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Does anybody out there know of any articles or websites that might have information on the topic of Life Insurance as an investment option within a retirement plan? The article can be pro or con, I just need a reference, as nothing that I have searched has anything that goes into the specifics. The only thing I find when I search things like CCH and the Retirement Plan Answer Book is that Life Insurance should be an incidental benefit within the plan and your premiums are subject to limitations (within a DC plan), which I already knew. Any help would be appreciated.

In reading the instructions to the Form 5500-EZ, they indicate that a Form 5500-EZ has to be filed in the year in which the plan liquidates, even if it has been under $100,000 for all prior years. My question: Do you have to file a Form 5500-EZ for the initial plan year, if assets are less than $100,000? I think you don't, but I have a conflicting opinion. Thanks for any responses.

Exactly what happened in this situation. Taxpayer showed us his applications approximately 10 months after he did it! And, never having someone try to write a check for an inherited IRA, I had never encountered it before. My confusion was in the definition of "rollover" and "trustee-to-trustee" transfer. I have processed many "rollovers", in the form of checks written to the new trustee as well as direct transfers from one organization to another. To me, these are "rollovers". Now, based on this discussion, I went to Publication 590, which defines the terms "rollover" and "transfer". Based on that, it clearly shows that the taxpayer should have consulted someone first! Thanks for all the replies, they were very helpful.

Thanks, Appleby. Let me play devil's advocate for a moment: Assume that the son originally set up the decedent IRA in a trustee-to-trustee transfer. Does not like the new trustee, therefore, closes the account, funds are deposited into his account, and then within 60 days a new decedent IRA is established. I think this is still a no-go, based on 408(d)(3)©, because it is not a trustee-to-trustee transfer. But I want to make sure... Thanks again.

Scenario: Son inherits IRA of father, who has passed away. Son receives a check from the original IRA custodian, and within the 60 day window, attempts to establish a decedent IRA with a mutual fund company by writing a check from his personal account. Mutual fund company rejects the application (after the 60 day window has expired) saying the transaction had to take place in a trustee-to-trustee transfer. Is this a true statement. If it is, where is the cite in the code/regulations? Any help would be appreciated!

Must a sole proprietor who has (or is interested in setting up) a "Uni-K" plan have their elective deferrals made by December 31? I seem to remember reading somewhere that the elective deferrals can be made up through the due date of the tax return. Any help would be appreciated!

I have seen many instances where an asset held in a retirement plan, such as an individual life insurance policy, is purchased by the individual owner, with the cash surrender value of the policy being remitted to the plan in exchange for the policy. I have a situation where a plan owns a partnership interest, and the owner of the company would like to purchase this interest. I know no reason as to why, if the owner remitted the "fair value" of the partnership interest to the plan in cash, the partnership interest could then be re-registered in the name of the individual. Am I off base? I do not believe this to be a prohibited transaction. Thanks for any assistance.

Client established a SIMPLE IRA plan during 2001. The matching contribution was calculated properly, and deducted on the 2001 corporate (S-corp) return. However, the matching contribution was not deposited with the bank trustee until September 28, 2002. The bank will not classify the matching contribution as being attributable to 2001, due to the lateness of the deposit. What are the options available? Should the 2001 corporate return be amended (which would also cause a trickle-down effect to the owners Form 1040, as it is an S-corp), and can the corporation take 2 deductions (the late 2001 contribution and the regular contribution) for 2002? Thanks for any assistance.

As a former recordkeeper now with a CPA firm, I have now taken on certified audits of retirement plans. These tend to be overlooked, especially when you have, as I did this year, a plan with greater than 100 participants ELIGIBLE but only 20 to 30 participating. The client came to us on October 11 looking for a completed audit by October 15! This specialty audit, as RCK mentions, is not a place where you go and try to solicit business. All of our certified plan audits are an additional service provided to a client that would utilize our form for corporate returns, etc...

