bzorc

Accounting firm merged with another accounting firm on November 1, 2015. Therefore, the auditor will be different for 12-31-15 audits than it was for 12-31-14. Question is does this change in auditor, due to the merger of accounting firms, require the completion of Part III of the Schedule C, reporting the "termination" of the accounting firm. Thanks for any replies.

Due to a merger Plan A is merging into Plan B before 12-31-15. Plan A offers brokerage accounts while plan B does not. Plan A has a few employees who are over 70.5 and have been deferring their MRD's. The merger requires either the liquidation of the brokerage account or transferring it in-kind to an IRA, which is permissible under Plan A. Question is do these folks have to take a 2015 MRD from the newly transferred IRA? They want to put this off to 2016 but Plan B wants Plan A merged before the close of 2015. Any replies would be appreciated.

The Plan Administrator had no idea that this was going to occur; they forwarded us the e-mail requesting the changes with the question "What is going on here?". I agree that a request should be made to return the excess, but how often does the return of funds occur?

An audit client of ours just received notification from their TPA that, due to incorrect compensation provided for the PYE 12/31/2013, the ADP test was re-done and 4 participants who received refunds actually were "over-refunded". The TPA has requested that the 4 participants return the excess refund to the plan, and then a corrected 2013 Form 1099-R will be issued, reporting the correct distribution. The TPA then advises the participants to "seek professional advice when amending their 2013 personal tax return". The TPA has also suggested the auditor be contacted to "correct the 2013 audited financial statements". I have never seen a TPA ask for participants to return a portion of their ADP refund. Does anybody have experience with this? The amounts are around $300 per participant; therefore, amending their personal returns for 2013 might net them a $50 refund, and cost them hundreds in tax preparation.

A small S-Corp has one employee who does not work in the state where the corporation is located. Since he was out of state, the company health insurance policy did not cover him, so the employee obtained his own policy and had the premiums paid with after-tax dollars. In addition, one in-state employee was paying her family portion of the health insurance with after-tax dollars as well. The company wants to adopt a premium only plan. The in-state employee family coverage payment is easy, but my question deals with the out-of-state employee. How is the payment of his policy, which he pays for on his own, handled through the POP plan? Does the company increase his salary by the amount of the premium, and then run the premium payment through the plan? The company prepares its own payroll so there is no payroll service to ask this question of, and my knowledge of the POP payment rules is limited. Thanks for any replies. Just found out that the out of state policy is an individual policy, so the POP plan is not an option.

I don't see that it is either. Can't convince the auditor of this.

What is the basis for the qualified opinion?

True, the participant could pay back the impermissible withdrawal (based on the fix it guide), but does not have the financial capability to do so. This is where 2003-12 comes into play.

The answer to this was also in Rev. Proc 2013-12; the participant cannot pay back the impermissible withdrawal; however, there is no "make whole" remittance required from the Plan Sponsor. To further this discussion, the impermissible withdrawal was found by the plan auditor (the plan sponsor does not utilize us as the TPA to review hardship withdrawals; they do it themselves and send the request straight into the plan trustee for processing ) during their fieldwork (plan has greater than 100 participants). They initially insisted on a VCP filing; however, Rev Proc 2013-12 changed their mind on this. However, they wish to classify this transaction as a "prohibited transaction", and are asking us as the TPA to prepare Schedule G to form 5500. Any thoughts on their position?

A 401(k) Plan that we are the TPA for does not consult is when issuing hardship withdrawals. The auditors for the plan, during their fieldwork, found a hardship withdrawal being granted to pay high school expenses for a student; and have flagged this as an impermissible hardship withdrawal, which is correct. Two questions: First, at a recent seminar it was mentioned that there is new (possibly proposed) legislation that deals with this; in essence, if the withdrawal was for a proper amount had the withdrawal been permissible, there is no corrective action or VCP filing required; the auditor should reference this internal control deficiency in their communications to the plan sponsor. Does anybody have a cite for this legislation? Second, is there a good "template" for submitting this VCP, assuming it comes to that? Thanks for any replies.

There is no CBA involved in this plan. I know that if you exclude the hourly employees you open up the coverage testing issues. In this situation the majority of the hourly employees work greater than 1000 hours, hence the question. My original thought was that the company should not adopt a plan due to the coverage (and more importantly the audit) issues imposed by the hourly employees being excluded. Austin, I have been drafting plans for 25 years. It's just the first time with the PPA restatements in the adoption agreement that the exclusion for hourly employees has been so noticeable. However, in going back to the EGTRRA restatements this exclusion is clearly there as well. Just a big ol' brain spasm on my part....

