Dougsbpc

We have a client who has a small defined benefit plan and 401(k) plan. Only he and his wife are participants. He wants to invest in Austrailian real estate. Can this be done? Thanks.

A sole proprietor does business from 1/1/2007 to 12/31/2010. He then forms a corporation on 1/1/11 and also hires an employee on that date. On 1/1/2013 the corporation adopts a SEP that requires 3 years to be eligible. Can the business owner be eligible for the SEP by counting years with his sole proprietorship? Thanks.

Have a very unusual scenario. A prospective sole proprietor client sponsors a traditional DB plan with 3 participants. His girlfriend is also a sole proprietor (in the same field) and sponsors her own traditional DB plan. Believe it or not, they just got married and she now merged her business with his. Apparently, when they met some years ago they each set up a prototype DB plan at a fund company. Is it possible to merge the traditional DB plans?

We have a 401(k) plan client that had been a 9/30 C-corporation. In late February they filed to be an S-corporation. As such, their accountant is filing a tax return for the period 10/1/2013 - 12/31/2013. Their 401(k) plan currently has a 9/30 year end. Question: can the plan be amended now (April 8, 2014) to change to a short plan year for the period 10/1/13-12/31/13 or must the amendment be prospective? Thanks

Suppose you have a safe harbor 401(k) plan with a safe harbor match. This year the employer wants to also make a profit sharing contribution. Each participant is considered their own group. Also the plan has no hours or last day requirement for a profit sharing allocation. An employee terminates 9 months into the year. Can he receive a $0 profit sharing allocation or must he get the gateway because he was entitled to the safe harbor match? Thanks.

For what it is worth, we just had an IRS audit of a floor offset DB plan and everything was fine. In this case, 7.5% of salary profit sharing was allocated to all but one participant in their 401(k) plan every year. The one participant who usually received a 15% allocation was excluded from the DB plan. In addition, the DB plan document had special language indicating that the defined contribution plan offset is the actuarial equivalent benefit resulting from employer allocations of a uniform 6% of annual salary and accumulated earnings for those eligible employees who participate in the Defined Benefit Pension Plan. I would be curious to hear what others think about carving a 6% of salary contribution offset from the 7.5% contribution allocation.

It appears there is no special treatment for RMD's from Roth accounts. So for example, if a participant has reached their RBD and they have $10,000 in a Roth salary deferral account and $5,000 in a traditional match account, the entire $15,000 is used when determining the RMD. Suppose the RMD is $600. Can they choose to: 1. Take it all from Roth? 2. Take all of it from Traditional? 3. Take some of it from Roth and some of it from Traditional? Thanks.

Thanks for the clarification. What about a plan that used the full yield curve prior to 2012? Was there a special election that had to be signed by July 5, 2013 to revoke use of the full yield curve effective for 2012 and future years? What if the interim amendment was signed prior to July 5, 2013?

A plan document interim amendment was signed 12/31/2012. As part of this good-faith interim amendment, the plan was amended effective for plan years beginning in 2012 to incorporate MAP-21 provisions and rates. As part of the amendment, a plan sponsor could elect to delay MAP-21 to plan years beginning in 2013 or to apply the MAP-21 provisions just for the AFTAP. Question: must there be a written election to the plan actuary to use the MAP-21 rates? Or does the signed amendment incorporating those rates suffice? Thanks.

Not a minimum participation issue if at least 40% benefit at least .5% per year prior to the offset. The additional requirement is that the DC plan provide uniform allocations for those who have their benefits offset in the DB plan.

Suppose a traditional DB plan provides nhces a benefit of .5% of average salary. The employer also sponsors a 401(k) plan. Could the 401(k) plan provide nhces with a 6.5% mandatory employer contribution in the 401(k) plan and meet the minimum gateway? It seems that a DB benefit is generally worth more than twice a DC contribution. The logic being a 5% top heavy minimum in a DC plan is equivalent to a 2% top heavy minimum benefit in a DB plan. Thanks

We have a potential takeover of a safe harbor 401(k) plan and a cash balance plan. The safe harbor 401(k) plan has a safe harbor match. For 2012, it appears they used the safe harbor match and profit sharing contribution to satisfy the minimum gateway. We don't believe the the safe harbor match can be used for gateway purposes. Does anyone agree or disagree? Thanks.

This is a single employer plan and there is an afiliated service group. The document appears to require the aggregation of compensation from related employers. The definition of Total Compensation for self-employed participants is earned income net of the adjustments for contributions and 1/2 SE tax. I am just not sure whether this would include losses. In other words should it be $100,000 combined with $0 = $100,000 or $100,000 -$80,000 = $10,000.

