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David, thank you, but I'm not looking at the Schedule of Assets Held. I'm specifically looking at the footnotes in the audit report for a limited scope audit, where you have to reference the various funds held within the plan. An asset greater than 5% has to be disclosed or asterisked. This is where I'm looking for the BOY or EOY classification.

As it's audit season again, the issue has again arose regarding the footnote regarding assets representing 5% or more of current assets. For years, we have used the asset figure as of the beginning of the year; now, there are those who feel it should be as of the end of the year. There is nothing in the audit guide or Form 5500 instructions as to whether or not to use BOY or EOY assets to determine the 5% level. Opinions? Or, if there is a thread to previous conversations on this topic, it would appreciated. Thanks much!

A Defined Benefit Plan holds individual life insurance policies on eligible participants. One of the participants would like to purchase his insurance policy and hold it personally. This does fall, I believe, under the DOL class exemption. The major question at hand is whether or not there is some method to coming up with the amount of money necessary for the participant to purchase the policy. I was under the impression that it would be the current CSV of the policy; however, I have been told (informally) that there is some formula to determine this amount. Am I off base, or is there a formula to determine the amount of cash necessary to purchase the policy? Thanks for any replies.

Client is a single member LLC. However, single member gave himself a salary for 2008 and reported it on a W-2. LLC has net income after deduction for salary. Client wants to establish a SEP. What's the contribution calculated on? 20% of net self-employment income? 25% of comp? A blend? Aargh!!! Any help would be appreciated.

A small company terminated its plan in early 2008 and distributed all benefits to the 3 owners, who were the only participants in the plan. None of these owners rolled the distributions over; thus they are taxable in 2008. However, one of the owners turned age 55 during 2008 (the others are over 59 1/2). Is this owner subject to the 10% excise tax, or is he considered "separated from service" for purposes of IRC 72(t)? Any replies would be appreciated, thanks!

If an IRA owner names someone other than the spouse as beneficiary, must the spouse signoff (i.e. spousal consent) on this, as in a qualified plan? I read through Publication 590 and do not see any reference in regards to this issue. Thanks for any replies.

Let's make this a fun hypothetical. Assume both companies have employees (non common to both), and both companies maintain a 401(k) Plan. One company matches, the other doesn't. Wouldn't the controlled group rules require the nonmatching company to match, or vice-versa? That is, don't the benefits offered by both plans have to be identical? I have this exact situation going on now, where a brother-sister controlled group both set up 401(k) plans with non-similar features. This was brought to our attention just yesterday!

Also: Do the QDIA rules apply only to plans with automatic enrollment features? I would assume not, but want to make sure.

Our firm has a client who maintains a SIMPLE IRA plan. As of today, only employee deferrals have been made to the plan, as the employer usually funds their portion before the due date of their corporate return. As no employer contribution has been made as of yet, could the company set up a 401(k)/Profit Sharing plan and just make the employer discretionary contribution for 2007 here (in a larger amount of course, as the client has a large profit for the year), and not jeopardize the SIMPLE deferrals for 2007? The SIMPLE would then cease and the 401(k) feature of the plan would commence 1/1/2008. Thanks for any replies.

We add paragraphs in the auditors report stating that we compiled the statements for the year in which the plan was under 100 participants. This is clearly spelled out in the audit guide.

Has anybody encountered or addressed the 80-120 rule in reverse? In 2005 plan had 240 participants as of the beginning of the year, requiring a Schedule H and certified audit. For 2006, certified audit is prepared, however, plan administrator just notified TPA that union employees have been improperly counted for 2006. Therefore, the 2006 Form 5500 shows 69 participants as of the beginning of the year, and the TPA has enclosed a Schedule H for the plan sponsor to file. Question: Since the BOY count is 69, doesn't a Schedule I have to be filed? As the count is under 80, I don't believe you could attach a Schedule H (80-120 rule in reverse), even if you wanted to. Any replies would be helpful.

I have a client who signed a letter to the asset custodian authorizing us as TPA to have signatory authority over submissions relating to participant loans and withdrawals, as the plan administrator (i.e., the company) does not want to be bothered with the "menial task" of signing a loan or withdrawal request form. The asset custodian has no issue with this. Should I be concerned with my liability?

Yes they are. I have found EZ-s that I have filed on the EBSA system.