Situation: A 100% owner of an S-Corp wishes to be bought out. They are interested in establishing an ESOP and moving the stock from the owner to the employees and new owner of the company. I seem to remember form somewhere that S-Corps cannot set up ESOP's. I know that the contribution to an ESOP is not deductible by the S-Corp, but can they set up an ESOP? Any thoughts and sites would be appreciated.

Can Summary Annual Reports be delivered electronically, for example, through e-mail? I think they can, but I would like to know for sure. Is there a cite for this, if the answer is yes? Thanks.

A mother dies with an IRA that she has been taking minimum distributions from. The beneficiary of the IRA was the father, who predeceases the mother. No contingent beneficiaries were ever named. The mother's IRA goes through probate, and is now "inherited" equally by brother and sister. Do minimum distributions continue? If so, on whose life expectancy? Thanks for any help.

The participants affected would need to amend their 2001 returns to report the refund. In this instance, the employer would now have a better idea of how much additional tax each person would have to pay, if they were still interested in paying the liability for the people.

Well, assuming your plan year was 12/31/01 and the refunds are being made now, the refunds (the contributions plus related earnings/losses) will be reported on the individual's 2002 tax returns. They will get a 2002 Form 1099-R reporting the distribution, with a code "8", indicating a refund of contributions taxable in 2002. Also, since its past 3/15/02, the employer will have to file a Form 5330 reporting the late refunds and pay a 10% excise tax on the total amount of contributions refunded to the participants. As far as the taxes due go, that can't be determined until the individuals prepare their 2002 personal returns. To figure out the additional taxes due on the behalf of each participant, depending on the number of participant's affected, will be burdensome. Hope this helps.

That's what I thought too, but an associate feels that the full 5500 (with related schedules) needs to be prepared because of the employer contribution aspect. Are we wrong?

I administer a 403(B) plan that has an employer matching contribution, as well as an employer discretionary contribution feature. The investment product is a group annuity contract. I have been filing 5500's for this plan because of the employer contribution aspect. The eligibility for 403(B) deferrals is immediate, while for the employer contributions it is age 21 with one year of service. Because of the immediate eligibility, my beginning of the year participant count is 108, so I get a pass on large plan reporting (Schedule H). However, if I added 13 eligible participants on 1/1/02, is a certified audit (albeit a limited scope audit) required? I have no idea, and thought the client should be warned if an audit is needed for 2002. Any replies would be helpful. Thanks.

To respond to Carol's post, in my experience interest was accrued on money market funds on a daily basis, based on a factor provided by the money market provider. At the end of the month, when interested was actually posted, a "true-up" interest allocation was performed. This step was necessary as we had participants who transferred or were paid from a money market fund during the middle of a month who complained (and in some cases, complained vehemently) that they had earned no interest during the period. Sad but true.

A sole-proprietor (with no employees) set up (I think) a SIMPLE plan during 2001, in which they deferred $250, and nothing else. A call today asks if they can make additional deferrals before April 15 and deduct them on their 2001 Form 1040, as well as making the 3% matching contribution on a higher level of contributions. I can't find the answer in the SIMPLE answer book, but my feeling is that the elective contributions must be made before the end of the calendar year. Am I right? Thanks for any answers. [see below; also see, SIMPLE, SEP, and SARSEP Answer Book Q 4:26 (7th Ed), Q 4:32 (6th Ed). I will add a cross reference or another question in chapter 14. Thank you.)

