Belgarath

The plan sponsor is not required to provide notification that they will not be adopting this optional provision. If the plan sponsor amends the language to permit such rollovers, they would either provide a Summary of Material Modification, or a new Summary Plan Description. Either way, it is possible/likely that the plan sponsor won't make a decision prior to February 15th. I suspect that many/most plan sponsors will ultimately allow this, but they often aren't in any particular hurry - it is one more potential added complexity/expense that they may not want to bother with.

Probably not. Stock can only be attributed once through family members. (IRC 318(a)(5)) But, for example, if the owner is not a 100% owner and the spouse owns any stock directly, or there are options involved, then it is possible that the father-in-law would have to receive a RMD.

IMHO, and assuming that the new company is truly independent, no attributed ownership through options, etc., and none of the employees are shared: 1. I agree. 2. Yes.

Depends upon the periodic payment. Many periodic payments are "eligible rollover distributions." If so, then mandatory withholding applies. If not an ERD, then as B2kates mentions, recipient can elect out of withholding.

Just a wild thought for a Monday morning (oops, Tuesday) - is your client the only person required to be bonded? If so, and presuming he/she has no intention of absconding with the funds, why not take the 300 bond? (assuming the quote is valid - but I doubt it is...) Without taking the time to really analyze this issue, my off the cuff thought is that if I'm the one purchasing the bond, and I'm the only person being bonded, I'd get the cheapest bond I could find - since I'm not going to steal the money, I'll never collect on the bond, and whether the company is financially unsound, etc. - as long as they are on the list of acceptable companies, then I don't care about the quality of coverage. Very different from purchasing any other type of insurance, where I am generally the one being protected. Now, if there is another fiduciary that must be bonded as well, then, then it is a whole different ball game.

There's no such thing as too much wine. Try this at the next medical society meeting - posit that the liver is a muscle, and therefore must be exercised regularly to be healthy. (Might be scary if some of them agree) Andy - I agree wacky, but I've actually seen this a couple of times where there are several HC that are not also keys. Always throws me for a loop because I have a horrible tendency to treat the two as identical, which they generally are in our plans, but not always...

This sounds suspiciously like a RIA paragraph reference to a writeup/analysis of the PPA '06. I'd ask the accountant for a copy of the reference. And part of it says, "As under present law, for purposes of determining the excise tax on nondeductible contributions, matching contributions to a defined contribution plan that are nondeductible solely because of the overall deduction limit are disregarded." Anyway, you'd want to look at IRC 404 as amended by Section 803 of PPA '06. Hope this helps.

Sorry, but I don't necessarily agree that the distribution must take place in 5 years. Assuming (always dangerous to assume) that the surviving spouse is the sole beneficiary, see 1.401(a)(9)-3, Q&A-3(b)(2). Assuming the plan allows it, I don't see why she couldn't leave it in the plan, and withdraw as needed and permitted by the plan.

Well, perhaps one of the true SIMPLE gurus like Gary Lesser will chime in at some point, but IMHO... I think the effective date provision is to specifically allow either plans for new new employers, or new plans for existing employers, to be instituted after the beginning of the calendar year. As far as deferrals, I agree that you can't defer (for W-2 employees) based upon compensation prior to the effective date of the plan. However, I'd say that for the employer match, which is dollar for dollar up to 3% of compensation, that this compensation would be besed upon the ENTIRE calendar year compensation, and not limited to comp during the "short" initial year. I don't see any way around this.

Yes, I agree. Of course, my opinion and a dollar are still only worth a dollar, so caveat emptor!

I think it is permitted under 10.05. This seems to apply to your situation, where there are multiple entitities but only one plan. So if the parent's EIN is used for the 5500 filing, then the remedial amendment cycle is determined by the last digit of the EIN for that parent corporation, and that corporation only. I don't think 10.07 is the applicable section in this situation, if I'm reading it correctly. So I'm saying that you cannot make the determination that you can't use the EIN of the parent. Which I think is agreeing with you.

