Fredman

Its permissible, but not practical. If the plan is not daily, valued only once per year and only allows distributions once per year, it'll work ok. I've seen plenty other plans do it this way, but its messy.

Disco, Here's what I have (thanks to Sal Tripodi's ERISA Outline Book)... You must return any allocable earnings along with the excess. Allocable earnings means the net gain or loss for the plan year attributed to the excess. You may also have to return gap earnings only if required by the Plan document. You can use any reasonable method to calculate the allocable earnings and if you can't afford a reasonable method you can use the one appointed to you in section 401(k)-1(f)(4)(ii). I haven't used/looked at the formula provided in the regs, but I think its clear that there are no allocable earnings for the excess contributions you mention. I would think that its safe to distribute the excess only. I haven't heard of a "hanging match" so I can't comment.

We use the PPD document and have a GUST ammendment provided by them. On a side note, we have have received one favorable letter on a plan with the PPD GUST ammendment attached. Is it the safest thing to do? Probably not. I wouldn't even consider it in most cases (other than this one). The other thing I didn't mention is that I'm working with plans with assets of 10k - 50k. Even if something comes back to bite us (chances?) our liability isn't going to "break the bank." I realize that the best thing is to file, I'm just looking for alternatives to filing a bunch of 5310s for a bunch of plans that should've been IRAs in the first place.

I thought this was discussed before, but I can't seem to find anything. What opinions are out there about filing for a determination letter before plan termination a one person plan? Assume that its been a clean plan (no compliance issues), there has always been one person and that its on a standardized document. I've convinced myself that it wouldn't really be necessary, but would like other people's views/experience.

Was the loan defaulted or offset? It sounds like it was only defaulted, otherwise (like pax sez) I can't see how he could begin making payments again. Also, keep in mind that since the participant was repaying a taxed loan, those repayments should be considered "basis" when figuring the taxable portion of his account. Basis amounts are not eligible for rollover, should be distributed directly to the participant and reported as such (not taxable). I hate loans...they shouldn't be allowed.

I agree that the count at the beginning of the year does not have to equal the count at the end of the prior year. Sometimes it will, sometimes it won't. Check out the instructions to Form 5500 to see who should be included. For new plans, it depends. If a plan's effective date is the first day of the plan year and with the right eligibility requirements, you could have participants at the beginning of the year.

www.peakone.com

Also checkout FreeErisa.com. 1998 returns won't be available on this web site until March, but its still a rather handy tool. david rigby originally posted this link on the "Using the Web in Employee" Benefits board back in December. [This message has been edited by Fredman (edited 01-26-2000).]

Depends. Was a benefit paid (check cut) to the beneficiary of the QDRO? If yes, then yes a 1099-R needs to be filed with a distribution code of 2 (exception to 10% penalty). If an account was split/segregated because of the QDRO, then the answer would be no.

This really doesn't answer the question, but we file a 1098 for a couple of P loans. According to IRC 72(p)(3) deductions are disallowed if the loan is made to a key employee OR the loan is secured by elective deferrals (we take the conservative road, so if any part of a loan is secured by elective deferrals then its not deductible). You can also read PLR 893018 & PLR 8742025. Letter 893018 sez that its ok to deduct the interest as long as its not disallowed under 72(p)(3) and the loan is secured by the residence. Those sites should serve as proof that you CAN deduct interst. I haven't found anything regarding the filing of Form 1098. Even if a 1098 isn't filed, a P should still be able to prove to the IRS all of the above and deduct. It wouldn't surprise me if a Trustee refused to file the 1098 due to administration headaches. I used Sal Tripodi's "ERISA Outline Book" while researching this question.

The 10% excise tax for late distributions applies only to late ADP/ACP distributions and does not have an impact on the 1099-R. In my experience I have not seen this tax applied to corrections made under VCR (that's not to say it couldn't happen). This tax is paid and reported by the Plan (on Form 5330), not the participant. For kharris's situation, the distribution code that he needs to use is most likely an 8.

Check the document. Like pax sez, if he was rehired before the check was cut, there's an argument to be made to destroy the check. Otherwise, I think I would treat this like any other rehire situation. Check the document for a break in service rule. Some plans do NOT allow for rehires to payback their distribution. Others will allow the participant to payback their portion and receive any forfeitures left. If it turns out to be a payback situation the participant can cash the check and repay the distribution (and make-up the withholding). If the participant repays the distribution, the tax reporting should not change. If you destroy the check, then you should also destroy the tax reporting.

Assuming that the correction called for the distribution to taxable in the year distributed, the distribution code on form 1099-r would be an 8. Its also possible that you would need to use a 'P' or 'D' or even to split the gross and earnings up on different 1099-Rs and use a combination of Ps and 8s. Look on the back of the 1099-R. It gives a brief description of the distribution codes. All of the distribution codes above (P, D & 8) mark the distribution as a corrective type distribution. Corrective distributions are not eligible for rollover, so they are not subject to 10% premature penalty.

The TWB for 1999 is $72,600. To see for yourself...search the BenefitsLink (click here) web page (search for taxable wage base).

At the risk of sounding stupid... What's an '04#'?

We use prime + 1%.

Check out the instructions to Form 5500 EZ. You can download a pdf version at the IRS web site... click here [This message has been edited by Fredman (edited 11-19-1999).]

I think if you read IRC 402(a) you'll find that a participant realizes income when the amount is distributed from the Plan. I would reissue the check (no 1099) and leave the 1998 1099 alone (except for maybe an address change). The participant will probably have to amend their 1998 tax return. Whoever is at fault for the participant not receiving the check/1099 should offer to pay any amending/late fees. [This message has been edited by Fredman (edited 09-08-1999).]

My understanding is that the 402(g) limitation period is the participant's taxable year. In general, a particpant's taxable year is the calender year, so the 402(g) limitation period would also be the calender year. I agree with Disco's post...if this P's taxable year is the calender year they can again defer the max in 1/2000.

Have you tried clicking on the link in my previous post? It works for me. I had a heckuva time finding the story. The article is ok...it basically talks about the PBGC and some of the newer things they have to offer. Your time would probably be better spent by going directly to the PBGC's web site and clicking around to see what they have to offer. [This message has been edited by Fredman (edited 07-28-99).]

I also had some problems finding the story...click here...for a direct link.

What if the NHCEs deferral % decreases dramatically over the last year? If mid-year testing is not done and this isn't discovered until after the test is completed at year end, the only solution would be to decrease the HCE for the coming plan year. I agree that mid-year testing has lost some importance, but some type of "check" of the NHCE rate is still a good idea.

Sounds legit to me. One of the services that we offer is corporate trustee. We are trustee for most of the plans we administer. Whenever we become trustee or when we are removed as trustee its accomplished with a corporate resolution.

Its my understanding (I've seen examples) that if you have a P/S and a MP plan only one of the formulas can be integrated. It is ok to have a cross-tested P/S plan and a cross-tested MP plan as long as each plan can satisfy the testing requirements. Go figure. No cites. No regs. Just what I've seen.

You are on the right track... The 1099s to the benes should only be for the the part of the distribution that they receive ($4500 in your example). The loan should be taxed and 1099'd to the estate of the decedent using the estate's tax id number. [This message has been edited by Fredman (edited 04-28-99).]