Stevo-PDX

A participant retired12/31/2013 and was paid 1/2/2014. The participant deferred, matched and received PS on the compensation paid 1/2/2014. The plan uses the standard 415 compensation definition allowing for post-severance compensation paid up to 2 1/2 months after separation from service or the end of the plan year. An argument could be made that they should be included in ADP & ACP testing because their compensation was includible under 415. An argument could be made that they should be excluded from the test based upon them not being an employee in 2014. Would anyone be willing to comment on whether they be included or excluded from the 2014 ADP & ACP testing? They are an HCE and I'm looking for a valid reason to exclude them.

Hello Everyone! We have a new comparability plan with 1 YOS and monthly entry for 401(k) and SHNEC(3%) and 2 YOS and monthly entry for the PS. The plan is also top heavy. We separated out all the otherwise excludible employees and are left with non-excludible employees. Can I get someone’s opinion on the correct compensation to use for each of the 2 example employees below for these test calculations? Gateway GND 401(a)(4) ABPT 410(b) Participant A: eligible for 401(k) and SHNEC only 7/1. Annual comp is $20k, mid-year comp is $10k. They will need to get a THM of 3% on full year compensation. I'm fairly certain that this is $10k compensation used for all 3 tests. Participant B: eligible for 401(k) and SHNEC for the full year. Eligible for the PS 7/1. Annual comp is $20k, mid-year comp is $10k. The THM will be satisfied from the 3% SHNEC allocation. Thank!

Great! Thanks Kevin. That's what I was looking for.

Here’s an interesting compensation question: Partnership 1 is owned by Company A, Partnership 2 and Person C. Partnership 2 is 100% owned by Person C. Partnership 2 received a K-1 from Partnership 1 Person C receives a K-1 from Partnership 1 Person C receives a K-1 from Partnership 2 Retirement plan is sponsored by Partnership 1 Partnership 2 is not a sponsor of the retirement plan (neither is Company A). The CPA believes that “pension law” dictates that the K-1 pass-through income from Partnership 2 onto IRS form 1040 Schedule E for Person C should be included for Plan Compensation purposes. My gut feeling is that Person C nor Partnership 2 are adopting employers to the plan and only the K-1 from Partnership 1 is Plan Compensation and only their K-1 from Partnership 1 is eligible Plan Compensation subject to the an EIC. If Partnership 2 adopted the plan too, that seems to resolve this question going forward except Person C’s ownership in Partnership 1 would only total 34%. Should the K-1 self employment income from Partnership 2 be included in the eligible plan compensation? Thanks

All they would need to do is submit the FT William prototype and their Trust Agreement to the IRS for favorable opinion. It's really an easy process, but the two must be approved for use together. Good Luck! The unrelated separate Trust Agreements are periodically modified, does this require a resubmission to the IRS for each modification?

I understand that Separate Trust Agreements were submitted along with the plan document providers EGTRRA Plans (Volume Submiiter etc.) for IRS approval. After approval, its typical for trust companies to make changes to the agreements. My question - do changes to the original trust agreement trigger a resubmission for approval or does the IRS accept changes that are not material?

We are currently using Relius PPD VS 401k/PS Plan Document, but are considering moving to ASC, FTWilliam or McKay Hockman. I'm looking for comments related to issues with these providers, such as unexpected limitations in plan designs, inefficient amendment process, problems with batch processing to generate the required various notices. Any feed back is appreciated. Thanks,

Just curious to see what anyone's opinion on this would be for the from 5500-SF: If a deposit is made to a trust account by the employer, TPA or investment advisor to make up for a trading error, would you report this as Contributions\Others (line 8a(3)) or Other Income (line 8b)? I guess it depends upon whether the we are reporting for the 5500 the actual trust earnings on the Other Income line or not. If we use actual trust earnings, then I think we would report the trade error as Contributions\Others.

Supposedly, the SAR is not due out until mid-February per tech support.

We're looking to start a relationship with a new trust company. I was curious to see what feedback people had using either STN or Matrix. I'd appreciate it if users could send me a PM with the good and the bad if you've worked with either of these companies before. Particularly, we are trying to evaluate: client service, ease of daily trading(we use Relius Administration) & accuracy of reporting. Are there any other platforms people use for daily val trading people might recommend? I'd prefer not to make this a public forum, hence the PM request. thanks Steve

You might also consider using the DOL's Voluntary Fiduciary Correction Program. This eliminates the IRS penalty, gives you an online calculator for calculating the lost earnings and may head off a letter form the DOL in a few years inviting the plan sponsor to participate in the VFCP. Yes, the application is longer, but the DOL will even help you fill it out over the phone. It also allow the sponsor to indicate on the schedule I that they participated in the VFCP. http://www.dol.gov/ebsa/newsroom/fs2006vfcp.html

