thepensionmaven

Client informs me payroll company took out too many deductions from employees' pay so employer has been calculating co. match on incorrect salaries for about 6 months. Company contribution made at the same time employee contribution. If I am reading the IRS methods of correction correctly, there would be no corrective contribution of 50%, but obvious the company must recalculate the match on the correct incomes and make the contributions to the employees' accounts plus missed investment income from date match was actually made? As far as rate of earnings, is there some sort of "safe harbor" like 5%?? And, the payroll company is marketing 401K administration!!

I believe the IRS wording was they will discontinue the ERPA exam, not the ERPA designation. According to the IRS release, the ERPA designation is renewable.

Two W-2 employees terminated from employer X profit sharing plan. These two are also 50/50 owners of their own corp, which does not have a qualified plan. Life insurance agent (of course) wants them to establish a profit sharing plan, take the rollover money to purchase ten- pay life insurance policies and make the plan the owner and beneficiary. This just doesn't smell kosher. Any thoughts?

Anyone have a sample plan amendment or corporate resolution to change plan year to co-ordinate with fiscal? My document service does not have one. Would appreciate a copy. Thanks.

I've run into the same situation - client sat on this for 3 months and now wants to move. An added question, is there a minimum amount that would have to be contributed by 9/30? Would the individual accounts need be set up by 9/30 or would a trusteed checking account with $2,000 or so suffice?

Thanks.

Just checked with the client, the plan has some rollover contributions. Checking EOB on that. Thanks for all the help.

Even if there are employees that are contributing $0 but in the plan regardless. Suppose an employer has a safe harbor match wherein he is the only participant deferring outof 15 participants who are deferring $0 and is the only participant receiving a match. Unless I'm missing something, how is this exempt?

This seems to be a very basic question but I am now having "third-thoughts". Employer asks us to review a Top Heavy safe harbor match 01(k) that another TPA firm currently handles. No employer contributions beside the safe harbor match. OK, but there are a few employees that have met the age and service requirements and have opted not to defer. OK, no match for these participants. Since the plan is top heavy and these people are eligible and were employed on the determination date, must these individuals receive the top heavy minimum 3%? We say yes, the current TPA says no and this is the way they "handle" all their 401(k) plans and has the audacity to back- up the claim by telling me she has "many years as a TPA"; and has requested the citation from us. So, I'd like to know where to locate a cite.

Would your answers change if I mentioned the sole proprietor physician is now a full time employee of a medical practice?

What determines whether a self employed is still in business if the employees have terminated? Is filing a Schedule C with no income or expenses? That is, when does the plan have to be terminated or can the plan remain "frozen" and if so, for how long??

Of course but the accountant wants to know if the proprietorship can remain "open" for a few years. Technically she has not closed the business, although no money is coming.

We have a profit sharing plan for a physician who is now a W-2 employee for a medical group. The plan has 2 employees who can not be found. The "investment advisor" has "advised" the client that as a sole proprietor, whether she has any Schedule C or not, she can keep the plan open; but if she were a corp the plan had to be terminated.

This was my thinking, as well. The other perplexity is the fundholder does not offset the loan from the total account balance when giving a 1099R; their reasoning is that if the loan is already out of the plan, there is nothing to offset. As this is a pretty large fundholder. I'm shocked.

Participant terminated employment with a defaulted loan. It is my understanding that if he does not request a distribution the amount of the outstanding loan is a "deemed distribution" and he includes the amount as income and is subject to 20% withholding and any 1099R would include the full amount of the outstanding loan. At the time he requests a payout, the outstanding balance would be treated as an offset distribution and would be netted out of any actual distribution. I just got off the phone with one of the fund companies that mentioned that they would give the participant a 1099 for the withholding only. This just does not make sense.

Participant has outstanding loan which he has been repaying through payroll deduction religiously, through his date of termination via payroll deductions. Terminated 6/1, loan paid through 5/29 installment. He is not over age 59 ½. Is a terminated participant eligible for the "cure period" of 60 days after the calendar quarter of missed payment to repay the missed payments and bring the loan up to date through the end of the cure period before he has incurred a "deemed distribution"?? Of course, the plan doc does not address.

At least half a dozen client call me every other week asking why a Fidelity Bond is needed on an individual account plan and the participant is in charge of his/her own investments. Apparently the DOL is looking at Sponsors who do not check the appropriate box on Form 5500, and one client has received a letter advising the client that he has 15 days within which to obtain one. If the participants are responsible for investing their own accounts, technically, why is a Fidelity/Fiduciary Bond necessary. In the old days before individual accounts, it is entirely understandable. To this day, a handful of insurance companies are still saying that as long as the plan invests in insurance company contracts, i.e. annuities, a Fidelity Bond is not necessary. As a TPA trying to follow the letter of the law, we are told we do not know what we are talking about when it comes to this issue. Any thoughts.

How is this different from "dual eligibility" which is quite common under 401(k) plans as well as profit sharing plans? The so-called "dual eligibility"seems to be used quite a bit.

One of our clients wants to invest part of his pension in some property owned by his brother. This purely an investment, no party-in-interest transactions as no one in either family will reside there. Purely rental property. Plan allows for individual accounts, so this is a permissible plan investment. All income will be placed in a trusted checking account, from which expenses will be debited and the rent will be credited. Question is, how does he set this up? Obviously the property must be owned by the plan. What kind of paperwork is involved? A standard type of loan agreement, but modified for investments?

I assume that if the key employee matches the employee's contribution, even if he is not contributing, the results are the same, meaning no TH contribution

No other key employees. Highest allocation rate would be 0%.

Client maintains a safe harbor 401K, which as amended 1/1/2014 to a traditional, tested 401K. The employer has more than 60% of the value of the plan, so the plan is top heavy, but employer is not deferring and does not want to contribute for the employees, now or in the future. If memory serves me correctly, as long as there is no employer contribution, he is not obligated to make the 3% top-heavy contribution???

We are reviewing a deminimus benefit defined benefit plan for a sole proprietor, age 74. The first year of the plan was 2013. An individual from an insurance company prepared the calcs for this individual. The TNC was 103% of the net Schedule C. Net Schedule C $3,900 - TNC $40,000? Isn't the deduction limited to the net Schedule C?

As Effen says: yes, but you really need to be careful and have a very solid understand of the testing process. We use Datair and have not had any problems.

2 employees are W-2 wages. Each contribute $15,500 to their company's 401(k) plan. Accountant urges them to form a partnership with one other individual. No control issues, no affiliated service issues. Assuming they have the income, I do not believe they can contribute the full $53,000 each to the partnership plan as long as each has made the $17,500 contribution in the same year. Doesn't the $53,000 maximum contribution include the individual's 401(k) contribution regardless of the employer? Accountant says they can contribute the full $53,000 to partnership plan. I could be wrong, but I do not believe so.