rcline46

He can do the following: 1. Buy policy with personal assets - taking other IRA assets would be a taxable event for that IRA, personal assets would not be taxable. 2. In the plan borrow the cash value down to PS58 accumulated assets and distribute - no taxable event. Then would have a loan which he could pay off from personal assets. 3. DIstribute policy (gross up distribution for trust to pay taxes) - issue 1099. That's about it. Don't forget the accumulated PS58. However if not incorporated technically there is no PS58 because the premiums were not deductible by the plan for a sole prop! At least that is how I remember the rules.

I am not an accountant, but most of this 'stuff' is under 404. This is not the fact pattern given in the usual examples which permit you to deposit up to 30 days after tax deadline to contribute for prior year and deduct this year. ASSUMING the amount over 15% was actually contributed after plan year end, and taking a leap of faith from the above, I think you can split it even if deposited in one day. And yes it does count against the next year 15%. And no 5330 is due because AS OF THE END OF THE YEAR there was not any non-deductible money in the plan.

If no one exceeded the 25%/30k limit the PLAN is ok. You can state that based on the information you received, it would appear the contributions exceed 15% of the pay given to you. Deductions are the client/CPA problem, not a TPA problem. If you ARE the CPA, file the 5330. FIx the 1120. The IRS takes the position that only they can declare money non-decutible and therefore refundable from the plan. Deduct it next year. If the funds actually went in after plan year end, you have more options, like no 5330 due, only amend the return. Allocations would have to be fixed. Are we having fun yet?

France, your fingers are about as good as mine, you typed 1955 again! I would say this is primarily an American board. Sorry since very few here would know how to approach the British boards. It is strange that you only got a verbal cure notice, one in writing would probably solve a lot of problems. It almost sounds like some of our disability schemes (US plans, GB schemes). The disability runs until some retirement age, then normal retirement benefits kick in. Possibly apply for normal retirement (or early retirement) benefits. I am not trying to insult you by mentioning the use of (dis)reuptable papers. Sometimes that is the only way to go.

For PBGC keys can only waive if 50% or more owners. For IRS paid to extent funded. Have fun with the final 5500 questions, will probably trigger an audit.

Now age 60, retired 46 years ago in 1955 at age 14??? Assuming there is a typing error here, and knowing how bumbling beaurocrats are in the US, I doubt we can provide much help. Newspapers and public ombudsmen love situations like this. Papers like the Mirror could really make a story out of this. Can't you see the headlines? GOVERNMENT DENIES MIRACLE CURE GOVERNMENT LOSES MAN TWICE and so forth. They even pay for these stories.

Mike, what is a technology company? My construction companies are pretty 'high tech' today, my auto body clients are really 'high tech' - did you know that metal is glued together for repairs? I guess my country clubs can't really be considered 'high tech'. Our asset management clients are really 'high tech' with their research tools. The doctors and lawyers definitely use 'high tech' in their work. Our software companies are only using brain power so I guess they are not 'high tech'. With the advent of deregulation, we have both telephone and power companies but I haven't figured them out yet. The interesting thing is that there is no correlation between industry and match that we can see across a broad spectrum of businesses.

Nope. Some left coast guy at ASPA said he had it approved. Reputable guy too.

Rumor has it that if you put in the doc that TH is only for those who have satisfied the 21 / 1 YOS rules, the IRS will approve it. I have not done so yet. Make sure you disclose in application for LOD. Otherwise, if in plan, MUST get TH contribution, and don't forget it is for full year pay, not pay while a participant!!!!!

Yes, because that is what the SH notice / rule says. Yes, it is a discretionary match and may be modified at any time (but not if it is a document match - then must amend!) No, yes, maybe (GG) Since the SH notice was timely given, and the match also given, I don't think it can be recharacterized, especially if the match is NOT an EOY, 1000 hrs match. If being recharacterized due to satisfaction of Top Heavy, yes - but this could lead to other problems. Maybe the participants will be too upset to even consider it.

