Cynchbeast

It also occurred to me that this might be a good case to do an anonymous EPCRS submission to IRS - if eligible for EPCRS. I haven't thoroughly analyzed that yet. If we amend prior 5500s, I don't know how far back we have to go. As for the client signing off on the 5500s, I have a sneaky suspicion she didn't sign off, that the TPA might have signed for her and that she may not even be aware of the requirement for her to sign.

We have a Profit Sharing/401(k) we have taken over from a prior TPA who we understand was doing some shady accounting. Plan is with American funds. I ran AF reports and compared them to past 5500s, and there are gross discrepancies. For a trust with assets in the range of $300k-$400k, assets on 5500s have been misstated (both over and under) by more than $110,000. The ending balance on the 2013 report is approx $444,000 when it actually should have been approx $551,000 How should I prepare the 5500 for 2014? Use ending values from 2013 and calculate earnings to get to correct 2014 ending value. Use correct beginning 2014 value, ignoring fact that 2013 report was wrong. Use correct beginning 2014 value, and include an explanation of error as an OTHER attachment to the filing Other ideas?

So does that mean that this person would get top heavy even when HCE status ?

Normally yes (and by the way, yes these HCEs were not key). But my question is, if they move from an included class to an excluded class, do they still have to get the top-heavy minimum since they are already a participant, even if they would otherwise be excluded from receiving benefit. EX: Year 1 - otherwise eligible employee is HCE and therefore is excluded; not yet a participant Year 2 - employee becomes NHCE and therefore becomes a participant and receives benefit in both plans Year 3 - employee again becomes HCE. He would normally be excluded from participating in both plans, but since he is already a participant in each, is he still required to receive TH min

We have DB/PS Aggregated plans. Both plans exclude HCEs who are not owner. Plans are top heavy and some people will move in and out of the HCE classification, meaning that some years they are eligible for accrual/allocation and other years not. 1) For an EE who is an NHCE in year 1 (became participant ant received benefits) becomes an HCE in year 2, must he still receive a Top heavy minimum in year 2 since he is already a participant? 2) If answer to 1) is yes, may the TH min be provided by either plan?

What is the minimum rate allowable for participant loans? We normally set at Prime +2%, but at 5.75% this is higher than participants might be able to get elsewhere.

We are in the process of preparing PPA restatements for our clients. What should the effective date of the PPA restatement be?

Thank you all; that answers my questions re PS contributions. Can I infer from this that this newly excluded NHCE (who is already a 401k participant) may be prevented from further deferrals? If not, he would be getting a 3% SH NEC; which I assume would necessitate including him in PS for an additional 2% in order to pass the gateway minimum allocation.

Plan is currently a (New Comp) PS/401(k) plan with no exclusions. Sponsor wants to amend to exclude one class of employees effective 01/01/16. What happens to an NHCE who is currently a participant in the plan and becomes a member of the excluded class on 01/01/16?

We have a plan for which the sponsor has always filed a 5500-EZ, even though it has been under $250,000. If he stops filing the 5500-EZ, should we expect a notice from the IRS?

Thank you for all the help. Now I understand that the point of EPCRS or VCP is to not only correct the problem but ensure that it does not re-occur - meaning he needs to either payoff the loan or begin making regular payments according to the note. So the next logical question is what to do if he doesn't make payments. In other words, we declare a deemed distribution and the default continues. Is this the same default? A new default? Is there another deemed distribution?

Let me preface this by saying this is a client who we last prepared a 5500-EZ for in 2010 (under limit), and who came back to us after a few years asking us to clean up the mess he created. Facts: He took a $45,000 loan requiring monthly payments, but has never made regular payments. He made a payment of $5,200 right before the loan would have gone into default More missed payments caused default as of 09/30/12 He paid an additional $4,500 on 01/15/14 He has made no further payments Plan is a DB, with NRA age 62; owner is currently 60 years old with a calendar plan year Questions: We plan to declare a deemed distribution and issue a 1099-R. Should the deemed distribution be as of 09/30/12, or should I use the plan year end of 12/31/12? How do we treat the loan in subsequent plan years? How do we handle a loan that is not repaid for 2 or three years? Any ideas on how to show everything properly on the trust accounting? For DB plans, we do our own accounting in Excel.

We have fiscal 401(k) plan, PY 07/01/14 through 06/30/15. The owner's deferrals are all after 01/01/15, and he turns 50 in October, 2015. 1. He will definitely defer $18,000 limit for 2015 before PYE. 2. Since he will be 50 by 12/31, he will be eligible for $6,000 catch-up for 2015 Q: Can he make his catch-up deferrals before the 06/30/15 PYE or does he have to wait until after 07/01/15 - which would be the plan year containing 12/31/15?

We run all our DB valuations as of the beginning of the plan year. Asumming plan year is calendar, with 01/01 and 07/01 entries and 1,000 hrs required for accrual: Q1 - should a mid-year entrant (07/01) with over 1,000 hours receive an accrual for the year? Q2 - if not, should that mid-year entrant be included in the testing with 0% benefit?

