kwalified

Plan sponsor matched on HCE's full comp for 2014 and probably prior years. Resulted in excess of $4536 in 2014. Should this have occurred in prior plan years would SCP be allowed? There are really only family members in the plan. Would corporate tax returns need to be amended? Thanks Excuse me...not 401(a)17 but 408(p)(2). Does comp limit apply to SIMPLE IRA match or just Non-elective?

Thanks for the replies. I looked at a ASC PPA document and it's a little more clear in section 10.02. Was looking at EGTRRA and just could not find clear verbiage.

We have looked. Article V and VI in a Mass Mutual prototype. It's not specifically referenced. I know I have seen it in writing somewhere.

Where does it state in black and white that a plan only has to provide an annual valuation to participants with pooled accounts and distributions can occur based on that valuation even if the market has increased considerably since the plan year end? Thanks

Ahhh, after tax deferrals go against 415/402(g). . Never had a plan that used after tax option.

Thank you for the links Bill, this is what I am looking for. Not sure how ACP would apply if the plan is safe harbor, but it looks as if it would be a nice option to have for those that want to go beyond 402(g).

A small S.H. 401(k) is considering adding an after tax option in order to go above and beyond the 415 limits. There recently has been a lot of press regarding the ability to convert these contributions to ROTH IRA down the road. What are your thoughts on adding such an option to a plan?

So freeze, pay participants as they become eligible to receive benefits(termination, NRA) and then terminate at a point when the repurchase liability is more manageable.

Thanks. It is non-publicly traded and the plan is self trusteed.

Yes good point. I would guess that the plan will probably be frozen initially before it is terminated.

a small C-corp has appx 4mil in assets in its non-leveraged esop. It's a plain vanilla esop. Strictly employer stock, no employee funds. The plan sponsor is considering shutting it down. Of course the main question is has the plan served it's purpose. The company is eyeballing a 401(k). It is my understanding that the plan does not need to be frozen and that a resolution signed by the board can effectively start the termination process and cease future funding and an optional letter of determination on termination can be pursued. The company is in good shape financially, is not being sold or going public and the plan has been in existence for several decades. One question, do terminated participants with account balances as of the last valuation date (12/31/13) and who have not been paid out as of resolution to terminate become fully vested? They are not considering employer stock as an option in any successor plan at this time.

A small plan that hasn't been funded since 2000, is it a requirement to fully vest participants since the sponsor has no intention of ever funding the plan? The plan was established in the 90's to buy out ownership of a partner.

thank you for your replies

Company A, B, C are all owned by one individual. Companies A and B are in the same state. C is in another. They more or less all have the same principal business activity. It has been established that they are in fact a controlled group. Companies A and B really are not profitable, while company C shows good numbers. The current 401(k) covers all 3 companies and just went to "large" status. The owner would like to reward the employees of Company C since they provide the greatest earnings. Their new CPA wanted to create 3 separate plans but I don't think the regs or QSLOB would allow that. Would a non-qualified deferred comp plan be the only option for C?

answer is B. Although I have not heard back from the participant. Maybe they reconciled

Thank you for the comments. With a loan from a plan you are paying pre tax dollars back with after tax money, hence the taxed twice argument. Of course the second time is when the distribution ultimately occurs.

Soon to be divorced small plan participant (HCE) had a QDRO drawn up where he was to issue a check to his soon to be ex for $43K. Now her attorney is not agreeing to the terms as the atty is reasoning that the ex will have to pay tax on the QDRO and the atty wants their fee to be paid as well from the distribution. The participant is now considering taking a loan from the plan to pay off his ex and repay the loan over 5 years. I explained he would be essentially taxed twice in doing so. His account is in money market right now, so he is essentially earning very little to none, so missing earnings on the loan amount would not be an issue, however he would not be able to defer the max like he has been doing. Would a loan even be an option in this instance? The plan would be amended to allow for loans.

A large plan has a few participants that received a safe harbor match and were not eligible. For example a match was issued starting with the Jan 2012 payroll. The error was discovered past the one year Mistake of Fact rules under 403©(2)(A). So how should the error be corrected?

Belgarath, Let me present this....Say she wants to replace the FMV with a $13,000 check to avoid taxation. She would be paying that with after tax dollars. Would would you be of the opinion that this would still be advantageous to her? She earns appx $35K a year.

It does. Thanks for providing both responses.

Thanks. Yea, it is just a 3 participant plan and funds are getting tight. The HCE and his wife will be retiring soon anyway, so they are not interested in the additional cost of restating, etc. The plan has been in existence forever.....change is bad?

they have decided to keep the MPP and are looking to amend the formula to reduce the allocation. The plan will only be in existence a few more years as the HCE will be retiring. They plan year starts 9/1 and would have to amended prior to that date in order to reduce the allocation, yes? It could not be amended retroactively in the current plan year.

A terminated participant wants to keep her life insurance policy. at 12/31/12 it had appx $13,000 CSV. What would be the tax consequences of getting that in her name and out of the plan? If there is a thread on this already, I apologize.

Thanks for the comments: The plan owns appx 14% of the common shares, it is non-leveraged and their main concern is to provide the liquidity to cash out participants without having a negative impact on their earnings or capital. I'm thinking an emerging liability study would be a useful tool in forecasting future outlay.

A small C-corp bank maintains an ESOP. They have been considering changing to a S-Corp and are interested in knowing what affect this could have on their plan. Outside greater scrutiny by the IRS and/or DOL due to pass through issues, what other pitfalls could they face? Would the benefits of changing to an S outweigh their current structure as far as their plan is concerned?