This is same as problem for all partnership plans. BUsiness expenses not charged to partnership but taken on the 1040 DO reduce the partnership income usable for benefits! However, many disregard this information but do send a letter saying that these expenses should be reported to correctly calculate contributions and the partner is responsible for providing them.

mea culpa - can use QNECs for Top Heavy. Deposit would be EARLIER of Qnec or Top Heavy. However we have never found anything relating to deposit of TH contributions! SOme could argue 412 deadline, which we use on clients, but there seems to be no support for this. Therefore would use EOY of following year as deadline. Note deduction would also be in following year which means 404 limits for the following year apply. Might be a problem.

A QNEC is treated as an employee deferral for all purposes including restrictions on withdrawals. Employee deferrals cannot be used to satisfy Top Heavy. Therefore, a QNEC cannot be used to satisfy Top Heavy (nor a QMAC). To do so destroys its position as a QNEC. The new Safe Harbor rules are something entirely different but your question does not seem to relate to safe harbor plans.

They are still a plan participant and if the document allows hardships, then you must give it if meets the rules for hardships. Its loans that are less likely to be available.

Whether Soc Sec Av Max Tax Wage (SSAMTW before TRA 86) or SS COv Com (Since TRA 86), the value depends on the YEAR the participant attains 65 (before) or SSRA (after). Unless everyone in the plan was born in the same year, it is different for everyone. If the plan formula was NOT updated to the TRA 86 Safe Harbor rules, then the table MAY have been fixed - such as 1983 Table I or 1984 Table II or something. Of course the plan then needs to be tested for non-discrimination. If updated for TRA 86, there are two options - floating table and jumping table (Covered Compensation). If floating table then it changes each year to the table in effect at the beginning of the the year. If jumping table then it changes every 5 years. You DO NOT HAVE ANY OTHER CHOICES. I would STRONGLY urge you to get to an Enrolled Actuary or someone with strong DB experience to do the calculations. The chance of making a mistake here is high and costly.

Got bad news - the sellor just ain't a partner anymore, just an employee on commission from revenues generated. You now have a sole prop no matter what the 'partners' say. Check with their CPA. So the person now called a 'partner' is no more than an employee, and they cannot have a K-1! Ok - if it is now a limited partnership maybe they can but I bet it is not set up legally that way!

My memory tells me it was a court case known as 'Keystone'. ERISA itself prohits promissory notes.

Also, since this is a defined benefit plan make sure the Enrolled Actuary responsible for the Schedule B is aware of what is happening because cost and many other values are going to change, depending on year end of the plan.

Check the 2000 rev notice on this (2000-3??) The notice is correct as written the way I read it.

The SPD clearly indicates inclusion of 125 and 401(k) in compensation used to calculate deferrals and match. Even if not in compliance with the document, participants are relying on the SPD for their benefits. A court will rule in favor of participants if it comes to this. Davida's spouse should question this immediately with her HR/Payroll person, also the Plan Administrator.

you have not given critical information - this participant - what is his/her relationship to the sponsor of the 401(a) plan? 402(g) will limit elective deferrals to 10500 no matter what because that is an individual limit, not a plan limit.

Being conservative. If the match is hardwired, then it is accrued when deferrals are made unless match is eoy and or 1000 hour rule. Therefore because it is expected that as I defer in the future, I will receive a match. Removing the match reduces my future accruals. Reduction of future accruals triggers 204(h). I don't think the question has been settled by the IRS if Top Heavy contributions or hard wired matches rise to level of 412 contributions (minimum funding) but failure to make them is a failure to follow the document.

You are correct. Need to look at loss carry forward or backward for sole prop - need a CPA for that one. Or could cause a 'cost basis' in the plan! This is even trickier bacause contrib is deductible, just the sole prop cannot take the deduction.

Before 12/31 of the tax year (12/31/2000 for K-1 for 2000) choose a % of pay limited by the $ amount. For example choose 10% of pay limited to $6000. Its just too bad they do not know final K-1, but they should have a good idea. If K-1 comes in at $40,000 then contribution is $4,000. By law the final K-1 income is as of 12/31 even if not known until August of the next year. That is why SDA must be in place by 12/31. None of the partnerships I service have a problem with this.

The partners election is really very simple. "I will defer the larger of 15% of pay or $10,500." No later corrections needed. By 12/31 adjust the % or $ level as necessary.