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Does anyone know of a website that would allow you to input information to calculate a MRD from an IRA or qualified plan? That is, input balance, participant DOB, beneficiary DOB, recalculation method, etc... I have seen hand-written spreadsheets for this, but am curious if one exists on a website that could be plugged into. Thanks.

I agree, but what about this scenario: Company establishes early retirement program, paying 18 months of severance pay. Company allows those opting for the early retirement feature to defer (both pre and post tax) for the 18 month period. OK or not? Supposedly this had the blessing of an ERISA attorney.

In my opinion, you need not report the cost basis of the mutual fund being distributed "in kind". The value of the fund on the day of distribution becomes the cost basis to the participant. To be nosy, how often do you distribute mutual fund shares in-kind? I would assume that if this happens, the shares transfer to an IRA, where cost basis is insignificant. If the participant was to take it personally, would you sell of some shares to raise the dollars for the 20% withholding? My experience in the daily valuation field was to sell the shares, distribute it to the participant, and let the participant buy back into the mutual fund, if that was their intention. Of course, I'm sure there could be some exposure due to market fluctuation.

Question is: A participant has elected a fixed amount per pay period for elective deferrals, in addition to a fixed Section 125 cafeteria plan deferral. For the current pay period, because of various circumstances, there is not enough gross compensation to cover both deferrals. Can no 401(k) deferral be taken from this pay period, assuming the participant agrees and wishes to have his/her Section 125 deferral taken instead? Next pay period compensation will go back to its normal level. Any comments would be helpful. Thanks.

I don't see a problem with it. I would address the account hierarchy that the loan is paid from in the plan document, though.

Thanks for your answer, Barry, it is the same one I had. My only other thought was to have this person transfer the additional $180,000 to a new IRA, so as to keep the original money (and its payment stream) separate.

Question that arises has the following facts: Person age 57 sets up a Qualified Plan Rollover IRA for $200,000 during 1999. Wants to takes substantially equal payments from the IRA, calculates the amount, using an IRS approved method, based on the 12/31/99 balance and receives an annual distribution. In February of 2000, the individual rolls an additional $180,000 into the IRA, which represented the balance of his qualified plan money. The question is as follows: Do the substantially equal payments have to be recalculated for 2001? May the substantially equal payments have to be recalculated for 2001? I believe I know the answer to each question, but would like to see if I am correct. Any help would be appreciated. Thanks.

Go to the website cyberisa.com. It has information on this book.

If you have a copy of the 1999 instructions to the 5500 series, take a look at page 15, which states: "If a Form 5500-C/R was filed for the plan for the 1998 plan year and the plan covered fewer than 121 participants as of the beginning of the 1999 plan year, the Schedule I may be completed instead of the Schedule H." I believe that gets you out of your audit requirement for 1999, if you're under 121 participants as of the beginning of the year. Hope this helps.

In my experience, the gain on the forfeiture account was used in conjunction with reducing the employer contribution. Essentially, the account balance at the end of a quarter (the client funded their profit sharing contribution on a quarterly basis)was used each time, which was a mixture of forfeitures and gains (the forf acct was invested in the plans' money market vehicle). Sorry, I don't have a code cite, but this was agreed upon by the client when they converted from traditional to daily valuations. Hope this helps.

It sounds like you followed your plan document. In a quarterly valuation setting, you paid him the correct amount; that is, the 12/31 balance. The participant does not share in any trust gains (which is a benefit to the other participants), which is why he is upset. If the trust had been in a loss position, do you think you would have heard the same complaint? In that situation, the remaining participants in the plan take a hit. That is why so many plans have converted to daily valuations, so that the participant actually receives that value of his or her account on the day of distribution. I had one plan take a unique approach to the problem you describe, as they received numerous complaints like you did. The procedure they followed goes something like this: 1. Distribution forms received by 12/31 (or any quarter end): The 9/30 value of the account would be moved from the investment funds to a money market account set up in the plans' name. 2. Any additional distribution requests received by 1/15 would have their 9/30 values moved to the money market. 3. Upon the completion of the quarterly valuation, any additional investment earnings on behalf of the above amounts would be moved to the money market. If the investments had sustained a loss, money would be moved back from the money market to the investment funds. 4. The interest earned on the money market account would be allocated to the participants, and then this value would be paid out. This procedure quieted the complaints, but not the whining, especially when the market was up in that 4 to 6 week period after quarter-end. Please note that the client fully documented this procedure and handed it out to all plan participants. It also received the blessing of the corporate attorney. Finally, our firm charged a significant premium (usually a charge of between $500-1,000 per quarter) to perform these gyrations. End result, if this is a major pain for you, consider converting the plan to daily valuations. Hope this helps.

