YankeeFan

Can a VCP filing be submitted anonymously to the IRS for any failure such as failures related to paying required minimum distributions timely and amending the plan document for compliance with EGTRRA?

A self-employed individual with a handful of employees adopted a 401(k) profit sharing plan effective January 1, 2014. The plan was timely adopted in December 2014 and only has a discretionary profit sharing feature for the 2014 plan year. The client inadvertently filed his 2014 personal tax return prior to making a profit sharing contribution for 2014 and without taking a deduction on the returns. It's not likely the client will have the ability to make the contribution before April 15, 2015. Can the client still make a contribution for the 2014 plan year and deduct that amount for 2014 and also count the allocations towards the 2014 415 limit? If it's still possible to make a 2014 deductible contribution, will the client need to file an extension for the 2014 personal tax returns to give himself the ability to make the deposit prior to October 15, 2015. I'm not sure it's even possible to file an extension for a return that has already been filed. Of course, the accountant is willing to amend the 2014 personal tax returns to pick up the deduction assuming it's still possible to make a contribution.

A 5% owner sponsoring a one person defined benefit plan began taking required minimum distributions upon attaining 70 1/2 in 2011. The participant elected to receive the RMD in annual intervals. As such, the annual RMD was always taken in March of the subsequent year. For example, the 2011 RMD was taken in March 2012, the 2012 RMD was taken in March 2013 and the 2013 RMD was taken in March 2014. Let's assume the participant's monthly accrued benefit is $5,000 and furthermore assume the participant's high 3-year average annual salary is $60,000. The annual RMD paid for each year in March 2012, March 2013 and March 2014 equaled $60,000. The plan is terminated effective 4/30/2014 with an assumed distribution date of 6/30/2014. The 5% owner will elect to take the remaining benefit in a single lump sum and rollover the distribution into an IRA. What is the RMD for 2014 that is not eligible for rollover? Note that the plan is slightly overfunded so the goal is to avoid use of the account balance method. The objective is to distribute the greatest amount possible to the participant. Can $60,000 be paid to the participant in order to satisfy the 2014 RMD? If so, will the payment of $60,000 reduce the remaining lump sum as of 6/30/2014 or can the remaining lump sum as of 6/30/2014 be calculated as the PVAB of the unreduced $5,000 monthly accrued benefit using the 2014 applicable mortality table at 5.5%? Please also suggest any other methods that would be deemed reasonable. Thank you.

The corporation is a December 31st fiscal year end and the corporate returns are due September 15, 2013 (with extension). So the question remains, can contributions be made after September 15, 2013 and deducted on the 2013 corporate returns?

A PBGC covered defined benefit plan was terminated effective December 31, 2012. The plan has already been submitted to both the PBGC and IRS. The PBGC 60 day review period has expired but we may wait for IRS approval before assets are distributed. The plan is underfunded and the 2 majority owners intend to forgo receipt of a portion of their benefits to the extend necessary to make plan assets sufficient. The plan sponsor intends to contribute at least the minimum required contribution to the plan prior to the September 15, 2013 funding deadline. The contributions made prior to September 15, 2013 will be deducted on the 2012 corporate tax return. Can the plan sponsor make additional contributions to the plan after September 15, 2013 and deduct these amounts on the 2013 corporate tax return? I'm uncertain since the plan terminated effective December 31, 2012 and there is no valuation required for the 2013 plan year.

A terminated participant in a defined benefit plan has attained the plan's normal retirement age (age 65). In accordance with the plan provisions, distribution to a terminated participant must begin no later than the participant's normal retirement date. The plan does not offer a lump sum provision. The available forms of benefit are a single life annuity, a 50% J&S annuity and a 75% J&S annuity. The benefit calculation has been prepared and the appropriate forms have been provided to the terminated participant. After repeated requests, the participant has failed to return the forms to the plan administrator. The plan's normal form in the case of a married participant is a 50% J&S annuity. Can the age 65 monthly benefit be paid to the participant without the participant's consent in the form of a joing and survivor annuity? If the answer is yes, would you suggest the 50% J&S annuity or the 75% J&S annuity be paid to the participant? These forms of benefit have been calculated using the spouse's exact date of birth. If the benefit can not be paid without the participant's consent, what other options are available to the plan administrator. Note that this individual is not lost or missing. The participant just does not care to respond.

