TPApril

I'm adding to this thread along the theme of 'mistake-in-fact' and cotnribution deposits. in this case, calendar year MP plan sponsor makes monthly deposits. The following year (after July 31) it was determined that forfeitures occurred which reduced the actual required contribution, resulting in a nondeductible contribution. Think this can be considered mistake-in-fact? Added to that, prior tpa didn't catch the over deposit so now 5330 for 2010 is late. Is that a prohibited transaction since the penalty was not paid and is now due .5% per month late. I'm not a 5330 expert but am hoping to attach a letter asking for waiver of interest and penalties due to mistake-in-fact, but I'm also not sure if i need to add this penalty to the 2011 form, similar to the ongoing penalties for late 401k deposits that are added for each year late. I'm thinking however that I don't add it to the 2011 form.

Does a privately owned organization that enters into a management relationship at company inception with a religious organization that owns similar businesses be required to file 5500? The similar businesses do not file.

Somewhat related to the topic at hand in Tom's response, about deemed loans in 5500's, so adding to this thread... Small plan with 3 participants is terminating. Participant loan held in individual's account deemed in 2005. No access to prior 5500's before 2008 by prior tpas. On 5500 Loan reported in balance and compliance section continuously. 2010 prior tpa removed it from eoy assets in 5500SF, subtracted loan balance from 'Other Income' and still included the balance int he compliance section. Is amending necessary for a seemingly minor issue? If so, is it enough to amend 2010 to show deemed amount in correct line item, and then reflect $0 in compliance part?

Participant went on leave of absence in 2009 after working 1000+ hours. Person never went back to work and was formally terminated in June 2010. Break in service is defined as Plan Year with less than 500 hours. Is 2010 treated as a break in service even though person was not on books for full plan year?

When standard tpa admin fees are charged directly to participant accounts, I have seen them charged based on account balacne. A long timer participant gets charged much more on a dollar basis than a new participant. So is there such a thing as dividing the fee by number of participants and withdrawing a flat amount from each? I recognize that doing so, however, would charge a much higher %age to newer participants with much lower balances. All that being said, for a plan that insists on passing through such eligible expenses, is there a solution that seems more equitable, particularly in the case that tpa fees are charged to begin with based on participant size, rather than asset size.

Slightly different scenario - professional LLP firm has Partners, none of whom have over 5% ownership. One of these partners allocated 401(k) to payroll of 10/1/11 but does not actually deposit the check to the trust until 12/15/11. First off, for 5500 purposes, is that considered a late contribution, and if so, would lost earnings be allocated in that only an HCE would be receiving such lost earnings (ie discrimination?).

Company of 300 ee has 3 medical and 1 dental plans. Never knew they needed to file 5500's. In order to save dfvc penalties, would be nice to file as 1 wrap plan. Can such a document be prepared now to cover prior years in order to process these filings? We dont even know how far back to go.

I haven't done this for a long time. At 100% TWB, I calculated 7.01% for 2012 as follows: 401k - $17,000 3% sh - $7,500 Rate on compensation up to TWB+comp>TWB - 5.7% on comp $250,000+(250,000-110,100)=$389,900 = $22,224.30 Remainder to reach $50,000 is $50,000-17,000-7,500-22,224.3= $3,275.70 for a rate of 1.31% when divided by max comp Final integrated formula is 5.7+1.31=7.01% on total comp + 5.7% on excess comp > TWB This results in ee making max comp of $250,000 receiving allocation of 10.2% and ee's < TWB get 7.01% 1. Does this look correct? 2. Next, trying to reduce NHCE even further, simply based on reading some posts, I'm reducing the integration level to 81% TWB. Using the same methodology I come up with 6.73% on total comp, 5.4% on excess comp. Think I'm on the right track here? End result-also 10.2% to owner, other ee's < TWB 9.73%.

Actually, it is the November 2010 deposit that went over the annual contribution amount when it came through in December. Yes there was also a December deposit that went through in January. I'm thinking 2011 will be thrown off as well. Good suggestion on the forfeiture amendment. I'm gonna go ahead and use those amounts towards the required 2011 contribution and contact client cpa.

Different question, though somewhat related to this thread: Money Purchase Plan (calendar plan year) - sponsor makes monthly contributions. 2010 had sufficient forfeitures so that part of the 12/2010 deposit was included in the 2010 allocation, but part of it ($1,000 per prior TPA) was to be assigned to the 2011 contribution so as not to exceed the required contribution. Prior TPA provided client with the report last week (with caveat to consult their cpa), so it is likely the full contribution was deducted by the corporation for 2010. Is that allowed, or do their taxes need to be restated? Is there any issue with including it as part of the 2011 allocation? At this point it is also possible that too much was deposited for (and during) 2011 as well.

I didn't think so, but can a money purchase plan be effectively changed into a profit sharing plan? this plan i am looking at, apparently changed its name from the 2009 to the 2010 5500, with the plan number staying the same. there are only 2 participants, if that means anything.

Referring a potential client where to invest their funds is not my area of expertise so I'm hoping to get some thoughts. Small nonprofit with no HCE's would like to set up a new 401(k) plan (no current existing plan), no employer monies currently intended to be contributed, just 401(k). Setup cost is not just a concern, like for everyone, but a major concern. is there a recordkeeper out there who will also set them up on a plan document with an adoption agreement that i can point them to?