Which PVAB do we use in calculating the RMD: PVAB calculated on valuation basis, or PVAB calculated on termination basis Also, our actuary uses the first day of the plan year for valuation, so presumably the PVAB shown on last valuation would be as of 01/01/13. Can we use this for the 2014 RMD, or do we need a re-calculation as of 12/31/13?

Can a Sole Proprietor make a contribution to a defined benefit equal to his entire Schedule C before deduction of s/e taxes and pension contribution? He will end up with a final Net Schedule C of $0

We have a large plan for which we received TPA fees in excess of $5,000 in, but all money came from plan sponsor (corporate checking account), not the plan. Does plan have to file a Schedule C for 2013 to report fees paid to us?

What date should be used as effective date of PPA restatements?

My mistake - loan repayment is not in the AA, it is in Loan Procedures. Sorry. Loan Procedures specify repayment through "payroll deduction from each regular paycheck." We use Datair and the question that drives this is a Yes/No question; a No answer would result in "Payments will be made by check or other method prescribed by the Plan Administrator." So a Sole-Proprietor who does not get a regular check cannot comply with the payroll deduction. If we go with the No answer, he still has to treat himself different than other participants if he requires them to pay by payroll deduction. So I repeat my question - is this actually discriminatory and how have others dealt with the issue?

We have encountered an issue with loans for a sole proprietor who has other employees. Per adoption agreement, loans must be repaid through payroll deduction. However, the owner doesn't get W-2 or regular payroll and so can only make payments directly. But on the surface, this appears to be discriminatory because the other participants don't have the option of paying say quarterly by check. Would the IRS likely look at this as discriminatory? How have others addressed this issue?

This really becomes messy as we now have several clients with aggregated DB and PS plans. So how does the actuary cross test with the DB valued as of BOY and PS at EOY? This is really how this all came to light because we have a plan with two mid-year entrants for whom he did not show any PS allocation.

Thank you all for the very helpful comments - especially Effen. What has me a bit confused is that our actuary seems to base some things on BOY and others on EOY: He uses asset value as of BOY He is including only those who are participants as of BOY He uses hours worked and compensation for entire year such that funding for the year is based on accruals required for the year Omitting mid-year entrants would make sense if 2013 funding were based on a BOY snapshot and accruals for 2012. But It is not; our actuary determines accruals and funding for 2013 based on what happened during the entire 2013 year, yet ignores the participants that entered mid-year. We are still trying to determine if his then gives the participants in question 1 1/2 yr worth of accruals in the next val. So the sponsor is funding for some participants and not others. If he has a large number of mid-year entrants that are omitted from val, he could be unknowingly underfunding plan by fair amount. Just seems very inconsistent.

In general, our DB adoption agreements have the valuation date as the last day of the plan year, and our actuary runs the actuarial valuation as of the first day of the plan year. There seem to be some inconsistencies and I am trying to make sense of them. Assuming plan has calendar year: A person is 40% vested on 01/01, and with an additional year of service is 60% vested on 12/31. Actuary shows him as 40% vested on his valuation reports but 60% vested on participant certificate. A person was hired mid-year 2012 and enters plan 07/01/13. The actuary did not pick this participant up on valuation because he was not participant as of 01/01/13. That means he is not shown as accruing any benefit even though he meets requirements for accrual (participant with 1,000 hours). We used to use the last day of the plan year as the valuation date, but moved it to the first primarily because we don't yet have year-end assets when determining contribution range for sponsor. I though the valuation date of 01/01 would be used simply for valuing the assets, not for determining benefits. How should these inconsistencies be dealt with?

WOW! Your response was very good, and such confusion over such a small amount of money! But this client has been sooooo irresponsible with deposits, we want to be sure to get it right and have him pay everything he owes. Needless to say, we won't be handling his plan after the 2013 report. Wouldn't our business be easy were it not for flaky sponsors?

Earnings aren't important, but used IRS calculator to determine earnings on each $100 deposit; some delayed only a few weeks others months. As for 5330, which was my actual question, Kevin C referred to page 7 of 5330 instructions. But on page 8, it says: Failure to transmit participant contributions. Purposes of calculating the excise tax on a prohibited transaction where there is a failure to transmit participant contributions (elective deferrals) or amounts that would have otherwise been payable to the participant in cash, the amount involved is based on interest on those elective deferrals. See Rev. Rul. 2006-38 So I prepared 5500-SF for 2012 with the total amount of deferrals that were delayed ($1,200), and the 5330 for 2012 with only the lost earnings on Schedule C line 2. My question is really how to prepare the 2013 forms. Some of the 2012 deposits were made in 2013, while the rest of 2012 plus all of 2013 was paid in 2014, as was all the lost earnings. SoI need to determine what specific figures to put on line 10.a. of the 5500-SF, and on Schedule C line 2 of the 5330. On the 5500-SF, I listed the total of all 2013 deferrals that were deposited late. On the 5330, do I put only the lost earnings on the 2013 deferrals, or do I also include the lost earnings reported on 2012 return since they weren't paid until 2014? To used specific (albeit round) numbers, let's say lost earnings on all 2012 deposits were $25 and lost earnings on all 2013 deposits were $45. I put $25 as the prohibited transaction on the 5330 for 2012. Do I put $45 or l$70 on the 2013 form?