Lou S.

For over $1,000 you should just establish a rollover IRA, send the funds there and make it the nonresponsive participant's problem. I don't see where you can send him a check less withwholding any more as the DOL/IRS changed those rules a few years ago. Also at this point the withholding is quite late.

His July 2009 should be $16,500 + $5,000 catchup. So the $16,500 woul go in the 2/28/10 test. Which it looks like you failed and you recharateize $1,600 as ctachup. He is still allowed to put in the $22,00 in 2010 but you have already used up $1,600 of the catchup for the 2/28/10 test so $18,100 (since $3,900 is charaterized as catchup 7/2011) so you have a $5,500 catchup for calendar year and you are OK. But you didn't have to make a refund for 2/28/10 becuase of recharaterization - esentially you sort of got a $7,100 "catchup" for the FYE ending 2/28 due to timing of how you hit the 402(g) limits between CYE and FYE. What you are doing is pushing the problem into future years as more and more of the $22,000 is going to go into the test if deferral patterns of HCEs and NHCs don't change. It looks like your system is working fine.

Thanks, I believe you are right. I think I was confusing the partnership return with the partners individual 1040.

Having a minor brain cloud this morning. For calendar year tax payor do I have the timing of deductible employer contributins correct - Corp (regular c or sub-S) 3/15 - extended 9/15 Partnership (or LLP) 4/15 - extended 10/15 but must fund by 9/15 (I think that chnged 2 or 3 years ago if memory serves) Sole Proprietor (or single member LLC taxed as sole prop) 4/15 - extended 10/15 can fund by 10/15 Am I wrong on any of these dates? Thanks

Tom, let's say the formula is implemented and the BRF tested and it fails. What is the correction? I would think the correction would be an amendment to increase the match for one or more groups until BFR is passed.

I would agree with this. edit - assuming it is a 1 man plan with no employees.

You might (or very likely) have difficulty passing discrimination testing on BFR as well as passing the ADP/ACP test, but leagally I don't think you have a problem drafting that match that way. Also are you going to be doing the match on election or ADP? Because people under age 50 effetively can't contribute over 10% of pay once pay is 10 times the 402(g) limit and people over age 50 can't once pay is over 10 times (402(g) + catchup). That won't be a problem form discrimination because you can always discriminate againce HCEs but it might not sit well with an owner making over $245K who is "only" getting a 50% match.

Benefit, right or feature. The additional match is listed in that Tres. Reg that I quoted previously. You could so long as you do not match deferrals in excess of 6% of comp and match itself does not exceed 4% of compensation... ...and does not increase as the rate of match increases. The design in the OP pretty much fails outright on numerous levels.

I think you are well out of self correction as this goes back potentially 10 years. Pretty sure this will fall under VCP or walk in CAP. Agree with all those who recommend qualified ERISA counsel.

depends on what your document says about allocating QNECs

How is a QDRO distribution to an alternate payeee reflected in the top heavy testing? Is this considered a distribution to the participants account or alternate payee's? Is it considered an in-service subject to the 5-year look back, or like a distribution in the current year to a "terminated participant" subject to 1-year look back, or is it ignored altogether? Is there anything in section 416 Q&A that I'm missing on this, I didn't see anything directly on point.

Austin, as long as the refund isn't more than the IRA limit, there is nothing wrong with leaving it in the IRA as a non-deductible IRA contribution.

http://www.irs.gov/retirement/article/0,,id=135668,00.html Along the same lines as GMKs link.

An new plan or conversion of existing 401(k). A new plan (or conversion of PS only) you can implement traditional SH as long as you have at least 3 months of effective deferral for the ees, so for a calendar year plan implement prior to 10/1. For a conversion, you need to give notices out 30 days* before the year starts and adopt prior to the year begining, unless you are doing a "maybe notice for the 3%". *some execptions apply On PPA safe harbor, I'm not sure, I assume the time frames are the same but you know what they say about assumptions.... My understanding is that you are already at 6% and don't need the 1% annual bump.

On its face I agee with Austin, seems like a staright forward PT. So unless there is PT exemption the Trustee can point out that allows them to do this I'd stay away. If it is covered by a PT exemption then sure you can do it but again, make sure you have your disclosures in order to the client and let them know of the potential conflict of interest.

Very timely just got one of these today. Thanks for this thread and the linked one by Tom Question about the 1099-R though (referenced in linked thread), the 1099-Rs went out in January and we are doing the test in February, do you prepare an amended 1099-R? And if yes what if you use a bundled provider that is reluctant to prepare corrected 1099-Rs? Any thoughts appreciated.

I agree with you but don't have a cite, sorry. I've always heard the IRS position is that you can amend up until the time at least one participant has earned the right to the benefit. So if 1,000 required you can amend up until the point someone is credited with 1,000 hours. If you have a last day requirement, I think you can amend up until the last day of the year. Of course it is possible the IRS has chancged its mind since last I heard them express this opinion.

Yes to consoldate to the SEP-IRA you would need to formally terminate the 401(k) if you are under 59 1/2, otherwise you can't take a distribution from the 401(k). If you do terminate the 401(k) you would not be able to start a new 401(k) for 12 months if that matters to you. Don't forget the final 5500 and 1099-R if you do term the 401(k). Yeah you could convert everything to ROTH, though you should probably check with your tax professional to see the impact of that first as we don't really know your financial situation here.

Are you terminating the 401(k) or are you over age 59 1/2? If not, I'm not sure you have a distributable event. I assume by self-employeed 401(k) you are the owner (Sch C or K-1 income) as such it is often difficult to convince the IRS you have a seperation from service for taking your money out.

I think the penalties section of circular E http://www.irs.gov/publications/p15/ar02.h...blink1000202484 may be helpful. I believe the penalty is 10% or 15% (depending on whether or not the client has been notified by the IRS) plus interest for the time the deposit should have been made.

I don't see a problem with it.

I'm going form memory here and unfortunatly don't have anything writen to go on so I could be wrong. But I agree with the no pay = no hours. I seem to recall this question coming up at more than on ASPPA meeting at the IRS responce from the podium was always, no the employee is not considered an employee. Again, I'm going on my memory of conferences and have nothing written to back it up so take that for what it is worth.

What is the definition of compensation in the plan document, from date of entry or full year? And does your plan document address if the the same definition applies to allocation and testing under 414(s)? For top-heavy 415© comp is full year even if allocation is from date of entry, but I've never heard the IRS requiring you use full year comp in testing unless that is written into your plan document.

And with a 1000 participanst I can only imagine what the independent audit looks like with all those individual contracts.

While this doesn't help in this situation, sounds like something that should be addressed going forward in the plan document. Question, has this ever happened before? Can you use what was done then as a guide for now? I'd be leary of giving just the 5% on the whole year unless that as is spelled out in the document and SPD as you could have a prohibited cut back issue, especially if the participant was expecting a 10% contribution credit at least with respect to service he had while in group A. I assume group A is something like "owners" and group B is something like "peasants". If you had people in the past move from B -> A mid year and get the full A benefit for the whole year that would support either "group at end of year" or "larger of two if you split groups" and I could see either being argued fairly successfully by a disgruntled participant absent language in the plan.