pmacduff

so sorry - guilty of not reading your entire thread thoroughly!!! (I know 100% vesting on termination!) I would agree that the former employee is entitled to nothing. We had a plan termination where the account in question was forfeited and used to pay fees (per the plan doc) with the remaining reallocated to everyone else before liquidation & distribution. I don't know if that is the correct procedure, but we/the client never received any "backlash" for doing it this way and it seemed more acceptable than returning $ to the Employer...

no vesting schedule? With 8 months of service, I would think that the "participant" whether legal or not, on a 2/20 schedule would be 0% vested....???

It is possible that the plan only allows loans from the 401(k) deferral source of money. Most of my client's plans do this (I'm a third party adminstrator). The plan does not allow the participant to take a loan from any of the Employer sources (i.e, profit share, match, QNEC, etc.) but the participant can take loans from any 401(k) deferrals they have made. Summer232 said from the get-go that she/he did not elect to put any of her/his own $ in, but became eligible for profit share after a year of service. I think when the SPD arrives, Summer232, you may find this to be true (borrowing only allowed from deferral source). Summer232 - I'm not sure what you mean by "the profit sharing monies were transferred to my 401(k) account". It sounds like your Employer has decided to allow participants to direct all of their investments (Employer & Employee) not just the 401(k) (Employee) portion or allows direction of all sources after you are vested. Investment direction itself does not automatically include participant loans. Participant loans are a function of the Plan & document not the Plan investments. It sounds like you might confused about the plan allowing participant directed investments and what that means for you. I'm sorry your PA is not responding as they should, but I think also that you may not be understanding your Qualfied Plan and the benefits it offers exactly correctly, either. Once you receive and read through the Summary Plan Description, hopefully everything will be clearer.

cstrong - what was the outcome of your situation and what did you end up doing regarding this distribution? I have the exact same situation now, but no access or info on family as maverick had. (The vested balance is $466.94.) I tried using the IRS locator program with his last known address (on the outside!!) to no avail. I found him on the state inmate lookup. I'm not sure what to do now.....any help is appreciated.

I found the info...under the Benefits Board Q&A section, look under Darren Watson's 'Who's the Employer'. It's question #237. I'm sure there is a way to link that here, but I'm not very computer savvy that way!!!

We have a MEP that operates this way. I had something awhile back from Darren Watson (when all the PEO stuff was going on) that said as long as the Plan Doc is set up properly, a multiple employer plan can allow for different Employers to utilize different provisions or something along those lines. I've no time to get it out right now, but when I can find it, I'll either copy it here for you or direct you to the info....maybe tomorrow...

I was under the understanding that in the event of an audit, the distribution $ reported on the 5500 form can then be tied to the 1099-R form $ for balancing. We do the 1096 & 1099-R forms under the name of the Plan anyway, even if using the Employer EIN. However, in the "old days" when there were many Employers with both a Money Purchase and Profit Sharing Plan, we used to combine the 1099-R forms. Upon audit, then or now, we have never had an issue. If you don't have separate Trust ID numbers for reporting, I think you could combine. So I guess my opinion is that you could do it either way! Others?

As I see it your SHNEC will be 3% and then you would, in effect, be making a 1% profit share. This might be a better way to go as you could apply a vesting schedule to the 1% or greater profit share you make. You lose your free ride on top heavy, but it doesn't matter with the SHNEC as that has already satisfied the top heavy 3%. (unless you are working on participation salary/comp, then you might have to give a new participant 3% of annual comp if greater to satisfy top heavy). The safe harbor 3% will still allow you the ADP test free pass. hope this helps.

If the participant is 75 years old, I don't believe that the plan should have been paying premiums for this policy anyway. I always understood that premiums MUST cease upon attainment of Normal Retirement Age and the policy surrendered or removed from the Plan...anyone else verify or concur? That said, the cash value can be stripped from the policy in the form of a policy loan. The proceeds are deposited to the plan and rolled over with the balance of the participants $ to an IRA. Participant then assumes ownership of the policy and would continue to make any premium payments (??) individually. No taxable event because no cash value upon transfer. The policy loan must then be repaid to the policy by the participant personally in order to replenish the value. This may not be the exact method in all cases, but this is how I've seen it done in my plans. As an aside, (and again due to this participant's age), I think it would be best all the way around if he spoke with a financial advisor to find out the best options for his situation.

Qdrophile - not sure if this is what FJR meant but I know our standardized doc lists "purchase of primary residence" as one of the hardships.....AFTER all available loans and other distribs have been taken. Our document, however, does not allow hardships for any reason to terminated participants, only active employee participants.

Agreed...but...one more thought...since this section refers to "the tax exempt status of the Trust", I was thinking that the only time the "Trust" would be subject to tax and lose the tax exempt status is if the Plan was disqualified, right? OK - I'll stop now..............

Bird - I found it... TITLE 26 > Subtitle F > CHAPTER 66 > Subchapter A > § 6501 Prev | Next § 6501. Limitations on assessment and collection Release date: 2004-09-28 (a) General rule Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period. For purposes of this chapter, the term “return” means the return required to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer has received an item of income, gain, loss, deduction, or credit).

