Bill Presson

I'm not aware of any requirement that insurance contracts be on the same year to be included in the same wrap plan. We've been filing wrap welfare plans for years with differing insurance year ends and never had an issue.

We use this: http://www.therpc.com/default.aspx

I agree with this. Another downside of waiting is we bill when the 5500 is out the door.

If you get paid to prepare the form, then you are a paid preparer.

Sorry, but in financial matters, I just don't think an old fashioned handshake is good enough any more. We won't take a client without a signed engagement letter.

All your comments got cut off. You'll need to repost the question.

BP- Issue is volume submitter template does not allow that option so we are hesitant to change the vs underlying language for this. You did mention that. Can you use someone else's document? That seems to be a pretty standard provision.

Why not just amend the plan to say forfeitures occur on payout? Then your plan would match your operation.

I always enjoy it when you strongly opine.

Generally an S-corp K-1 will be reporting only investment income, not earned income for retirement plan purposes. The W-2 would report the ONLY income that can be considered. Mike knows that. He was just wondering if the OP mistyped the question. Guess we'll have to wait and see.

Why did the TPA not ask about a terminated participant with deferrals every pay period? Especially if they are processing a distribution every pay period? Did I read that right?

You can use as much of the account as you want to purchase insurance. However, there are consequences to what you do. If you satisfy the incidental rules, then the participant just reports the PS 58 costs as taxable income. If you don't satisfy the incidental rules, then the participant reports the entire premium as taxable income.

Very helpful string of messages! One more question - one person indicated that the IRS could consider the rollover contribution used to purchase insurance to be a taxable distribution. If the plan were to apply the incidental benefit rule broadly and consider the rollover contribution to be part of the "aggregate contributions and forfeitures," and only used 25% of the rollover contribution for purposes of purchasing insurance, would this reduce the risk of an adverse IRS finding of a taxable distribution? For example, using $25,000 of a $100,000 rollover contribution as a premium to purchases insurance, which is then held in the plan as a plan asset. Thanks again! If you will note in my response from Jim Holland above, rollovers are not contributions.

Bill, coming from a banking background I always thought that whoever held the assets was a custodian. And to my way of thinking the mutual fund company clearly holds the assets. But apparently this is like so many other terms in this industry that has a specific meaning that may be different than the common usage of the word. I understand, but I would push American Funds a bit harder before giving up.

I posted this earlier this year in another thread. The highlighted words are only because that's what I searched on to find my post. I've been dealing with this for a long time. Back in 1993, I asked some very specific questions and got a General Information response from Jim Holland. Part of that letter dealt with Rollovers. Here it is: "You also asked whether the existence of rollover money from another qualified plan would have any effect on the transaction. Again, any question regarding the income tax effect of such a transaction is beyond the scope of a general information letter. However, we wish to draw your attention to certain considerations that affect the calculation of the level of incidental insurance coverage in such a situation. The requirement that a profit-sharing plan provide for the accumulation of funds for a "fixed number of years" is found in section 1.401-1(b)(1)(ii) of the regulations. In applying the provisions of this section of the regulations to rollover money, the instant plan is considered separate from the prior plan. (See, for example, private letter ruling 8134110, dated may 28, 1981.) Furthermore, under Rev. Rul. 57-213, the amount of premiums that may be used to provide an incidental level of insurance coverage is determined with regard to the "total contributions and forfeitures" allocated to the participant's account. Because rollover money is neither a "contribution" nor a "forefeiture", no portion of the rollover money is taken into consideration when determining the amount of premiums that may be used to provide an incidental level of insurance coverage." I know this isn't a ruling, but it is in writing and I've never seen anything more official to contradict it.

I'm assuming the assets are held in one of American Funds programs (direct or connect). If so, how is American Funds (or one of their subs) not a custodian that can certify the assets?

Make sure to warn everyone that this participant can't defer for the rest of this calendar year!!

What about some kind of brokerage window that would enable the participants to choose the funds they love?

But don't they now have a 80% board control test for controlled group purposes?

Monica, this really needs to be reviewed by an attorney. The IRS has started looking very closely at these arrangements. IRS Rollovers Memo

I wanted to do 10 or so clients this year to work out the kinks. However, the EFAST2 system is so completely different, the DOL has said nothing we would do would carry over to the new system. So, we wait.

Remember that the number of eligible participants on 3/1 is what determines whether an audit needs to be done or not. The 12/31/09 participant count is irrelevant.

12/31/08 since he doesn't meet the 1000 hours by 7/19/08.

I believe the notice is only required if you are filing under the VFCP program and are seeking relief from the excise tax. If you are self correcting and paying the excise tax, then the notice is not required.

Sorry, I completely overlooked that the firm paid the premium. Obviously, it should have been paid by the trust and they need to understand that going forward. It's not the first time that a business did this, although it has been a while since I've seen it. I would have to vote for allocating it as a ps contribution OR (maybe??) counting it toward the match amount?