a problem in future years. The amount that can be contributed each year is indexed for inflation, although it has been the same for the past 3 years. For 2011 it is $16,500 for people who are 49 or younger. It is $22,000 for those of us 50 or older.

I'll add that as a TPA we always find it preferable to have written proof that we notified the client. A phone call comes down to he said/she said.

I'm looking at a DRO that gives a percentage of the participant's ESOP balance to his ex wife. It is not currently in a form that can be qualified due to missing information. In general, are there any details required for an ESOP QDRO that I am likely to be overlooking since I usually only deal with 401(k)s?