Vlad401k

Let's say a plan excludes all years of vesting service prior to age 18. How does that provision actually affect a participant. Let's say someone turns 18 during the plan year. While the participant worked over 1,000 during the whole year, the participant only worked 500 hours since turning 18 (the plan required 1,000 hours to get a vesting year of service). Does the participant get full vesting credit for that year since he turned 18 during the year, or are the hours prior to his 18th birthday excluded for vesting purposes?

Could someone please confirm if I'm correct in regards to this procedure of rolling Traditional 401k funds into a Roth IRA? 1) Code "G" will be used for this distribution. 2) The total distribution amount will be included as "taxable income". However, taxes don't actually have to be withheld at the time of the distribution. The taxable amount will simply be added to the participant's ordinary income for the year. 3) There will only be 1 1099-R issued. Do you agree with all 3 of these procedures?

The title basically says it all. Can a plan that does not allow Roth Deferrals allow Roth Rollover into the plan or is that not permitted?

Thanks Lou. Could you please enlighten me what the 11(g) amendment is and how it applies here? Appreciate the help.

Let's say the plan is cross-tested and the owners want to max out and give themselves the profit sharing contribution that will bring them to the 415 limit. The plan gives a 3% Safe Harbor non-elective contribution as well. However, there is an allocation condition (have to be employed on last day of the plan year to receive an allocation) on the regular profit sharing contribution. A few people were terminated during the year and while they receive the Safe Harbor non-elective, they are not entitled to the regular profit sharing because they didn't meet the allocation condition. Because they don't receive the regular profit sharing contribution, the plan fails to allocate the minimum gateway. My question is this: can the document be retroactively amended in 2015 in order to remove the allocation condition and allow all the employees to receive the regular profit sharing contribution?

We have a Safe Harbor plan that does not currently allow for In-Service distributions. The owner needs to take money out of his plan in order to help his business and be able to maintain the 401k plan. If he won't amend the document, he will have to terminate the plan. I've read a lot about amending the Safe Harbor plan mid-year and because in-service distribution amendment was not on the list of allowable amendments, which leads me to believe that this amendment is not allowed. However, I've also heard people on here comment that amendments like that should be allowed for a Safe Harbor plan and the whole restriction was not meant to be an exhaustive list of all possible amendments. What is your opinion? Do you think the owner should be able to amend the plan mid-year?

Company B did an asset purchase for Company A and acquired Company A's employees under "same desk rule". What should the board of resolution language be for this amendment?

Can a participant request a distribution of RMD that's greater than the required minimum if the plan does not otherwise allow for in-service distributions? It is my understanding that the plan has to distribute just the minimum and anything above that is not allowed (as long as in-service distributions are not allowed). Would you tend to agree with that? Also, do you use 10% as the default withholding (plus state withholding) if there was no indication of what the participant would like to withhold?

A participant chose to enroll in the plan 3 years ago. Let's say they chose to defer 4% of comp. From my understanding, a QNEC of 50% of that (2% of comp) needs to be made by the employer for these 3 years as well as any missed match/profit sharing. My questions is this: the IRS states that this amount must be adjusted for the earnings. How do you calculate the earnings? There are two possible scenarios for this plan: 1) Use the earnings for the fully managed model the participant selected and calculate the returns for each contribution. This will take significant amount of work on the part of the TPA. 2) Use the VFCP Calculator for each pay-date. This will be a lot simpler to calculate. Is there any guidance from the IRS as to which method is correct? What do you think is the correct method?

Yep, that's what I was asking. I just didn't phrase the question correctly. That's what I thought as well, just wanted to confirm. Thanks.

The owner is over age 50 and wants to max himself out. He deferred only $4,000 for the year. Can he do a profit sharing contribution to himself of $53,000 and re-characterize the $4,000 deferral as catch up?

Let's say a participant has $1,000 Roth basis in the plan. The assets subsequently appreciate to $2,000, so there is $1,000 gain that's taxable (the distribution is not qualified). Let's say the TPA firm charges $50 to process the distribution. How would that $50 affect the gain? I see 2 possible scenarios: 1) The distribution fee of $50 reduces gain by $50 and the total gain is $950, which is also the taxable amount. 2) The distribution fee applies proportionately to the basis and to the gain. One half ($25) of the fee applies to Roth basis and the other half (also $25) applies to the gain. The gain is thereby reduced to $975. Which of these approaches seem right to you? Is there any guidance from IRS as to which approach should be used?

