CLE401kGuy

Thanks for the feedback, i really appreciate it!

Sponsor has a participant who has terminated and become an independent contractor. As an independent contractor he or she provides services for the business from which he / she terminated - provided that the definition of independent contractor is met - the participant is considered terminated from the business and therefore eligible to take his / her distribution out of the business' retirement plan in which he / she had a balance - correct?

It's not a hardship so the participant is not eligible to take any amount out of the elective source - unless he terminates employment - participant is age 56 - so close but no cigar!

The plan permits in-service distributions at age 55 from all sources (sources here are elective and match) - are there limitations on what the participant is permitted to take from the elective source? Under age 59 1/2 is the participant only permitted to take the sum of the elective contributions (i.e. not the earnings on the elective)? Thanks!

Thanks - I found this this morning as well... I appreciate the quick response have a good afternoon!, TT

Have a prospective client who currently has a SIMPLE IRA set up for his co. There are approx 3 - 4 IRA's set up in the SIMPLE. He's unhappy with his investment provider. Can these IRA's be transferred to another investment vehicle under the same SIMPLE IRA. The prospect is intending to kick off a 401(k) plan at 1/1/2013, but in the meantime wants our firm to manage these SIMPLE dollars. If anyone could point me to regs, source doc that tells me we can do this without restarting the 2 year period that $'s have to be invested, I'd greatly appreciate it. (Idea is to close the SIMPLE IRA at end of '12 and roll those $'s into the 401(k) plan)

Our office has been using a paperless document storage solution called Edrawer since 2005. The Edrawer people are 'upgrading' their system and the new system just doesn't seem to be a good fit for our office. So the question is, what paperless document storage solutions are other TPA's using that are 'best fit' for a TPA operation. I'm not looking for a system that does workflow. I really want a system that 'acts' just like a regular fileroom with 'drawers' and 'folders' - any suggestions or discussion would be helpful.

Company AB was owned 50% by A and 50% by B. A and B recently sold the company. As part of the sale, both will receive consulting income of $200k for 5 years (or less if A or B terminates the consulting agreement). A and B each set up an LLC to receive the consulting income. A would like to set up a DB plan and defer as much as possible. If the LLC is considered a successor to the Company AB then all the consulting can be deferred as there is a wage established. If not a successor, then there needs to be wages (or earned income). Is A's LLC considered a successor corp to Company AB?

Company AB was owned 50% by A and 50% by B. A and B recently sold the company. As part of the sale, both will receive consulting income of $200k for 5 years (or less if A or B terminates the consulting agreement). A and B each set up an LLC to receive the consulting income. A would like to set up a DB plan and defer as much as possible. If the LLC is considered a successor to the Company AB then all the consulting can be deferred as there is a wage established. If not a successor, then there needs to be wages (or earned income). Is A's LLC considered a successor corp to Company AB?

Plan has different eligibilities for making elective contributions (date of hire, no age requirement) and profit sharing age 21, 1 yr of service, monthly entry dates. the plan is a discretionary safe harbor and the client has elected to make the safe harbor contribution to satisfy the ADP test for the '11 plan year 4 people enter the plan during the '11 plan year - satisfying eligibility for 401k - but not for PS since they were all hired in '11 - The safe harbor contribution goes to ALL participants including the 4 who came in during the '11 PY and were hired in '11. The plan is also cross tested - if the highest HCE receives 12% and gateway requirements are triggered, must the 4 who enter the plan in '11 also get the 1% PS, if so, wouldn't the plan need to be amended to allow the 4 to receive the allocation of PS since they did not meet PS eligibility requirements? found my answer further in the doc - gateway is triggered and throws out the other requirements in order that it can be met

Client missed auto enrollment of several participants. The plan is cross tested, each participant is their own group and makes profit sharing contributions (2.5% to each participant). Provided that the non-discrimination testing is still satisfied, can the PS be 'shifted' to cover the QNEC and missed match (Formula is 25% up to 6%)? (All dollars in PS source would be shifted to avoid issues with cross test) Corrective allocation would be 1.5% QNEC + .75% match = 2.25%. Can a sponsor allocate a QNEC that is slightly greater than the amount required to make the correction? Would this be allowable? Any thoughts anyone?