A new company has 20-30 office workers, and 700 or so "laborers" who are paid on an hourly basis and are "provided" to various other businesses for their use. The hourly employees are paid by the new company as W-2 wages. The new company would like to establish a retirement plan for the office workers and exclude the hourly "laborers", as the owner feels that these employees would not want to take advantage of the plan. In addition, the owner does not want the expense of an audit that would come along with 700+ eligible employees. Question is can these employees be specifically excluded? I am currently in the PPA restatement phase for current plans and see that the prototype document I am using allows an exclusion for "Employees that are paid on an hourly basis". If this is allowable, I might have to have a new conversation with our new company CFO... Thanks for any replies.

A former partner of a company is retiring December 31, 2014. However, this partner will be receiving deferred compensation in 2015 and 2016. They have asked whether or not they can make elective deferrals off of this compensation during 2015 and 2016. They will not be working in either of the two years. It is my belief, in reading the plan document of the company, that this deferred compensation cannot be used for deferral purposes, as the partner is performing no services for the company in 2015 (or 2016). Just want to make sure that my interpretation is correct. Thanks for any replies.

A participant in a 403(b) plan has been notified that they have had excess deferrals made to their account for years dating all the way back to 1998. The plan has entered into an agreement with the IRS, and now each affected participant is receving a distribution in 2014 for the amount of the accumulated excess, plus applicable earnings on the account. Each participant is being advised to properly report the distributions in the appropriate tax year affected by the excess deferrals. The question here is whether this participant, who had excess deferrals in 1998 (and beyond), must amend personal returns for tax years in which the statute of limitations has been met, or only for tax years that are still open to examination. Thanks for any replies.

Taxpayer is MFJ and is going on extension to October 15, 2014. Current AGI allows a Roth IRA contribution for both H&W. However, what are the ramifications if the taxpayer's AGI goes up over the limits between now and October 15? Can the Roth be converted to a traditional IRA without penalty? Any answers would be helpful, thanks!

Participant took a 401(k) loan, proceeds of which came from his Roth 401(k) source. Participant has left the company and cannot repay the loan. Question is: Is the default considered taxable? I have never encountered this before, and the 1099-R received by the participant for 2013 indicates that the entire defaulted balance is a taxable event. To me this seems as if this is being double taxed. Any replies would be helpful, thanks!

Thanks, masteff, forgot all about Pub 560!

Many years ago a small employer established a SIMPLE IRA plan for its employees, and it has been operating nicely. However, over the past couple of years, the employer has been expanding and adding employees to the extent that they may exceed 100 employees in the next couple of years. What happens when the employer hits 100 employees? Must the SIMPLE plan cease operations? I have looked through my various answer books and can't seem to find an answer. Thanks for any replies!

This is the reason why the participant cannot invest in the Facebook IPO. Thanks for the replies!

A 401(k) Plan has a brokerage option available to participants. One of the participants has asked if they could invest in an IPO (I guess Facebook is coming out this week) and they were told that they could not. Is there something in the IRC or regs that prohibit an investment in an IPO? Thanks for any replies!

A school teacher taxpayer has come to me with the following question: Teacher is retiring in June of 2012. The school district, as part of the current contract, has agreed to pay the teacher an amount equal to $1,000 per year of service. Teacher has 32 years of service, thus a payment of $32,000. However, the contract provides that the payment must be made to a 403(b) plan. School has an employee contribution only 403(b) plan in place, and teacher is currently deferring $1000 per month to a long standing annuity under the terms of the plan. The teacher, while retiring in June, is paid through August 31, 2012; thus, will have $8,000 of elective deferrals through then. The teacher contacted the 403(b) plan provider that administers the annuity being utilized. The provider said that since the $32,000 payment is an "Involuntary contribution" to a 403(b) plan, that the IRC limit on contributions is increased to $50,000, from the $22,500 limit. Therefore, the entire payment and current deferrals ($32,000 plus $8,000) are within the IRC limits for 2012. The current financial officer of the school has never heard of this and is asking to see the rules regarding IRC 403(b) involuntary contributions in writing. Could anybody please point me to where this is contained in the IRC 403(b) regulations? Thanks for any replies! Duh!!!! The limit is the annual addition limit. Tax season has mushed my brain!

You are correct.

Thanks for the response, ERISA! The deadline wasn't extended, after further research. Had to be done by October 15, 2011 at the latest, so this taxpayer is out of luck.

Taxpayer converts a traditional IRA to a Roth during 2010 and elects to pay the taxes in 2011 and 2012. Taxpayer now wants to recharacterize the conversion back to a traditonal IRA. Is this allowable? Have not seen this one yet this year. Thanks for any replies!

Unfortuately, aggregating them together does not solve the top-heavy issue. Thanks!