Cynchbeast

As for distributable event, the owner turned 66 last year. Although no termination, disability, hardship, etc., he was eligible for in-service distribution when he took the money. And a final (technical) question about reporting the PT - plan earnings are allocated annually, after PYE (12/31). If I allocate earnings BEFORE any distributions, he is obviously in a better position. But in considering the balance he has available for withdrawal, can I consider the earnings or not? Balance available for withdrawal PRIOR to earnings is $364,109; balance AFTER earnings would be $430,899. In this case, it clearly makes a big difference.

Yeah, but my boss wants to - the client has already paid us for 2012 and he doesn't want to get THIS particular attorney angry and cause us more pain.

Leave it to our clients to drive us crazy. We have attorney client who was desperate for money and withdrew over $470,000 from his plan in 2012 without consulting us. After running calculations for 2012, this left his own profit sharing account overdrawn by approximately $42,000, and left the trust with only $50,000 remaining to cover other participants' balances totaling about $92,000. We have referred him to an ERISA attorney to resolve this - we will not get involved. However, I have to prepare the 5500-SF for 2012, and I have never encountered this before. 1) I assume the transaction has to be reported on the 5500-SF somewhere, probably in line 10. Can someone please advise me where they would report this, and do I report the entire $472,9500 transaction, or just the $42,000 he is overdrawn? 2) I also assume we have to prepare a Form 5330. Same basic question - where on the form is this reported and what amount do I list? If not for the clients, we might still be sane. But we would also be broke.

Leave it to our clients to drive us crazy. We have attorney client who was desperate for money and withdrew over $470,000 from his plan in 2012 without consulting us. After running calculations for 2012, this left his own profit sharing account overdrawn by approximately $42,000, and left the trust with only $50,000 remaining to cover other participants' balances totaling about $92,000. We have referred him to an ERISA attorney to resolve this - we will not get involved. However, I have to prepare the 5500-SF for 2012, and I have never encountered this before. 1) I assume the transaction has to be reported on the 5500-SF somewhere, probably in line 10. Can someone please advise me where they would report this, and do I report the entire $472,9500 transaction, or just the $42,000 he is overdrawn? 2) I also assume we have to prepare a Form 5330. Same basic question - where on the form is this reported and what amount do I list? If not for the clients, we might still be sane. But we would also be broke.

We have a client who has had a PS 401(k) since 2007. They have adopted a DB effective 2012; there is overlap in participation in the 2 plans but there are some people who are excluded from one plan or the other. For the DB, can we disregard service prior to 2012 or is the PS plan considered a predecessor plan?

We discovered that a client of ours mistakenly deducted about $90,000 less than the actual contributions for his DB back in 2007 (Total contributions = $490k and deduction was $400k). Q: Is the $90,000 in contributions that was not deducted considered a "non-deductible" contribution for the purposes of 5500/5330 reporting even if it was within the deductible limit?

We have a plan where the owner has over 80% of the assets. Without consulting with us first, during 2012 he took out the majority of the money in the trust (nearly $473k), which was much more than his vested balance, leaving himself with a negative balance and insufficient money at the end of the year to cover all the other participants' balances. The trust now has about $50k and all other participant balances total about $97k. Has anyone encountered this before and what suggestions do you have?

Thank you for the advise. That is pretty much what I figured.

We have a few clients who after leaving us, saw the error of their ways and came back, with plans in distress asking us to help them bring their plans current. The most extreme is one case of a client with two plans needing 9 years worth of amended or DFVC filings (about 4 or 5 are DFVC). Rather than preparing the 8955-SSA (or SSA) for each year that one would have been required, our inclination is to just prepare the 8955-SSA forms for the final year's filings (which will be 2012). If we do it this way, we also would report only those people remaining to be reported (in other words, if someone would have been added (code A) and paid out (code D) within the years we have worked on we would just omit them, leaving only those newly reported participants (code A), or participants who were paid out and had been previously reported (code D). Opinions?

I am preparing a VCP submission for a defaulted loan. Participant and sponsor "forgot" to continue payroll deductions and we discovered non-payment when working on 2012 trust accounting. The participant took out a second loan which was sufficient to pay off the first prior to the original maturity date of the first loan. She is now making payments on the second loan. Technically, it seems the second loan is irrelevant; it shouldn't matter where she got the money to pay off the first. What I want to know from those of you how have some experience with submissions on defaulted loans is should I include mention of the new loan to payoff the first or should I omit those details? I don't know if it would be helpful or harmful to the client's position with the IRS.