Yes, there's a potential problem. One of the requirements for eligibility is that the employer does not "...maintain during any part of the calendar year another qualified plan with respect to which contributions are made, or benefits accrued, for service in the calendar year." (My emphasis) So if a contribution is made for the PS plan year ending 6-30-07, this requirement isn't satisfied, and they cannot have a Simple plan for 2007. If there are no contributions to the PS plan, then you aren't using the "same" compensation twice, and therefore you should be fine for a Simple plan beginning 7-1-07.

I'll toss out my opinion here. Since you have specific statutory/regulatory requirements as to the allowable methods of correcting failures, and since your proposed method is not one of those allowable corrections, then you can't do it, or at least the plan can't explicitly provide for it. I suppose you might be able to somehow get the "net effect" by distributing and then increasing deferred comp by that amount, depending upon timing, but that's purely speculative on my part - I really don't know.

I'd go back and check the document/adoption agreement again. I've never seen a document that doesn't specify what death benefit options are available to beneficiaries.

See Section V of IRS Notice 2007-7. V. SECTION 829 OF PPA '06 Under § 402©(11) of the Code, which was added by § 829 of PPA '06, if a direct trustee-to-trustee transfer of any portion of a distribution from an eligible retirement plan is made to an individual retirement plan described in § 408(a) or (b) (an "IRA") that is established for the purpose of receiving the distribution on behalf of a designated beneficiary who is a nonspouse beneficiary, the transfer is treated as a direct rollover of an eligible rollover distribution for purposes of § 402©. The IRA of the nonspouse beneficiary is treated as an inherited IRA within the meaning of § 408(d)(3)©. Section 402©(11) applies to distributions made after December 31, 2006. Q-11. Can a qualified plan described in § 401(a) offer a direct rollover of a distribution to a nonspouse beneficiary? A-11. Yes. Under § 402©(11), a qualified plan described in § 401(a) can offer a direct rollover of a distribution to a nonspouse beneficiary who is a designated beneficiary within the meaning of § 401(a)(9)(E), provided that the distributed amount satisfies all the requirements to be an eligible rollover distribution other than the requirement that the distribution be made to the participant or the participant's spouse. (See § 1.401(a)(9)-4 for rules regarding designated beneficiaries.) The direct rollover must be made to an IRA established on behalf of the designated beneficiary that will be treated as an inherited IRA pursuant to the provisions of § 402©(11). If a nonspouse beneficiary elects a direct rollover, the amount directly rolled over is not includible in gross income in the year of the distribution. See § 1.401(a)(31)-1, Q&A-3 and-4, for procedures for making a direct rollover. Q-12. Can other types of plans offer a direct rollover of a distribution to a nonspouse beneficiary? A-12. Yes. Section 402©(11) also applies to annuity plans described in § 403(a) or (b) and to eligible governmental plans under § 457(b). Q-13. How must the IRA be established and titled? A-13. The IRA must be established in a manner that identifies it as an IRA with respect to a deceased individual and also identifies the deceased individual and the beneficiary, for example, "Tom Smith as beneficiary of John Smith." Q-14. Is a plan required to offer a direct rollover of a distribution to a nonspouse beneficiary pursuant to § 402©(11)? A-14. No. A plan is not required to offer a direct rollover of a distribution to a nonspouse beneficiary. If a plan does offer direct rollovers to nonspouse beneficiaries of some, but not all, participants, such rollovers must be offered on a nondiscriminatory basis because the opportunity to make a direct rollover is a benefit, right, or feature that is subject to § 401(a)(4). In the case of distributions from a terminated defined contribution plan pursuant to 29 C.F.R. § 2550.404a-3(d)(1)(ii), the plan will be considered to offer direct rollovers pursuant to § 402©(11) with respect to such distributions without regard to plan terms. Q-15. For what purposes is the direct rollover of a distribution by a nonspouse beneficiary treated as a rollover of an eligible rollover distribution? A-15. Section 402©(11) provides that a direct rollover of a distribution by a nonspouse beneficiary is a rollover of an eligible rollover distribution only for purposes of § 402©. Accordingly, the distribution is not subject to the direct rollover requirements of § 401(a)(31), the notice requirements of § 402(f), or the mandatory withholding requirements of § 3405©. If an amount distributed from a plan is received by a nonspouse beneficiary, the distribution is not eligible for rollover. Q-16. If the named beneficiary of a decedent is a trust, is a plan permitted to make a direct rollover to an IRA established with the trust as beneficiary? A-16. Yes. A plan may make a direct rollover to an IRA on behalf of a trust where the trust is the named beneficiary of a decedent, provided the beneficiaries of the trust meet the requirements to be designated beneficiaries within the meaning of § 401(a)(9)(E). The IRA must be established in accordance with the rules in Q&A-13 of this notice, with the trust identified as the beneficiary. In such a case, the beneficiaries of the trust are treated as having been designated as beneficiaries of the decedent for purposes of determining the distribution period under § 401(a)(9), if the trust meets the requirements