Belgarath

Fairly typical scenario - employer sponsors a SEP for, say, 2015, then decides to change to a 401(k) for 2016. No problem there. When calculating top heavy, a SEP is included. My question involves determining when the SEP is "terminated" so that SEP balances no longer have to be included in the top-heavy determination. According to the IRS website re terminating a SEP: "To terminate a SEP, notify the SEP-IRA financial institution that you will no longer be contributing and that you want to terminate the contract or agreement. It is a good idea to notify your employees that you have discontinued the plan. You do not need to give any notice to the IRS that you have terminated the SEP." This brings up a couple of issues. First, assuming such notice is given, it seems that this would be considered a "plan termination distribution" - even though no actual "distribution" takes place, so you would have the 5-year addback. Agree/disagree? If no such notice is given, which I suspect is often the case (the employer simply stops making contributions to the SEP) it may not technically be "terminated" - but it also seems unreasonable to not consider it terminated. It still seems to me that it would be reasonable to use the 5-year addback and just consider it "terminated." Agree/disagree? There seems to be a lack of specific guidance here, so it seems like you have to determine what is reasonable and give it your best shot. I appreciate any and all thoughts.

The VFC program is used if you want to avoid paying the 20% excise tax, (and if you can satisfy the requirements of PTE 2002-51). Generally, I think the expense and hassle aren't worth it, and most people just do as you do - employer makes the contribution plus earnings, pays the excise tax, (which is usually small) and be done with it. I suspect the DOL is just doing this as part of some new initiative to make people aware of the program? I don't know...

I agree with Jpod, although obviously don't know. $900 seems like a strange number for something supposedly this old, also. I'd wait to see the letter, and see if it really is the IRS and what it is really all about.

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It is subject to the mandatory 20% withholding, which is a royal PIA with life insurance. Could involve partial loans or withdrawals depending upon type of policy, etc. - and of course you may need to take taxable terms costs into account in determining taxable distribution, blah, blah, blah... See 31.3405©-1, A-10(d) sends you to 35.3405-1, F-1 through F-3. (My CCH - excuse me - Wolters Kluwer - lists it as 35.3405T-1 - I didn't have time to check if the "T" is appropriate or not)

Would you consider an electrical contractor (business code 238210) as a "service organization" for ASG purposes? I generally would not, but I'm wondering if facts and circumstances could dictate otherwise. For example, all the two businesses do is repair work - no new construction requiring substantial investment/inventory, and the two separate corporations are owned 100% each by Father and Son, (assume they are regularly associated in providing services for mutual clients, etc...) Pay is for personal services - (ie hourly rate only.) It still doesn't seem like an ASG, but just curious as to how others feel.

Short answer, no. Longer answer - you need to determine applicable deadlines depending upon whether IDP or pre-approved plans, and when last restatement and approval/determination letter was done. Also See Revenue Procedure 2007-44 and 2011-49 for starters.

Nope. I just suspect that this is so obvious that everyone is accepting it as a given that it is impermissible if the document doesn't permit it, and instead some tangential issues are being discussed.

Ditto. Can't add much to that!

Well, from what seems to me to be a practical standpoint, I can't possibly imagine any such provision is in a pre-approved plan. So how do you even attempt to put it into a plan without submitting a D-letter, thereby forcing employer to spend money, as GMK mentioned previously? ANY plan has to have definitely determinable benefits/allocation formula, and I'm dubious that the IRSA would approve it. I don't have time to attempt the intellectual exercise to see if there are specific statutory/regulatory provisions that would automatically cause it to fail, but my gut says it isn't allowable. Doesn't mean I'm right... Even if the IRS were to ultimately approve it, I can't possibly see a cost/benefit analysis showing the expense to implement and administer such a provision as being worth it, but maybe there is one gigantic pot of unallocated expense fund money there, and an enormous pool of non-participants. Interesting question, though. Good luck with it!

Gracias. And I agree, no reason to bother the horse any more...

Any IRS reference? I do recall seeing this somewhere re minimum funding deadline, but I'm not sure where I might have seen it for the quarterly contributions.

No. Now, if it were an existing PS plan, for instance, that was ADDING a 401(k) provision, then yes. But for an existing 401(k) plan, no. Now, you might be able to get around this by amending the plan year, but that's a separate issue altogether.

