rcline46

No true up, that violates the document. Have match on annual basis, and there is no problem if it is calculated and contributed per payroll (no restrictions on who gets match!). THen you can do a true up. Or don't let anyone 'prefund' deferrals, they must be prorated over all pay periods for the year.

Yes. There are other threads on this because it can get complicated. Fundamentally, you are looking for the 'earned income' from the partnership that goes on the Schedule SE (or the net of this after 1/2 SET which comes from the schedule SE).

What does your loan policy say about repayment? If it must be from their paycheck, and the loan becomes due upon termination, then is it reasonable to issue a loan which is likely to be defaulted? DOes the plan permit inservice W/D at 65? If so, would a distribution be better with increased deferrals to make up the W/D? There is no regulation prohibiting loans that start or extend after 65. It is a matter of fiduciary judgment whether to issue a loan which is likely to be defaulted.

There have been previous threads on this. YOu are FAILING the ADP test, therefore you cannot do any shifting. The requirement is that you pass ADP both before and after the shift.

You got it. Of course if over 100 you could always voluntarily go into audit.

The Safe Harbor hardship rules require employee contributions to be suspended for 6 months. That includes voluntary contributions and elective deferrals. Elective deferrals can be either pre or post tax, so that means Roth is also stopped.

Still no audit. RUle is you can do the same as last year until you go over 120.

Our quarterly certs say 'If not challenged in 30 days after receipt, tough nuggies' or something like that. If your certs don't, they should. Then the participant only has a claim up to 30 days (max claim period would be say Jan 1 to Mar 31, cert Mar 15, claim ends April 15th). Does not solve the problem, but limits exposure.

The allocation formula in the document does not consider vesting. Failure to follow the document is a disqualification issue. Client must follow the document. If not, report him to the IRS/DOL. (Wish we could do this!)

Also check the rule that they must be married for a year before the new spouse becomes automatic!

Got it! Thanks guys. I see that a resident is also considered, and the could be a resident alien, but not a non-resident alien even though they may live here 2 or 3 years.

My fading memory tells me there was a change in the law which required that at least one trustee of a plan must be a 'U.S. Person'. I remember having to add individual trustees to some of our plans where the trustee was a foreign national and not a U.S. citizen. Trouble is, my adeptness at running search engines approaches the level of -0-. Can anyone provide the cite? Code or Reg? Thank you.

A termination of the plan forces 100% vesting! So a freeze keeps the vesting intact and may be a better solution. Vesting is a red herring in this situation.

If this is a balance forward plan, the money was deposited into the trust account for the plan because there cannot be such a thing as a holding account. Allocate the money according to the document, the client does not have a choice. If this is a participant directed plan, there has been an operational failure because the money was not allocated according to participant direction, and/or participants received contributions to which they were not entitled, and/or I am sure other failures. Again, there is no such thing as a holding account. The only way I would think of permitting a withdrawal is an indemnification letter from an attorney experienced in ERISA law, where the attorney puts themself on the line. An expensive lessor for the client and you for maintaining an account which may have been used to circumvent the law.

And my point is that the IRS expanded what the law says, that is, they wrote a legislative regulation and not an interpretive legislation. But do you have the money to fight them?

The following is a 'Soap Box' message - read at your own peril. Although we follow the IRS guidance, it is my personal belief that this, like top paid group and a few other items are TESTING issues and should not be in the document. Therefore they should not be subject to amendment restrictions. Nor should you be required to keep current year testing for 5 years. If either I or my client had deep enough pockets I would challenge the IRS on at least the interpretive vs legislation regulation issue.

Back to mjb - in the example given, the cost is so much higher because of the fees for the required audit. The audit alone is likely to run $7,000 to $10,000 payable to the auditor. I have seen audits run to over $30,000. Since you can no longer exclude union employees under the 403(b) unless you offer them their own plan, you can get over 100 (120) participants real easy. Remember it is NOT how many are contributing, but how many are eligible to contribute that is the participant count.

THe plan had to be submitted with the testing which combined the DC plan. This was the schedule Q attachement with a specific request during the determination process. If it was, fight it, if it was not then submit the test, and of course a higher 8717 fee.

Tom, there is no er contributions so the 'fix' is even easier. He must run the ADP test on a safe harbor definition of compensation (ie on total pay, not pay less bonus). If any corrections are due, use EPCRS cuz it is now too late for normal fixing for 2007.

It is prohibited. The indicia of ownership must be subject to the US courts. The brokers compliance department needs to be made aware that of this purchase in an account listed to a qualified plan. Of course the the account is misregistered........ The findings would be under IRC 501 in the rules for the trust.

It would appear the indicia of ownership is outside the US. If so this is a prohibited transaction at least, and quite likely even worse. Hie thee to an attorney pronto.

Research the DOL cases - fines, jail, and cannot serve as a fiduciary come to mind.

The 5305-SEP is clear, and yet you said they were lawyers????? They should be able to read the law and regulations as well, if not better than non-lawyers!

Andy, I can see 'forcing' an annuity payment to a child, parent, brother etc. I cannot see forcing an annuity payment to an estate. That means the estate could never be closed, how do you determine the 'age' of the estate, and if said annuity is distributed to multiple benes of the estate - or if there are NO benes of the estate, can you see the state getting an annuity? It looks like another PPA pothole to me. Or maybe a sinkhole. Think maybe installments over 5 years would satisfy the rule?

Participant is not at early or normal retirement age, and dies. Plan has a death benefit equal to 100% of PVAB. Lump sum is permitted as a form of distribution. Plan has AFTAP of 73%. PVAB is in excess of $5000 (really about $33,000). 1. Spouse is beneficiary - I believe spousal options are annuity or 1/2 annuity and 1/2 lump sum. 2. Non-spousal beneficiary - (children, parents, estate or other) - I think lump sum must be paid. I am interested in other opinions as I didn't catch this kind of detail in what I see in the regs. Thanks all.