bzorc

I used to work for a consulting firm that would actually count the number of pages a person could conceivably receive when asking for a full report and then multiply that by 25 cents. Therefore, the total cost would differ by each plan. Currently, we use $5.00 or 25 cents per page.

My firm is using Hyperprep software, and in your situation, it creates 3 page 2's. I think I would go that route. Hope this helps.

I might start by bringing the loan current; that is, having the person make up all missing payments for the years in question, including unpaid interest. Now the dilemma, in my opinion: Your original loan was before 1/1/1987, therefore, it did not have to be repaid quarterly. If payments had been made timely, this loan could have been repaid under its original terms, as it was allowed to be grandfathered (I am still administering loans taken in the early 80's like this). However, bringing the loan current can be considered "renegoiating" the loan, thus bringing it into quarterly payment status (the term can be longer, due to the principal residence provision). In my experience it has been left up to the plan administrator (usually the company) to decide which way to go. I have seen it both ways: Let the loan continue under the old terms, or a new loan agreement is drawn up, with appropriate at least quarterly payments of P&I. Also goes a lot to do you want to take a conservative or aggressive approach. Hope this helps.

I have a client who is interested in investing a portion of his IRA in a L.L.C. The investment would be in the form of a note, which would outline the principal amount, interest rate, payment schedule, and so forth. The note is highly speculative in nature. My belief is that this note, which from a fiduciary standpoint is probably not the best investment in the world, is still allowable under the IRA investment rules. The L.L.C. is not a "disqualified person" under IRC Section 4975 (therefore, not falling under the prohibited transaction rules)so that is not a consideration. I do not feel that the IRA is being used as security or being pledged as a loan, so it does not become a distribution under IRC Section 408(e)(4). Anybody with experience or an opinion? Thanks.

From an administrative standpoint, giving terminated participants their paperwork when they're walking out the door could speed things along a little, since they will return it faster. As far as paying terminees, short of turning the valuation over on a much quicker pace, you don't have much recourse except for going to a 2 payment approach. If, in your example, you have an April 15 terminee, you could possibly pay that person 80% of their March 31 balance, and then pay the remainder once your valuation is completed. Now you're getting into having to issue two checks, which is a pain. Short of that, you are doing things the way you are supposed to, in my opinion. Such is life in the retirement world, where everybody now is aware of market fluctuations and wants their money "yesterday". Good luck.

If you are interested, I used to work for a firm that does what you are looking for. Please send me an e-mail and I will reply to you that way, I do not wish (for personal reasons) to put this info up on the bulletin board.

Does anybody out there have any experience with filing late returns under the DFVC program? We have unearthed a couple of clients who have never filed Welfare and Flex plans for a period of 3 years or so. (Both plans are subject to filing standards, i.e. Welfare plan has greater than 100 participants) I called the DFVC helpline in Washington, and they gave me a procedure to follow which is pretty straightforward. I'm just curious as to whether anyone has tried this, and what the result was. In addition, has anyone tried to file a bunch of late returns without paying the sanctions ($5,000 for a 5500 filer if greater than one year late, $2,500 for a 5500-C filer) and just submitting a reasonable cause letter? I used to do a bunch of these back in the late 1980's and get away with it, but did DFVC close this possibility? Any comments would be appreciated. Thanks.

I believe the answer is yes. I have administered a plan where the match was $3 for every dollar contributed. This set-up allowed a group of doctors the ability to hit the $30,000 annual addition limit in a "creative" fashion. The plan was all HCE's, so ADP/ACP was not an issue.

Through attribution, you are deemed as owning 100% of the s-corp. Therefore, I believe you may not take a loan from the plan.

I believe, though, that what Chip does may be frowned upon by the IRS. I know I have been on a campaign to get all of the qualified plans that I work on (including one-man plans) a Trust EIN. Makes things much simpler, as the IRS, when trying to reconcile payroll and retirement plan distribution withholding, can really cause trouble for a company if these numbers do not tie out.

What software are you using? From your description, I believe that you are looking at the other "bar code" that imbeds the English answers into code, which the IRS computer can scan and input. Based on a seminar I attended, that code is called "Computer scannable 2D bar codes".

I have seen this handled in a couple of different ways: 1. Allow the deferral, as it does not exceed the 415 limit for the participant. Amend the plan going forward to allow a higher rate of deferral (not retro!). As an aside, a 10% max rate seems low, unless the company has a generous match/profit sharing feature, or has a partner money purchase plan. 2. Refund the excess over 10% (with associated gain/loss), handled and reported as a 415 refund (Code E). I never saw eye to eye with my superiors on this one, as there in real life was no real actual 415 violation. 3. Say oops, a couple of people were over in the first year (set up pains), we made the adjustments, it won't happen again....

Kirk: In the plans that I administered, there was no re-execution of the note at my (the recordkeeper)level. I don't know if the companies I worked with did that on their level, though. I was just told that here's a rollover loan, here are the terms, set it up on your system.

I have worked with 401(k) plans that have routinely allowed loans to be rolled into their current plans (mainly law firms). What is needed is an amortization schedule of the loan to be rolled over, current balance, and a history of the outstanding balance, to properly calculate the highest outstanding balance if the participant would look for another loan in the future.

You also report your controlled group on Page 4, Item 8 of the 5500, using the code "3H".

There are no cites that I can think of, but annual loan maintenance fees are becoming more and more popular. I have seen them in the $10-25 range for a year. Some things to consider: 1. Only applied to new loans taken after a specific date 2. How often is the fee collected? I worked on a plan that allowed participants to have 9 loans outstanding at once. These maintenance fees add up!

Well, duh on my part! It helps to read the question, as I have found the other codes which are recited on pages 17-19 of the 5500 instructions. Back to my calling the insurance companies!!! Thanks for your help, Greg.

Greg, where on the IRS website are the codes? I looked at the 5500 instructions for 1999, but did not see them. Thanks.

As far as I know, that is acceptable. However, why won't the mutual fund company waive the load fee? I have seen them waive the load if you can commit to so many dollars going into the fund over a period of time (the American Funds work that way). It may be worth a call to the fund company to see why they are charging load fees.

There is nothing on the web that gives this information. What we have tried is contacting the insurance companies' compliance department, who should understand why the NAIC code is needed. That has worked so far.

You can certainly write the loan off and create a taxable distribution for the participant. However, the loan cannot be written "off the books". The participant can (however unlikely)come back and repay the loan in the future. The loan is essentially in default. The only time the loan can be physically taken off the books is when the participant has a "distributable event", e.g. termination. Also, you may want to look at the instructions to the 1999 Form 5500. The reporting of a defaulted loan is quite ugly.

In my opinion, you are correct.

Yes, the two entities have separate EIN's. The ownership of the C-corp and the foundation is similar, i.e., same percentages in each entity. Lisa, does that help?

I have had many clients who allow loans from rollover accounts before they become participants. The loan policy should address this, as mentioned above.

A company which is a C corporation is considering adopting a Cafeteria plan to accomodate basic benefits, i.e., insurance premiums, health expenses not covered, and dependent care coverage. They also have common ownership on a IRC Section 501©(3) foundation, which to date does not have any employees, but may end up with employees from the C-corp in the future. Can/should/may the foundation adopt the cafeteria plan, so that these employees can continue their pre-tax deductions upon transfer to the foundation? Any comments would be appreciated. Thanks.