401king

Straight from the horse's mouth: http://www.irs.gov/pub/irs-tege/rollover_chart.pdf

rcline is correct. Here is the IRS's rollover chart which indicates that Roth IRA's are not eligible to be rolled into a 401k account - http://www.irs.gov/pub/irs-tege/rollover_chart.pdf

When reviewing the regulations, I can find no distinction between the employees and the owners for the sake of the 401k deferrals and deadlines. The fact is, there should never be a cashflow situation as long as the money is withheld from a paycheck that would have been otherwise payable to the employee (owner); how else would they be able to fund the paycheck is money was not withheld. One way to look at it is that the owner is loaning herself the money until she "wants" to deposit it. If given the option, many employees would wish to "defer" from each paycheck, but then pay the money into the plan at their leisure -- might be difficult explaining that rationale to the client but that's certainly how I look at it.

Typical plan design will allow for profit sharing contributions even during a year in which the company has no profit. Formulas are generally based on employees' salaries, and often times not finalized until after year-end, once the company has had time to calculate how much they can afford. This allows greater flexibility in that in years in which the company has high profit, they may make a larger profit sharing contribution, and in years of low or no profit they are not required to make any contribution.

http://lmgtfy.com/?q=401k

What I read stated that you can get an extension already. I haven't seen a letter, yet, so I cannot attest to this, but it may already be an option.

Sometimes the hardest part is trying to figure out a rationale that you can explain to the client that makes sense

I have had this question before, too. It is discriminatory in that you are allowing employer contributions to only one person's account, when it should be made on a uniform and consistent basis. The easiest way for me to describe how it is discriminatory to the client was that it allowed his investments to make gains, while the other participants were not allowed to take place in those gains. It's like allowing an investment type to only the owner, but not the employees.

A plan sponsor assumed a participant would be terminated as of 4/1/2010. On 4/1/2010 the participant submitted distribution paperwork to take a direct payment of the funds. Taxes were withheld, distribution was processed as normal. Turns out, the employee never terminated... So, now we (the TPA) are trying to figure out what to do. Here is my assumption: Participant writes a check to the plan for the full taxable amount of the distribution (including the 20% withheld). A 1099 would be issued with a tax withholding amount (20% of the distribution amt), but $0.00 under taxable amount and distribution amount. This way he would be able to deduct the withheld amount, but not be taxed for a distribution. Is this just "the easy way" of fixing this (thus, making it the wrong way)? We suspect it will be difficult if not impossible to get the withholding amount back from the IRS.

If they're already a participant (even though they're not contributing) then they will be a participant as long as they are employed with the sponsor. Just because they have not contributed does not necessarily mean they have not been a participant all along.

Our company establishes accounts through Schwab in the manner that (I assume) the OP is describing. A trust is established, so the only action participants may take on the account is with regards to trades. All distribution/contribution requests must be authorized by a trustee on the account, or authorized agent. It's more like an IRA account, with activity limited to trading.

It's my understanding that you could allow for a true-up in a case where someone's deferrals are not "even" throughout the year. Such as when one person maxes out by deferring 100% of the first XX paychecks. In this case you can true-up, but you have to true-up the whole plan. Your case is different in that the person requesting the true-up is an HCE. Let's say he's the only one who would be due a true-up, this might catch the attention of and auditor.

http://www.irs.gov/pub/irs-tege/rollover_chart.pdf

If that's the case then you will want to write a check for the overage, including gains/losses...then make sure it doesn't continue to happen.

The simple answer is that the benefit would be a point of contact for participants to go to with investment-related questions (assuming it's an investment advisor). The detriment would be the additional fee that the advisor takes (0.10% on the low-end, to 1.5% on the very high end [too high-end]); probaby 0.75% on average). Depending on the level of involvement, this fee could be worth it, but if they end up just telling the participants which target-date fund of your choices to put their money in it probably is not worth the fee.

