Belgarath

Just tossing out a thought FWIW. Why even bother with an SAR other than for, say, the last 3 years? It isn't filed with anyone, and there's no specific penalty involved. If the DOL or a participant asks for one, then of course you must produce one, but it seems unlikely they will.

TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.) No one can afford, as a TPA, to provide excessive handholding/telephone time/letters/client visits, etc., for a client who refuses to help themselves, without charging for it. Either the base fee is higher, or there will be hourly charges, or maybe some revenue sharing, or some combination, etc., etc... Or at least no one can afford to do this for free for very long. Those people are called former TPA's. Most good TPA's will provide as much service as you want/need. So the question is: how much is the client willing to pay? If he requires lots of service but isn't willing to pay reasonable fees for the time/services required, then most TPA's are going to drop him as a client. (Well, maybe I shouldn't speak for others - I'll just say that WE would drop him.)

A block of Cafeteria Plans has apparently been filing for some number of years when forms were not required. Now that they have discovered this, they want to stop. Seems reasonable! Has anyone had any experience with this? I've never had much to do with Cafeteria Plans. Is it likely that they will receive a reminder/penalty letter when they suddenly stop filing, or is this a commonplace occurrence? Any observations welcome!

I'm with you. If there's something more recent, I'd love to know what it is! Possibly whoever told you that was not differentiating between 2011-03 and 2011-03R, so they knoew 2011-03 had been updated, but didn't know that it was 03R?

Just a quick vent here - I see no reason why the IRS can't provide a formal Notice or whatever allowing some set rate (Prime plus 2, plus 1, plus Pi, whatever) as an acceptable safe harbor rate until such time as they formally change it, yet still allow a different rate if it is justifiable by their standards. Seems like they are being rather unreasonable on this issue.

Just be careful that it is in fact an offset and not a "deemed distribution." A simple "deemed distribution" doesn't satisfy the RMD requirement. Q-9. Which amounts distributed from an individual account are taken into account in determining whether section 401(a)(9) is satisfied and which amounts are not taken into account in determining whether section 401(a)(9) is satisfied? A-9. (a) General rule. Except as provided in paragraph (b), all amounts distributed from an individual account are distributions that are taken into account in determining whether section 401(a)(9) is satisfied, regardless of whether the amount is includible in income. Thus, for example, amounts that are excluded from income as recovery of investment in the contract under section 72 are taken into account for purposes of determining whether section 401(a)(9) is satisfied for a distribution calendar year. Similarly, amounts excluded from income as net unrealized appreciation on employer securities also are amounts distributed for purposes of determining if section 401(a)(9) is satisfied. (b) Exceptions. The following amounts are not taken into account in determining whether the required minimum amount has been distributed for a calendar year: (1) Elective deferrals (as defined in section 402(g)(3)) and employee contributions that, pursuant to rules prescribed by the Commissioner in revenue rulings, notices, or other guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2) of this chapter), are returned to the employee (together with the income allocable thereto) in order to comply with the section 415 limitations. (2) Corrective distributions of excess deferrals as described in § 1.402(g)-1(e)(3), together with the income allocable to these distributions. (3) Corrective distributions of excess contributions under a qualified cash or deferred arrangement under section 401(k)(8) and excess aggregate contributions under section 401(m)(6), together with the income allocable to these distributions. (4) Loans that are treated as deemed distributions pursuant to section 72(p). (5) Dividends described in section 404(k) that are paid on employer securities. (Amounts paid to the plan that, pursuant to section 404(k)(2)(A)(iii)(II), are included in the account balance and subsequently distributed from the account lose their character as dividends.) (6) The costs of life insurance coverage (P.S. 58 costs). (7) Similar items designated by the Commissioner in revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin. See § 601.601(d)(2)(ii)(b) of this chapter. [T.D. 8987, 67 FR 18994, Apr. 17, 2002, as amended by T.D. 9130, 69 FR 33293, June 15, 2004; T.D. 9319, 72 FR 16894, Apr. 5, 2007]

So if you file a form, and on the "plan characteristics" section you have a typo that gives a 4D instead of 4E, the SOL doesn't start to run, since the form is technically incorrect? Very harsh. Sort of negates the "close enough for Government work" argument for ignoring exceptionally minor mistakes. But perhaps this is more of a theoretical problem than a realistic one? I dunno.

