ETA Consulting LLC

In your instance here, the pure death benefit would be $80,000. It's merely the face value less the cash surrender value (the accrued economic benefit has no bearing). The economic benefit (e.g. $3,000) was merely the accumulation of the taxes paid each year for the pure insurance. It's basically telling the participant, "Hey, you are receiving life insurance protection at a cost of X for the year. There is no income tax deduction on life insurance premiums; so this amount is taxable to you. If you were to die, then your beneficiary would receive the death benefit proceeds income tax free". So, $80,000 would be the net amount as risk payout and received income tax free. Now, your point on the accumulated economic benefit amount ($3,000) has become the subject of endless debate in the pension community. I can discuss what I believe and why I believe it based on citations, but we'll be talking for the next 3 years. I had to research every single rule in this area when I headed a Qualified Plan team within a Life Insurance Company :-) Good Luck!

I think you'd enter the 'Pure Death' benefit in Box 1 [Total Distribution] and enter '0' in Box 2a [Taxable Amount]; and then enter '4' in Box 7 [Distribution Code]. This would reflect a distribution that is not taxable and is due to death of the participant. Keep in mind that, pursuant to Section 72(m)(3) that the pure death amount [e.g. the amount of the face value in excess of the cash surrender value] is only tax free to the beneficiary if the taxes on the economic benefit [i.e. PS 58, Table 2001, or One Year Term --- Whatever you decide to call it] was paid each year. Good Luck!

You're basically creating a separate plan as of the date of the "transfer in" from the Total Source Plan. This appears to be the classic definition of a spin off; so you should use 2016. Good Luck!

Read The Fantastic Document? Sure :-)

In the beginning, God created the heavens and the earth... Oh, my apologies; that is for bible study. Plans must be operated pursuant to their 'written documents'. That's Section 401(a)(1) of the Internal Revenue Code; which is like Chapter 1, Verse 1 of everything we know. I cannot even fathom a situation where verbal communication would supersede the written language in the plan. I think that was Kevin C's point. Documents are, generally, written to address the time frame for the calculation while leaving the deposit timing open. For instance, a match this is calculated using compensation and deferrals during a payroll period is just that; a calculation that is performed for a certain time frame. It says nothing about the deposit timing; or that you have until the tax filing deadline for a deduction. Now, if it is a Safe Harbor Match, then there are some deposit timing issues for the match that is done more frequently than the plan year. (like end of the following quarter). I say this to reemphasize what many of us have been saying for the longest.... RTFD. I'm not saying it with any emotion, but it's just that the answers are there over 99% of the time. Now, there are instances where language in the plan may be tricky (e.g. timing of calculation vs. timing of deposits), but we can work through that. We must first agree, however, that only one thing trumps the plan document; and that's the Treasury Regulations; not the spoken words of an owner. Good Luck!

You're referring to the SIMPLE IRA rule that is a hard fast 30 days. This, apparently, trumps the delay for calculating the deferral amount until the CPA determines the earned income of the owner. This rule does not apply to 401(k). Good Luck!

You're, partly, trying to fit a square peg into a round hole; it can be done. You are, basically, using the section saying the plan wasn't timely updated for recent law changes. However, in the write-up on how the failure occurred, you're explaining that there was never a document. This would beg the question of how did you satisfy the notification requirements to the employees each year. Was there a model form for the notification and summary description? We know what should've been done, but do we really have a full differentiation between that and what was actually done in operation? That may be necessary before completing the Schedule D. Good Luck!

Typically, the payroll of a Partner in a partnership will not be managed by the payroll company. All the payroll reports I obtain from non-corporate entities do not report for the partners; since no partner is receiving a W-2. To answer your question about deposit timing for the partner, they do have until they actually determine what their earned income is for the year to separate the deferral. Technically, the election of how much to defer must be in place by the end of their fiscal year. So, if I am a partner, I would make my election by December 31st, but will not actually make my deposit until my CPA determines my earned income for the year (which may be in April). For partnerships who know their earned income is going to be high enough to actually fund a deferral, there is nothing to preclude them from going ahead and making that deferral during the year (even though they will, technically, earn all their compensation on the last day of their fiscal year). Good Luck!

It does not because there is no distribution. There is a plan to plan transfer. So, on the final Form 5500 of the transferred plan will have a zero ending balance with the transferred out amount completed. Good Luck!

