K2retire

Given all of the ID that must be produced in order to start a job, I can't imagine how this employee got away with such a thing.

Many IRS rules do not make sense and you have accurately described one of them.

Have you really succeeded in training your clients to keep that sort of thing? If so, please share your method with the rest of us!

I agree that it doesn't make sense. But I work for a competing fund company and our SAS70 specifically excludes recordkeeping services for retirement plans. What OP is being told by American Funds goes along with that.

I've seen it fairly often.

It can be done, but there are limitations about the timing.

Bill, coming from a banking background I always thought that whoever held the assets was a custodian. And to my way of thinking the mutual fund company clearly holds the assets. But apparently this is like so many other terms in this industry that has a specific meaning that may be different than the common usage of the word.

Ownership cannot be attributed twice -- the wife gets her husbands share, getting it to her mother would require a second attribution.

I am told that a SAS70 specifically excludes assets for which the fund company is neither the trustee nor the custodian. If American is acting solely as recordkeeper, their SAS70 is not likely to be helpful.

We are on the Corbel prototype. It does say that the employer includes related employers (LLC is owned 100% by the same person who was the sole prop.), but it also says that employees of related employers can only participate if the related employer adopts the plan as a participating employer. That is the step that they neglected. It would be very helpful if a successor employer were automatically included, but I'm struggling with how the successor employer "shall maintain this Plan" without ever adopting it. Is making contribution deposit sufficient for that purpose?

Sole proprietor establishes a safe harbor 401(k) plan in 2007 for which we are the TPA. While reviewing the 2008 Form 5500 the trustee calls us to say that we have used the wrong EIN on the form. After further questioning, it seems that the client became an LLC in February 2008, but never mentioned it to us until now. The LLC has never been added as a participating employer, but it issued all of the 2008 W-2s, including reporting salary deferrals. The LLC also made the SH match contribution. This is a tiny plan with 4 participants (including the owner and his wife) and less than $10,000 in assets after almost 2 years. Any suggestions about a fix it that won't cost more than the plan is worth?

The Corbel prototype only allows the 7 year graded or 5 year cliff vesting to apply to profit sharing contributions. We've chosen to only allow the 6 year graded or 3 year cliff to avoid having to deal with different vesting schedules for different money types ever since the requirement for match vesting changed.

Most auditors I've heard from (both IRS and DOL) want to see the signed form with the zero election, not a procedure.

And many qualified folks elsewhere who would be willing to handle a DB in NC.

No indication of the type of business, but I suspect there may be an affiliated service group or controlled group. The simple solution is for the sole proprietorship to be a participating employer. But I don't think you can make that happen retroactively.

If the partnership income was zero, where did the other half million come from?

But don't they now have a 80% board control test for controlled group purposes? There is a rule, but I don't remember the specifics. But the OP said owner, not board control.

It is only required if below $5,000 -- and most of ours are below that amount. Once terminated, we only allow lump sums, effectively eliminating taking a hardship and leaving the rest in the plan.

My observation is that if you can't information from a client who is wanting to begin using your services, it is a good indication of how likely you are to be able to get information on an ongoing basis. Approach with caution.

Not for profits don't generally have owners.

Although it was deposited to the plan as salary deferral money, because it was not truly withheld from pay it is an employer contribution. As such, both the excess deposit for deferrals and the match should be forfeited.

What does the document say about timing of distributions for terminated participants? Ours require distribution immediately, which makes the hardship question a mute point.

Any plan, including a safe harbor 401(k) can require that an employee meet age and service requirements to participate. The maximum age is 21. The maximum service is 1 Year of Service, which can be defined to require up to 1,000 hours.

Another way to think about it is IF the plan had the most restrictive allowable eligibility (age 21 with 1 Year of Service) and entry requirements (semi-annual), would those people be in? If not, they are part of the otherwise excludable group.

It is only a guess on my part as to the reasoning, and regardless of what it was, I'm certain that has never been communicated to a plan sponsor in that manner. But I have asked myself many times if a prudent fiduciary would agree to various terms that we have. (I've also asked myself how long I can justify staying in this job if I feel that way, but that's another story.)