A question has arisen as to a taxpayer who initiated a Roth Conversion in November, 2005, when the taxpayers AGI was $90,000. The taxpayer paid the tax on the conversion with their 2005 return. However, the new custodian of the IRA failed to complete the conversion until January, 2006, and has issued a 2006 Form 1099-R stating that the conversion occured in 2006. The taxpayers AGI in 2006 is over $100,000, so a conversion could not occur in 2006. The question is whether the taxpayer can leave things as they are; that is, the conversion occured in 2005, or do they have to file an amended return removing the conversion in 2005, and then having to go through a recharicterization of the Roth in 2007, due to the inability to convert to a Roth in 2006. Any replies would be helpful! Thanks much.

Not knowing much about HSA's, I pose the following question: Can an employer discriminate against his or her employees in setting up an HSA plan? That is, can the owners set up HSA's for themselves under a company HDHP and not offer the HSA to the employees? Thanks for any replies.

A partner in my firm came to me yesterday with the following concern: Owner employee turned age 70 1/2 in 2005. 1st distribution was made in March 2006. As he was preparing the 2006 distribution to be made by December 31, the owner employee informed him of a TEFRA 242(b) election that he signed back in 1982. Question: If the owner puts back in the 2005 distribution that he took in March, could the 242(b) election be considered "not broken"? The owner is even of the mind to consider the distribution as a "prohibited transaction" between the plan and the corporation, which will be corrected before December 31, with the appropriate Form 5330 to be filed reporting the PT and paying the excise tax. Any replies would be appreciated.

How about sending the balances to your state as unclaimed property?

You could file your 5500 without the audit report, get a DOL notice for filing an incomplete return, and then respond with the completed audit report. I have done this in the past. Or, you could hold your entire filing and when the audit report is complete, file the entire return under DFVC. I guess I would say it depends on your comfort level.

In reviewing the PPA information on adding an automatic enrollment feature to a 401(k) Plan, it states that contributions must be placed in a multi-asset class default investment if the participants do not direct the investment of their elections. I deal with a handful of plans where a new plan participant receives a brokerage acccount with a designated brokerage company, and then he or she is responsible for calling the "plan broker" to place investments within the account. If I wanted to add automatic enrollment to a plan such as this, what is my default "multi-asset" class investment? Thanks for any replies.

As an auditor, I usually prepare a Schedule of Assets Held for Investment Purposes to be attached to the Form 5500 in the IRS/DOL requested format. Makes things much easier for the filer.

In reading this thread, a situation came up in our office yesterday, where an attorney is referring a VEBA plan (providing welfare benefits, as well as benefits such as vacation and sick pay) that was established in 2002 but has never had a return filed. There are about 50 participants in the VEBA, and the VEBA maintains a trust to hold funds to be used to pay benefits on an ongoing basis. My question: In addition to the 990, is there a 5500 requirement? The last time I filed a 5500 for a VEBA was in 1988, so my memories are not as good as they used to be... Thanks for any additional responses to this thread.

Sole-Proprietor sponsors a "uni-k" for himself, in order to make an elective deferral and also benefit from the 20% deduction for profit sharing. As of today, the sole-proprietor has not made any elective deferrals for 2005. Can the sole-proprietor still make an elective deferral for 2005? The profit sharing portion is still allowable, as the Form 1040 has been extended to 10/16/2006. Any replies would be appreciated.

Participant in a 401(k) plan dies with an outstanding participant loan. Beneficiaries are the two children. Is the outstanding participant loan taxable to the two beneficiaries, or to the participant's estate? I haven't had this situation arise before, so any comments would be appreciated.

A taxpayer, for both 2004 and 2005, made a Roth IRA contribution. In getting ready to prepare the 2004 and 2005 Form 1040 for the taxpayer (yes, the 2004 return has not been filed), it was discovered that the AGI for the taxpayer is over $160,000 for both years. The taxpayer could have made a deductible IRA contribution, as there is no active retirement plan participation. The question is whether the taxpayer could instruct the IRA custodian to reclassify the contributions into a traditional IRA account, and then take the IRA deduction on both the 2004 and 2005 return. I have never heard of this occurence, and wonder if anybody has an opinion. Thanks for any replies.

For what its worth, I had a slightly similar situation where in 2003 a client had late deferrals and had them submitted along with lost earnings. The client received the DOL "invite" letter. We wrote a response to the DOL explaining that the late contributions and earnings were deposited and that future contributions have been submitted timely. We received a response from the DOL today acknowledging our letter, stating they are not taking a position on whether the correction was performed under the standards set by VFCP, and, interestingly, will not be initiating an investigation regarding the matter "at this time". Finally, they state their letter cannot be relied on as a "no action" letter. They close with stating thanks for bringing the matter to a prompt resolution. So I guess the moral of the story is that if you write the DOL with your fact situation, they may put off an investigation. Well see....