ETA Consulting LLC

If EVERYONE deferred at least the amount to receive the match (i.e. there is no HCE who failed to defer), then it is a non-issue; you're only dealing with an issue where each HCE is receiving a same percentage of salary. That would leave no audit trail suggesting violation of the contingent deferral rule. Fact patterns are important. Good Luck!

No problem. All you are doing is giving them additional Compensation and reporting it as such. With that, they are merely given an election to defer. So, you answered your own question when you stated that they are well under the $17,500 limit, because that would appear to be your only concern (not exceeding that limit). Keep in mind that when it is paid as Compensation, it will be subject to FICA; unlike employer contributions to the plan. Good Luck!

Some things cannot be fixed under conventional methods. If you have a clear line to getting it the way it would've been if the error had not occurred, you would document that process in a VCP submission to the IRS and get them to approve it. Not sure of the variables (e.g. did anyone take a distribution, is it retrievable). Good Luck!

Sure, there is no reason they wouldn't be able to do this. Keep in mind that a loan id deemed distributed only in the absent of a distributable event. If the participant is eligible for a distribution, then it may merely take the outstanding loan balance as a taxable distribution.

Not true. A SEP is treated as a Traditional IRA for distribution purposes. Good Luck!

Keep in mind that a "Restatement" of the plan to a new document is not necessarily an "Amendment" of the plan's provisions. Typically, all you are doing is documenting the plan's current language (including the provisions on the Good Faith Amendments) into a new document that now contains those previously Good-faith provisions within the Basic Plan Document (and received an opinion letter). Of course, I'm speaking of the pre-approved plans. Just a thought for those wondering if you can restate a safe harbor plan in mid-year; as the question is bound to arise :-) Good Luck!

I'll amend the plans for CA and HA to exclude HCEs. You'd have to find another way, potentially a non-qualified arrangement, to benefit them. That would be a quick fix. Good Luck!

Please provide a cite. I'm aware that when determining the number to use, you may exclude certain groups of employees, for instance, employees who've been employed for less than 6 months. I've never read any Reg saying you may round down. Please provide the Reg.

Typically, you may use any definition of Compensation that satisfies 414(s) for testing provided the document does not preclude using it. When you use that definition, however, you must use it for all testing purposes. Good Luck!

Off the top of my head, I'm thinking a Final Form 5500 with the plan to plan transfer line at the end would be in order. Good Luck!

I was wondering if someone was going to speak to the 'rounding down' comment

I agree with Lou. I don't see where you have any option not to enforce the daughter's rights (as death beneficiary) under the plan. Good Luck!

Not sure, but I'm lost on the mention of how disqualification would relate to bankruptcy. We know if an IRA is disqualified, it loses its favorable tax treatment and is no longer considered an IRA. I believe there is case law where a petitioner got access to the respondent's IRA by showing the court that the IRA engaged in prohibited transactions that made it 'no longer an IRA'. I believe a qualified plan is different. I never considered ERISA protection (DOL purview) as having any relation to income tax treatment (IRS purview). Good Luck!

The administrator failed to follow the written terms of the plan. This is under either scenario, a loan or a distribution. I would revisit the plan's procedures to determine how a participant accessed funds without administrator involvement (i.e. distribution form or loan form) before I attempt to determine how the amount is to be treated for tax purposes. Once you determine this, then the process should become clearer. Hope this helps. Good Luck!

It should be tested the same way as if the profit sharing had a two year eligibility. Let's assume (for argument sake) the safe harbor is a match (with 21 & 1) and the plan included a Profit Sharing with a two year eligibility. As long as you account for 415 and Top Heavy, you should be fine. Keep in mind that the SEP states that if the employee performs ANY service (i.e. at least an hour) during the year, then he gets credited for that year when counting the 3 out of 5. With that said, there may be a mathematical possibility where the owner may choose to use the SEP for the (service during any three of the preceding 5 years) in order to get a free ride on that portion. It's like you stated, "under the right circumstances". Edited: I'm not implying that the SEP is subject to testing, but merely making a reference to the use of the extended eligibility. Good Luck!

Sure. As long as the 401(k) feature passes 410(b) with the exclusion of employees in the other plan, it would be fine. Good Luck!

Technically, they could. I wouldn't violate 410(a)(4) since they are basically entering the day before the 1st day of the next plan year (which would be a single entry date with no minimum age and service). But it is an odd design. It would be something if they used compensation for the period of participation only

Agreed. You must, generally, meet the 'eligibility' requirements for the plan before the 'accrual' requirements for receiving a benefit applies. You're confusing eligibility with accrual. Good Luck!

SSSP, I agree with Bird and ShERPA on the qualified plan aspects. You're trying to implement an estate planning strategy through a qualified plan. When you do this, you should be sure to account for the following: 1) The ILIT is a taxable trust. It is the investment in insurance (and I'm NOT saying that insurance is an investment, so let's not argue this) that provides for the tax deferral on the gains. 2) You must make arrangements to fund the ILIT while the policy is sitting in the plan. This will ensure you remain under to estate gifting limits (e.g. the annual and the lifetime limit). Just contributing a policy to an ILIT will give you a 3 year lookback; making death proceeds within 3 years considered an asset of the estate. 3) When placing a policy in an ILIT, you'd typically want a second-to-die (or survivorship) policy. The premiums are already lower since the policy will pay on the death of the 2nd insured, so this may beg the question of why you'd need a qualified plan. Good Luck!

The ILIT, in this case, would actually purchase the life policy from the plan. It would not be a taxable distribution, but merely having the ILIT write a check to the plan for the fair market value of the policy. Good Luck!

It would depend on how the plan is written. The Regulations state that you may not use more than the 401(a)(17) limit (255K) for testing purposes. So, you can continue to defer after reaching that compensation limit, but you may not include more than that amount when testing the plan. Good Luck!

Of course a Form 1099R is required. And yes, the total distribution would be in box one and the taxable amount of "zero" would be in box 2 since it is all basis. The Form 5498 produced by the Roth IRA would show that the deposit was actually added to a Roth. At the same time, you would use box 5 to show that the total amount in box 1 was "Employee" Contributions. So, box 1 - Total distribution. Box 2: Taxable amount of zero. Box 5: Same amount in Box 1. Box 7: G That's how I would do it. Good Luck!

No, you must restate to a GUST AA, then an EGTRRA AA. Good Luck!

I can relate. Will Rogers once said, "Man (Woman) gets smarter in two ways: 1) Reading; and 2) Associating with smarter people. I've, personally, done much of both. In doing so, I have witnessed everything you two just pointed out. I've seen the young take a back seat and go for the quick-fix instead of gaining a deeper understanding of concepts and principles in order to apply them in the future. I've seen Employers refuse to offer training to their employees while being the first to point the finger as if their employees are the root of their problems. Despite all of this, there are those who have a passion for the work today that is stronger than I've ever witnessed. The details in their answers and the ability to reference the Code and Regulations to provide a cite on any topic is amazing. I wish we had more of this in the industry and less of those who are merely looking for the next button to push. I used to attempt to learn as much as I could from the individuals I work with. Now, I learn from the community of professional right here who take time to participate in discussions on various issues. Good Luck!

There is no RMD due for 2013. The surviving spouse's first RMD would be due by December 31, 2014. Keep in mind that the participant dies BEFORE his required beginning date. Good Luck!