Correct me if I'm wrong, but... I think mphs77 was saying that no matter what you call it; it's a violation. There is a clear exclusive purpose violation (whether or not it would meet the technical definition of a prohibited transaction and, therefore, corrected in the same manner as you would correct a prohibited transaction is a good question). But, it is a qualification defect at the very least that should be corrected. Do you correct under the prohibited transaction methods with the 15% penalty and Form 5330 submission, or merely make the plan whole by having the employer reimburse the fees? I'm not saying one way is more preferable over the other, but just clarifying the point that "I think" mphs77 was making. Good Luck!

The difference is the cause. If you work 10 weeks, then you're going to get 10 weeks of pay; in the same manner you were paid for the last 10 weeks you worked. So, this is "regular pay" for work that was performed. Severance Pay is when you say "BECAUSE, you are being severed (and for no other reason), we're giving you this pay. If you work and receive pay every other Friday, then you are assured a paycheck if you remain employed and working until Friday, ceteris paribus. So, merely terminating employment before Friday, but continuing to receive that paycheck is regular pay. Heck, that paycheck could be for two weeks in the hole or for work performed during a pay period that ended last week. The point is, your receiving the same check you would've received had you remained working (even though it may have been a little more due to more hours being worked). This is different from saying; we're giving you this parting pay because there is no more work for you here. This is merely what I'm reading from the 415 Regulations. When I read these, I try to ascertain the meaning without incorporating my own caveats in order to ensure I'm doing things correctly. Heck, sometimes I miss, but I have an entire army of experts that won't hesitate to provide me the needed insight But, if I cannot see a difference between Severance Pay and Post-Severance Regular Pay; then I'm going to continue to read the Regulations until I see a distinction that makes sense, because (the one thing I do know is that) the Treasury wouldn't have taken the effort to write the additional sentences explaining a difference if there wasn't one Keep in mind that we operate in an industry where regular words carry meanings that seems to undermine the English Language. "What in the heck do you mean the estate is not a 'designated beneficiary'? It's the beneficiary the participant designated!" Good Luck!

"Severance Pay" is not defined as "pay received after severance"; that would be post-severance pay. Severance pay is pay that is received "because" you are leaving and would not otherwise be paid if you are staying employed. In this case, it's not Severance Pay. Depending on the date of termination on the employment records; it may not be post-severance pay. (This was the root of David Rigby's reponse; verify the Date of Termination). However, let's assume the employer approached the individual and said, "We're downsizing and do not need your services any longer. We'll have you work through the end of the week and pay you for that time; an amount of $1,000. Additionally, because you are being severed (laid off, job abolished, etc....), we're giving you 10 weeks of pay ($10,000). In this instance, you'll receive $11,000; $10,000 of which would be Severance Pay (because this is an amount that you wouldn't have received had you remained with the company). Now, the $1,000 would be Post-Severance Compensation merely because you received your check after you terminated employment. [[Not to change the subject, but it's like saying the pre-tax amounts that you contribute to the plan out of your paycheck is not an employee contribution; but an elective deferral. However, should an HCE contribute too much and receive a refund, it will be an excess employee contribution; not an excess deferral. An excess deferral is a 402(g) violation.]] I guess the point I'm making is that when you see a term in a document with a capitalized letter (i.e. Severance Pay), the document should have a definition of it. In this case, the Regulations in Section 415 makes this distinction. Good Luck!

You'll NEVER hear me object to it

My line of thinking is that it is not Severance Compensation, because this is compensation that would've been received had the employee remained in service. As we know, Severance Compensation (e.g. basically Compensation paid because you're being severed that would not otherwise be payable should you remain employed) is not benefits eligible. So, you're looking at the equivalent of some paid time off such is vacation pay. A plan may be drafted to exclude post severance Compensation (which is merely compensation paid after you terminate) from being eligible Compensation; but even then you have an argument that the participant is employed throughout his notice period, but merely not working at the request of the employer. I would be interested in knowing what termination date is being recorded on the employment records with the employer. I don't know much about labor law, but it would appear more consistent if the employment termination date is the end of the two week notification period. Otherwise, you have effectively fired the employee for resigning. Again, I don't know labor law, but could imagine a situation where someone provides a notice that they're leaving at year end (while the plan has a last day of employment provision). It would make for an interesting case should that employee be deprived of the right to earn those benefits merely because they provided a notice that they're leaving. Good Luck!