If the amount is less than the distribution fee, we just explain to the participant that it will be taken as a fee, but generally create a forfeiture with it instead of going through the whole distribution process (for $1.32). Our distribution forms read that if the amount is greater than the distribution fee, we will immediately process the distribution (net of fee) in the same manner that the previous check was issued.

If she will is eligible to receive the SHPS contribution, doesn't that mean she's eligible to defer? It's my understanding that 99% of the time, eligible for one means eligible for the other (with regards to SH contributions and deferrals).

Thank you all for the responses. This, too, is a situation involving an insurance company. I literally have 4 emails from different people saying "I have cc'd xxxxx on this email who will be assisting you." Still, I have yet to find someone who will actually be of any assistance. Now I'm just crossing my fingers that they don't have the original loan documentation to prove that loans do not transfer, or that a phrase to that effect doesn't exist in the documents. I'm just not sure how this company makes money on these outstanding loans, unless of course there is a annual loan fee but it has to be barely worth it considering they will have to transmit data annually to my company.

We took over a plan a few months ago that had outstanding loans. We posted the loans to our system and participants have since been making loan repayments to their new accounts. Now the participants with loans have received invoices from the previous provider for loan payments (loans were repaid quarterly). I contacted the previous provider who stated that "Loans for clients do not transfer to new carriers." I've only been doing this a few years, but I have never heard of that and can't find any information on it. It's my assumption that loans are part of the plan, and if the plan transfers then the loans come with it. How could we accurately keep records (top-heavy test, vested account balances, keeping participants under max loans outstanding, etc.) without this information? Maybe this is totally normal and I've just never dealt with it...I sure hope that's not the case.

We're doing the same thing, it sounds like. Using the template provided for both, for each section we list Traditional and Roth so it is evident that the information provided is for the respective type of account. For example, here's a piece of one of the sections: "How can a rollover affect my taxes? Traditional Accounts You will be taxed on a payment from the Plan if you do not roll it over. If you are under age 59½ and do not do a rollover, you will also have to pay a 10% additional income tax on early distributions (unless an exception applies). However, if you do a rollover, you will not have to pay tax until you receive payments later and the 10% additional income tax will not apply if those payments are made after you are age 59½ (or if an exception applies). Roth Accounts After-tax contributions included in a payment from a designated Roth account are not taxed, but earnings might be taxed. The tax treatment of earnings included in the payment depends on whether the payment is a qualified distribution. If a payment is only part of your designated Roth account, the payment will include an allocable portion of the earnings in your designated Roth account. "

I've always been told that 401k's cannot consider K1 as income, but always had a hard time finding the facts on that. I'd be interested in someone shedding some light on this, as well.

Obviously if they are cutting out the NEC then you are reducing the cost of the plan, and if they are excluding KEY/HCE from receiving SH Match, then there's another reduction; so, yes, this is a reasonable way to cut costs. Other than that, I would just find make the entry into the plan as strict as possible to reduce future costs. And compare the SH match formula costs to what it would be under a SH NEC. Or, if you are seeing a lot of participation in the plan, a QACA would reduce the expense of the SH formula by 0.5%; if you have low participation then this would likely increase the cost of the plan, though.

It can be done by amending the plan and providing the participants a summary of material modifications informing them that the loan is available.

I have tried to find more clarification on this, but had no luck. I understand that the 2009 Sch. I now has a line item for administrative expenses; does this mean only expenses paid by the plan (i.e. distribution fees, loan fees, pro-rata fees administration fees paid by participant)? Or does it mean the full administration cost of the plan?

It's not an IRS document you need to reference, it's the plan document. It's very possible that he can enroll at anytime after his eligibility (10/1). What you need to look for is the entry dates. It's not out of the ordinary for someone to miss their initial enrollment and then come it at a later time and enroll. Obviously he can't go back and deduct from prior payrolls, but he is probably entitled to defer 100% of the remaining 2009 compensation (up to limits).