thepensionmaven

Ex-client sponsors a 401(k) that is now being TPA'd by one of the payroll companies, and the broker wants our input on the issue of starting a new plan: " A Qualified Retirement Plan may not be established until 12 months after all the assets have been distributed from the current plan." As far as we know, the 12 months refers to the timing the IRS gives to liquidate the plan assets in order to qualify as a valid termination; but nothing about establishing a new plan during the time thst another plan exists. Souns to me to be a lame reason for the TPA scare the client into keeping the plan, or possibly this is a part of the Serving Agreement that TPA is reminding client that he signed upon takeover. Any validity, or is TPA attempting to keep the case??

I'm preparing for a small group seminar on 410(b). I know there are some homemade stand-alone spreadsheets available tfor ratio percentage test of 410(b) but does anyone know of any stand-alone spreadsheet for the average benefits test? It's been several years and the creator has since passed.

Thank you, Bird.

Thank you Masteff, I was coming to that conclusion. However, I may have been unclear in that she previously worked for two of the dentists ( she never the third, she had no payroll from the third). She stopped working for two dentists, does not have any payroll from Employer # 1 since 12/31/2012 and only has payroll from Employer #2 as of 1/1/2013. I believe she can not rollover to an IRA because she has not separated from service.; but what about rolling over ( or transferring) her account) to the plan of Employer #2) and by so doing, make her 100% vested in the account from Employer #1? All plans allow for rollovers and trustee to trustee transfers to/ from other Employers' plans

We handle three separate plans of three dentists who share a dental office, as well as a few employees. For purposes of eligibility and contribution, we are using RR 73-447 and RR 67-101 which basically says that although the employee works PT for each employer, she must participate and receive a contribution in each employer's plan if she is employed by that employer whether FT or PT We have one employee who works for two dentists. She "terminated" employment with one of the dentists and now works FT and exclusively for one of the other dentists. She wishes to rollover her vested account balance to the other plan. She already has an account in the other dentist's plan. The plans are all safe harbor 401Ks with a discretionary PS contribution. She is not yet 100% vested in the profit sharing portion of either employer's plan. Question #1 - is she entitled to a distribution, i.e. did she "terminate from service" Question #2 - would she now become 100% vested in the profit sharing account balance in the first employer's plan?

Lou, Thanks. Could you give me a citation?

I had another client several years ago who did have a QDRO. The financial institution insisted on a separate account for the spouse as a participant in his pension plan. Once the funds were in the account, she took the distribution as a terminated employee who was over 59 ½ anyway, and rolled over to her own plan.

Husband and wife have two separate businesses, each has a pension plan, we are the TPA for both. I had suggested a QDRO years ago, neither party went with the idea. Probably neither wanted to pay or the attorneys talked them out of it. Five years later the divorce is final and the wife is to get $x as part of the divorce decree and wants to roll it into her plan. Absent a DRO, I believe the full amount is taxable to herald she can not roll it into her plan???

Tom, Not quite sure what you mean with this " no. but if you toss in a 1 year wait for safe harbor then you lose you "get out of top heavy free" card." I would think the 3% safe harbor would have to be given to all the NHCEs who are or would be eligible to defer, if the eligibility were lowered for the 401K portion.

We currently administer a combination 401(K)/safe harbor non-elective/profit sharing plan, the eligibility is the same for each plan component; age 21 with 12 months of service. Client is thinking of amending the plan to allow for more rapid entry into the elective deferral portion only. If my memory serves me correctly, we have to test each component separately as to participation and BRfs; as well, wouldn't anyone who comes in to the 401K) portion have to get the 3% nonelective SH contribution?

Pardon this senior moment, but I'm setting up a SHNE 401(k), usually this would be done for a January 1st ed and the SH Notices would go out by December 1st of the previous year. Prospective client wishes to go ahead with a safe harbor 401(k) 30 days after he supplies the employees with a SHNE Notice, which he wants to give out this week, which would mean that contributions would start May 1st. Plan year = calendar year = limitation year, so what is the plan effective date? May 1 and a short plan year 5/1/14-12/31/14; or January 1 with comp measured on participation? Sorry for the brain fart.

You do not mentioned whether this is a sole-participant plan or not. Was there a normal cost for the prior year? My reading of the SB is that minimum funding would apply apply if the termination date was anything but the last day of the plan year.

We administer a DB that we set up in the 1980s with a valid 242(b) election. The sole participant is now 78 and wants to terminate the plan. Clearly she has to take an RMD prior to rolling over to an IRA. Can we use the account balance method and then rollover? (I doubt it.) How is the "make-up" distribution calculated? I would assume by calculating each distribution, then accumulating that distribution at the plan's interest rate from the date it would have been taken through the current valuation year; adding all these up and subtracting from the current value of all the plan investments.

