K2retire

Larry, I usually agree with your suggestions, but recommending a DB plan to a client who can't figure out a PSP seems beyond reason to me!

As you are comparing options, be sure to get all of the information about how these companies are paid so that you have an apples to apples comparison. Mutual fund companies and insurance companies are likely to tell you that their services are free and neglect to mention the sales charges associated with their products.

I won't claim to know about the legality of this arrangement, but it does not appear to me that you are avoiding the payroll taxes, merely transferring them from the company to the employee.

Please keep us updated on this. Because retirement accounts are governed by Federal law, which does not recognize gay marriage, many of us are anxious learn the outcome.

Mike, Thanks for that information! I was beginning to wonder if what I'd learned over the past 9 years had somehow been horribly misinformed.

I don't remember anything in the partnership tax laws that allows a partner to choose to receive a W-2 instead of a K-1. Kinda makes me wonder what other shady practices this client and his accountant are using.

Larry, I don't think the problem is with who is paying the fees. It is with some participants' fees being handled differently than others. At that point doesn't it become a BRF issue?

Do all those seasonal employees actually get their balances withdrawn before the end of each year? Terminated participants with account balances are included in the count.

To me it's simply definitional of "level amortization". Each payment is applied first to accrued interest and then to principle. So you'd only apply it to as much interest as is due for the next regular payment. That's the way most banks would do it too.

If he was 40% vested he would have been required to redeposit the 40% match and the deferrals to have his nonvested balance restored. Are you saying that because he was 0% vested he no longer has to return the deferrals to get the match restored?

If the issue was inadequate postage, there would not be a question of the IRS refusing the package -- it never got to them in the first place. Processing any special handling takes the post office a long time, whether it is a return, forwarding, or a return receipt, because it must be processed manually rather than by their usual automation. When you call the IRS as S Luskin suggests, don't get into a discussion about why or how they delayed the process. It will only hurt your cause.

Be very careful about hiring and adviser. Many of them have an interest in selling you what pays them the best commission rather than what is the best investment for your situation. With that in mind, you really need to invest the time to understand investment options, even if you hire an adviser.

Sounds like an excellent question for the partnership's ERISA attorney!

Why wouldn't you just do the 3% SHNE and make the additional amount a discretionary nonelective?

We ask the client to sign indicating that they have actually deposited the contribution that was calculated and used in the testing.

Particularly since this trustee is also giving bad advice to support his/her position!

The answer depends on the investment performance in each account. The type of account (at least the 2 you mentioned) does not impact the choice.

I agree that it was totally unexpected -- but we didn't want to annoy the auditor and tempt her to disqualify the plan!

We recently had this come up under audit. The IRS auditor required the client do the 1 to 1 deposit plus earnings, and pay the excise tax for each of the 3 years that the refund was late.

Doesn't freezing the plan effectively terminate it since there are no longer substantial and ongoing contributions?

Loan payments withheld from payroll are subject to the same deposit timing rules as salary deferrals.

You benefit because it your IRA.

It depends on the terms of your particular plan. That should be explained in the Summary Plan Description that you received when you became eligible for the plan. If you can't find it, ask your plan administrator for another copy.

They are separate accounts. I totally agree that this is an option to be avoided, unfortuantely I didn't write this document.

The plan document specficically excludes deferrals from the one year hold out rule. The participant was allowed to defer immediately. The plan also matched her immediately. My question is if this is something that can be self corrected by amending the plan to conform to its operation.