Thanks Bird - that is pretty much how we handle it (putting in the Sponsor EIN) when there is an investment vendor doing the 1099-R forms. From the Schedule P instructions - it refers to the tax-exempt status of the 'Trust'. However, if you were not to file a Schedule P and, for example, the plan was disqualified, perhaps it limits the years the Service can go back and tax the participants and Employer? That would lend some importance to the filing requirement! There is a reference in the instructions to "the statute of limitations under section 6501(a)" starting when you file the P. I haven't had a chance to look that section up yet, maybe that will yield more info...

Ok - I couldn't find the old thread that I thought would answer my question, so I decided to add on to this new post since I have a Schedule P question.......... If a Plans investments are with John Hancock, for example, and John Hancock does all of the 1099-R reporting, I use the John Hancock EIN on my Schedule R regarding distributions from the Plan. Do I also use that same number on the Schedule P as the "Trust EIN"? Now I realize that it is not actually the Trust EIN, but the software doesn't like to let you out without putting a number in there. If you click on "help", the instructions say that you should use the EIN that is used for plan reporting purposes and mentions the 1099-R & 945 forms as an example. What do others put on the Schedule P in these cases or do you leave it blank when there is no actual trust ID #? Thanks in advance.

We also had a small client receive a letter and fine after submitting with an #8109 (but their payroll taxes are electronic). They were able to get the fine waived, but the Service told them that they had better get a Trust ID # for the Plan tout suite, so that's what we did. It seems to be kind-of random at this point, because we do have other small Employers who are still filing coupons @ their bank as you mention and they have never gotten a letter...maybe just a matter of time?????

I think I too found my own answer... in an "old" (2000) thread. It used the example if your prior year NHCE ADP was 3.0% and you used statutory exclusions that year; then the following year you don't add those se back in and reduce the 3.0%. I think the same would follow if you only had one NHCE who was statutorily excluded in the prior year - so no NHCEs in the test. I think the HCE gets a pass. I'm still not 100% convinced but getting closer...............

fiona1 - I found your thread and another and agree with everyone that if there are no NHCE in the prior year and you use prior year testing, you can use the exemption. I have a different issue. Plan uses prior year testing. In 2003 used prior year testing - no NHCEs in 2002. In 2003, one NCHE that can be statutorily excluded. (Plan eligibility is 1 month of service for deferrals.) So - if I statutorily exlude the NHCE in 2003, does that help me for 2004? I'm thinking no - because you only get the exemption if there were no NHCEs. In my case, there was a NHCE in 2003 he was tested separately in the ADP as a statutory exclusion, but was a participant nonetheless. I know I'm probably grasping here.....what do you think?

stevena - I have only done pension administration for small firms (our clients are from 1 - 300 roughly) and I do everything for the client as you mention. I came from another small company where I also did everything from soup to nuts. You sound like you have a lot of experience, have you ever considered starting your own business? I know you said you have a family to support, but perhaps you should consider this avenue...

Kate - FWIW - I think it is a good idea since, as you pointed out, the EIN is on those schedules. I always highlight where I made the changes, so I would send in all affected schedules. Others????

401(k) Plan with safe harbor match. Eligibility is 1 YOS, 12 months, over 1000 hours, age 21. Dual entry dates (Jan 1 & July 1). The owner's son completed over 1000 hours in calendar 2002, turned 21 in March, 2004. He worked 509 hrs. in calendar 2003 and 526 hrs. in calendar 2004. My question is, does that completed YOS over 1000 hours from 2002 stay with him until he reaches age 21 since he didn't have breaks-in-svc in '03 and '04 (over 500 hours each)? This seems like it should be a basic thing, but I'm not getting a grasp on it this busy Monday...........thanks in advance for all thoughts.

Belgarath - thank you, that's what we thought, too.

I had a broker ask me...does a SIMPLE IRA offer any protection from bankrupcy or lawsuits as other Qualified Plans do?

I'm with Blinky on this one...see attached #945 instructions, page #1 column 2, 1st paragraph. We (and our clients) have enough forms & paperwork to worry about without having to file forms in years when they are not necessary. As Blinky points out, if I were to "miss" ANY distribution in the Plan (not just the massive ones), I believe I should find another career as that's a very important part of what I do..... i9452004.pdf

Stevena - I had to comment on your comment about ONLY having 2 jobs since college and you seeing that as a negative. My how the world has changed ! I'm 42 and have only had 2 full-time jobs my entire adult life (worked 13+ years in retail and started in pension administration in 1990 - been here ever since). In the old days, it looked good for an employee to have stability & loyalty, etc. That was one of the reasons I was hired in 1990 with no pension experience - because they were impressed with my background! I'm not trying to be flip or snied here, I just think it's amusing that the younger generation thinks that more jobs might be a positive on the 'ole resume whereas I think the less times someone has changed around is a positive!!!

Austin - FWIW - I agree...jehmig's initial comment said it best "the chicken or the egg"????????