Lou S.

We had pretty much the same experience with both IRS and DOL audits of plans without them. That is they said, get one and show proof. But no penalty was issued to either plan, though each was at least 5 years ago so the kinder gentler IRS/DOL may not be so kind going forward. I think it probably all depends on the particular auditor you draw and if that is the only problem with the Plan. Both were routine random audits and other than the missing fidelity bond there were no other issues with either plan. If there were other problems uncovered maybe the results would have been different.

PPA §902(e)(2) - Starting with plan years beginning on or after 1/1/08 excess contributions will be includable in the tax year distributed. PPA §902(e)(3) - Eliminates GAP period income for plan years beginning on or after 1/1/08.

I'd say that is too much of a stretch but if you are trying to pawn it off, inculde it in VCP and see if the IRS gives its blessing. However, what would you gain? If the IRS says OK you are not top-heavy, presumably at this point the top-heavy minimum has already been made. The IRS almost certianly won't let you take it out of non-key accounts so if key-ees didn't also get a T-H you might find you have opened a different can of worms by allocating a contribution against the terms of the document. Now if your VCP is going back to 04 & 05 because no contribs were made, it might be worth a shot but I don't think the IRS will buy what you are selling. But I will give you points for creativity.

We've had the same problem as you in the few ESOP/401(k) combos we do and always did refunds in the past. Not sure what will happen going forward but our plan at this point is to continue with refunds only under EPCRS.

You are correct, the reversion does not apply to a tax-exempt organization. No form 5330 is required. As for other reporting, I am not sure but I'd guess it is probably reported somewhere on their 990 though you might want to ask their CPA.

I cases like this we make refunds during the plan year but after the termination date. We just did something similar for a plan that terminated 11/30. I don't have a cite to help you with but I don't see where the IRS would challege you. If the refund is made in 2008 it would have a taxable code indicating taxable in 2008 so yes I think 8 is the proper code. I assume they are trying to close the trust before 12/31 to avoid next year?

Very doubtful. The mistake of fact rules are fairly narrow if I remeber correctly and do not appear to apply in this case. I think you are going to be stuck with allocating a descretionary contribution under the terms of the plan. You might try this thread for some additional suggestions. http://benefitslink.com/boards/lofiversion...php/t14199.html

Bummer. I agree with Andy, have the trustee supply the value and recomend they have an appraisal done if they ask your advice but my best guess is the assets are $0 or something close to that. Hope they are looking for a big deduction because that is going to be one hell of required minimum contribution you are going to calculate for them.

GBurns, good post. It sounds like the person is eligible to me from the facts described. The issue would appear to be how do you pay her out if/when she is fired and how to report the distribution on a 1099-R since is sounds like she does not have a valid SSN.

He probably rolled over the other plan (less RMD) so I don't see how you can say the refund came from the other plan. If on the odd chance he took a taxable distribution from the other plan over and above RMD you could probably classify a portion of that as 402(g) refund but you may have trouble getting the other TPA to issue the 1099-R that way.

To use an example - Employee A works very part time and works only 400 hours in the first 6 months and does not enter the plan. But then that employee increases their hours such that they work 700 hoours in the second 6 months giving them a 1 year of service in the first 12 months. Or even more extreame Employee B works 600 hours a year (300 every 6 months) for 5 years then is hired full time at 2000 hours per year, employee B would come in under the 1-year of service rule. Unless you are checking eligibiliy every 6 month period and I'm missing the point. Usually what employers are trying to do with these conditions is to keep out part timers from the plan while bringing in the full time ees in less than one year. It is fine to do that but if one of your part timers who doesn't make the 500 hour rule 6-month rule later satifies the 1-year of service rule they have to come in. Typically with a 6 months service requirement you don't also have an hours requirement and everyone comes in after 6 months even the part timers is all I'm saying.

I agree 100%. We rarely see it happen but it sometimes it does and now you have to track the after tax basis in a plan that might not normally have after tax money. In cases like this we setup an after tax source for the participant just for the buy back so we know to track the basis.

Yes, as long as your retain the fall back year of service option for those who don't make the 500 hour 6 month rule. Otherwise it is a 410 violation, 410(a) I think.

Will the partners have earned income for self-employement tax purposes. If not, you have no pensionable income.

It has been a while since I looked at this issue but last time it came up I thought you had 12 months to make the T-H minimum contribution though if made more than 30 days after the due date of the contribution for deductibility for 2007 (4/15/08 in your example) then it is 2008 415 annual addition.

How about - has anyone had the IRS reject a 5310, ever? No we have never had one rejected. We've had several plans under 5 years. I think 3 was shortest but that was a dot com bust with valid reason. I think the rescession may be a valid business reason, many employers are cutting expenses. I'd make the client aware that the IRS might challenge on permancy issues to cover yourself but I'd be mildly surprised if the IRS didn't issue a favorable ruling.

Correct me if I'm wrong here but isn't the discretionary match an "additional employer contribution that is not required on account of the ADP/ACP safe-harbor" and doesn't that blow the Top-heavy exemption? Is there an exception for the additional discretionary match? I know the formula you aredescribing satisfies the ACP test but I'm not sure it maintains the T-H exemption.

This info is old. The DOL clearly allows charging participants directly for distribution processing under the 2003 published guidence.

Unless A & B constitute an Affiliated Service Group (ASG) relationship, A would have no problem establishing its own plan. From the limited info my guess would be A & B are not an ASG but you probably have much more info to make that determination than I.

How do you retroactively terminate the plan now as of 5/17/08?

What does the amendment terminating the MP plan say with respect to compensation? Typically we word them to exclude compensation paid after the date of termination to avoid any grey areas on when compensation was "earned" vs when it was "paid".

The due date of their tax return was 9/15. Shouldn't it have been deposited by that date? Are you sure it is really late? If they have a post mark or some other record of mailing on 9/15 I think they are OK, even if the trust didn't post it until a few days later. It would be late for minimum fiunding which I believe says the money has to be in the trust but for tax deductibility, timely mailing is timely filing as I understand it.

Not stupid at all. I had this discussion recently with a person involved with this situation. I know we would still file a 5500 rather than a 5500-EZ for 2008. Nonetheless, it is unclear when the plan ceases to be subject to PBGC juristiction. I'm unsure at this point how to notify the PBGC they're no long involved without filing with the PBGC. These are questions that need to be addressed. Just write the PBGC for a coverage determination with the facts showing when the plan ceased to cover any non-substantial owners. It's pretty easy and they are pretty quick. Not sure if the PBGC will rule by end of year but we submitted one earlier this year on April 7 and had Ruling form the PBGC on May 2. That inculded an interim corrispondence to clear up a minor question they had.

You must do the RMD before the rollover.

Under §415(h), yes. Just make sure that owner A's partnership interest really is not more than 50% in company Y.