thepensionmaven

There is no Schedule A needed on a one life (owner) plan. As you know, there are no specific instructions for this on the 5500EZ, but if this were a regular 5500, Schedule I tells you NOT to include the cash value of any life insurance contracts.

I didn't make my point very clearly. The assets and liabilities of the partnership plan were taken over by the like PLAN of the successor corporation not by the corporation. I don't see any fiduciary problems under that scenario. Thanks for the help. Steve

You raise an interesting point. My questions was whether we should do one 5500 or two. I have been getting conflicting advise. One says the sponsor is really the same, ie a partnership that incorporates is in essence still the sponsor, just the form of the company has changed, therefore only one 5500 is necessary. The partnership plan HAS NOT bee terminated; the assets and liabilities of the old plan have been assumed by the successor corp. I do not believe this would constitute a termination requiring us to file a 5500 for the period the plan was under the auspices of the partnership, would it? Some sources say no, only file one 5500 for the new entity. But, i prior years when IRS was involved they wanted to see a filing for the prior entity showing zero assets and the funds transferred to the successor entity. This still seems like a complete waste of time. Why is there the question about a change in sponsorship and why do they ask for the old EIN if they do not link them up?? Thanks

We have a partnership that incorporated mid year 1999. Under the old rules when IRS was handling the 5500s, we would have had to file a 5500C/R for BOTH entities, one closing out the filing for the partnership if the assets were taken over by the successor plan, and one for the new entity showing assets accepted by new corp. This has always seemed like a tremendous exercise in wasting time, effort and paper, especially in lieu of question 3, "has the sponsorship changed". In lieu of the fact that DOL not IRS is handling the forms now, don't you think we can just file one form under the name of the new entity showing the name and EIN of the old entity and call it an initial return and cut out all the extra (and now it really is EXTRA) paperwork and BS?

From what I hear, no way. The word is, the October 15th deadline can not be extended as "that would be a change in the law." Which law??

Are you speaking of 401(a)(4) testing software? If so, I have an Excel spreadsheet for $100. Steve Taft pensiondoc@aol.com

I am looking for a copy of IRS Notice 87-13 regardiing the exception of the 10% premature withdrawl penalty from a qualified plan to a participant who has separated from service upon attainment of age 55. Have a situation where a participant terminated employment about 10 years ago( she's also a trustee) and now she is 57 and wants to take money out of a profit sharing plan that allows for distributions, but she doesn't want the 10%. The way I read 72(t)(2)(a)(v), the plan has to have an early retirement provision, which this plan does not. Even if the plan did, I believe she would have had to have terminated (separated from service)AFTER attaining age 55 AND elected an instalment payout in order to not have the pre-59 1/2 penalty apply. He seems to be hung up on the "retired" language. A terminee is not a retired participant unless he has met the requirements for normal retirement. The accountant is telling me this couldn't possibly be correct; he postulates that since she is NOW over 55 that she can take a distribution w/o the penalty. I don't see how this has any bearing on the intent of the law.

We have a money purchase plan funded with an insurance company annuity. Each year the fund withdraws for contingency and expense charges. The charges are shown as expenses to the trust on the Schedule A. The client wants to reimburse the plan for these expenses. This is a small 3 life case, the contribution is around $25,000 per year. If the contincency fees are $5,000, can the client contribute and deduct $30,000? Steve

You will also have to be VERY careful with the 5500C/R filing. There should be two filings for the year in question, one for the old entity to terminate it off the IRS' rolls and one for the successor organization taking over the old organizations' plan. Box 3 gets filled out for the new plan with the old employer's information. Box 10, I think it is, gets filled out for the old organization; and, oh yes, you have to say that the old plan has been terminated, although it technically hasn't been. It is the ONLY way to get the IRS computer to halt the EIN. If you do not, you will be in IRS hell, and both sponsors will be amassed with IRS letters from here to kingdom come.

I will have to agree with the above. Don't forget, if the prospect never sponsored another plan that covers some or all of the same participants, that prospect can use a Standardized form plan and it need not be filed for approval. The client can rely on the issuing sponsor's approval letter (usually an investment house or insurance company. 98% of our clients have standardized form plans as they do not want to pay for a determination letter that, alas, once was free. If you go Standardized, read the plan definitions of investments and trustee/custodian very carefully. Some, though not all, Standardized plans are proprietary and require use of that sponsor's products, and may require that that institution be the custodian of the funds or a trustee. Nobody like to give away a "freebie", but if you are careful they are out there.

You're right about the "pension department" at NW Mutual. Regarding any terminating plans prior to 2000, I've been using generic amendments for GUST through my document provider. Some insurance comapnies issue amendments and actually send them to the adopting employers; most do not. Email if you want to take a look. A simple 8 eight page termination amendment. pensiondoc@aol.com

Or, if you want to stick to the NY metro area, we are a small employee benefits and actuarial service company, servicing companies from one to 100 employees. Please feel free to visit our website at www.tagdata.com/SPT_Pensions for more information. Thank you. Stephen Taft

I feel as though I'm missing something here. You seem to be discussing two different points, one being the timeliness of an employee deferral, the other about when a contribution in general must be made to the plan for a deduction to the entity. How about the DOL regs that state the deferral contribution has to be remitted to the plan in a "reasonable" time-frame, and I believe they consider "reasonable" to be between 15 and 30 days after the date the contribution is withheld from pay. Isn't it the same thing for a common law employee?? To be deductible, the contribution has to be paid by the due date of the tax return.