Interesting point, and I don't know rthe answer to this. Does filing an amended 5500 form restart a new date for a statute of limitations?

I respectfully (and strongly) disagree. The section you cite is in fact referring to "employer contributions made to a plan pursuant to a cash or deferred election..." - take a look at 1.401(k)-6, which defines "elective contributions." Rollovers are not made pursuant to a cash or deferred election. The employee has no option to receive a rollover as cash compensation from the employer.

Austin - did TAG provide a citation? If so, I'd love to know what it is. Or perhaps they are just looking at the DOL FAQ's, and because the FAQ's don't specifically say you can do it, they are interpreting it that you can't? There's very little sense in an interpretation that says, "if you are a complete screw-up and didn't file at all, we'll give you a reduced penalty, but if you actually FILED, then just because you made a mistake and filed late, therefore being MORE in compliance than the complete screw-up person, we're going to penalize you more than we will penalize the complete screw-up."

I'm with you. I'd ask for them to provide a citation to support their position, if they are going to stick with it. Perhaps the service rep there is equating the rollover "principal" amount with elective deferrals for these purposes? Who knows...

First, although it sounds like nitpicking, she's trying to avoid CURRENT taxation. If she pays it to the plan, then rolls her account to an IRA, it'll get taxed eventually when withdrawn. On the other hand, she'll now have a policy with a FMV of $13,000. I don't have an opinion as to whether this transaction is beneficial from a tax viewpoint or not. Dangerous to guess when you don't know someone's full financial situation, both current and expected. I'm only giving options. In addition, I'm not a CPA or financial planner, so my free advice, if I were able to give it, would be worth the cost...

Well, technically they could amend in the next Plan Year, as long as they amend (with appropriate 204(h) Notice) prior to the time anyone satisfies the eligibility requirements - so most likely 2-3 months into the next Plan Year. But it makes more sense to just go ahead and do it before 9/1 - easier to explain and for employees to understand. I have a hard time understanding WHY they would want to retain it as a MP plan. The PS plan gives them much greater flexibility. Maybe cost to restate? Simple inertia? Union contract requirements?

Well, that's by no means the only solution, particularly if the participant wants to avoid current taxation and (possibly) premature distribution penalties. First, think "Fair Market Value." Although Cash Value and FMV are often the same, often they are not. But let's assume they are for the moment. Participant should be able to buy the policy from the plan for FMV. She writes a check to the plan for $13,000, plan assigns ownership of the policy to her. No taxation, and now she can roll her entire account balance in the plan over to an IRA if she wishes - (I'm assuming this isn't a DB plan that prohibits lump-sum distributions.). Sometimes a maximum loan is taken by the plan trustee and policy immediately then assigned. This reduces taxable distribution, but participant now receives a policy with an outstanding loan. There are additional "wrinkles" to this, potentially involving "taxable term cost basis" that require more detailed answers than I have time for now. The insurance company and/or agent should be able to provide you with this type of information - the fancier footwork typically involves policies with higher FMV. Hope this helps.

Good question. I suppose it depends upon how you wish to interpret 1.401(a)(9)-5, Q&A-3(b).I think a strict reading would require the additional amount you mention. The earnings are not a "contribution" that is "allocated but not actually made," and therefore can't be excluded. In real life, I'm very dubious that this is actually done most of the time - not that this is a high volume situation anyway. However, I think you are correct to recalculate and distribute the additional amount.

Has some good ideas, but this one caught my eye as a HORRIBLE idea: QDRO expenses—retirement plans of all types would be required to allocate QDRO expenses to the plan as a whole and not to the individual(s) involved in the specific domestic relations order. If I'm an alcoholic and a drug addict and get divorced 4 times, why should other participants have to pay for my stupidity and obnoxious behavior? Presumably this is so ridiculous that even Congress should be able to figure it out, and strike this provision if this bill or any part of it passes...

I agree. And if you point this out to the auditor and the auditor disagrees, ask the auditor to provide an explanation, with citations, of how this is a nonexempt party in interest transaction.

