Lou S.

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..

The IRS not the DOL has the authority to rule a partial termination has or has not occrured. If you subbitted for a ruling that a partical termination did not occur and the IRS agreed then the DOL would be out of luck on the matter. Though I would assume such a rulling would have to be made before the DOL brought suit since I think you have disclose matters pending before other government agencies such as DOL, PBGC and Bankrupcy Court when requesting the partial termination ruling. If the DOL was already involved I suspect convincing the IRS that there was no partical termination would be much more difficult. Did the doc consider repalcing the fired employees and making them immediatly eligible for the plan? I always wondered if that would be a way around the partical term rules in a small plan.

It is the same person or one of them is lying. We had this happen once but in one case the SSN was for the owner (or owner's son) of company A and was correct. In the other, company B, it was a false SSN for a worker of questionable leagal status, so it was easy to insist that company B provide a corrected SSN which I think they did. This was easily 10 years ago but we ran into similar problems as you are experiencing. Not sure what to do in your case.

Yes

1. I have steady income about $400k - 600k every year from the practice. I try to avoid SEP-IRA or 401k etc startin this year since most of the plasn require me to cover employees and that become too expensive to me. Really? I think you are one of the reasons the IRS nonsidrcimination rules are around in the first place. Insurance in a DB can be a god thing, though I agree with others, I'd avoid especially if it is being pushed by a life insurance guy. And as David Rigby suggests, once you hit around age 50 the DB may be more attactive as a tax deduction vehicle but seriously rethink the idea about covering your employees.

Try this thread http://benefitslink.com/boards/index.php?/topic/52983-investment-firm-refuses-to-correct-1099-div/ I think the issues are simialr to what you are decribing here.

Why does your client have both a SEP & MPPP? That aside I think a similar issue came up about a week ago. Making sure the the insitution knows these are tax exempt accounts, possibly by filing an update W-9 with them should stop future 1099s.

In my experience the PBGC will usually allow the waiver (with spousal consent) if the waiver is the difference between a standard and distress termination but as others have said, run it by them to be sure.

I'm not an expert on business entities but if they have a sub-S election I'm assuming that means they are taxed like a sub-S Corportaion. If that's the case i would assume that the memebers get 2 forms of income, their W-2 wages as an employee that are generally eligible for pension purpose and their pass through dividends as member/shareholder which are generally not eligible for pension purposes.