set forth in § 1.401(a)(9)-4, Q&A-5, with respect to the IRA. Q-17. How is the required minimum distribution (an amount not eligible for rollover) determined with respect to a nonspouse beneficiary if the employee dies before his or her required beginning date within the meaning of § 401(a)(9)©? A-17. (a) General rule. If the employee dies before his or her required beginning date, the required minimum distributions for purposes of determining the amount eligible for rollover with respect to a nonspouse beneficiary are determined under either the 5- year rule described in § 401(a)(9)(B)(ii) or the life expectancy rule described in § 401(a)(9)(B)(iii). See Q&A-4 of § 1.401(a)(9)-3 to determine which rule applies to a particular designated beneficiary. Under either rule, no amount is a required minimum distribution for the year in which the employee dies. The rule in Q&A-7(b) of § 1.402©-2 (relating to distributions before an employee has attained age 70 1/2) does not apply to nonspouse beneficiaries. (b) Five-year rule. Under the 5-year rule described in § 401(a)(9)(B)(ii), no amount is required to be distributed until the fifth calendar year following the year of the employee's death. In that year, the entire amount to which the beneficiary is entitled under the plan must be distributed. Thus, if the 5-year rule applies with respect to a nonspouse beneficiary who is a designated beneficiary within the meaning of § 401(a)(9)(E), for the first 4 years after the year the employee dies, no amount payable to the beneficiary is ineligible for direct rollover as a required minimum distribution. Accordingly, the beneficiary is permitted to directly roll over the beneficiary's entire benefit until the end of the fourth year (but, as described in Q&A-19 of this notice, the 5-year rule must also apply to the IRA to which the rollover contribution is made). On or after January 1 of the fifth year following the year in which the employee died, no amount payable to the beneficiary is eligible for rollover. © Life expectancy rule. (1) General rule. If the life expectancy rule described in § 401(a)(9)(B)(iii) applies, in the year following the year of death and each subsequent year, there is a required minimum distribution. See Q&A-5©(1) of § 1.401(a)(9)-5 to determine the applicable distribution period for the nonspouse beneficiary. The amount not eligible for rollover includes all undistributed required minimum distributions for the year in which the direct rollover occurs and any prior year (even if the excise tax under § 4974 has been paid with respect to the failure in the prior years). See the last sentence of § 1.402©-2, Q&A- 7(a). (2) Special rule. If, under paragraph (b) or © of Q&A-4 of § 1.401(a)(9)-3, the 5-year rule applies, the nonspouse designated beneficiary may determine the required minimum distribution under the plan using the life expectancy rule in the case of a distribution made prior to the end of the year following the year of death. However, in order to use this rule, the required minimum distributions under the IRA to which the direct rollover is made must be determined under the life expectancy rule using the same designated beneficiary. Q-18. How is the required minimum distribution with respect to a nonspouse beneficiary determined if the employee dies on or after his or her required beginning date? A-18. If an employee dies on or after his or her required beginning date, within the meaning of § 401(a)(9)©, for the year of the employee's death, the required minimum distribution not eligible for rollover is the same as the amount that would have applied if the employee were still alive and elected the direct rollover. For the year after the year of the employee's death and subsequent years, see Q&A-5 of § 1.401(a)(9)-5 to determine the applicable distribution period to use in calculating the required minimum distribution. As in the case of death before the employee's required beginning date, the amount not eligible for rollover includes all undistributed required minimum distributions for the year in which the direct rollover occurs and any prior year, including years before the employee's death. Q-19. After a direct rollover by a nonspouse designated beneficiary, how is the required minimum distribution determined with respect to the IRA to which the rollover contribution is made? A-19. Under § 402©(11), an IRA established to receive a direct rollover on behalf of a nonspouse designated beneficiary is treated as an inherited IRA within the meaning of § 408(d)(3)©. The required minimum distribution requirements set forth in § 401(a)(9)(B) and the regulations thereunder apply to the inherited IRA. The rules for determining the required minimum distributions under the plan with respect to the nonspouse beneficiary also apply under the IRA. Thus, if the employee dies before his or her required beginning date and the 5-year rule in § 401(a)(9)(B)(ii) applied to the nonspouse designated beneficiary under the plan making the direct rollover, the 5-year rule applies for purposes of determining required minimum distributions under the IRA. If the life expectancy rule applied to the nonspouse designated beneficiary under the plan, the required minimum distribution under the IRA must be determined using the same applicable distribution period as would have been used under the plan if the direct rollover had not occurred. Similarly, if the employee dies on or after his or her required beginning date, the required minimum distribution under the IRA for any year after the year of death must be determined using the same applicable distribution period as would have been used under the plan if the direct rollover had not occurred.

