jmartin

I just verified with client that the partners do not have any URBE amounts. Based on that it sounds like in my list, I only subtract the Section 179 and disregard the "other deductions", "non-deductible expense", and "investment income" items. Is that correct?

Have a small partnership that is cross tested. We were giving two sets of numbers from client and wanted to verify which we should use to calculate the plan wage for testing purposes. One was the k1 report itself (self employment earnings in box 14a). The second number received before the k1 was a "net number". To go from K1 earnings to the testing wage you do the following: Step 1 - Take self employment earnings (box 14a) Step 2 - Subtract out "?" Step 3 - Back out partner's share of the non key employer profit sharing Step 4 - Back out 1/2 SE Tax Step 5 - Back out partner's own profit sharing Result - Testing wage When I was reconciling from the self employment earnings to the "net number" they initially provided. I found they did the following: Took earnings in box 14a and then subtracted out Sec 179 (box 12), Other deductions (box 13), non-deductibles (box 18) and then added investment income (box 19). Wanted to double check on should be backed out in Step 2. For example I know you would back out Section 179. Should I back out the other items mentioned above (including adding back the inv income)? Or just some of the items, like Sec 179?

The husband was listed with a hire date and term date. I verified with the company that the hire date was actually for his spouse and the term date was the date his spouse passed away. The husband never worked for the company. In addition, the company said that the investment company, situations like this, automatically transfers the account to the beneficiary. To the best of the company's knowledge the investments were the same (mapped). The company did confirm that the "transfer or assumption from spouse to husband" was automatic and the husband didn't have any say in the creation or transition of balance from spouse to himself. That should clear up that piece. Thanks for your heolp.

We don'' have a ton of info on it. All the husband wrote to us said was that it was an inheritance from his spouse. All the company said was that he "assumed her balance as the spouse". That could just be how they chose to answer the questions. When I spoke with the participant he seemed quite affirmative that this was his wife's account and was told multiple times by the prior provider he wouldn't have to take RMD's. I tried emailing the other provider for more questions. Previously all they would give me was the balance. It was the participant and the company that let me know of the spouse death benefit... When we took over the plan each participant had to choose the funds for it to be invested in. Fund mapping was not an option. The husband did complete an election form to invest this spousal balance. We do not know what he was invested in from the prior company. Does his choosing investment funds change anything? I believe the participant still considers the balances to be his spouse.

Husband DOB - 11/28/1941 Terminated in 2007 Turned 70 1/2 in 2012 Spouse DOB - 6/9/1950 Died 2/3/07 Would have turned 70 1/2 in 2020 Question regarding a participant for a plan we recently took over. The spouse died with a balance. The husband, as the beneficiary, rolled her balance in this his account. His entire balance is the death benefit rollover. Should the husband be taking RMD's at this time? Or, does he start taking RMD's in 2020 when his spouse would have turned 70 1/2? Based on what I could find: there are three options: 1. The entire death benefit amount must be distributed by December 31 of the calendar year containing the fifth anniversary of the owner’s death; 2. The death benefit must begin to be paid out over the spouse’s life expectancy beginning by December 31 of the year following the owner’s death; or 3. The death benefit must begin to be paid out over the spouse’s life expectancy beginning by December 31 of the year in which the owner would have reached age 70 ½. It would appear that option three says that the husband, despite be 70 1/2 does not have to take until 2020.

well so much for that..guess talking with chuck isn't as helpful as it sounds...

I have a similar topic in current year but thought I would revive this post as it's similar. Given the facts above, should the spouse really be a "former key" in 2012 since her husband/owner terminated in prior year and gave up his ownership? Also regarding HCE status, would the spouse be a HCE in 2012 even though her husband/owner terminated in prior year?

As for voting rights I am not sure. All I knew was that "they are credited with only a portion of that income this year"... In terms of stock: There is roughly 1000 total shares of stock. Owner A has 300 shares to himself. 500 shares belong to the ESOP. Son B and Manager C each have 100 shares of treasury stock (100 shares of esop was bought back by company as treasury stock).

