Lou S.

He needs to change his procedure to deposit the employee contributions when they are withheld. The first issue I see is you probably have late deposits on a fair amount of the withheld contributions. Assuming the are doing the current quarter deposits retrospective and prospective in the middle of each quarter. That is the deposit on 8/15 is for the period 7/1 - 9/30. The second issue is you are depositing 401(k) contributions that have not yet been withheld (if I read your post correctly). In this second case, what do you do if you make the deposit then the employee, stops contribution, takes a hardship or terminates employment before the deposited contributions are ever withheld or if the estimates of the future deferrals run out to be wrong? But my guess is what is likely happening is he is making quarterly deposits of deferral and safe harbor AFTER the period not in the middle and then you have a lot of late deferrals.

Most likely the participant was reported on an SSA back in the 80s and is now receiving a letter from SSA that they they may have benefits in this plan because they just applied for SSA benefits. We've found that even some participants who were properly removed from the SSA when paid out still get the letter from SSA.

Out of curiosity why would someone with a SAR-SEP now want a 401(k)? And if they want one, why not just put it in first of the year? I think since new SAR-SEPs were axed by the IRS quite a few years ago you might have trouble finding a proto-type or custom SAR-SEP now since there is really little or no incentive to draft one that I'm aware of at this point other than maintaining existing grandfathered SAR-SEPs. Lastly if they are currently on a 5305A-SEP are they even allowed to change that to a prototype or custom SAR-SEP mid year? I honestly don't know.

On time and expense?

I believe she can rollover to an inherited IRA and continue RMDs from there.

Ha, Ha I didn't even catch that in the original post. In that case it just par for the IRS course.

I've heard different opinions on changing loans mid-year on SH Plans. It is not one of the limited items that has the IRS blessing as far as I know but since it generally doesn't have an impact on what is in the SH notice that some folks thing changing this is OK, and other think because it is not on the pre-set list changing it is not.

On safe harbor, I've seen most advice saying make amendment effective 1st day of the next plan year. RPG, I see no reason not to make those types of changes in the restatement process.

See code section 411. I believe (d)(6) is the relevant sub section but I could be off. In short some benefits are protected, things like vesting, retirement age, certain distribution options and timing. Other benefits are not, things like - eligibility, loan availability, insurance, the right to direct investments.

It is standard. Save the letter for when you file by the extended deadline and the IRS still sends you a notice that you are late.

It sounds like an administrative policy, but if terminated employees are allowed to set up an ACH to make payments I don't see why active employees would be treated worse by forcing a default.

What does the participant loan program say?

Not only have I never heard of it, I'm not sure it is even allowable under the regulations.

They are trustee directed until they hit individual participant accounts. It is more of a fiduciary issue on prudence of investment selection then anything else. And possibly a failure to follow plan terms if it takes "too long" to allocate and all funds are supposed to be participant directed under terms of the plan. But participant direction is not a protected benefit.

Thanks for some reason I'd read it as 5/12/09 not 5/09/12. My bad.

I believe this was the relevant thread http://benefitslink.com/boards/index.php?/topic/54289-another-contribution-due-date-question/?hl=sole+prop#entry235882

I think there has been quite a bit of discussion on this issue in the past and the conclusion has been the contribution has to be on the Schedule SB for 2013 to be deductible for 2013 even though the tax payers extended deadline is 10/15. Contributions made between 9/15 - 10/15 would need to be deducted in the 2014 year in this case. I think a search might find the prior discussions with more supporting detail.

It depends on the reasons for terminating. Some sets of facts it would be perfectly fine, others the IRS might have issues with the permanency rules.

I don't deal with this in 409A plans but I know it does come up in 401(a) plans somewhat regularly and the answer is you cannot forfeit, as irksome as that is. But the rules may be different for 409A, has the client consulted legal counsel? That's probably the first place to start.

Send them a fax asking them to provide details of the calculation. Not sure what you are invested in but the S&P 500 has more than doubled in that time period (roughly 909 -> 2003) so the earnings don't seem crazy to me. Are you sure the 7% return figure you are quoting is accurate?

Ask him where in the 1.410(b) regs is there an exception for DB plans to excluded such participants. I've never seen one.

Not to my knowledge. Our Non-standardized DB AA points outs something to the effect of - plan may fail discrimination if 1000 rule is used for accrual instead of 500 hour rule.

I took it to mean Google and the like and if that didn't work you had to decide if it was prudent to spend money doing other searches. But maybe I'm wrong.

Have you tried getting a copy of the policy from the insurer?

Yes. You are correct.