rcline46

The excise tax for funding deficiencies as referenced in the Form 5330 refer to section 412. If a funding deficiency shows up on a Schedule SB, it is no longer under 412. THe question is - do we still have to file a 5330 for the 10% excise tax on the deficiency?

Santo - I see nothing that limits the match. You have a wonderful opportunity to do some consulting here if the facts hold.

KJohnson, that is true, but one has to work to meet the exception. No commissions, fair value on date of contribution (which means no closely held stock), not in excess of required contribution, and a few other rules. It is similar to investing in Real Estate - can you say ERISA ATTORNEY? Will it be worth the additional cost to make sure it is done right? Is it a prudent investment at the time made?

Let me know who makes that and has a SIMPLE IRA, he needs a real plan!

Read the Keystone decision. That 10% number you have in your head is INVESTMENT in corporate stock, which is much different than CONTRIBUTION in corporate stock.

Audit is based on number of people in a PLAN. If each QSLOB has their own plan, then no plan has over 100 participants. If they are in one multiple employer plan, then the plan has over 100 participants. Therefore, your question is answered.

What is the first payment interval? 4/1/2007-3/31/2008? I don't think so. I think the first payment interval is 1/1/2007 to 12/31/2007 (delayed to 3/31/2008) with the second payment interval 1/1/2008 to 12/31/2008 (no delay allowed). Why? the minimum distribution is for 2007, the year of attaining 70 1/2. Returning to the orginal question, I think a full payment for 2010 must be made even if the plan terminates before the interval (either one) expires.

I thought the match is 100% to 3% of pay. The deferrals large enough to invoke a catch up have to be far in excess of 3% of pay, so how is catch up even invoked here?

As I re-read the original post, the RMDs were not processed correctly. An RMD was required for 2007, but could be delayed until 4/1/08, which was done. However, the RMD for 2008 had to be taken in 2008 and could NOT be delayed, but it was. Alternately, the 2008 RMD was missed and the 2009 and 2010 RMDs were taken of 3/31 of the respective year. The client needs to take the 2008 RMD before the plan is distributed. Otherwise you have two failures to take RMD timely (08,09) and still owe the 2010.

WIth a corp ending 5/31, you must ALWAYS use the comp earned in the corp year for the 25% calculation. This is a corporate item, not a plan item.

What does the accountant take for the Schedule SE??

Based on what you posted, CO. B's employees became eligible on the day they began working for Co. A.

This was the original post - the answer is no. Since only 1 employer, it is not a multi-employer plan, and the participants are not employed by the plan sponsor so you violate the exclusive benefit rule.

Different situation for a multiemployer plan and this is specifically permitted in the code. Does not work for a single employer. Now if you can get the employer to be 'sponsor' and have the union as Plan Administrator and take responsibility it might fly.

Has anyone tried to find the 'official' definition of contribution? When we look to annual additions it mentions contributions and forfeitures separately, but is there a definition of contribution? And if so might it not include forfeitures?

As described, no. The union does not employ the participants.

When you produce a non-sensical result, you are wrong. The result of the current interpretation is non-sensical. If you have forfeitures, they must be allocated (suspense account) at year end. If the plan has become a safe harbor plan, and there are forfeitures from previous contributions, consider this - for a $0.50 forfeiture allocation to a person in a plan which otherwise satifies safe harbor (deferrals and safe harbor only) triggers a Top Heavy contribution, this result is non-sensical, and therefore the conclusion is wrong. Sal was much, much more polite in discussing this with Rhonda, and promised to put the arguements in writing to her. Since she was apparently a TPA in a prior life, reaching such a conclusion disturbs me.

First, just say no. If the client doesn't listen, make sure ALL of the real estate work is done by an ERISA attorney. If the client doesn't listen again, resign. You do NOT want to deal with real estate in a plan. The accountant an attorney must deal with the issues.

Remember that the responses given by the individuals are NOT official guidance. Rhonda said they could NOT be used for Safe Harbor, but maybe for Qnec and Qmac. SHe was depending on the language in the law that says contributions must be non-forfeitable when contributed and obviously forfeitures were not 100% vested when contributed. THis belies a fundamental misunderstanding and contributions and allocations as pointed out by Sal Tripodi, a fundamental misunderstanding that forfeitures are used in lieu of employer contributions, and not understanding the guidance we received from the IRS of what happens to forfeitures in a money purchase plan when the plan is merged into a profit sharing plan. Also note that most documents contain language that forfeitures may be used for any employer contributions including Safe Harbor contributions. I for one will not pay any attention to the answer. It is just wrong.

If you want to get to the $49,000 limit, you may not get there with an enhanced match. You would need two Safe Harbor match formulas, therefore 'stacked'.

Install a 'stacked' Safe Harbor Match 401(k). Make sure all eligible employees receive notice AND sign a zero deferral form.

Try FAB 2010-01. This has more explanations.

What you said is true, but you indicated the DB plan would NOT satisfy the general test ON ITS OWN. It is necessary to combine it with the DC plan to pass testing. That throws the exceptions you quote out of the window.

With the owner at 60% of pay, you need a gateway of at least 7.5% of pay for NCEs. Even more fundamental - since you claim this is a floor/offset, then the DB benefit is reduced by the equivalent benefit of the contribution in the DC plan. Note that since it is a CBDB plan, the contribution rate in the CB must be converted to a benefit which is then offset for funding. When you combine the plans for testing you cannot use the CB 3% benefit since it will not be provided IN ADDITION TO the 6.5% benefit in the DC plan, you must use the offset benefit. I would think you not only have 401(a)(26) problems, you also have 401(a)(4) problems.

The individual does not complete the 5305 series, the EMPLOYER completes the forms. THe custodian has to answer to the SEC or FINRA for opening accounts with documents. They need to take this up with their legal counsel and/or compliance department. There must be a broker involved in this somewhere. How the courts would apply any responsibility is open to question.