Earl

Yes, if you defer 5% and have 10 YOS you get a 140% match. But "and then 100% on 5% or greater" is not exactly correct. If you defer more than 5% you get 5%. If you defer less than 5% you get 0%. Maybe that is what you are saying. The thing that confuses me is that usually employees who would get a match if they deferred are treated as benefitting for 410b. Here an employee could actually defer and not benefit, so s/he would not make it into the numerator. That seems clear. But I should treat employees who do not defer as "not benefitting"? Seems so but seems different than normal so it stopped me. Or maybe what you are saying is that since there is no last day or 1,000 hours requiement, you don't 410b test? You would brf test and that is somehow different? Thanks.

I took over a plan: 401k is immediate. If you have at least 2 years of service, the match is $ for $ on 5% deferral. (if you defer 4.999% you get $0). Then, if you have 10 years of service you get 7% match on a 5% deferral (still only matching starting at 5% deferral - and stopping at 5% deferral). How many rates of match are there? Is it 3 rates; 0%, 5% & 7%? I am really confused by this. Thanks

Kept searching here and found another thread: IRC 408(p)(10) provides transitional relief in this situation. The transition period begins on the date of the business transaction and runs through the last day of the second calendar year following the calendar year in which the transition occurred. In order to be eligible for the transitional relief there must be no significant changes in coverage under the SIMPLE plan and the exclusive plan rule must be satisfied except for the situation caused by the business transaction. So I think I am good. Thanks

My client with a 401k is purchased by company with a SIMPLE Plan. Can the 401k continue for the year (and next, does that 410b exception apply here) or do the employees have to start participating in the SIMPLE (when)? Thank you Earl

Is a new cash bal plan allowed to exclude service before the effective date for vesting? I find articles (tax facts) saying no but they seem to come to a conclusion based upon the regs, not a specific reg statement that I can find. Thank you

A client of mine had his CPA tell him he could use the level amortization method for his RMD calculation. I thought that was only for avoiding the extra 10% tax if you are under 59 1/2. (And it specifies no additions other than g/l, but my client will not be making more contributions.) I can't find any reference to it satisfying the RMD requirements. Am I missing something or is the CPA missing something? Thanks!

Its actually a husb & wife only plan and they want to pay off $85k. I can't find anything that says "payment in cash" and even if a policy says cash & payroll w/hold, that can be changed. If there are employees I can argue "bad policy" but in this case I don't like to say "no" when I don't know what I am talking about. Thanks for your imput. At least that means its not obvious.

Can a loan be paid back with non-cash assets? It is publicly traded stock so value is not the issue, just the concept. The loan policy does not specify "repaid in cash payments".

I have a case where a 2009 contribution range of $100,000 - $500,000 is generated but the Sole Proprietor only has earned income of $200,000. A contribution of $400,000 would hit his PVAB for a maximum distribution. The plan will be terminating by year end 2010. Is it possible to fund $400,000, deducting only $200,000 in 2009 and then deduct the rest in 2011 & 2012 when he has income to deduct it against. (By a quirk, the Sole Prop will have $0 earned income in 2010, but will have income in 2011 & 2012.) Any sort of direction/code reference where I could look it up would be great. I have been through 404 but do not see anything about it. Thanks

sorry

My document says (basically) you can pro-rate rates of each group based on months or days or there is a place to make an election to say one group or another for the full year.

Care should be taken in listening to Vanguard about compliance. Their recent letter to clients announcing discontinuing of fbo accounts said client had options such as rolling to an IRA - which my client did (without talking to me first). Now he as made in-service distributions (no provision in plan), distributed 401k money (everyone is under 59 1/2 and no provision even for age 59 1/2) and he wants to continue his 401k plan without interruption at Schwab. Thanks for your help there, Vanguard.

2002 client adopts a plan specifying Leased employees are ineligible. But all r&f employees are leased. And client has always ignored this plan provision and let all employees defer immediately. How to correct this? If you kick them out 410b fails. So you add them back and give a Qnec? I am thinking that a VCP filing requesting permission to remove the exclusion back to day one is only clean solution. Any ideas? Thank you

I have a Sole Proprietor that had no income in 2008 but has a required contribution to his DB Plan. He is now terminating his plan. Can the contribution that was not deducted be paid to him with no taxes or must he roll it over to avoid taxes. He is actually retiring so there will be no future earned income. Thanks

I have a client that has heard of someone getting a PLR OK'ing non-cash contributions to a DB Plan. Any ideas on the characteristics of the asset(s) that would make the IRS rule favorably? (or other thoughts on the subject?) Thanks

Seems to me that #1 - The plan paid Merrill. Merrill would be the Broker Dealer on the account and be who the check is made payable to. #2 - The Plan paid the TPA. Agreements the TPA has with others is the TPAs business. Alliances would be TPA disclosure to clients, not government reporting. Probably not 100% right but I focus on who the plan pays only.

Yes, the formula percentage goes down after the TWB is reached. My theory is that when they converted from a MP to PS Plan, the person writing the PS document, while trying to maintain the MP formula, didn't really know what they were doing and typed it up wrong. Re-inforced by a review of prior year's administration where the contribution is 8.75% of all + 5.7% of excess, what one would expect to see but not what the doc says. Gotta love takeovers.

I think I get it. Since (3.05%) < 5.7% the disparity present is less than the disparity permitted so it is still within the Safe Harbor constraints. Thanks

Taking over a plan with the following fixed contribution formula: 8.75% of pay up to the wage base + 5.7% of pay above the wage base My foggy recollection of integration was X% on all + 5.7% on excess and x had to be >,= to 5.7%, which it is here. So I am thinking that this is not stricly under the permitted disparity method and would require general testing. Does that seem correct? Thanks

straying off topic but A client received a penalty notice for $25 for late filing Form 5500. I called the VRU at EBSA and they report receiving the 5500 on 10/23. That would seem to indicate a 7 day grace period.

Yes I am, as an "administrative convenience" on the 5558 only. Otherwise I fear we are looking at a lot of sound and fury, signifying nothing. (It's just an idea. Got a better one? Collecting them from clients is a non-starter, in my opinion.)

Trying to be serious for a minute: I just got one from a client. It says: "We received your 5558, and we have extended the due date." "It is important (not "required") to attach a copy of this letter and a copy of your Form 5558, application for Extension of time to file an Employee Plan Return to your return when you file it. It will show the Department of Labor that we granted you an extension of time to file your return. If a copy of the extension is not attached to the return, it could (not "will") be processed as a late filed return." So, I think we can ignore it for now (of course attaching it for those who bother to forward it to me). And, I am considering putting my address on future 5558s, so if it turns out that this matters, I will get it. Thoughts?

Thank you, Mike

If you pass 401(a)(4) on an allocation basis (with non uniform rates) are you subject to the Gateway for those benefitting?

OK, real scenario: Partner has K-1 with $0 earnings from self employment in line 14. He deposited $15,500 in 2008. (all checks dated 2008) So I have a 415 refund that I will process on Monday. It seems the refund amount is taxable in 2009. But with no earned income it would not be deductible in 2008. So is this double taxed? (Seems unlikely) Is it not taxable in 2009? (Also seems unlikely) (I double checked with the CPA, line 1 = $150,000; Line 14 = $0. Which I don't understand but that is not really my job.) Any thoughts on this? Thanks