Yes. Good Luck!

This is open to interpretation. I would continue to accept loan payments until the participant is actually paid out their plan balance due to the plan termination. The language in the loan program seems to address the issue that the plan will no longer be in existence to collect loan repayments. So, if you have 3 years left on your loan but must pay out all balances within 12 months of plan termination; then the plan will not remain open for purposes of collecting the loan payments. Hence, the loan must be due and payable. I wouldn't lose any sleep over continuing the loan until the balance is paid out. Good Luck!

First and foremost, it's not an IRS issue. It's a DOL issue where those amounts are treated (by the DOL) as plan assets as soon as they are withheld from the participants' pay. AND, like any plan asset, the DOL is pretty adamant that they are separated from the employer's general assets (i.e. checking account) as soon as administratively feasible. With that in mind, two reasonable alternatives would be to have the recordkeeping platform to create a single account (e.g. forfeiture or whatever) for the exclusive purpose of receiving the contribution from the employer and holding it until it can get allocated pursuant to each participants' respective investment elections. The platform "MAY" have a lockbox account. Depending on the amount of time, the employer may write a check for the payroll amount and mail it into the platform's lock box. By the time it gets cashed and allocated, the accounts may be set up. Another approach may be for the employer to set up a checking account in the name of the plan for purposes of receiving the deposit. This may be least advisable if we're talking about a delay of a week or less. The thinking is merely to get those amounts separated from the employers assets as soon as administratively feasible. Whatever you do, ensure each participant's account receives the amount that was withheld from their pay. Good Luck!

In this line of work, it's always a good idea to know where the lines are drawn. If you are currently a small plan filer AND you do not have MORE THAN 120 participants covered on day one, then you may still file on a small plan (and, therefore, have no audit). Good Luck!

No. The Davis Bacon portion has it's own rules with respect to eligibility and vesting; and these will, typically, be hard-written in the Basic Plan Document. This has nothing to do with the Profit Sharing vesting. Good Luck!

Sometimes, you can run out of space for conditionals (e.g. "If-then") in the single command. You may want to create a separate space of each item "GT PASSES". Then, you can use a single "OR" command to say if either of these are true, then produce "GT PASSES". Does that make sense. It's merely breaking the command apart to analyze different items instead of loading the "IF-THEN" conditionals into a single command. Good Luck!

This is from the instructions for the Form 1099R (I'm not sure about the specifics of your case): For a direct rollover of an eligible rollover distribution to a Roth IRA (other than from a designated Roth account), report the total amount rolled over in box 1, the taxable amount in box 2a, and any basis recovery amount in box 5. (See the instructions for Box 5, later.) Use Code G in box 7. If the direct rollover is made on behalf of a nonspouse designated beneficiary, also enter Code 4 in box 7. Good Luck!

It would depend on how confident you are that the IRS will accept your calculations. Or, should they not, would their suggestions create the need to fund additional amounts to each affected participant. Good Luck!

Hey! I have an Owners' (k) document :-) LOL The adoption agreement is only 6 pages (a plus), but you are constantly reminding the owner that as soon as you hire another employee AND they become eligible for the plan, then you're required to move to a full document. It IS another thing to monitor in order to prevent an automatic failure upon another employee becoming eligible. It's always good to have it amended to a full fledged document prior to the new employee becoming eligible. BTW, I cannot speak for anyone else, but I enjoy how often we go beyond merely answering the question being asked and offer insight into every related issue as well :-) That has to be worth something. Good Luck!

Just another piece of info not exactly pertaining to the question. Should the daughter meet the 1000 hour requirement, then the Form 5500 being filed will NOT be a 5500EZ. In this case, the plan will become subject to Title I of ERISA. Conversely, should it be a spouse that works 1000 hours and enters the plan (and not a child of the owner), then the plan will continue to be treated as a one person plan. It's just helpful to reiterate the requirements for filing the forms in order to alleviate any confusion. Good Luck!

Back in the Balance Forward (Traditional Recordkeeping days), plans contained provisions stating that no in-service distribution was allowed when a loan was outstanding. This was done in order to maintain proper security in the event the participant does not pay (as the loans were funded from pooled accounts and merely earmarked to the participant). Nowadays, it's as straight forward as ESOP Guy states; but you ALWAYS want to verify it with your document. Good Luck!