Different plan - professional firm with multiple partners who are HCE but not Key. One partner declares annual 401(k) deposit in full from one paycheck during the year, and then pays it to the plan over a month later. This is the only late deferral in the planyear . Is it discriminatory then to have her pay lost earnings on her own deposit? Does it need to be included as late in the 5500 since she is a Partner in the LLP?

Really? He already filled $880 of the $5,500 catchup bucket, which leaves only room for $4,620 in excess of $49,000. I would think limit to $30,000.

Plan allows multiple loans and loans are not my strong point. Participant terminated last year and 2 loans were defaulted (total $17,000). Plan Sponsor then moved assets and in the process, 1 other outstanding loan was deemed (total $18,000). He never took a distribution and was then rehired. He is now asking for a new loan, with a current outstanding balance of $37,000. I'm without a doubt confused here, and there are probably issues I'm unaware of, but assuming he can take another loan, with balance 1 year ago of $35,000, would available loan balance be $1,500 (50% of $37,000 - $17,000)?

Generally when calculating eligible income for Self Employed, 1/2 of the social security tax and 1/2 of the medicare tax are subtracted - which would normally be 6.2% (up to TWB) and 1.45%. 2011 had a 2.0% tax cut for EE's, so the Self Employed ended up paying 6.2+4.2=10.4%. Would we then take half of that, or 5.2% for calculating eligible earnings?

maybe with the end of the year here i'm not focusing, but i cant recall how to put into practice inclusion of a participant who reached the 1 year (& 21) service when we are not defaulting them to the dual entry date within 6 months. example for plan with 401(k) eligibility on 1st of month after hire: DOH-9/15/10 DOE-10/1/10 Was excluded from 2010 ADP test as otherwise excludable. For 2011 testing, will include, but which pay/401(k) amounts do we include: a) Full year since including in the test and participated for the full year b) 10/1/11 - 12/31/11 since that is the period that is not being treated as otherwise excludable

This question was posed to me but this is not my area of work: Participant submitted request for $1,000 for 2012 flexible spending. HR told her it wouldn't round out correctly at 24 payrolls (41.67 * 24 = $1,000.08). HR told her she needs to submit a round number and made her fill out $40.00 for total of $960.00. Is there an issue here? The same HR btw did not inform those ee's who did not participate in 2011 of their option to participate in 2012. Any issue here?

Slightly different scenario and question, though related to late deposit of safe harbor - 3% nonelective safe harbor is deposited for staff on a payroll basis. Owner (and only HCE) has not deposited for himself any amount for both 2010 and 2011. Assumptions: 2010 - should be deposited as soon as possible with calculation of lost earnings (through vfcp calculator?), though technically, owner has until 12/31/12 if not audited. 2011 - should be deposited by tax deadline (if extended) of 9/15/12. But considering that it is paid on payroll basis to staff, would it be different? (I read somewhere that for safe harbor match the deadline would be end of following quarter, so would 3/31/12 be best deadline?) For either year, I dont think it necessarily makes a difference at this point if they are deposited before or after 12/31/11. Any thoughts, much appreciated.

Tom & ESOPguy - thanks for your replies. Definitely prefer the more conservative approach. However, what if such approach actually produced better adp test results? Would you stick with that, or check the other approach first? (could potentially happen with this firm due to its smaller size and the make up of the new hires)

10 years later on this thread.....when i've done Otherwise Excludable testing for a plan with monthly entry dates, i've always included NHCE's if their entry date following their 1 year anniversary fell within the plan year. Now I'm looking at a calendar year plan with 3 months elapsed time for entry. For 2010, plan's prior tpa excluded any NHCE who was hired after 7/1/09, treating them as excludable until 1/1/11. I'm just new to looking at this approach, is this the current best practice?

Thanks for your reply. We will do what we can to advise him to make him whole as soon as possible. Now, more of an ethics questions re the role of the TPA. Dr. fails on a regularly basis to deposit 401k timely. He does not pay non-eligible expenses. I dont believe another tpa will take him, so I dont know if he is better off if we step down at this pt. Is it acceptable to advise him to correct his contribution issues (including the differences btwn SCP and VCP) and then terminate the plan? I also believe he will not want to pay for a determination letter upon termination if that route was advisable.

Similar situation, different employer type though...S-Corp with 1 HCE - the doctor. Due to his financial issues, he never put in his 3% safe harbor for 2010 for himself, but he did deposit for his staff on an ongoing basis. He has not put any to himself yet for 2011. Based on this thread of posts, he does not have a choice, is that correct? That being the case, I think he can still deposit the 2010 amount by 12/31/11. Also, I'm not sure if he ever gave out his safe harbor notice in 2009 for 2010. If not, would that change the necessity of depositing 3% to his account for 2010 or 2011? As a minimum, I'm thinking he needs to be advised to remove himself from future safe harbor allocations, effective 2012.

Why is it that so few plans that do have fidelity bonds report coverage amounts that are less than 10%, often it's not even close to 10% of the assets, yet the have the coverage.

Thanks - you didn't mention the forfeiture option at all - reason I am thinking about it is that because of the small population size, no matter what, the allocated amounts will be in the hundreds of dollars, so even if only 1% of comp, it kinda feels material to me. another thought on the forfeiture option - the owner's amount as a forfeituer will be half of what it would be if allocated as earnings, however, there is one non-owner-family inactive who was employed at the time who would miss out on his $70 if not allocated to all as earnings.