A participant in a defined benefit plan who is a "restricted employee" because of the Top 25 HCE rules requests a single lump sum. The single lump sum is restricted since after the single lump sum payment would be made, the value of the remaining plan assets is less than 110% of the value of the current liabilities. Furthermore, the PPA lump sum restributions do not apply since the plan's AFTAP is greater than 80%. Let's assume the current single lump sum is $200,000 and the annual amount of benefit payable to the participant as a single life annuity is $20,000. It is my understanding that the participant can elect the single lump sum and receive $20,000 as an immediate payment for the 2013 plan year. Let's further assume the plan continues to be restricted for 2014 so I believe the participant can receive an additional $20,000 payment for the 2014 plan year. Is that correct? In addition, can someone confirm whether these partial payments are eliglbe for rollover into an IRA? Let's assume that the single lump sum is no longer restricted for the 2015 plan year. Annual payments of $20,000 have been made to the participant in 2013 and 2014. Exactly how is the remaining lump sum calculated? Should the original single lump sum (equal to $200,000 based on 417(e) rates) be adjusted for interest and then reduced by the 2 annual payments of $20,000 also adjusted for interest? What interest rate should be used for these adjustments? Thanks in advance.

We're actually having the same issues. We published plans to webclient more than 7 hours ago and they have not yet appeared. One plan that was published around 11:30am appeared around 6:30pm. Just curious, how many planbook do you have pending? We have attempted to contact Sungard on several occasions and have not heard back from them.

Yes, there is "ALWAYS" that possibility; technically speaking. You'd be surprised, however, how human many IRS agents can be. They may drill you, but once it becomes clear that there wasn't any intent to deceive and the situation was nothing more than a misunderstanding, they will typically approve what you're trying to do. Good Luck! Thank you for the response. I'm curious if anyone has had any experience with the IRS on a similar matter.

A corporation sponsors a defined contribution plan. There are no employees other than the 100% owner. The owner is beyond age 70 1/2 and receiving required minimum distributions from the plan. All RMDs for 2010 and prior years were distributed on a timely manner. During 2011, the owner dies (before receiving the 2011 RMD) and the owner's spouse (who is the sole beneficiary) is required to receive the 2011 RMD before December 31, 2011. The 2011 RMD is calculated by the TPA and communicated in writing to individuals handling the affairs of the deceased owner. Partially as a result of being unfamiliar with the plan operations, the owner's spouse did not receive the 2011 RMD prior to December 31, 2011. The client would now like to correct the defect by submitting the plan under VCP. The intent is also to get relief from paying the 50% excise tax on the missed RMD. According to the VCP guidelines, if there has been a failure to satisfy the minimum distribution requirements, the IRS will waive the 50% excise tax if the plan sponsor applies for relief through VCP and requests the waiver as part of the submission. If the affected participant is an owner-employee or a 10% or more owner of a corporate plan sponsor, an explanation supporting the waiver request must be attached. If the plan is submitted to the IRS under VCP, is there a possibility that the IRS may not accept the client's explanation and then impose the 50% excise tax on the missed 2011 RMD?

Would someone be kind enough to post a sample employer election to use funding relief under PRA 2010? Thank you in advance.

Prior to plan termination, can a defined benefit plan with a NRA of 62 add a fully subsidized early retirement benefit at age 50 as opposed to the more common age 55? I would like to make sure the IRS would not question this approach.

A sole proprietor maintains a one participant defined benefit plan with a plan year ending December 31st. The plan was terminated effective December 31, 2009. The owner-employee is entitled to a single lump sum of $1,050,000 and intends to cash out the plan before December 31, 2010. The plan's market value of assets is currently $1,000,000. The sole proprietor would like to make a $50,000 contribution to the plan prior to the distribution of assets in order to fully fund the plan. Can the employer (sole proprietor) contribute $50,000 to the plan and take a 2010 deduction against his 2010 net schedule c income although the plan terminated in 2009? Thanks in advance.

I think the 3/31/10 payment covered your 2010 RMD requirement, and all remaining benefits may be rolled over in 2010. The DB RMD rules require that a series of annual payments commence by the required beginning date. There's no need to "double up" in the year following the First Distribution Calendar Year, as there is with a DC plan. Just make the initial RMD by 4/1 following year of attainment of 70.5, with subsequent payments on the anniversary of the initial one. I don't agree that the 3/31/10 payment was for 2009. It was paid in 2010, and therefore covers the RMD requirement for 2010, IMO. Again, the rules for DBPs are different than for DC plans. .. Scott I have a very similar situation and would appreciate additional comments and/or differing views on this calculation.