I've done some research on this matter, but received conflicting information. Let's say that the plan's effective date of termination is 6/30/2014. However, the last distribution from the plan actually takes place on 12/31/2014. For 415 limit ($52,000 plus catch up), as I understand it, the limit is pro-rated and is only $26,000, because the plan terminated half way through the year. 1) Is that a correct assumption? 2) As I understand it, the catch up limit is not pro-rated. Is that correct? Is the 401(a)17 limit ($260,000 for 2014) pro-rated? I've read that there are 2 ways to interpret this limit. It could be affected by the effective termination date (in which case, it will be decreased to $130,000) or the actual date of the final distribution (in which case it's unaffected). Let's say the plan document offers no guidance on this, can the plan use either way to test the plan? Finally, let's say the termination date and actual date of final distribution were 6/15/2014 and 12/15/2014 respectively. Would that have any effect on the way the limits are pro-rated. Would you simply take number of days divided by 365 or not?

1) Let's say a participant takes a distribution from a plan. His account balance is $1,000 and the TPA firm charges $50 for processing the distribution. I would assume that $950 should be listed as "Benefits Paid" (since that will be the 1099-R amount) and the $50 should be listed under "Administrative service providers" section. Do you agree? 2) Also, let's say the plan does its Form 5500 on accrual basis. At the end of the year, one of the participant's account balance is $1,000. However, for the fourth and final quarter of that year, he is due to pay a management fee of $5. That fee is not pulled from his account until the first week of the following year. Should the ending balance on Form 5500 that's attributable to this participant reflect that $5 fee (with the $5 fee listed under "Administrative service providers")?

We received a distribution request from a beneficiary. The death certificate is a copy and not original and says: "This is not an original death certificate" in large letters across the whole page. Doesn't seem like this would be an acceptable proof of death. What do you think?

Let's say we're doing a Form 5500 for 2014 year. If someone terminated on 12/31/2014, are the considered to be participants as of the end of the plan year in section 5d(2) on Form 5500? Also, if someone is hired on 1/1/2014, are they considered to be participants as of the beginning of the year in section 5d(1)? If the answer to either of these questions is "yes", then the total number of participants at the end of (let's say 2014) can be different than the total number of participants at the beginning of the following year (in our example, 2015). Is that line of thinking correct?

We have one client who is an owner of a small company. He wants to take all of his money out. He cannot take his money out as an in-service (he's under 59 1/2 and his account consists mostly of Deferrals and Safe Match contributions). What he wants to do is "terminate" himself for one day, take a distribution out for all his funds (approve the distribution as the trustee), and then become "re-hired" the next day. This seems pretty sketchy to me personally. Is this allowed?

Just have a quick question... Can a plan that doesn't allow for an in-service distribution be amended to allow for in-service distributions at any time?

How does the non-owner exception work for RMDs? I have these questions that I wasn't able to find any answers for (assuming the plan document allows the non-owner to delay the RMD)... 1) If the non-owner took his first RMD at, let's say, the age of 75, is he required to keep taking them or is it on a year by year basis, until he retires? 2) If the participant takes above the RMD amount, can the 20% federal withholding apply only to the portion above the RMD amount (since the RMD is not rollover eligible)?

Is a 20% mandatory tax withholding required for a non-spousal death distribution? What about state taxes (if applicable for that state)?

Can a death distribution be done to a "Revocable" trust of the deceased participant or does it have to be "Irrevocable"??? I've read some sources that state it must be Irrevocable, but can't verify with the ERISA books.

Must all mutual funds held in a large plan during the year be reported on Schedule C with their tax ID? How does the $5,000 requirement come into play? For instance, let's say the participants within a plan hold 30 different mutual funds throughout the year. The TPA received, let's say $100,000 in management fees for the entire year. Should all of the 30 mutual funds be listed on Schedule C?

If the participant dies (has no spouse, kids, and the document states that the distribution to the participant's trust is the default distribution in such a case), which distribution code should be used in such a case? Code "4"? Does the mandatory federal (and state, if applicable) tax withholding apply?

Let's say the participants in a plan are charged (by mistake) 1% annual management fee whereas they should actually have been charged 0.50%. In this case, can the plan sponsor reimburse the participants for the years they were charged extra? Is this considered an allowed correction procedure?

Let's say a participant contribution a total of $100 in a 401k plan in Roth contributions. The participant takes out a distribution and is charged with $50 distribution fee. How should the Roth basis be reported on 1099-R? Is it the total $100? Does the $50 distribution fee count as a loss?