JanetM

I don't think a lump sum payment that is being made as retroactive payment for payments due in prior period is technically a lump sum one time payment. Think of it this way. Person is eligible to draw retirement 3/01/07. You actually start them now (yes you did all the RASD stuff) and give them on check first off for the 13 months (March 2007 to March 2008), this first payment is not eligible for rollover.

My first question would be does the plan allow lump sum? I don't think the payment, a retroactive one to make up missed payments would qualify for rollover.

Hire a seach firm or gat a subcription to database for finding people is your best chance. I have never had luck with IRS letter forwarding.

Good catch lori, I should have said most not all.

Yes, but only if you mean you both have earned income for working. Withdrawal from retirement plan, interest, dividends and rents don't count as income.

Been there as TPA in CPA firm. I would be upfront and show the IRS the issues, explain mitigating circumstances and detail the proposed fixes. Many years ago I went through the same thing, employer did exactly what the finanacial advisor told him to do. Unfortunately the financial advisor was clueless. IRS did assess fines but waived penalty. The financial advisor was then sued by the employer - employer won.

Bearlee, are you sure the plan is abondoned? Could it be that there have not be recent contributions but the owner still intends to keep the funds tax deferred for now?

All ERISA Health & Welfare and Pension plan require SAR. SAR reg found at 29 C.F.R. §2520.104b-10.

IRAs not better than 401K. Contribution limits for 401K are much higher and allow savings to build faster. See attached for basics. p590.pdf

Escheat to the state maybe. Have you tried to find this person, are they sick, in jail, or what?

We report deceased participants on SSA. This, we hope, will result in someone claiming the benefits.

Why not just amend the plan to eliminate eligibility and vesting schedule.

The form is also used for coverage and funding of DB plans. If you are DC plan you still have to mark line 9.

Since you friend withdrew the account balance there are no protections. The only protection is that the funds, as long as they are in the plan, can not be attached by creditors. The employer is making a mistake by holding the check. From what you have written it sounds like all the parties are in the wrong.

My advice if you don't hear back from the participant is to verify the address. Don't just issue the check and send it to last know address. Chances are you will end up with a large number of outstanding checks.

You use the comp for the entire year. If you think it through, it is the same as including those who don't defer and adding their 0% to average. This guy effectively only contributed 5% for the year. Just because he was not able to defer does exclude it from compensation.

Sorry, misread the OP. There is not documentation of the loan. No promissory note or amortization schedule. Make the client provide one ASAP. How can you say the payments are not late if there is not promissory note that would indicate payment schedule.

Amend the plan to permit loans.

There are search firm who will find addresses. There are also subscription data bases you can use - WestLaw and LexisNexis are two that come to mind.

Don't have a cite andy. Speaking with one of our actuaries I believed the rule was no lump sum, accelerated or subsidized benefits if funding < 60% and partial amounts if funding between 60% and 80%

My understanding is the restrictions also applies to accelerated and some subsidized benefits. So if you offer an unreduced early benefit for someone age 55 w/30 years you have to stop.

Thanks.................

Cancelled checks at the gold standard of evidence becuase they show the issuance of the payment and that the participant cashed the check (recieved the funds). As far as 1099 testing, it is more for compliance with statute. But since it is quick and easy way to get list of all distributions to test many think that the 1099 is the only source for distributions. Don't forget 1042S if you pay folks out of the US. We like to mess with baby auditors with these.

1. Is there records to show distribution requests from participants? Alternative test could be sending confirmations to all that were paid. Is there enough detail in from trustee to show distribution to individual? Can the 1099s be recreated by issuer? 2. Not good ones. Grovel beg and plead to avoid penalties. Audit will have to be done, even if they must issue adverse opinion. Is this limited scope with no actual opinion or full scope with opinion?

HMMM, I guess I would ask if this is in connection with an actural divorce or is this some kind of way to get funds out of the plan without 10% penalty. If this is an actual divorce and noted in property settlement then I don't see an big issue.