Suppose you have a calendar year 401(k) plan sponsored by a Corporation. Also an LLC adopted the plan as a participating employer. Ellen, the 100% shareholder of the corporation also has a 45% interest in the LLC. Her compensation was as follows: 1. Corporation W-2 = $100,000 2. LLC K-1 self employment income (adjusted for contribs 1/2 SE tax etc) = -$90,000 Question: Must the $100,000 be aggregated with -$90,000 for contribution allocation purposes? Or does the the corporation fund its contribution based on $100,000 of salary and the LLC fund its contribution based on $0? Thanks a million.

We are a TPA for qualified plans but sometimes get requests for nonqualified plans. Thanks.

A 1 participant DB is sponsored by a sole proprietor. We have always suggested he incorporate. In 2011 he had $0 net profit. He thought 2012 was going to be a good year so he contributed $50,000 mid year without ever consulting us. It turns out he had $0 net profit for 2012 (plenty of revenue but plenty of expenses). With his MAP-21 election his minimum would have been $0. I don't believe he can remove the contribution based on it being non-deductible. Does anyone agree or disagree? Thanks.

A Form 5500-SF was filed for a 1 participant plan for 2010 and 2011. The 1 participant is the 100% owner of the corporation that sponsors the plan. The plan has always had less than $75,000 of assets. They should be eligible to file a 5500-EZ. The question is, would they be able to file no return since they are 5500-EZ eligible but have assets less than $250,000? In other words, are they eligible to not file given they already electronically filed in the past? Thanks.

A floor-offset defined benefit plan will be terminated with excess assets. The plan is covered by PBGC so priority categories 1-6 must be followed. The allocation of excess will pass 401(a)4 on its own. Question: Must the excess allocation be provided before offset or after offset? For example, suppose a participant has PVAB of $10,000 prior to offset and an offset of $15,000 resulting in $0. Now he receives an excess allocation equal to $1,000. Is his distribution: A. $10,000 + $1,000 - $15,000 = $0 or B. $10,000 - $15,000 = $0, + $1,000 = $1,000 Thanks.

We are a plan administrator and have an outside actuary certify all the schedule SBs. Sometimes clients are quite eager to file right away. However, the actuary is often swamped between 8/1 and 10/15 (understandably). This because often many of the small clients fund late in the year. It seems like as long as the actuary delivers the certified SB by 10/15 (the filing deadline) per the 5500-EZ instructions, the SB would be considered retained with plan records. In any event, really appreciate the responses on this issue that may not have a clear answer.

For a one participant Defined Benefit Plan: The 5500-EZ instructions indicate that the schedule SB should not be filed but instead it must be retained with plan records. The instructions also indicate that the enrolled actuary must deliver the certified schedule SB to the filer no later than the filing deadline. It appears there is no requirement to actually wait for the schedule SB before filing. For example, if a client is on extension until 10/15/13 but files the 5500-EZ on 8/7/13, is that a problem if the SB is not signed until 10/14/13? Thank.

Have a small client that terminated their DB plan and 401(k) plan effective 1/31/12. The plans just covered husband and wife (no employees). We have been reminding them of the one year distribution rule. However, they are going through a very bitter divorce and assets (including plan assets and benefits) are part of it. They have not been able to finalize the financial aspects regarding plan assets. I dont believe there is any relief (other than non-liquid assets) in terms of the one year distribution requirement. Has anyone been through this? Is there any solution? Thanks.

A frozen underfunded defined benefit plan has met the requirements to be deemed as satisfying 401(a)(26) and the prior benefit structure test under the special exception. One of the requirements for the exception is that the plan does not have sufficient assets to pay all benefits as evidenced by the schedule SB. The liabilities on the schedule SB can be considerably lower than what actual benefit liabilities are if all benefits were distributed (especially with a MAP election). It appears this requirement only applies to the liabilities as reflected on the schedule SB. Anyone agree? Disagree?

An LLC covering two 50% partners/owners has had a defined benefit plan for 6 years. They froze benefits as of 12/31/12 and terminated the plan effective 6/15/2013. They also hired 4 employees back in June 2012, all of which would enter the plan 7/1/2013. The plan is fully funded or close to being fully funded (depending on the marklet) with the 2012 year contribution. Each of the participants have 415 limits that far exceed their accrued benefits. Since PPA allows such high contributions, could they make a large deductible contribution for 2013 even though the plan terminated 6/15/2013? Would there be any discrimination issues with the employees that did not enter the plan by the time it terminated? Thanks.

Can a cross-tested profit sharing plan use accrued-to-date method based on average comp with a corrective amendment bringing in a NHCE who is not yet eligible? Can't seem to find anything that prohibits this. Thanks.

Suppose you have a 5 participant DB plan that was frozen three years ago. The plan is not top heavy. The plan has a maximum benefit of $5,000 per month. Only the company owner (and only HCE) has been limited by this maximum. Could the maximum benefit be amended to $5,500 without unfreezing benefit accruals? If this is possible, the company owner would still have accrued considerably less per year of participation than any other participant. There were no former participants. Also, all other participants have accrued much more than .5% of pay per year of participation so I would think 401(a)26 would not be a problem. Thanks.