Lou S.

VCP sounds like the way to go to fix this. The IRS might accept your solution or they might require the excess to be treated as a reversion to the Plan Sponsor sunject to the excesie tax if it can''t be allocated to anyone.

The 401(k) portion does not recude the SE's pay for PS calculation and the 401(k) portion doesn't go against the 25% deduction limit which I'm sure you already know. But you are right in that both are treated the same for payroll tax purposes. Ans yes that is one of the disadvantages or SE v Corp.

It is retained and never leaves the plan. It is not subject to the penalty in any way.

My understand is if you don't make the refunds by the 12 months dealline, you need to make a correction under EPCRS to correct which generally requires the plan sponsor to make some sort of QNEC/QMAC type contribution to correct the failure.

I would agree. The actuarial increase can't exceed the 100% of pay limit even if it is under the dollar limit.

yeah I agree, since you have no exculsions or other eligibility requirements they are employees therefore they are eligible.

Not aware of anything either. In the few plans that we have that invest directly in real estate the trust pays the taxes as a Plan expense. Though none of our plans that do this are located in New York.

The 100% owner of the bankrupt company who is also the plan trustee as well as the partcipant receiving the refund who is also is going through a personal bankruptcy. So assets in qual plan that were exempt are now going to taxable, subject to the backruptcy and hit with an exice tax - talk about adding insult to injury after his company went under with the economic colapse.

Unless this is a merger of plans, yes he will need to take his RMD prior to rollover.

Probably need to ask an attorney but I think it could be argued that it is a moving expense.

As the title implies a terminated plan of a bankrupt employer is processing late refunds for the 2010 year, after 3/15 but before 12/31. This is not an automatic enrollment plan with the 6/30 deadline. Who pays the excise tax and files the 5330 in this case when the Plan Sponsor is out of business, has gone through bankruptcy and now no longer exists?

The participant does get a 1099-R for income and it is treated as a distribution for that purpose so I'm inclined to treat it as such for Top-Heavy pending further guidance from the IRS. I was just hoping the guidance was out there and I just missed it.

Is the in plan roth conversion treated as an in-service distribution subject to the 5 year look back rule for top-heavy purposes or is it treated as a transfer to a related rollover source and inculded in the balance on the determination date?

Unfortunately I agree with you. I was hoping someone else had a different view and perhaps a citation or at least a tidbit from the IRS to support it. If they do I would be interested in rethinking. edit - Thanks Tom that helps.

If a partner has negative earned income for 2010. Effectively $0 compensation for plan purposes, I understand that the employer contribution is $0, the deferral limit is $0 and the 415© limit is $0. The question I have is, if the plan allows for Roth-401(k) contribution and catch-up contributions can the partner make a $5,500 ROTH catchup contribution under 414(v) for 2010 since it is excluded from 402(g) and 415? I did a few searches and scrolled through several pages of threads and didn't find anything directly on point so if this has been covered before I apologize.

For purposes of determinimg the highest allocation rate of any key employee you have you add in elective deferrals prior to any corrections. My guess here is you will have a required 3% top-heavy minimum for this client. edit to add - see Q M-20 of the treasury regs 1.416-1.

Revenue Procedure 2008-50 sets forth the current EPCRS. http://www.irs.gov/irb/2008-35_IRB/ar10.html See Correction Methods and Examples for more details.

Curious as to the why. Are there muliple HCEs and you want to limit the owner ADP to $1/comp and still put in $5,500 as catchup that isn't tested?

I think I agree with you 100% on the bold.

Thanks all! Very helpful.

If your mother was less than 70 1/2 in 2010 she would treat the IRA as her own by refusing to take the MRD as a beneficiary which would eliminate the need to take an MRD until she attains 70 1/2. See IRS Pub 590 P 18. I am assuming she is sole bene of the IRA. Yeah but doesn't help in this case, both were in their 80s when dad passed away. RMD clearly applied for the 2010 year she just didn't realize it having not be the original IRA owner. Taxes and investments not exactly her specialty.

My mother inherited an IRA when my father passed away in 2009. Prior to 2009 all RMDs had been taken and 2009 they were suspended. Somehow in 2010 the first year she should have taken an RMD it was missed for the new account. She got some letters from custodian of the IRA in early 2011 and has since taken the 2010 RMD (late) and setup monthly payments which will be larger than the reqired 2011 RMD. It's a pretty small IRA and not a teribbly large amount we are talking about but how often does the IRS waive the 50% penalty for reasonable cause in this case? And is it as simple as sending a letter with the 1040 and 5329? Also do you still pay the 50% exicse tax and request a refund or do you assume they will waive it for cause and not pay the excise tax with the 1040? Any experince with this would be appreciated.

But he says A and B are related. Doesn't that help in this case? I'm not sure how related they are but if CG or ASG wouldn't his time in Company B be continuation of time in Company A? I admit some of the employer-employee relation questions vex me at times so I could be way off on this and have never actually run into this particular situation before.

He is an HCE right? He did in fact have a deferral of $22,000 from 3/1/10 - 2/28/11 right? I mean it came out of his check and was depoisted in the plan in July in one lump sum. So even if your interpuration leads you to believe he is over the 402(g) limit you would still have to test the $16,500 + $1,600 = $18,100 in ADP because 402(g) excess deferrals are always tested in ADP for HCEs and never tested in ADP for NHCEs. I forget the exact cite but I'm sure that is true. Now the question becomes is the $1,600 a 402(g) excess in 2010? Under both example 5 & 6 the participant is allowed to defer the full 402(g) + 414(v) limit for the calendar years. It just becomes a question of which plan year and how much is tested in both examples more than the then $15,000 is tested in at least one PYE. I still believe under this set of facts and circumstances that $18,100 is the correct amount to be tested in the PYE 2/28/11 ADP and that the $1,600 that was recharaterize as catchup for PYE 2/28/10 does not now limit the participant to $20,400 ($22,000 less $1,600 recharaterized) calandar year limit in 2010. Now the position might be that becuase actual deferrals were $0 for 1/1/10 - 2/28/10 that the $1,600 was not eligible for recharaterization on the 2/28/10 ADP test and as such you should have done a refund last year, but I don't see anything in black and white on point that would support that though if someone has an citation I'd be more than happy to rethink my position on it and admit that I'm wrong.

A plan that is safe-harbor and has only safe-harbor contributions that satisfy the k & m regs is deemed to be not top-heavy. Unless you have a PS contribution or forfeiture reallocation that will blow the exemption, you don't need to provide additional T-H contributions for 2010. 12/31/2009 is simply the determination date for the plan year beginning on 1/1/2010.