Dougsbpc

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.

A DB plan has been using the full yield curve. I beleive we have a one-time ability to switch to segment rates (not MAP-21 rates) starting in 2012. I think we have until the filing due date of the 5500 to make the election. Does anyone know of any sample election language? Thanks.

Can a 401(k) plan with a SHNEC also have an integrated Employer nonelective contribution allocation? Can the SHNEC be used as part of that integrated employer nonelective contribution allocation? Thanks.

This is somewhat related to another post which is a hot topic, but it may be a little different. One employer sponsors two 401(k) Plans: Plan A is a non safe harbor plan covering 5 owners only. Plan B is a safe harbor plan covering the 5 owners and 10 employees. It provides the standard match safe harbor and only non-keys are entitled to the SH match. No contributions have been made to the non safe harbor plan for 4 years (ever since the safe harbor 401(k) plan has been adopted). Also, no owner has ever made salary deferral contributions to the safe harbor plan. One owner made salary deferral contributions to the non safe harbor plan. On the surface, this would appear to be non-discriminatory. Non-keys and NHCEs are definitly getting better benefits than key HCEs. 1. Can plan A and plan B be aggregated for 410(b)? 2. Would the ADP test for plan A be done by aggregating plan A and plan B? 3. If the group is top heavy, is the TH minimum satisfied by all non-keys being in a safe harbor 401(k) plan? Thanks.

I know this has probably been answered but I was not able to find through the search. For 401(k) plans that have a brokerage account for each participant and traditional and Roth deferrals, are most requiring a separate brokerage account for the Roth money? It would sure be easier just to record keep each source separately within the same brokerage account. Thanks.

It is interesting. The plan definition of total compensation also includes "Deemed Section 125 Compensation". So even though the Employer HSA contribution is funded through a 125 plan and not taxable to the participant, it is counted as plan salary for all purposes. Revenue ruling 2002-27 allows this.

What about HSA contributions contributed by employees?

A 401(k) plan considers plan compensation to be gross W-2 salary + section 125 contributions. I dont believe HSA premiums should be added. Does anyone agree / disagree? Thanks

Suppose you have a one participant plan that has a plan year that begins 9/1/2012 and ends 8/31/2013. If the plan terminates 2/28/13, the participant has 10 years of participation, maximum average salary and is age 65, would his 415 dollar limit be $17,083? Thanks.

Suppose you had a 12/31/12 profit sharing plan that added salary deferrals and safe harbor match features effective 10/1/2012. The employer will fund the SH match after December 31. They will not make any profit sharing contribution. The SH match of course will be based on salary deferrals from 10/1/12 - 12/31/12. Will it also be limited to salary from 10/1/12 - 12/31/12 or could it be based on salary for the entire year? Thanks

Suppose you have a profit sharing plan where one of the participants had no contribution or forfeiture allocation. Can that salary be used for the 25% deduction limit? I think not. Does anyone agree? Disagree? Thanks.

We administer a Profit Sharing Plan that had 7 participants for many years. All were terminated back 3 years ago. Partial plan term so all were made 100% vested and paid all their benefits. For the past 3 years, only the company owner who is also trustee has remained. No contributions have been made in the past 6 years. They just sent us the year end information and investment statements showed the withdrawal of all assets throughout the past year. Upon asking the owner (and only remaining participant) where the money went and he replied "my pockets". He mentioned that he never contacted us because he needed the $400k and felt no need to go through us for the "nonsense" of benefit elections and withholding etc. Besides the considerable problem of no tax withholding, are there any other problems? He is willing to pay all taxes and pre-mature distribution penalties.

It was the fault of the trustee, who also happens to be 100% shareholder of the corporation that sponsors the plan. Also, it was his personal account that the $100k was mistakenly transferred to.

Thanks all for the replies. Not sure why this one would need to go to counsel. I agree in cases where the excise tax would be a high number or involve a complex transaction. In this case it was an honest mistake and the account it went into only earned .21%. The excise tax will be less than $400.

A trustee of a small 401(k) plan with pooled investments moved $100,000 from bank A to bank B. He himself had a personal account at bank B and $100,000 of plan money mistakenly went into his personal account. This was not caught until a year later. They will transfer the funds back to the plan account with proper interest, file 5330 and pay the excise tax on the prohibited transaction. Section 4975 indicates that the disqualified person who engaged in the prohibited transaction is responsible for the excise tax. However, the definition of disqualified person could also include the plan sponsor, fiduciary etc. Should he personally pay the excise tax or should the plan sponsor? Thanks.

A 401(k) plan with 20 participants terminates 7/7/2012 because the plan sponsor is being bought by another company. The buyout deal falls through 11/2/2012. The only action that has taken place is that a resolution and amendment have been executed to terminate the plan. Could they just adopt a new resolution and amendment to activate the plan or must they go through with the plan termination then adopt a new plan a year from now? Thanks.

The regulations state that the most valuable accrual rate should be based on the increase in the participant's most valuable optional form of benefit, and further, that the most valuable optional form is determined by calculating the normalized QJSA associated with the accrued benefit. (1.401(a)(4)-3(d)(1)(ii)) Does anyone believe that a lump sum would be the most valuable optional form of benefit if a plan offers a lump sum as an optional form of benefit? The difference in the most valuable accrual rate is substantial. Thanks.

Suppose you have a plan that was not frozen. Instead, the plan was amended to reduce the benefit formula a few years ago. As a consequence, most full time participants have not accrued additional benefits over and above their grandfathered accrued benefits for the past two years. All will next year as the new benefit will exceed grandfathered benefits. I would think participants would be entitled to a 415 dollar limit increase for the two years when they did not have an increase in their accrued benefit. This because they would have met all the requirements to accrue a benefit for those years. Anyone agree / disagree? Thanks

Suppose you have a safe harbor plan that deposits safe harbor employer contributions more than 2 years after 8 1/2 months after the plan year end. Along with going through VCP to make up the late contributions, are they able to take a deduction in the year the contributions are deposited? Thanks

Suppose you have a safe harbor 401(k) plan. An Employee participated in the plan for several years, then she terminated had a distribution and returned to work 3 years later. However, she returned under an excluded class of employees. Normally, she would have re-entered the plan the day she was re-hired. Can she be excluded by class under a safe harbor 401(k) plan? I would think so as long as the plan passes 410(b). Anyone agree / disagree?