I have a client who made a $2,000 Roth contribution for 1999 and invested the cash in stock. Realizes in March 2000 that he has no earned income to base the contribution on. Takes the Roth account (which has the shares in it)and converts it to a personal account. At the time of conversion, the stock has appreciated so that the value of the account is $2,300 (no dividends have been paid). Does the client pay tax on the $300 of appreciation? If so, in what year, 1999 or 2000? And where is it classified on the individual's Form 1040? And, for the sake of arguement, what happens if the stock had depreciated to $1,700? Could the client claim the $300 loss on his personal return? Any help would be appreciated. Thanks!

My first look would be at the plan document. Many documents I worked with listed the order of accounts where loans would be taken from. If the document is silent, I would probably start with after-tax dollars. If the participant terminates and "defaults" on the loan balance, at least the default has already been taxed at the personal level. Hope this helps.

In my experience, we used the "what happened, what should have happened, what needs to be done to fix it" methodology to correct errors as mentioned above. If the participant came out ahead, the error was allowed to stand, but if was short, the difference was deposited to the participant's account. A no win situation for the TPA/trustee, a win-win situation for the participant.

My belief is that it does not show up again in taxes because he had already been taxed on the defaulted loan, back in 1996, from the fact situation. My only arguement would be that the accrued interest that was rolled up into the reamortized loan should be taxable. I have actually seen where a defaulted loan was repaid after the 1099-R was issued. The key concept here, in my mind, is what the employment status of the participant is. It sounds like in Spencer's situation the participant remained employed. Pax mentions the account balance being written off the records for the participant. That would require, for most plans, that the person be terminated, which is an approved way of "distributing" the loan balance. When I would write a loan off for a terminated participant, I would accrue interest to the date of default, add it to the loan, and then distribute it. The distribution of loans is always a sticky subject. I do know that there have been some IRS notices dealing with the accrual of interest on loans. As always, its clear as mud as to what to do. Hope this helps.

It has always been my contention that a refund of excess contributions, due to an ADP test failure, plus earnings or losses thereon, are includible in the year of contribution if refunded before 2 1/2 months after the close of the plan year end. I have an associate who asserts that an ADP refund is treated like a refund for an excess deferral; that is, the contribution is taxed in the year of contribution, while the earnings are taxed in the year of distribution. Has anybody seen or done refunds like this? I was totally surprised when my associate mentioned this. Thanks for any assistance!

If a participant somehow is able to participate in 2 SIMPLE plans during a calendar year, is he or she limited to $6,000 in the aggregate, or $6,000 for each simple? I know the rules for 401(k) plans (the $10,500 limit applies to the person in the aggregate), but this is the first time I have been asked the question regarding SIMPLE's. Any help would be appreciated. Thanks!

The plan document usually dictates when a terminated participant should be paid, usually in a "reasonable" time frame after either the valuation date or, with the advent of daily valuations, termination. The only thing to note is that you may have an issue if there are forfeitures involved. If the person was paid, they would be entitled to their forfeitures back if they paid back the employer money. If the person was 0% vested and forfeited, the company would have to reinstate his balance, either out of accumulated forfeitures or through a company contribution. Either way, it's a messy thing. Bottom line, if the person hasn't been paid, and you know they will be rehired, the best course may be to not distribute.

Your investment choices, in my opinion, are pretty much what is allowed for regular IRA's. You should be able to go to a bank, brokerage company, insurance company, etc. and set up what you are looking for. These folks know what is allowed and not allowed as investments, and should be able to get you on your way with your Roth! Hope this helps.

In my experience, if an eligible employee is omitted, that person is given an option to make up the "missed" contributions either over the remaining part of the year (thus greater than 15% deferral), or on a one time make-up contribution on the next payroll check. This has, in my experience, been approved by the attornies that have been involved with the plan. In fact, I had a client who had duel entry dates (1/1 and 7/1), but used whole year compensation for all plan purposes. They would allow a mid-year entrant to defer up to 30% of pay for the second half of the year, so that the annual result would be 15% of overall compensation. No complaints from the ERISA attorney on the case. In fact, it was his idea.... Hope this helps.

If you work with a CPA and/or attornies, they can also refer TPA firms. In addition, any mutual fund company (Fidelity, etc.) has daily valued products. Check their websites for more info.

The TPA should be investing these contributions into the trust, and would have to do the catch-up reporting later. The employer is indeed blowing the whistle on himself, but then his recourse is against the TPA, in my opinion.

I generally put an employee rollover on an SAR, under the employee contribution section. With all the fancy programs to generate SAR's, I go in and change the wording to reflect the fact that it is a rollover contribution. Hope this helps!

I don't think so, since his money is in an IRA, which makes it a separate issue from the qualified plan. As long as the payments continue, the 10% penalty is avoided.

I would see no reason why the distributions cannot be combined into one IRA. It would be important for the person to keep the qualified plan rollovers separate from personal IRA's, in case the participant would want to roll the money into another qualified plan; i.e., a conduit IRA. Hope this helps.