Manager C's comp was $139k in 2013. However his 2012 comp was $61k. So if he is only a 2% owner (prorated) then he may not be a HCE for 2013. I do not think he is an officer (still have to check on that though)

Company A has a 401k plan and ESOP. Currently run by owner A. He has a Son B and a manager C. Owner A wanted to institute an employee retention program to ensure Son B and Manager C stay with the company. The were each given 10% of stock in 2013. However the stock is vested out over 5 years. The owner wanted to know what counts for HCE determination. Do we caount the stock in their name or only the part that is released to them (pro rated share). That would make a difference at least in Manager C rather he be a 10% owner (and a HCE) or a 2% owner (and potentially not a HCE as his comp is only $139k and is not an officer)

A participant completed a form mid October requesting to suspend his 401k contributions. The employer received the form and "entered it into their system" so he is shown as 0% in their records. Yet on payroll he is still deferring. They have successfully shut him off for the first pay in January. Even though there is one more December payroll, it is too late to turn off the 401k so he'll have one more payroll deduction. Is the stopping in January enough or should a refund be issued for the payrolls back to when he signed the suspension form? Since we do not know the final December payroll amount, I presume the refund would be processed in January (and count for 2013 income). All of the excess payroll withholding will still be counted in 2012 testing. Correct?

Facts: - Father A owns 25% in company A - A Trust in the name of Father A owns 25% in Company B - Three other partners each own 25% in company A and each has a Trust in their name which also own 25% each in company B. - Company A and B are part of a controlled group and in the same plan. Question is in regards to Father A's adult Son (Son A) who would like to contribute in the plan. The son will work for and be paid from Company B. I believe, for controlled group purposes (section 1563?) anyways, Father A is attributed ownership of Company B since he is the beneficiary of the Trust. The adult son would not be attributed any ownership because: A) He is over 21 and B) his father does not own more than 50% of either company. However for HCE purposes (section 318) would the same rules apply? Or would the Son be attributed ownership from the father who was attributed ownership from the trust. My initial feeling was the he would be an HCE/Key for ADP,Coverage,Top Heavy, etc. Almost sounded like double attribution and after going back and forth between the two rules I wanted to make sure I wasn't mixing them up.

Wow my first "hot topic"! Fortunately for the plan I was asking for, there are no Keys and only one HCE. The plan is 0% top heavy (the owners take no comp in the plan). Looks like I have it easy. So is it safe to assume I can have different eligibility then? Or do both 401k and SH need to be immediate and I just invoke stat exclusions?

I know that you can apply statutory exclusions when giving the Safe Harbor contribution, provided your eligibility is less than 21/1. In relation to that topic, can a plan have immediate eligibility for 401k but a one year requirement for safe harbor? Or would they both need to be immediate, but then the company could apply the stat exclusion for safe harbor?

Match is currently calculated on a YTD (minus prior) basis. It is deposited per pay. It is not a safe harbor match.

Plan currently uses w-2 compensation for matching calculation. A HCE receives quarterly bonuses. Already received one for 3/31/13. Match was calculated on YTD compensation, which included the bonus. The company wants to amend the definition of compensation to exclude bonuses. Q1 - Do they have to amend now (effective 6/12/13) to exclude all future bonuses (3/31 still must count). Q2 - Can they amend retroactively to 1/1/13? By doing so would that make the 3/31 bonus excluded and therefore allow the company to "pull back" the match contributed on the 3/31 bonus? Q3 - Say we were doing this 4/5/13, the match on the 3/31 has been calculated, but not deposited. Can we amend 1/1 to exclude the 3/31 bonus from matching calcuation (and therefore not have to deposit)?

Plan allows for changes anytime. They have bonuses every year. Some participants may receive multiple bonuses in a given plan year. The company is setting up a new payroll system and had a question regarding the bonus election. We know that the participant can elect to have a different amount withheld from the bonsus compared to normal pay. For those situations we have the participant complete a bonsus election form. Those that do not complete this form have the same % withheld from bonus as normal. No issue there. Does the participant need to complete a bonus election for each bonus? Can the participant complete a bonus election form, say 1/1/13, which would cover any bonus received for the entire 2013 plan year? The form we have does lists the plan year, so could assume it is for the entire plan year? Could they complete a bonus election form that would cover all bonuses in the future (multiple plan years)? Would it be as simple as adding simple wording that this is for all bonuses received after this date will have "x" percent or zero, etc.?