We are working with a new startup custodian, although the person behind the custodian has 25+ years experience with other trust companys. This custodian is requiring that with each deposit that either the plan sponsor or the record keeper provide the detailed loan principal and interest amounts with each deposit. They claim to have an ERISA fiduciary and a bank regulatory responsibility and a to provide the information on their statements. We disagree that the loan is an asset to them when the plan trustee holds the notes so they should have no reporting requirement associate with the loan. I've used 3 other custodians that acted in the capacity as a custodian and a corporate trustee and they have never requested detailed loan information. They have only gone as far as wanting a breakout on any deposit as to the type of money and nothing else. I have also never had an auditor question a certified trust statement about the loan information. They have always relied upon the records of the record keeper for loan information. If the custodian is acting as a corporate trustee too, then I can see a stronger argument for reporting the loan detail information. Does anyone have any information that would support the custodian's position that they must receive and report loan information and report the loan balances on their statements? If so, how would this be any different then them not tracking the plan's self-directed brokerage accounts or other outside investements (employee stock or property)? I'm looking for specific sites in ERISA or federal/state banking regulations that would require the tracking of loan information.

Wouldn't income from the rental of property be investment income and not earned income? I don't think that you can include that income just because it's reported on a K-1. See this link, page 4 definition of Earned Income Retirement Plans for Small Businesses

Just a thought. Maybe I'm missing the boat, but aren't forfeitures a reallocation of previous deducted contributions therefore they would be applied after the calculation of Earned Income? Then wound't the allocation of the forefeitures be done according to the plan document: "in the same manner as the employer contributions", "to reduce the employer contribution" or "prorata" ? If there is a requirement to include forfeitures in the calculation of the earned income, then I'm in over my head here!

Can someone educate me on the proper calculation of Self-Employment Tax and earned income? Do the deductions for contributions to employees and for the self employed individual come before the calculation of the self-employment tax or after? does anyone have a handy spreadsheet for calculating the SET & earned income when a self employed person has employees? Thanks.

I can't imagine not having a Relius license for each full time employee who uses Relius for most of the day: daily traders, distributions & administrators. We couldn't survive without all having licenses. The occasional users have to use it early in the morning, during lunch or in the evening. The licenses are not cheap and they come with monthly maintenance, but if your needs are great, they are probably worth the added cost. Steve

We recently took over a plan with a difference between the SPD and the plan document for accrual requirements. The SPD has the safe harbor last day or 501 hours if terminated allocation conditions. The plan document has last day and 1000 hours allocation conditions. Normally I'd say the plan document rules, but the SPD indicates a more generous allocation requirement and is what the participant actually received about the plan. Any suggestions on how I would resolve the difference in allocation conditions?

Vicki, I certainly agree with you on this, particularly with drafting the document w/o the match provision until it's needed. Thanks.

I'm curious to see if anyone takes what I perceive as the more aggressive stance on this... Suppose a plan has been in existance since 2003 with 401k and match provisions, but has never made a match contribution. Begining with 2005 or 2006, the employer would like to make a match contribution. Would anyone take the stance that the first year they make the match contribution triggers the assumed 3% prior year NHC ACP or is the plan required to switch to current year testing if the employer wants the HCE's to get any match the first year? Of course, that puts them on the minimum 5 year route for current year testing. Thanks, Steve

I think that I found the answer in the American Jobs Creation Act. According to a Delloite document on this website, the elimination of the common ownership threshold applies to section 1561, which relates to tax brackets and not 1563 which relates to qualified plans. Status quo for QRP's. http://benefitslink.com/articles/deloitteETI041008.pdf page 46 Thanks for your input.

I had someone suggest that the common ownership 80% threshold had been eliminated either late 2004 or early 2005. That's a good point on the shared 415 limitations. I'm pretty sure that the owners are not working for both companies, but will review.

For determining a control group under a brother-sister relationship, is the common ownership threshold still 80% and the identical ownership threshold still 50%? Someone is suggesting that the common ownership threshold has recently been reduced to 50% or some lower percentage than 80%. Thanks

An employee has joined a union and is no longer eligible to participate in the employer's 401(k) Plan. The employee now wishes to take a hardship distribution for payment of medical expenses. The plan does allow for hardships. Does anyone know if this union employee is still eligible to take a hardship distribution or are hardship distributions limited to active participants? Thanks, Steve

A 401(k)/Match plan has 28 employees. The employer terminates 16 employees in the year, most are involuntary and in the last month. 12 total participants are active or termed have match balances. (5 x 100% vested & termed, 5 x partially vested, & termed, 2 x active). Evaluating the plan on simple math, the employer terminated 57% of the employees. Is there any deminimus amount of employees/participants that would allow the employer to not be considered as exceeding the 20% threshold of terminations for a partial plan termination? The forfeitures may not be significant enough to warrant getting a FDL.

We have a client of a single-participant plan who mistakenly made his 2000 money purchase and profit sharing contributions to his taxable brokerage account instead of his retirement account. His checks were made out for the proper amount, the contribution type was written on the memo field and the checks deposited before April 15th 2001. He just sent them to the wrong account. Has anybody seen some relief from the IRS on this type of situation and what types of penalties and correction procedures would he be looking at? Presumably this would not fall under DOL and ERISA jurisdiction. Thanks