An employer maintains a cash balance plan which is general testing with other defined contribution plans also maintained by the employer. All eligible employees receive a 1/2% accrual under the cash balance plan so 401(a)(26) is satisfied. The gateway for the NHCEs is satisfied with employer contributions made to the defined contribution plans. Can the gateway and 401(a)(4) nondiscrimination testing be satisfied with contributions made to an ESOP as opposed to a money purchase and/or profit sharing plan? Furthermore, the cash balance plan benefit for non-owners is offset by the actuarial equivalent of the participant's account balance in any defined contribution plan maintained by the employer. Can the ESOP account balance be used for purposes of the offset calculation?

In my example where the minimum required contribution is 100k, I thought that if the 100k contribution is made on 9/15, nothing can be added to the prefunding balance since the contribution for the year did not exceed the plan year's minimum required contribuiton. That was my understanding based on the above posts. Has something changed from the proposed regs?

Suppose a calendar year plan is subject to quarterly contributions of 25k and the plan has carryover and/or prefunding balances totaling 100k. The required minimum contribution for the year is 100k. Must the employer use the carryover and/or prefunding balances to satisfy the quarterly contributions? Could the employer elect not to use the carryover and/or prefunding balances and simply contribute 100k prior to 9/15? Of course in this scenario, the quarterly contributions would have been missed but the carryover and prefunding balances have been preserved. Is this legal?

Unfortunately, we have not been able to get the special run setting to work. Do you happen to know when we can expect Version 16.0 to be released? We are currently running Version 14. We would like to go to Version 15 but cannot do so without updating our hardware. When we purchase new computers for the office, it makes sense to get MS Windows 7 on the new machines...but then we may not be able to run Relius Administration and very well may be forced to downgrade the operating system to Windows XP.

We have not been able to get a satisfactory answer from Relius as to whether Relius Administration 15.0 works under the Microsoft Windows 7 operating system. Any input would be helpful. Is anyone currently running Relius Administration 15 standalone version on a computer with MS Windows 7 as its operating system?

Lets assume you have a one participant defined benefit plan sponsored by a sole proprietor. The plan's normal form of benefit is a 100% J&S annuity. Note that a single lump sum is one of the plan's optional forms of benefit. The actuarial valuation for the year prior to the enactment of the PPA funding rules was prepared on the basis the participant would receive a 100% J&S annuity from the plan which had the effect of increasing the funding obligation. Is it reasonable to continue to fund for the 100% J&S annuity under the new PPA funding rules if the participant at this time indicates his intent is to indeed take a 100% J&S annuity from the plan? Therefore, we would fund for the annuity and use 0% as the probability of the lump sum. Is this approach too aggresive or can it be deemed unreasonable by the IRS upon audit?

A qualified retirement plan is sponsored by a sole proprietor. The plan solely covers the owner-employee and is therefore not subject to Title I of ERISA. Was the plan required to adopt an amendment for compliance with the automatic rollover provisions under IRC 401(a)(31)(B)?

Thanks for your response. Has anyone increased the normal retirement date and not actuarially increased the BOY and EOY accrued benefits? Is there any justification to do it that way?

Is the above approach valid under PPA? For example, the plan's normal retirement age as defined in the document is age 65 with 5 years of participation. Can you change the normal retirement date for funding purposes to age 69 without actuarially increasing the BOY and EOY accrued benefits that are payable at age 65? Lets assume that we're dealing with a one participant plan where the sole participant is the owner-employee.

We just took over a profit sharing plan that currently has a GUST prototype document. The client’s EIN ends in “2”. Can we restate their current GUST prototype into an EGTRRA Volume Submitter? The document provider/sponsor for the GUST prototype is different than the document provider/sponsor for the EGTRRA Volume Submitter that we use. Did the client need to timely execute a Form 8905 in order to restate in the above manner? Your input is much appreciated.

A plan sponsor adopts a new defined benefit plan effective 1/1/09. The plan's benefit formula grants prior service credit. As such, each eligible participant has an accrued benefit as of 1/1/09. The purpose of granting prior service credit is to create a cushion amount and increase the maximum deductible contribution. Lets assume the following: Funding Target as of 1/1/09: 200,000 Target Normal Cost for 2009: 0 Assets as of 1/1/09: 0 Shortfall Amortization Balance as of 1/1/09: 200,000 Since the plan grants prior service credit, the benefits are accrued as of 1/1/09 and there is no target normal cost for the year. In this case, each participant accrues 1/10 of the 415 dollar limit as of 1/1/09. Two questions - (1) Does it make sense that the Minimum Required Contribution is the amortization of the $200,000 shortfall amortization balance (or lets say about $40,000)? If the plan had not granted prior service credit, the Minimum Required Contribution would be $200,000. (2) The AFTAP as of 1/1/09 is 0% (0/200,000). Is there an exception for new plans or would the plan have benefit restrictions the first year?