Here is a situation that I have recently encountered that I have never seen in my years in the business. Any comments would be appreciated! Companies ABC and XYZ are in a controlled group situation, and currently all eligible employees of each company participate in a Money Purchase, Profit Sharing, and 401(k) plan (3 plans total). Unknown to our firm, the client's attorney adopted a 4th plan in 1997 (or so), a Profit Sharing plan strictly for the employees of XYZ. However, the plan has $0 in it, as XYZ has been making its profit sharing contribution to the combined profit sharing plan. Skip forward to 2001, where ABC has encountered a loss year and does not wish to make a profit sharing contribution (it will fund its mandatory MP plan contribution). XYZ is profitable, however, and desires to make a Profit Sharing contribution for 2001. The attorney has now come in, and is advising the client to move XYZ's portion of the combined plan assets out of the combined PS plan and into the 1997 plan set up strictly for the XYZ employees. The XYZ employees will remain in the combined MP and 401(k) plans. The attorney also wishes to take the PS plan forfeitures attributable to terminated XYZ participants and transfer it over to the XYZ plan as well. The plan assets are not segregated by employer, they are commingled. The attorney feels (and we agree) that a profit sharing contribution can be made and still pass IRC section 410(B), as the majority of HCE's are employed by ABC. We are uneasy with this situation. Concern #1 is whether the separate XYZ plan still exists, or was terminated due to lack of substantial and recurring contributions. Concern #2 is if the assets of the plan indeed transfer from the combined plan to the separate plan, are we creating a partial plan termination in the transfer. I don't know if there is anything to worry about, but this situation does not feel right. Any thoughts? Thanks.

I am in the process of updating a prior standardized prototype (Profit Sharing Plan) for GUST. Under the prior standardized prototype, the contribution was allocated to those participants who completed 500 hours of service during the plan year, or who were employed on the last day of the plan year. Client would like to institute the 1000 hours/last day rule going forward (switching to a non-standarized prototype). Is this permissible? I have researched everywhere, and can't find any guidance. Thanks for any help.

I know this has been answered before, but I need it applied to the following fact situation: 1. Taxpayer makes an excess Roth Contribution for 2000 during 2000. 2. Taxpayer makes an excess Roth Contribution for 2001 during 2001. Excess is discovered for both years while preparing the 2001 return. Amounts for both years are removed before 4/15/2002. Questions: 1. Does the 6% Form 5329 penalty equal $120 or $240 (assuming no losses in the Roth), since the excess 2000 contribution is removed in 2002? If there are earnings on the Roth, are the earnings taxable in 2002? How does the Form 5329 show the distribution of the excess contribution, so that no future excise taxes are owed? 2. Is there no Form 5329 penalty for the 2001 contribution, since it is removed by 4/15/2002? In addition, if there were earnings, are the earnings taxed in 2001? Thanks for any assistance!

You can use the Trust EIN on Schedule P's for years and the IRS will still purge the number due to inactivity. I am dealing with this situation right now, responding to IRS inquires regarding the filing of 1099-R withholding under an EIN that had not been used for a number of years. The IRS has taken the withholding filed under the "inactive" EIN and transferred it to a brand new EIN that the client and I have never heard of. It is a mess!

A brand new start-up company, formed July 1, 2001, desires to have a qualified plan to benefit the new owner. Plan is drafted with the following eligiblity requirements: If employed on July 1, 2001, employee is immediately eligible for the plan. After that, eligibility is the attainment of age 21, with semi-annual entry dates. The company adopts the plan with a July 1, 2001 effective date and then hires a series of new employees after July 1 and before December 31, 2001. The company now wishes to amend the eligibility requirements to require 1 year of service instead of only the attainment of age 21. Effective January 1, 2002, can we amend the plan to reflect eligibility of age 21 and one year of service (1000 hours) so new employees hired after July 1, 2001 will not enter the plan until January 1, 2003 (i.e., after completing one year of service)? Thanks for any answers and comments.

In 1998, could an individual roll over a traditional IRA into a SEP? My research leans me towards no, but I'd like to be sure. Thanks.

I have a client that started a 401(k) plan effective 1/1/2001. In November, they transferred all of their employees to a PEO. The PEO has informed them that they have the option of keeping their current 401(k) program or changing to the 401(k) program of the PEO. The PEO has assured the client, the TPA for the current plan and I that, even though the employees no longer work for the client, the 401(k) program which was originally set up can continue to be maintained, with the client signing off on forms provided by the PEO. Is this reasonable (I thought the employees became leased employees at this stage), and if it is, can someone point me to a reference which allows it? Thanks in advance.