pmacduff

thanks for the replies. txdd - I was referring only to those participants terminating after age 55 but before age 59 1/2 as to the applicable 1099-R code to avoid the 10% excise. thanks again.

This has always puzzled me and I'm pretty sure there are other threads on this but I can't find them! Anyway - participant in a profit sharing plan terms at age 58. takes cash payment distribution the following year but before turning 59 1/2. In reviewing the 1099-R codes, I think the 1099-R code should be a "2" because the participant termed "in or after the year the participant has reached age 55" (quoted from the 1099-R instructions; code 2) and not a "7" although the participant will be 59 1/2 before the end of 2017. It doesn't appear that code 7 applies in the year a participant turns 59 1/2 but rather after they turn 59 1/2. Does anyone know why didn't they just make the age 55 instead of 59 1/2 to avoid the 10% excise? Is this a leftover from when pension plans were more prevalent and more people took early retirements? I can only think of two examples of those between 55 and 59 1/2 who might still pay the 10% excise - active participants between 55 and 59 1/2 who take an 1.) allowable in-service distribution or 2.) hardship withdrawal. Any other examples?

Looking for an update on the Relius ASP system....jkharvey - are you still using the system? If yes have things improved in the past 3 years? CLE401kguy - did you go with the ASP system and if so what are your thoughts? thanks in advance for any comments!

relative to Belgarath's last post...I had a participant's wife call and even before I had the chance to tell her that I couldn't speak with her about her husband's account/plan she proceeded to tell me that there was no way her husband's plan did not allow for hardship withdrawals because her plan at work and her sister's plan at work allowed them! She told me that I really needed to check again for her because it just absolutely was not the case. Once she finally stopped talking I threw it out there that I couldn't talk to her but would be happy to talk to her husband about it. (The plan did NOT allow hardship withdrawals.) She hung up on me and I never did hear from the husband......:)

This particular one was for American Funds Premier. AND AF charged the client $100 because they said it could only be done manually. There are other vendors that don't charge (for example Empower) but still have to do it "manually" where I send them in a spreadsheet and they do the forfeiture reallocation from that.

ok so the client isn't going to make any profit share for the plan year. there are forfeitures to be reallocated. Most vendors (even some of the largest in the 401k arena) don't have an easy mechanism for the forfeiture reallocation process. Yes - they allow a "contribution" and then fund it with forfetiures but then it shows on the annual reports as a contribution and not as a forfeiture reallocation. Why does this seem to be so difficult...?! I understand that the forfeiture reallocation is a contribution of sorts, but since it isn't deductible again I would like it to show as a forfeiture reallocation and NOT as a contribution. mostly just venting but was wondering what others thoughts are on this.

it's late in the day and I just have to add my two cents...if the house is in foreclosure and they aren't married yet what's going to happen in the future?! I think I would be running fast the other way or at least postponing the wedding for a very long time

touche' - will put on the rollover line and then if necessary move where the auditors decide they belong Thank you!

I'm working on a form 5500 Sch H where the plan had 11 participant loans roll into the Plan from a prior plan of the Company that was purchased by the client. (They are definately rollover and not transfer loans; that plan termed.) Where would others report these loan balances rolled into the Plan? My first thought was to put them on line 2 a (1) (C) with the regular rollovers. However is that really received in "cash" from the participants? Am I overthinking this?! Thanks in advance for any replies.

as per usual this time of year I'm getting a very clouded mind! anyway - if the plan states that participant consent is not required for distributions under $200 (those get forced out) is it still required that the Plan Administrator provide the "special tax notice" to termed participants under $200 before processing the distribution?

Here is background: client sold a portion of Company in May of 2016 and a large group of employees transferred to the new Company and were treated as termed under the old for payroll, benefits, etc. The original plan remains in effect though much smaller. (Partial termination rules applied) Original plan has last day rule for profit share but does allow that termed participants who meet early (age 55 and 10 yrs) or normal (age 65) retirement will receive an allocation regardless of hours worked. So....original Company intends to make a profit share for 2016. Are those participants who went to the other Company that fall in to the "early" or "normal" retirement categories eligible to share in the profit share for the old Company? I thought yes at first but then the question was asked because they did not actually "retire" but rather went to work for the other Company. Thanks in advance.

We have a client with a PEO Plan (multiple employer). A client has left them and is transferring from their PEO Plan to another PEO Plan. The receiving (new) PEO Plan provider is requesting a copy of the Plan Adoption Agreement from the sending plan. The question has been asked if the sending Plan is legally obligated to send the new PEO provider a copy of the AA? Thanks in advance for any responses.