I'd be careful on this. First, as already noted, you aren't following the terms of the document. IRS/DOL penalties? Maybe - one can never tell. However, there are other items that may have to be considered. Just as an example, suppose that by not being considered "active participants" by virtue of not receiving an allocation of forfeitures, the owners who might otherwise be ineligible for a deductible IRA contribute full amount to IRA's and deduct them. IRS audits, and says they should have received an allocation in the plan, hence were "active participants" and therefore based upon income they were ineligible for a deductible IRA contribution. IRA deduction denied, taxes and penalties imposed. Far-fetched? Very likely, but it's hard to get in trouble by just doing it correctly. I would not advocate ignoring the allocation provisions in the document. I'd just say sorry, nice idea, but you can't do it.

"i can't find anything wrong with a small percentage of the participants account being held back because it is illiquid." Do you have a citation or basis for this opinion? I'd say this is a huge problem. It is a fairly safe bet that the plan terms require distribution of the entire account balance. Just on a basic level, this is an operational error, and potentially disqualifying. Possible fiduciary issues spring to mind if the plan is investing in things which inherently do not permit a participant's full benefit to be paid without incurring a substantial loss.

This is purely idle curiosity, so please don't waste any time if you don't know this off the top of your head. Just wondering why the regs were written to make non-deferrals eligible for pre-59-1/2 in-service from an annuity contract, but not from a custodial account (other than hardship). Intentional? Oversight? One of those items lost in antiquity in the days when 403(b)'s were all annuity contracts? Again, doesn't matter - just seems odd.

The Sungard/Relius document seems a bit clearer on this.Emphasis is mine. The 6-month period would seem to be only the initial 6-month period, thereafter, the 1-year requirement. As we are currently looking at switching to FT William, I'm glad this came up so I can ask them about it. (not to exceed 1,000) Hours of Service within (not to exceed 12) consecutive months from the Eligible Employee's employment commencement date. If an Employee does not complete the stated Hours of Service during the specified time period, the Employee is subject to the 1 Year of Service requirement in f. above.

Why in the world they don't make it easier yet, and just just say that the 2-year cycles are calendar year, and your first 2-year cycle begins the first day of the calendar year FOLLOWING the year you receive the designation(s) is beyond me. So your deadline would always be 12/31 of whatever year. But, I'm a simple-minded person, so there are probably reasons why this can't be done...

Try 1.401(k)-3(h)(4). I think this will clear up your questions.

Employer has two 403(b) plans. Don't ask me why, I don't know. Some participants want to change their investments, and transfer the funds from one plan to another. The "other" plan apparently offers different investments. The regs under 1.403(b)-10 generally permit this, but I have a question on one item in the reg. If you look at the section I underlined, I'm concerened that if the investment in the transferor plan, let's say an annuity with TIAA, has a surrender charge, then the accumulated benefit immediately after the transfer won't be at least equal. If read literally, this would prevent ever transferring any investment with a surrender charge, which seems crazy. Any thoughts on this? (3) Requirements for plan-to-plan transfers —(i) In general. A plan-to-plan transfer under paragraph (b)(1) of this section from a section 403(b) plan to another section 403(b) plan is permitted if each of the following conditions are met— (A) In the case of a transfer for a participant, the participant is an employee or former employee of the employer (or the business of the employer) for the receiving plan. (B) In the case of a transfer for a beneficiary of a deceased participant, the participant was an employee or former employee of the employer (or business of the employer) for the receiving plan. © The transferor plan provides for transfers. (D) The receiving plan provides for the receipt of transfers. (E) The participant or beneficiary whose assets are being transferred has an accumulated benefit immediately after the transfer that is at least equal to the accumulated benefit of that participant or beneficiary immediately before the transfer. (F) The receiving plan provides that, to the extent any amount transferred is subject to any distribution restrictions under § 1.403(b)-6, the receiving plan imposes restrictions on distributions to the participant or beneficiary whose assets are being transferred that are not less stringent than those imposed on the transferor plan. (G) If a plan-to-plan transfer does not constitute a complete transfer of the participant's or beneficiary's interest in the section 403(b) plan, the transferee plan treats the amount transferred as a continuation of a pro rata portion of the participant's or beneficiary's interest in the section 403(b) plan (for example, a pro rata portion of the participant's or beneficiary's interest in any after-tax employee contributions). (ii) Accumulated benefit. The condition in paragraph (b)(3)(i)(D) of this section is satisfied if the transfer would satisfy section 414(l)(1).

What changes did they make? (So obviously no, I don't have an explanation, since I don't know what the changes are!)