Bill Presson

Peter, I haven't seen it and, frankly, don't expect to. This just has the feel of the 419 plans where the sales people always swore there was tons of legal backing and if you would only sign a 20 inch stack of agreements, they would be happy to provide it to you.

I've seen lots of discussions on this issue and it appears that Zane Benefits and TASC are the only two groups advocating this reimbursement program. @zbenefits with all the discussions over the last year, is any other group or accounting firm or law firm agreeing with your position? I'm all for fighting the IRS when they're wrong (like the safe harbor plan amendment prohibition debacle for example), but I'm cautious about recommending something to a client when the professional community is almost unanimously on the other side of the fence.

No. Show the old information in Question 4 of the 5500.

More plans should be worded like this.

We don't use a Trust EIN if the plan is a daily valued plan and the assets are held by a custodian (eg TDA Trust, MG Trust, etc). If the plan uses brokerage accounts, we always apply for a trust EIN. I would think it's pretty rare for a plan to have multiple trusts (though we have a couple) and typically a brokerage account isn't going to use the custodial EIN.

Our plan excludes interns this way: "interns hired for a period not expected to exceed 180 days" If they become full time employees or if they work 1000 hours in a 12 month period, they enter the plan. As a large CPA firm, we have a lot of intern turnover/transition.

Every time we have a plan go from balance forward to daily, we change from accrual to cash. We document the reconciliation to show the change, but it just stays in our files. We've had several plans audited by the IRS or DOL over the years. They often look at multiple returns so they've looked at years where we've changed. We've never once been questioned or told to get approval or anything like that. Frankly, it's been a non-issue.

The guy who believes that 3 percent of pay is going to be enough to live on in retirement? Yep, aka too many participants.

Assuming it is allowed, this kind of offset generally works well for one year until the employees start talking and one guy brags about how he got the same contribution and didn't have to put any money in.

FWIW, we save the K-1's just like we would save a monthly brokerage account.

If there is no controlled group, then each person can receive $53,000 to multiple plans. The deferral limit of $17,500 ($18k this year) is an individual limit and that can't be duplicated in multiple plans. So, if I worked for Ford, GM and Chrysler and made enough money in all three, I could get three different contributions of $53k in each plan.

Mike, how many times in the last 30+ years have you gotten a response like that?

I don't see how.

Yeah. I've got an attorney that won't even allow their client to amend from balance forward to daily valuation because it's safe harbor. Sigh.

I believe there is an exception under Notice 2013-54, but I think it's only for the owner? Not sure. One-employee plans The requirement for unlimited covered benefits does not apply to one-employee medical reimbursement plans. Businesses that have only one employee may continue to offer this benefit. In a very small business in which a family member is the owner’s spouse, the medical reimbursement plan may cover the spouse and dependents of the employee, and thus include the business owner. In this manner, medical expenses, in addition to medical insurance, can be provided on a tax-deductible basis. But Section 105 plans must meet nondiscrimination rules, so these one-employee plans are only practical where there are no other regular employees in the family business.

Thanks everyone. And thanks to Peter Gulia for the call.

We were just informed by a client that they have terminated everyone's employment and will be shutting their doors next week. The 401(k) is a safe harbor non-elective plan. We were told they wouldn't be able to make the 2014 safe harbor contribution. Try as I might, I cannot find anything addressing what is supposed to happen. The final regs issued last year anticipate the employer would be smart enough to know a bit in advance and make some changes to reduce the contribution to an amount they can still make. We obviously have other issues (like how are we going to get paid for termination services), but what do we do? Currently, the problem belongs to the client and I want it to remain their problem. Is there a possibility the IRS/DOL would come after the owners due to compensation they took out before the company shut down? Thanks.

So someone works for the company, takes the qualified plan money out after terminating employment, dies and the beneficiary wants to roll the IRA into the plan? They aren't a participant, so I don't see any way you can accept the money.

it's mostly likely that the brokerage firm just doesn't know what they're doing.

I've never seen this done, but I can't imagine where you could get a cite to support it.

Kind of, but I'm just thinking out loud. In operation, I don't see the employer contribution to the plan being compensation. It's obviously not subject to federal or state taxes and, in this case not subject to FICA or medicare. So, my vote is not, it's not compensation, while the $200 bonus is AND the $50 additional spend on the premium is if the election in compensation definition include Section 125 comp.

I would think for a C or S corp that not getting a paycheck would at least be a good indication although we all know of owners that work with out taking paychecks from time to time. For a sole proprieto/LLC, etc, I would think it would be a bit more difficult because of the earned income. This would definitely be a facts and circumstances situation that would need to be documented.

Is this done through a formal cafeteria plan or any other document?

If it's a small plan, I would just smile and continue to use the 7 day safe harbor time frame. The auditor can pound sand.

I would do the calculation, which will probably be small, and calculate the penalty, which will also be small, and deposit both amounts to the plan as a self correction. Also make sure that the corporation DOESN'T deduct the interest or penalty. Doesn't meet the letter of the law, but, again, that's what I would do. Not enough info to know, but if the owner's income is $120k or less, this method allows them to mostly max out the 415 limit.