Here is another twist on the EZs not being filed. We had a husband and wife plan for which we last prepared a 5500-EZ for 2004 (approx. $70k). Despite our efforts, they provided us with no information since then, and we finally gave up and dropped them. The husband recently contacted us asking for our help. They now want to terminate the plan and rollover to IRAs, and they have had their broker speak with me. Fortunately, the plan still has only around $80k, so there were never any reports to be filed. They are prepared to file a final report. However; The plan is a Money Purchase (contribution is 25%). They probably didn't make any contribution at least for most of the 8 missing years, and if and when they did, you can bet it wasn't in the right amount (Sole Proprietor). It is highly likely that to have done everything properly with the plan, there would have had to be amendments for years they made other than 25% contributions, including a probably amendment to freeze the plan. Or alternatively, they would have had to start a Profit Sharing plan, and then merge the 2 plans. Or yet another alternative would be to just forget the whole thing and perhaps prepare the 5500EZs for their records. Obviously, making up the documentation now or not addressing the problem at all would not be strictly Kosher. What are thoughts about this qualifying for EPCRS? Any other brilliant ideas for handling this? I look forward to feedback.

EXCELLENT idea re obit! And the hitch here is it is the plan administrator who died. So the son is acting as administrator - - sort of a conflict of interest situation?

Yes, your are correct. The document says that if there is no designated beneficiary and no spouse, the death benefit is payable to the participant's children. So - how do w establish that the participant was not married, and that the son is, in fact the son?

We have a plan with a deceased participant (the owner) with a balance of around $140,000 in his 401(k). Although there was no designation of beneficiary every submitted for the 401(k), his adult son claims to be the sole heir. He claims that his father had a living trust in which the 401(k) was addressed (we are getting copy), and his attorney assures him that will take care of him inheriting dad's 401(k). Is there any way a living trust can address this, or will the money have to go through probate, or how else will the son get his inheritance?

I figured it was probably still one per year. But the situation we are in is that we have a couple clients who left us and have now come back (realizing the grass wasn't really greener), and are paying us to do several past years as DFVC filings. So we would be looking at an authorization that was for specific years - say PYE 12/31/08 through 12/31/12 - and at the same time we would have them the 2008-2012 returns. Do you think that might be acceptable to IRS rather than preparing 5 separate authorizations?

I know that when we first started with EFAST, the IRS would not accept an electronic filing authorization (so that we as TPA could sign for them) for multiple years - we had to prepare a separate authorization for each year. Does anyone know if that has changed?

We have client filing 5500-EZ (just husband and wife). In one plan year, they deducted $4,000 more than they contributed. The next year, they deducted $4,000 less than they contributed. Net deductions and contributions are the same. Accountant is aware of this (we don't know if he is doing anything about it or not). Any concerns from the stand point of the plan that we, as TPA need to address?

Can we exclude a class of employees from participant in a plan based on salary range? For instance, exclude from participation all NHCEs with compensation exceeding $45,000.

So I've gotten no responses so far. Does anyone have a creative idea for getting around the exorbitant fees for filing a 5500-EZ late?

We have encountered this problem a few times. ER in a one-person plan finally contacts us after a few years of not responding and we find that a 5500-EZ should have been filed for one or more past years (assets over $250,000). As an EZ filer, he is not eligible for DFVC. Any suggestions on how to properly correct this without incurring horrendous late filing penalties? Although we could probably file a 5500-SF and use DFVC, this is probably not the right way to do it.

I understand the feeling of it being easier to do it all yourself. We have forms for clients to complete and it is like pulling teeth to get the information ... and then often it doesn't really make sense. But my question is, who pays for all the extra work of you going through statements yourself? Do you charge? Is it built into your fee? Does the client have the option to save money by providing you with good detailed data?

Thank you all for your input. Included in this discussion was comment questioning how we could do a trust accounting and miss the distribution. This leads to the question of how one reconciles the trust accounting. I would love some feedback on this. The majority of our plans have at least some of their assets invested in other than a bank (stock, mutual funds, annuities, etc.). Since we do not do daily valuations, ideally the client identifies for us all transactions that occurred during the plan year and provides a year-end statement. After accounting for all contributions and disbursements, including participant distributions, interest, dividend, fees, etc., we then determine the "unrealized" earnings (gains/losses) for the year. THIS is how a distribution may not be detected. If the sponsor neglects to inform us that a distribution was made, the calculated net gain/loss would just be off by that amount - and not always apparent. So how do others handle this?

You mean we can't control our clients? So what's new? But besides that, any experience as to how IRS views a rollover that never gets reported on a 1099-R? Or alternatively, a late 1099-R for a rollover?

We found out that a terminated participant in one of our plans rolled over his balance to an IRA in December, 2009. We didn't know about it until now, so of course no 1099-R was issued. 1) Since this is a non-taxable event, what are the ramifications? 2) What if we just skip reporting altogether? 3) Does anyone have any experience of IRS's position on this?

So - we have an outstanding loan of around $20,000 and less than 3 months remaining on the original term, and a participant who may not be able to repay it in that time. What do you suggest?