Agree with Jpod - clearly seems to be a repayment - then a subsequent distribution or "loan." Although IRC 72(p) does not, by itself, directly address the "enforceable agreement" requirement, 1.72(p)-1, Q&A-3(b) does. I'd say it is reasonable to submit a VCP application treating the error as a new loan, with appropriate repayment of outstanding payments, interest, etc.. Having said that, I have not submitted a VCP in just such a situation, so can't say from first-hand experience if the IRS would routinely approve it. Anyone else handled such a submission, and if so, with what results?

Agree. Like you, we are a strictly fee-based TPA, and receive nothing from such a referral. Although I haven't digested the impact of the regulations yet, everything I've seen leads me to believe we would not be considered a fiduciary in this situation. One thing I haven't looked at yet is a situation where we provide a list of possible advisors, and one of those advisors is chosen and recommends a fund that pays the TPA (us) some amount of Revenue Sharing (when we receive Revenue Sharing, by the way, we don't keep it in addition to our normal fees - it is used to offset those fees). Haven't yet looked to see if this might somehow throw us into a fiduciary role, but everything I've skimmed from third-party sources seems to indicate that it would not, which makes sense to me. P.S. ASPPA is doing a webcast on this today. I signed up for the recorded version so I could review at my convenience, so it won't be available to me until next week. But anyone who is interested in the webcast today should check ASPPA's website.

Maybe this will help - IRC 7503. When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section, the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia; and in the case of any return, statement, or other document required to be filed, or any other act required under authority of the internal revenue laws to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district, the term “legal holiday” also means a Statewide legal holiday in the State where such office is located.

Well, I'm not sure what they are looking for - you may have to ask them. But here's a link to the 1.436 regulations, which includes the text of the (j) 1-9 definitions. Good luck! http://www.ecfr.gov/cgi-bin/text-idx?SID=f08104df7ff53f8d0cf900e730130990&mc=true&node=se26.7.1_1436_61&rgn=div8

I'm not sure I understand the question. Section (j) is definitions. Did they just want you to remove the incorporation by reference, or do they want you to actually insert the text of all the definitions?

Thanks Bird. Good enough for me. Of course, since this precise situation has not (to my memory) come up in 30 years, it seems unlikely to be problem one way or the other...

Gateway only has to be provided to anyone who is "benefiting" under 1.410(b)-3. In this case, see (a)(1). So just because someone has satisfied the eligibility requirements, if they receive no employer contributions/forfeitures, they don't receive gateway.

"Some don't tax income. ..." I think I need to move. I'm pretty sure I get taxed on the air I breath, a user tax because my feet touch the ground when I walk, and because I'm either a member of a family or know people who are members of families.

Hi Lou - do you have a cite/reference for that? Don't know as I've ever seen that specific situation come up, but I wouldn't, off the cuff, have said that filing before the original non-extended deadline invalidates the extension. I'm sure I'm probably wrong on that... Thanks.

Agreed - see 1.415©-1(b)(6)(i)(B). Technically that would make it on or before 4/14, as it is 30 days as Lou mentioned.

And just FWIW, not in this case, but I have found that you can't necessarily rely on the term "SERP" to mean a 409 plan. I've found several situations where this term is used for a qualified plan - usually in the context of a new comparability plan where there was a takeover of a standard type PS or 401k plan with a pro-rata allocation, and the new salesman finds that it would pass testing with large amount to head honcho by converting to new comparability, so it is sold/marketed as a "SERP."

I can only give you my gut feeling: if the plan excludes commissions from the definition of compensation for match purposes, and the "recoverable wage" of $2,000 is later offset by commissions, then it wouldn't count for plan purposes. Only way it would count is if there weren't enough commissions to offset it. I've not (knowingly, at least) encountered a state minimum wage law that says a commissioned salesperson must receive at least minimum wage. But let's suppose that under that regime, a salesperson works 2000 hours, yet only generates $3,000 in commissions. Minimum wage is - whatever - say $10.00 per hour. So the employer must pay the salesperson $17,000 in additional minimum wage. In that case, I'd say there is plan compensation of $17,000 for match purposes.