I have a terminated calendar plan with the final short plan year ending October 31, 2016 and the plan needs an audit report. The Accountant who will perform the audit has asked that I file an extension to give him until August 15, 2017. My question is...can I file a 5558 now? Will it create a "flag" in the IRS system because the plan year end would normally be 12/31/2016? There is a place on the 5558 to mark if it is for the first return filing, but I'm seeing nothing if it is for the final filing. thanks in advance!

IMHO I don't think the 100% withholding was ever really sanctioned (so it didn't really "go away".) Many years ago It was a way to get the balance out of the Plan and the funds to the participant, who hopefully got a nice surprise when they filed their taxes. If memory serves, somewhere along the line it became stated that it was not a valid way to remove a lost participant account from a qualified plan.

Participant completed and timely turned in the enrollment form. Deferral election was properly entered into payroll however enrollment form was not forwarded to vendor for investment election set up. Consequently participant was default enrolled for investment when deposits arrived. Contributions have been made timely since June to the participant account in the default investment. Any one know if there is a stated correction or example correction for this error? Since it isn't a missed deferral opportunity I couldn't find anything on point. Is there even a required correction? It seems there would have to be because the Client made the error. Client would like to compare earnings from default investment with the earnings from the participant investment choices and make a corrective contribution for the difference, if applicable, which sounds reasonable. That will "put the participant in the position he/she would have been in had the error not occured". thoughts?

Am I crazy today (mostly because it is filing deadline day ) don't the limits for the next year (2017) usually come out some time in October? Mr Poje?!?!?

I'll put in my two cents. He had not met the eligibility when he termed. It's not as if he had met the eligibility and just not made the entry date. If that were the case i would say 02/01/2016. However, he meets the eligibility criteria as of his rehire date so I would say he enters the plan on the next entry date of 04/01/2016.

Thank you Kevin - Some of Rev Proc 2013-12 was updated in Rev Proc 2015-28, which had exactly what I needed. In addition, though, I was looking for a model notice to the participant if one was available. Rev Proc 2015-28 specifies what information must to be in the participant notice so one can certainly be created from that information if necessary.

thank you duckthing, this is exactly what I needed! Information that needs to be in the notice is included in the rev proc. It would be nice to have a model notice, though, so if you have a chance to link that I would greatly appreciate it!

employer has mulitple locations, which have independent payrolls. Participant transfers from one location to another. New location neglects to enter participant's deferral election into payroll resulting in approx. 3 months of "missed deferrals". since we know the participant's exact missed contribution amount, would you agree that one method of self-correction might be for the employer to make the QNEC contribution based on what the participant's contributions would have been for that period, along with the corresponding employer match? I've been looking over the self-correction info and they address a participant not given the opportunity to defer but not specifically failure to follow the participant's election. Also wondering since we are in the same plan year with 4.5 months left in the year - can the participant be offered the opportunity to increase contributions for those that were missed? any thoughts appreciated.

It has been both on a personal and professional level (work at a TPA firm). "Consult your tax advisor" is what I have been telling people in both environments. I wanted to know more for my own curiosity.

From the IRS website regarding the 10% excise tax due to premature distribution: "The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50."I deal only with qualified plans. Every now and again I'm asked by someone who is age 55 if the tax applies to them and I'm wondering why in the qualfied plan arena the powers that be didn't just make it 55 instead of 59 1/2? anyone know?

Thanks FBJ Not trying to get "extra" match to those doing 6% but rather trying to equal out to a previous formula that would be equivalent to the original formula without having to change the SH formula. Client took over another company and wanted to be able to get the participants the same match amount they had been receiving under the previous plan. The new plan has the basic safe harbor match formula and the old plan had the 100% up to 4% formula plus the additional discretionary of 50% of the next 2%.

A plan utilizes the basic SH match (100% up to 3% and 50% of the next 2%). I'm trying to find a formula for a discretionary match on top of the basic safe harbor above that would be equivalent to a formula of SH 100% up to 4% and additional discretionary of 50% of the next 2%.

Although many are I know - I'm not a big fan of auto enroll, at least not in the small plan market where I live..... anyway - this hasn't come up before but I have an auto enroll plan where a person was termed and took their balance out & now is rehired without a break-in-service and can/will enter the plan immediately upon rehire. The client & vendor will send this rehire all of the auto enroll materials and go through that whole process again. Of course the vendor has a timeframe on the auto enroll process in order to give the participant all of the required disclosures and time to opt out, etc. So this person won't actually begin contributing to the plan upon rehire but some later date that could potentially be as long as a month or more out. Is there an issue with this? Seems to me (as an example) if the participant had NOT taken distribution of their account then they would simply be reactivated and could contribute as early as their first paycheck after rehire. thoughts?