cpc0506

I am not sure that this thread helped. The client has employees who may want to make salary deferral but there is not enough money after fica and state taxes to make a contribution. They want to use their tips to make the contribution. How is this accomplished?

I have a client who is a restaurant. Employees make minimal wages, Most of the money comes from tips. How can a employee make salary deferral contribution on the tips they receive? Is this allowable? The definition of compensation in the document is w-2 wages. Thanks

This was not the first RMD for the account. The participant had received one in 2007 and 2008 and waived 2009.

One employee X owns 100% of company A. The same employee X owns 90% of company B. The rest of company B is owned by employee Y. Both companies are covered by Plan run by Company A. I know I have have a controll group issue, but my question concerns who are HCE? Employee X is clearly a HCE. But is Employee Y also a HCE? He does not own any of Company A but he owns 10% of Company B. Please advise....

Participant knew he had an RMD coming for 2010. Funds never arrived from the Investment House. Investment House then sends check dated 1/12/2011. Is this a valid 2010 RMD? Did the participant miss the 2010 RMD? What are the consequeances of a missed RMD?

Client failed the ACP Test in 2009. Instructions were sent to make a corrective distribution of the money. Now it is 2011 and and the client has provided investment statements and the correction was not made. What are the consequences? Thanks.

We had this issue come up this year when the client provided us compensation for 2010, they informed us that they have been paying employees extra if they opt out of medical coverage, but they have not been withholding 401(k) on these funds. Is this a problem? The plan defintion of compensation does include deemed 125 compensation. I think it is but I am looking for guidance. Thanks

Thanks.

A plan fails the ADP Test in 2010. Refunds are made within the first 2 1/2 months of the following year (2011). There were gains on the return as well. What is the tax consequence to the affected employee? Is the full amount taxable as 2010 income? Just the returned Salary deferral in 2010 and gain in 2011? Or all taxable in 2011? I know there are no gap earnings any more but I am finding conflicting info on handling this. The plan is not failing the ACP test, but due to the return for the ADP test, the participant, in essense, will receive too much match. These funds need to be forfeited. Is there an issue if the funds are not deposited to the participant's account until later in the year (after the 2 1/2 month period, closer to due date of corporate tax return.) Thanks.

Husband owns 100% of a doctor's office. Wife owns 100% of a gym. Neither works for the other or is a member of either's board. BUT, they have minor children - ages 13 - 11 - 9 Is there a control group due to the minor children? This is a new (takeover plan) plan for us and prior TPA did not have the companies as controlled groups. I am not sure that is correct? Please advise.

Client has a Profit Sharing plan only. Would like to add 401k feature to plan. One payroll left. Can ha add 401k? Can he make it a Safe Harbor 401k? Why, oh why, does everyone wait until the last possible minute????

SH Plan does not need an ADP Test. That being said, my thought is that an employee is no longer 'otherwise excludable' as soon as they have met the IRS minimum requirements - that is 21 and one year of service with semi-annual entry dates. So your employee with hire date of 2-1-10 would no longer be 'otherwise excludable' as of 7/1/2011, so should be in the 'not otherwise excludable test' at the of the 2011 plan year.

My thought is if John has met the eligibility requirements of age and service of the match, he should be in the test. Does the plan pass the coverage test when you comparing those benefitting to those not? But maybe my thinking is too simple.

Client is buying a company. The company will become a wholly owned subsidiary of the client after the acquistion. Client currently has 401k plan. It is a calendar year plan. The company it is acquiring has a SEP (also a calendar year plan). Client wants to make the purchase effective December 22, 2010. What does this mean with regards to the status of the two plans? Can the client have both a 401k plan and a SEP plan in the same year? Should the SEP be terminated prior to the acquistion? This may be beyond the scope of this forum but the client just called yesterday and thought they better check with us (at least they did it ahead of time and not after the effect.) Any guidance out there? I could not find anything in the ERISA outline book.

Hello. Particpant passes away. Did not have a beneficiary form. The deceased is not married and has no children. What happens to the money? Is there a next in line? Thanks.

Client can file a Form 5500-SF. It does not need to file a Schedule I unless it has to.

We have had a number of clients contact us after receiving their 2011 Safe Harbor Notice and they are telling us that they do not want to be Safe Harbor for 2011 or not sure if they want to be Safe Harbor for 2011. The document is written as safe harbor. First, does the document need to be amended to remove the safe harbor feature of the plan? Or is it sufficient that the client DOES NOT provide the safe harbor Notice? Second, can a plan that again has the safe harbor feature written in, give a Safe Harbor Maybe Notice to allow the client time to determine if they can really make a contribution for 2011? What are your thoughts on this issue?

Plan document allows for loans from only the salary deferral money source. Can I use the entire account balance to determine the 50% vested balance and then check to see if there is enough salary deferral to matke the loan amount?; OR Is the 50% vested balance limited to 50% balance of the salry deferral account? The office is divided on this issue. Thanks for your insight.

A particpant has contacted its employer to take an in-service withdrawal from his account. Plan allows for in-service after age 59.5. The participant has after-tax funds (old money, prior to Roth) as well as pre-tax and match. The amouunt of money he wants will require that some of his after-tax money be taken. Question 1: Can you roll over after tax money to an IRA? I thought yes so long as the funds go to a ROTH account..... Question 2: Should the money be taken from all account pro-rated so only a portion of the after-tax is withdrawn? Thanks for your help.

New client wants to offer a Brokerage Account (managed) to the participants in the plan. The minimum account balance is $25,000 for this type of account. Is this discriminatory? Do I need to test this 'feature of the plan'? Thanks

A client has come to us with this situation: I have an employee that was cashed out of her prior 401k plan. It is my understanding that if she wants to rollover the funds to her current (our client's) 401k plan, she would have to make the distribution “whole”. Is this correct? She would like to sign the check over to her current employer and pay the federal taxes that were withheld along with the distribution check. How long does she have to do this? How do you fix the 1099 that the prior employer will generate for 2010 for a distribution, which they thought was a lump sum and is now a rollover to another qualifed plan? Thanks for your help

Why the top paid election was chosen in the document I do not know..... But for discussion purposes, I understand that the owner is a HCE regardless of compensation amount, but if you were do just do the mathematics, if there are a total of 2 employees and 20% of 2 is 0.4 and you round up, that is 1 employee. Correct? So the question is: is my HCE count 2 - the one HCE and the one employee from the test calculation?

Client has 2 employees. One owner, other not. Both are HCE. If the client elects TOP PAID GROUP ELECTION, who is in the top of the test? Number of employees equals 2. 20% of 2 is 0.4. Rounding up the count is 1. Is this 1 in addition to the owner, so my HCE count would still be 2 or is the count just 1 and the owner take that spot. Can I get a discussion on this?

Client paid too much match (based on match formula) to a few participants. Do you perform ACP testing before or after you make an adjustment for the over-deposit of the match?

We took over a 401(k) for a catholic high school associated with a local parish that has been filing a 5500 since 1998(?). They are going to need an audit for 2009. We don't believe that they ever filed a 401d election. Any way out of filing the 5500 for 2009?