Sounds like you are an attorney. No one is saying the order is not qualified. The plan document names the Plan Administrator as the Plan Sponsor. On face value , the Order is not correct.

The Plan Administrator (capital letters) has been identified in the Plan as the Plan Sponsor. Therefore, the TPA (or plan administrator as you call it - with small letters) is not the Plan Administrator, and I do agree with GMK that the DRO be returned. I do not believe this is a question of semantics. I'm a TPA, I pass myself off as a TPA; if I pass myself off as an attorney, I get sued. Seems like it is more a discussion of what is right and what is wrong. It appears to be wrong to refer to a plan administrator (small letters) as a Plan Administrator (capital letters) if that is not de facto the case.

One of our clients is going through a divorce, and I had recommended a QDRO be drafted by a local firm. The QDRO was drafted and sent to us for review. The QDRO had my firm as the Plan Administrator. I called the preparer and asked them to correctly enumerate the Plan Administrator as the Employer. I was sent a new draft and will still down as the Plan Administrator and had them redo. This was the last I heard of the issue, until last Friday when we were served with the QDRO papers as filed in the court. Needless to say, my firm had been incorrectly listed as the Plan Administrator. Upon receipt, I called the opposing attorney as well as the QDRO preparer. It appears as though the investment broker is related to the wife, and he is not knowledgeable on pension matters and he is the one who told the parties that we are the Plan Administrator. Has anyone else run into a similar circumstance and how was this handled. Having been a pension professional for over 30 years, I am finding it more difficult to deal with incompetent people.

We are a non CSP TPA firm. Are we subject to the 408(b ) and 404(a)(5) DOL regs? We have been told "no".

If the plan sponsor decided to file Form 5500-SF instead of 5500-EZ - which did not require that Schedule SB be filed with 5500-EZ, doesn't a Schedule SB now have to be filed if they go ahead and file 5500-SF???

Several years ago, we met an attorney who used a document called "conversion minutes" to "convert" a defined benefit into a profit sharing plan. The name of the plan did not need any change as the defined benefit was called "pension plan", the plan continued as Plan #001 and the 5500s were subsequently filed as Plan #001, but as a profit sharing plan. Over the years, we have seen several of these plans, all the documentation prepared by the same attorney. He said this could be done, but ONLY in the case of a plan whose sole-participant is the owner of the company, or a sole proprietor. After all, there are no common law employees, and technically, if there were any discrimination in benefits, since the owner is the only participant, this is of no consequence. Thoughts??

A client has several frozen SEP accounts and wishes to consolidate them. He has found an investment vehicle with a fixed rate of return, but the investment is only available to SEPs, SIMPLES and 403(b). Can a SEP account be established just as a rollover with no additional contribution?

We just inherited a plan with an outstanding loan by the officer of the company. The participant made one payment in 2011 and has not made a payment since; the prior TPA has not issued a 1099R. We asked around at a few pension meetings and someone mentioned the possibility that the transaction could be handled as follows: participant taxable in 2011 on the missed payments due in 2011 participant taxable in 2012 on the missed payments due in 2012 participant taxable in 2013 on the missed payments due in 2013. Therefore, there would be 1099Rs in 2011-2013 only for the missed payments and these would be a code "1". The participant has every intention of starting to repay the loan with the next quarterly installment. This is a most interesting take on the situation and would appreciate any comments.

Where did you find the penalty for a 1099R, the only One I could find is a flat $100 for 1099-MISC.

I have a doctor client who was fortunate enough to have a plan in force at the time of TEFRA and has a valid 242(b) election and he is not going to retire anytime soon. The plan is a profit sharing plan and he needed to take an inservice distribution in order to purchase a primary residence. I do not believe this has any affect on the 242(b) election??

I posted this elsewhere, but don't think it would be seen. We just took over a profit sharing plan in which the owner took a loan in November, 2010, has never made any payments, but is in a financial situation to pay the entire loan back plus interest. He has not filed 2010 or 2011 5500s, but we can address that under DFVC. Since I have never dealt with this prior to this point, he's obviously defaulted on the loan in 2011 and should be issued a 1099R for 2011. But, does the fact that he has defaulted negate the fact that he wants to, and is in a position to, repay the loan now with the interest owed? Any suggestions are appreciated.

Related question. We just took over a profit sharing plan in which the owner took a loan in November, 2010, has never made any payments, but is in a financial situation to pay the entire loan back plus interest. He has not filed 2010 or 2011 5500s, but we can address that under DFVC. Since I have never dealt with this prior to this point, he's obviously defaulted on the loan in 2011 and should be issued a 1099R for 2011. But, does the fact that he has defaulted negate the fact that he wants to, and is in a position to, repay the loan now with the interest owed? Any suggestions are appreciated.