Directed 401k plan is under audit and is missing a signed and dated copy of the Final 401k / 401m amendment. The plan was using a prototype and the prototype sponsor supplied a copy of the amendment but did not have any signed copies. The client could not find where the prototype sponsor sent them the amendment, it appears to have been never rec'd. The IRS auditor has indicated that if no signed correspondence / cover letter regarding the amendment or the signed and dated amendment itself can be found, the plan will go to audit CAP. The auditor indicated that plans of this size (5 participants, under $500k investments) see $3000 - $4000 fines for having a missing restatement. That said, does anyone out there have experience with the fine for a missing amendment for this size plan? Thanks!

Plan is terminated, but the business no longer exists. One participant remained to be paid and distribution forms received recently. How should the 20% federal income tax withholding be submitted using EFTPS? Should a business account be set up using the Trust ID for the plan?

Just back from ASPPA and geared up to get our 8955-SSA's filed for our clients. The question regarding having supplied the required individual statement was mentioned. Does anyone have any particular wording they are using? The instructions generically say to provide a statement setting forth the information contained in the SSA form. Isn't all this on the quarterly plan statement that most 401k participants receive regardless of active or terminated status? Any thoughts on the wording you're using out there would be appreciated, Thanks

We act as fiduciary on our plans so that will not be an issue, thanks for your response, much appreciated!

The client has hired a PT bookkeeper who will work only 650 or so hours each calendar year. To vest, 1000 hours is needed each calendar year. The 401k plan has a 6 yr graded vesting schedule (there is also a CB plan with a 3 year cliff). In order to help this participant vest are either of the two following options OK to use and which would you prefer.. 1) Fully vest the participant right out the gate - make her 100% vested outright (obvious downside, the participant leaves in under 6 or 3 years with contributions she would not have been vested in 2) For this participant only define a year of service as 500 hours for vesting purpose - while perhaps a challenge to keep track of, it would still require 6 or 3 years for full vesting on contributions to the plans - The participant is an NHCE and always will be an NHCE - My main question is can I choose to define a year of service for vesting for an NHCE differently than all other participants in the plan.

In an effort to assist clients and their participants with the participant loan process, our office would like to work with participants directly when they request loans. Plan Loan Programs in our documents indicate: "The Plan Administrator is authorized to administer the Participant loan program. All applications for loans shall be made by a Participant to the Plan Administrator on forms which the Plan Administrator will make available for such purpose." This is boiler plate language across all of our Corbel / volume submitter plans. We'd like to allow the participant to initiate the loan with us directly to save time for the Plan Administrator and his / her personnel to avoid / limit back and forth with participants taking new loans. Can our office assume the responsibility from the Plan Administrator? If yes, should our office request a sign off from the Plan Administrator indicating they authorize our office to work directly with participants on loans? At the tail end of our process, we provide the Plan Administrator with the amortization schedule to set up the loan payments in their payroll system. Any suggestions are welcome. P.S. We work with Nationwide, but have found it difficult to convert to their online Loan Module system due to limitations regarding how participants are charged and how loan numbers are assigned by their system.

Have a group of participants in a 401k that were brought into the plan 4/1 instead of 1/1. None of them contributed when enrolled at 4/1. What is my correction for the missed quarter. A qnec based on the quarters ADP for NHCEs? It's a calendar year plan. I believe that since I'm within the plan year and none elected to contribute there may not be a qnec. Any help appreciated.

to my 2 cents.... what does your firm do? a cursory review? do you charge? i'm just curious... also at what level do you implement - administrative staff review? administrators who work on the plan? if you're doing a review, i'd like to perhaps implement something similar...

A participant completed his primary bene election as 100% to his wife and 50% to his son - then his 2nd son as 50% under contingent - he most likely meant to name the 2 sons as 50 / 50 contingents.... Anyway... our firm did not audit the incorrectly completed bene form completed by the participant - we scan for our files and then forward the original to the client... The client rec'd the form and was very angry / upset that we did not audit the form to see that 150% was named as primary and that the form should be re-completed.... What do others do with bene forms? Do you audit them for accuracy / correct completion? Do you catch obvious errors and return for completion of new forms? Or do you touch them at all and instead forward directly to the client for them to review / store? Thanks!