Ditto!

IRC 72(t).

Full calendar year. There is no short plan year/compensation period provision in 408(p).

Yeah, we'll just agree to disagree on this one. You may be right. I'd maintain that they can't possibly be "late" if they can't be deposited into the plan, and they can't be deposited into the plan until the income can be known, because you can't "defer" income until you have income. And it may turn out that income is lower than the amount already deposited. But heck, whatever works. At this point at least, I think this is one of those esoteric questions that we TPA's love to debate, which the IRS/DOL don't appear to find of any particular concern. Yet... A Happy and Healthy Holiday Season and New Year to all! (I'm out from this afternoon to January 2, so I'm in a rather jovial mood this morning. No amount of wandering through obscure regulations can disturb my equanimity today.)

We have, on rare occasions, had a client or CPA who got in a snit and refused to file for an EIN. That's their right, but we just tell them to go elsehwere for their plan administration. Life is too short, and a plan that starts on this kind of basis is generally a losing proposition from the start!

Wsp - Rcline and I are talking about the Employer id #. The Trust id# is a separate thing, (or EIN for the trust, whatever terminology you choose to use - we find it less confusing for our clients to discuss the issue in terms of TIN's and EIN's) and yes, I agree they would want a separate TIN regardless of what they choose to do for an EIN. The investments would be registered under the TIN.

I agree with MJB. It isn't always reasonable to do it earlier, (yes, I know, the DOL isn't noted for being reasonable) but I, too, have yet to hear from any credible source that this practice has been challenged.

There are different rules depending upon which direction you are changing. You could take a look at IRS Notice 98-1, and regulation,1.401(k)-2©, IRC 401(k)(3)(A), and 1.401(m)-2© for starters. There's also an "anti abuse" rule for multiple changes - see 1.401(k)-1(b)(3) and 1.401(m)-1(b)(3). And slogging through these will undoubtedly lead you to some additional sections.

We are not receiving this type of request (yet, anyway...) but we also deal almost exclusively with small employers, so perhaps your case is a larger employer?

You could possibly refer him to the footnote #1 on page 2 of the SS-4 itself. But this may be a hard sell if no forms are being filed, and no distributions are being made.