I strongly agree with the above. The 15% limit applies to all contributions to a profit sharing plan-deferral, match, and profit sharing. The safe harbor election is treated, I believe, just as a profit sharing contribution is, except that it must be made in order to get out of the ADP testing.

I am calculating the maximum deduction for a client that has a standalone 401(k)( no match) with an employer profit sharing component. And they have a 125 POP Plan. Three HCEs, who are more than 2% owners are contributing to the premium only plan. Since they are 2% owners, their contributions are NOT deductible. When calculating the max 15%, do I take gross W-2 less all 401(k) contributions less only the non-owners contributions to the 125 plan, or must I also subtract the owners non-deductible 125 plan contributions then apply the 15%, then subtract the K contributions less the 125 contributions, and the diference is the amount they can contribute to the profit sharing component?????

I am designing a small 401(k)profit sharing plan, calendar year 1999, of which for '99 there will be no 401(k) contributions. The employer wants to include all employees for the first yeat then have 21, 12 months for future years. Problem is, may employees were hired after 1/1/99, some as late as 12/1/99. I've thought as far as 1/1/99 effective date, double entry dates of 6/30 and 12/31 and the amending as of 1/1/200 for 1/1 and 7/1, but I don't think that will solve the problem of bringing in the people hired in December '99. We're not talking of a huge contribution, the annualized % is around 7%, but I don't even want to think of a short plan year of 12/1/99 to 12/31/99. The also want to go 401(k) for 2000. Any ideas??

Thanks for the input. I spoke to Nancy Martin at the PBGC who advised of two scenarios: One would be to pull the termination. The other would be to pay out the rank and file and have the principal waive benefits. I prepared a waiver when I did the Notice of Plan Benefits and it is signed. I guess if they do settle, the principal will get his portion through the court system, although he obviously can not roll it over.

Have a 10/1/99 effective date on a safe harbor 401(k). Min age 21, 12 months service. Employer tells me most of the employees are part time, work less than 16 hours per week, and were hired 5/98. Problem is, I usually have effective dates of 1/1 on my plans, not 10/1. Would the first 1000 hours for eligibilty run from 5/98 to 12/98 and if the hours were not met, they would not come into the plan on 10/1/99? Or is the year measured from 5/98 to 5/99 and if they didnot have 1000 hours in that period, they would not come into the plan 10/1/99??

I am in the process of winding down a DB plan. There was one investment in the plan that apparently the client, and others bought with plan funds for a third pary to invest. The funds were apparently absconded with. My client and others have sued to regain the funds. The accountant has shown a $300,000 investment loss on the books and this is reflected in the final numbers, on the 5500s as well as what was filed with PBGC for the termination. The 60 days have elapsed and all mothe funds are liquid at this point ready to be distributed. The group is comprised of 8 participants, 7 of which are family. The company has no active payroll but still exists. The employer wants to know what happens if we rollover all available assets now, and close out the plan ASPA WHAT happens if the clients win the lawsuit and recoup the funds? How can you distribute funds from a terminated DB when the plan has technically been closed out, everyone has received a 1099R and final 5500s have been filed. OR should we leave the plan open until that time?? OR, should the asset be renamed as a Corporate asset and earmarked for the participants IF and WHEN anything transpires? Lorraine, what would you do?? Thanks, Steve

TPA stands for Third Party Administrator. The Employer is designated as the Plan Administrator in the plan document, usually, and retains the services of a "Third Paty Administrator" to erform the duties of plan administration: calculation of eligibility, who shares in the contribution, who shares in the plan's earnings, etc. TPAs usually have a retainer agreement which dekineates what we will do for a client and how much we will charge. Services as well as fees vary widely.

Send me an email message, and I will be glad to email you back both safe harbor notices. My email is sptpensions@aol.com.

The only exception to a 5500 filing is in the case of of plan covering an owner, and owner and spouse, or plan covering only owners and spouses if less than 100K in assets. Any other scenario requires 5500s. As a practical matter, on a defined benefit plan, I always do the 5500EZ because the Schedule B is required. Instructions to the Schedule B do not say anything about a plan for an owner, owner and spouse, etc. as being exempt from filing a Schedule B.

I'm a TPA who works exclusively with Qualified Plans. Occasionally, we do POP plans for our clients and the 5500s. One of my clients asked me about premium only plans, flexible spending accounts and medical spending accounts, as of they were one thing. I don't know anything about MSAs or FSAs and must get educated rather quickly or someone else will get the business. Where can I go for help. I tried to view those FSA IRS audit guidelines, but quite obviously, they want you to buy their service to get the full view. Any assistance is helpful. Steve

To the best of my knowledge, TPAs are not licensed per say, most, such as myself, have credentials or intials after their names. I wouldn't call the credentials "licenses", however. We are not licensed in the sense that an attorney is licensed. We have credentials and carry liability insurance, and hopefully, like attorneys, have years of experience behind us.

I am in the frequent position of accompanying many life insurance agents on their pension sales calls. I try to limit this because I'm afaid I won't be adequately compensated for my time. I can see it two ways: 1. If we sell the case, I get the administration. Many times, I leave a bill for the administration or the plan document and they pay immediately. 2. Lawyers and other professionals charge for their time. We are professionals (although lawyers like to think of theselves as THE ONLY professionals on the planet. If I am charging $500 on a case, and it takes me 2 hours each way travel time plus an hour meeting with the client, I have not made any money. And, if the agent blows the sale, we have all wasted our time. Steve What is the usual practice, if there is one?