K2retire

George, Am I reading correctly that you got to keep the extra funds (less your defense attorney costs)?

Interesting. I've worked places where the trustee had to sign everything, and others where the employer did, and one that couldn't decide and kept switching back and forth, but no one has ever explained the reasoning for each position.

Would your concern be influenced by whether the plan a discretionary trustee or a directed trustee?

While the possible bankruptcy may or may not ever occur, and may or may not impact the plan's investments, I believe a prudent fiduciary would be well advised to consider what could happen in each of those possible scenarios. If the assets can be moved without incurring large surrender fees (such as those charged by many insurance related investments) it is worth considering. On the other hand, if there are surrender charges, that certain expense must be weighed against the unknown other possibilities.

Good point!

We don't have enough information to answer your questions. Since you don't seem to want to divulge more details, we can't point you to a specific line on the 5500 or what the correction rules are. As to the repayment period, that would probably also depend on the specific situation. Keep in mind, however, that if this particular PT involves an excise tax, an additional tax is likely to be due for each year until the PT is fully corrected/repaid.

I also believe 30 days after the tax return due date is correct. And since the 415 limit is based on year of contribution comp, and some of the folks due a contribution from these historical periods may not have any current comp, you have a potential problem. Lip, are you sure you really want to take on a client with this many problems?

I completely agree. Unfortunately, the sales people are employees of our client company -- and the client is always right. Or at least cannot be directly told no.

Although I am currently working for a low cost bundled service provider, and agree that "you get what you pay for" I would add that the statement also applies to using a financial planner without spending the money to consult an attorney or accountant before signing legal documents. Definitely start by verifying the participant count on the 5500 in question. Counting the true number of individuals who have met the plan's eligibility requirements and passed an entry date gives you a starting point. Add to that number any terminated employees who still have money in the plan. Notice that neither of those steps mentions anything about whether or not the person has made a current election to contribute to the plan. That is not relevant to the government's definition of a "participant." Whoever prepared the 5500 showing more than 100 participants should have alerted the client to the need for an audit. My guess -- and it is 3rd or 4th hand rumor -- is that the cost will be a mid 4 to low 5 figure sum. FWIW, this is an issue that we fight all the time with the folks who sell our bundled product. We in the TPA area would prefer to make these details known before someone finds themselves in this position. The sales staff is afraid they might scare someone off and lose a sale.

Your comments are thoughtful and right on, as usual John. Sadly, regulators live in a different world than the rest of us.

Should -- but often don't. I found it most ironic when the national payroll company used by my TPA employer stopped my deferrals at the prior year's 402(g) limit the first year the limit was raised by EGTRRA. Fortunately, I reached the limit before the end of the year and was able to get the rest taken from a subsequent check. Had that not been the case, I would not have been amused.

Being completely ignorant on matters related to life insurance, the OP sounded to me like an inept attempt to describe a top paid group election.

It is unlikely that an employee who was not the business owner would want to give up employer contributions to be able to make more salary deferrals, if they understood the concepts.

I've seen higher processing fees, but never lower. If you are using a full service, independent TPA, the annual maintenance fee is also what I would expect to see. If you are using the TPA division of a payroll service, that might be on the high end.

There is a lengthy discussion of this issue in a post by bg5150 with a subject line about the final paycheck crossing the plan year.

The 20% withholding is the mandatory rate of withholding. The actual tax due may be more or less than 20%. If the distribution is subject to the 10% early withdrawal penalty, 20% is likely to be too little (since few people are in a 10% tax bracket). But the actual amount due is not of concern to the employer or the plan.

Do they have the same credentials?

I'm curious why they need to be off shore. I would think that few non-US residents would have completed the necessary steps to qualify as an enrolled actuary in the US.

Our spouse was already a participant in her own right. The note did not require payments through payroll. Redoing the loan in her name would not have been possible since each spouse had originally taken a $50,000 loan. At the time of the husband's death, the balance of each loan had only been paid down to approximately $28,000. I changed firms not long after this incident, so I never heard the final resolution.

I've only had a deceased participant with a loan once, and I'm not positive this is the correct position. We allowed the spouse to continue making the loan payments on the original schedule. Part of the discussion at the time was that the only alternative was to deem the loan and issue the deceased participant a 1099. Since they filed joint returns, she would have been effectively taxed on it if she had not made the payments.

To further confuse the issue, some 401(k)s now permit Roth contributions. So you cannot make the blanket assumption that 401(k) contributions are all pre-tax any longer.

Of course, if it is a small plan, there is no audit.

But with a balance forward plan, it could be an entire year before the TPA had the information to discover that the deposit was never made. Based on the timing of this question, I suspect that may be the case here.

You have a corporation providing services (that would otherwise be provided by the parent corporation's own employees) to its parent corporation. How can it NOT be an ASG?

Perhaps in conjunction with the merger it is time to rethink the Plan B investment options. That would likely be less expensive than maintaining two plans. As for participant reluctance to liquidate, it is really the trustee's decision not theirs. After all the trustee is the one charged with making prudent investment choices for the plan, despite the current participant belief that they always have the right to their own investment selections.