Lou S.

Scannig is cheap and easy. That's what we do.

We had an audit that had a typo on some signature dates the year got put in accidentally as X+1 instead of X in a few spots and no one caught it. The IRS was threating a closing agreement over the "late" adoption of the amendment but we were able to produce e-mails, UPS overnight reciepts both ways at te time of the amendment showing everything was done in year X and that year X+1 was a typo. Eventually they relented but I think we went back and forth several times before they agreed. As others had said if th IRS wants to take a hard line you may be out of luck but my experience is they are usually very reasonable if there are no real problems with the plan and it is just a form over substance issue.

That's odd, most will let you do it if you pre-pay before they send the money out. If doing it as you suggest yes I think the IRS position is this is treated as a contribution subject to plan terms which can be problematic at times for ex-employees and general testing and allocation conditions. You could try a private letter rulling though that seems excessive. I'm not saying this is the best idea or if it would even work but the Sponsor could take the position that they are simply restoring plan expenses to head off a potential fiducicary breach lawsuit. Again not saying that is the correct position but it seems like one that could potentially be supported. edit - BG's response is better than mine.

Can the Plan Sponsor simply write a check to the prior carrier as a Plan Expense?

relius has a fix. they can send you a link to a mircosoft file to run depending on if you have 32-bit or 64-bit operating system. It is an issue with some older windows operating systems and the SSA program.

I'd tell her to contact the Plan Sponsor. Yes I realize they are out of business in this case, but I don't think that changes the answer. I guess now it wouldn't be an issue since instead of forfeiting it would presumably be rolled over to an IRA in the missing participant's name but that's now and not 2005.

For 2012 - I'd issue corrected 1099-Rs now. For 2011 and earlier it is a stickier issue. I'm not sure which VCP program this would fall under but it would seem that VCP should be able to handle something like this.

I'm a bit confused by your post but if I understand correctly you are asking what will be taxable if you take your full vested balance? The ROTH-401(k) contributions you made are non-taxable since you already paid the taxes on them when you contributed them. The rest of the distribution is taxable and subject to the federal early withdrawal penalty of 10%. Depending on what state you live in there may be an additional early withdrawal penalty.

If the participant and spouse consent, the benefit can be paid in an alternate form of payment. If no consent, the plan must commence paying the plan's normal form of benefit. In this case a 50% J&S annuity.

Good queation I have the same one. With pre-approved doc do you still need DL submission? Also has anyone submitted a VCP application where the client could locate NO PRIOR DOCUMENTS? Is it even possible to submit this as VCP?

Morbid but I don't see anything prohibiting a distribution to him. Unless maybe you've been served with notice of a cival suit from the deceased spouse's family. I don't see an issue with direct deposit, assuming he has an account to send the funds to. I would be leary of sending to the friend's bank account.

How big is the settlement? Unless it is quite large I'd think the fees for reopening a trust, filing an additional year 5500, and distributions to all the participants along with 1099-R would far outwiegh the amount of the check.

It can be different but it would need to be disclosed in the participant notices.

Yes, minimum funding requirements apply to 1 person Money Purchase Pension Plans. If you don't want the required contribution, convert it to a profit sharing plan.

Don't you by rule issue corrected 1099-Rs? Wouldn't that by default mean income would be in the year received which was actually the prior year? At issue is money went into his IRA that was not eligible for rollover, you just didn't know it until the testing was completed.

I'm not a lawyer and I haven't seen this set of facts before but just a guess - The bankruptcy trustee is probbaly trying to argue that the redeposit of the tax refund prior to filing bankrupcy was an attempt to hide those assets from the bankruptcy proceedings and not legitamate IRA savings since the owner already used the IRA assets to pay for expenses. From an IRA standpoint I agree with you 100% that if this was all done in the 60 day period and there is no other such occurance in the last 12 months, the IRA should be fine. But I can see where the bankrupcy issues might cloud this somw. I don't think the term "prohibited transaction" is correct in this case since as you note this looks permisable under the law but rather a potential "improper diversion of the assets" from the bankrupcy (if that's the correct term) by funneling the tax return back into the IRA. Again I'm not a lawyer and bankruptcy rules vary by state, I'd have the client talk to qualified tax counsel that specializes in bankruptcy and who has some pretty strong knoweledge of IRA exepmtions as they pertain to bankruptcy laws in that state.

Raise their fees until they agree to move the assets to a new vendor? Explain the impracticality to the trustees and let them decide?

Not sure. We almost tried that route last year but the auditor got us the audit on 10/15 and we were able to file on time.

I guess it depends how you inturpert the reg and I see where it could be vauge. I know we have pro-rated the 415© limit in short inital plan years in the past but I do see how you could argue if the limitiantion year is the calendar year you have a 12 month limitation year and thus no need to prorate. I haven't seen a case on this but if I were a betting man I would bet the IRS would rule a short intial plan year the same way they rule a final short plan year. As a side note, the final short plan year could be problematic if someone defered the 402(g) limit in January and the employer terminated the plan very early in the year.

415 limit is prorated for short plan year. 401(k) and catchup are not pro-rated but 401(k) can be limited by 415 for very short years.

I believe the answer to this question is yes. Though the IRS might challange it as a disguised 401(k), especially if the HCEs are self-employed partners. It is usually a good idea to document at the organization level the zero allocation rate for various groups.

Isn't that a one-time thing that must be done prior to becoming a participant? Maybe. I've only actually seen it done once and I think he did opt out before becoming a participant but I thought you could do it prospectively at any time but to be honest I haven't checked in a while.

I think he make an irrevocable election to be excluded from the plan forever if the plan document allows for it.

I agree with BG5150 but I will say even in our office there is some disagreement, my boss thinks it should be done the way the OP describes.

Does he currently have any IRA? If no, then he could could make a non-deductilbe IRA contribution (for 2012 and 2013) and immediately convert it to a ROTH IRA. While it would be a 2013 conversion, he would only be taxed on the gain which would be nearly non-existant if conversion done on day account opened or next day; most financial institutions are set up to handle this kind of transaction as it is not that uncommon. Now if he already has any existing IRA it gets more complicated as there are rules for apportioning the after-tax basis based on the combined total of all the individuals IRAs but the CPA should be able to help with those questions..