R. Butler

The DOL won't charge. I'd do what the client wants & charge accordingly.

Has the terminated employee already requested the distribution? If the value is a significant, I'd be inclined to consult legal counsel. There are court cases on both sides of this issue.

I agree with Sieve that some sort of agreement paperwork reflecting new repayment schedule should be signed. Anytime withholding money from a paycheck is involved I'd be more comfortable if it was in writing. I also agree with Sieve that putting writing doesn't change the nature of the transaction. Changing the amortization schedule is either a refinance or it is not. Setting forth what you are doing in wirting does not change that answer. I'm curious does PLR9729042 really address the new paperwork issue or does it merely set forth the IRS position that modifying the repayment frequency is not a refinance?

Participant has a whole life policy inside of a retirement plan. Participant's balance is currently $350,000. Cumulative contributions are $300,000. Participant is going to withdrawal $300,000. My only question is when appyling the incidental benefit rule can plan sponsor still base the 50% limit on $300,000 or is the limit reduced due to the distribution? My understanding is that the limit can still be based on the $300,000, but wanted to double check. Thanks in advance for any guidance.

Not necessarily; just the argument the employer set forth was interesting. The employer did not dispute that salary reduction contributions are subject FICA, the employer disputed whether compulsary contributions were in fact salary reduction contributions.

The interesting thing on the TAM is that the 403(b) contribs were compulsary.

From the GCM -- For employees, elective contributions to a section 401 (k) plan or to a section 408(k)(6) SEP are includible in the FICA wage base under sections 3121(v)(1) and 3121(a)(5)©, respectively. However, elective contributions to a qualified plan containing a 401 (k) arrangement or to a salary reduction SEP on behalf of a self-employed individual are not “wages” for FICA tax purposes, since the self-employed individual is not an “employee” for FICA tax purposes. Furthermore, as in the case of nonelective contributions by an employer to a qualified plan or SEP on behalf of a self-employed individual, elective contributions to such plan or SEP on behalf of the self-employed individual are not attributable to his or her trade or business. Accordingly, such contributions do not generate a deduction from gross income for SECA tax purposes under section 1402(a).

See GCM 39807. It sets for forth the IRS position on this issue. http://www.legalbitstream.com/scripts/isys...ry/irl6dc/1/doc

Since preparers of 5500's & 5330's may now be subject to tax return preparer penalties, does anyone have any thoughts about potential preparer liability for understating the amount of late 401(k) deposits? For instance, if the preparer is not counting deposits late that were remitted within 20 days of the payroll date, but based on guidance we know that generally deposits should be remitted within 7 days or sooner, is their potential preparer liability?

That was my thought also, but was looking for verification. Thanks

A handful of lost partiicpants with nominal balances were reported on the 2006 Sch. SSA. Plan Sponsor made reasonable efforts to find, but was not successful. Plan Sponsor ended up just forfeiting the balances. Do we report those particiants with a Code D on the Sch. SSA? Thanks in advance for any guidance.

IRS Notice 2000-32 permits the plan to disregard the proposition you state, but that probably is the reason for the financial institution's initial stance. They never really gave me clarification. Thanks again.

Thank you for your replies. The financial institution backed off their position. They now agree that mandatory withholding not required.

Participant, age 60, is taking a hardship withdrawal. No other in-service withdrawals are allowed under the plan. The financial insititution holding the assets is taking the position the 20% mandatory withholding applies because the participant is over 59 1/2. Thye cannot provide me with any cite to support that position. It is my understanding that a hardship withdrawal is not subject to mandatory withholding. The participant's age is irrelevant. I son't see anything that says otherwise. Am I missing something? Thanks in advance for any guidance.

EBIA has a premium access service. Does anyone know whether that service allows users to ask questions of other benefit professionals? We have a person handling cafeteria plans that wants to subscribe & use it as meesage (like this one) to ask cafeteria questions. I doesn't look to me like the premium access does that, but figured I could double check. Thanks in advance for any guidance.

I'm hoping against hope here. Key employee prior to EGTRRA became former key due to the law change. (Officer whose comp. no longer sufficent to be key) We have been exlcuding him from top heavy since he is a former key. It would be awful nice to callhim non-key. Was there anything in EGTRRA that I may have missed that would allow us to classify a former key due to the law change as a nonkey employee? I haven't found anything, but it doesn't hurt to take a stab in the dark.

I don't really have an opinion on contacting the participant. To give a little more context on my previous post mentioing our firms dealing with the DOL -- The 2 participants that complained probably were only due about $2,000 each. The plan sponsor did end up contributing the amounts owed them. (I don't recall any gains being added, but its been a few years & maybe gains were added & I just don't remember.) We did not notify those participants; they contacted us. We did not tell them directly that contributions were not remitted, but we did encourage them to compare their pay stubs to their investment statements. We also encouraged them to contact the DOL if they felt that they were shorted contributions. Over the next few months we heard from each of them several times. At some point the 2 participants were told that our records also showed that money was due them, but we always referred them back to the plan sponsor & to the DOL. Eventually their persistence paid off because the DOL did investigate & the DOL did get the plan sponsor to contribute the amounts due for those 2 employees. The plan sponsor owed approximately another $4,000 divided among 3 or 4 participants. Those participants never contacted us nor the DOL. The DOL investigator did ask us if additional amounts were due for others. We answered truthfully & supplied him with information to verify that fact. Once the money was remitted for the 2 complainers; the DOL investigator told me that the DOL wasn't going to pursue the rest of the money. He said the DOL just didn't have the resources to pursue such a small amount. The other participants may have very well received their money had they complained vigorously. Kind of like the parable of the persistent widow.

I wouldn't be all that concerned with notfying IRS/DOL. I'd be comcerned if I had crossed the line & could somehow be considered a fiduciary. I know that as a general rule TPA's are not fidcuiaries, but that doesn't mean that a line hasn't been crossed somewhere. I'd also,as several others have mentioned, look at any contract/engagement letter.

I will add that I'd be more concerned about legal exposure than notifying the IRS/DOL. Depending on the amount its possible that neither the DOL nor the IRS will do anything. We had a similar situation where the DOL was investigating due to participant complaints. Plan sponsor made some of the employee deferral contributions, but not all. The DOL was aware that not all of the deferrals were made. The DOL investigator handling this case told me that since the amount was under $10,000 that they didn't have the resources to pursue it further.

Tough call. http://www.thompsonhine.com/publications/p...n1191.html#3153

I found my answer, no need to post.

i know very little about cafeteria plans. Can an employer terminate an FSA provision mid-year and adopt an HSA provision? I am finding conflicting information. Thanks in advance for any guidance.

It goes on to stipulate "...However, in the case of an employer that did not previously maintain a SIMPLE 401(k) plan, the establishment date can be as late as October 1." In my hypotehtical the plan isn't currently a SIMPLE 401(k). The plan year would be amended to the calendar year. I'm just not clear whether a SIMPLE can be done for the the short year from 07/01 - 12/31. Thanks

I've somewhat with a similar question that I posted in the 401(k) forum. If you have a fiscal year 401(k) year end 06/30, can you amend to a SIMPLE 401(k) effective 07/01 or do you have to first have a short year from 07/01 - 12/31 & then amend to SIMPLE 401(k) effective 01/01? I ask because of the exclusive plan rule. Although it is not a new plan, I struggle with the fact I can't simply terminate the 401(k) at 06/30 & start a SIMPLE IRA 07/01, but I would be able to amend to the SIMPLE 401(k) 07/01. I just want to make sure I am not missing something. Thanks

The excise tax is on the excess contribution (or excess aggregate) amount. See page 10 of the 5330 instructions.