Company A has a 401k plan. Let's say they want to terminate the plan 12/1/13. They plan on paying everyone out by 12/15/13. The following questions are posed: - Can the 401k be aggregated with their Cash Balance plan for the 2013 plan year due to the 401k having a short plan year? - The company will be starting a new 401k plan. When can the successor plan be started? Is it 12 months from plan term (12/1/14) or final distribution (12/15/14)?

A participant turns 70 1/2 11/30/13. He is terminated. Since it is the first one, he can extend until 4/1/14. If the participant takes a lump sum distribution in August 2013, which is before he turns 70 1/2 but in the same plan year he turns 70 1/2, will it count towards the RMD for 2013?

Company A has a 401k plan. Company B has a 401k plan. Both companies are unrelated. On 12/30, company A terminates its 401k plan. On 12/31, Company B purchases the stock of Company A. What is the impact on the retirement plan of Company B...and even Company A? It is our understanding that the the intent of Company A was to allow its employees to distribute their account balances before they were considered employees of Company B. Due to the stock sale, wouldn't we have a controlled group and therefore no "severance from employment" due to having the "same employer", and wouldn't that prevent the participants from taking distributions (successor plan issue)? Or does the fact that Company A terminated the plan before the sale take precedence?

We agree which is why we are using this example to move all participant accounts under one roof....I think if we "borrow" some of your wording, the memo could be quite convincing.

We have 401k plan where each participant has their own account. Rather than everyone being invested at one company, each can pick whoever they want. There was a participant who terminated and wanted to cash out. He conacted his investment company, obtained their withdrawal form, had the trustee sign, and he was distributed. We were unaware of the distribution. For our plans we have our own "plan distribution election form" which has a Speicial Tax Notice. We have them complete this form which serves to not only keep us in the loop but ensures the participant receives the proper notices, and the proper distribution amount. The participant in quesiton was 100% vested, so no issues with the amount. What is the "correction" here, if any? Does the entire distribution need to be reversed? Do we merely need to send the Tax Notice and have him acknowledge? Should we have him complete our dist form for the files?

To clarify, I am referring to his balance in his own retirement plan. Thanks for the response.

We have participant who was convicted of murder of his spouse in 2011 and has since been in prison. Expected to be there quite a long time. He also has an account balance in his former employer's retirement plan. He expressed a desire to "get his money" to a friend who happens to be employed with the company and relayed the information to us. Based on some research, especially here, it does sound like we can send him a distribution form to complete and he can potentialy take a distribution. Doesn't sound like an IRA would be an issue, but rather a lump sum. Could he have a lump sum wired to his checking account? Seems like a check would be the issue. Can anyone verify?

Provided below is an abbreviated breakdown on how to calculate the "tesing comp" for a particpant in a partnership. I have included numbers for example purposes.… Step 1 - Take K1 Wage (disregard partner portion of the nhce ps...assume that is zero) - $183,137.21 Step 2 - Back out URBE - $6,590 ($176,547.21 net) Step 3 - Calculate ½ SE Tax on net amount in Step 2 - $9,190.30 ($167,356.91 net) Step 4 - Back out personal PS - $7,969.38 ($159,387.53 net). Partner received a 5% profit sharing contribution. Step 5 - Equals “testing comp” - $159,387.53 A portion of the $183k included non-taxable life insurance proceeds of $11,099.35. My question is how does the $11k impact the calculation? A) Do I simply reduce the $183,137.21 by the $11,099.35 in Step 1 and then continue with Steps 2-5? B) Would I only back out the non taxable portion for purposes of the ½ SE Tax calculation and then add the $11k back for the plan comp? C) Include the $11k in the $183k since the $11k is only not subject to Federal Tax and is subject to Social Security and Medicare Tax.