Vlad401k

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?

Let's say a participant dies and has no beneficiary form. According to our documents, the death benefits should go to the surviving spouse. However, let's say the surviving spouse chooses to distribute the funds into the deceased participant's trust instead of distributing the funds to himself. Is that allowed? Can a beneficiary elect to have the distribution made out to someone else other than himself, including a trust of the deceased participant?

We have 2 plans that were previously part of a control group, but that have now been merged together. After doing some research, it appears that 1099-Rs are not required for plan that was merged into the other plan. Would you agree with that? Also, should the merged assets be listed as "benefits paid" on the final Form 5500?

Let's say a participant is 60 years old, but has the funds in the Roth account for only 2 years when he requests a distribution. Two questions: 1. The 10% penalty doesn't apply and the 1099-R code is simply "B", correct? The participant simply pays taxes on earnings because it's not a qualified Roth distribution... 2. Let's say the participant is actually 40 years old. In that case codes "B1" are used. However, does the 10% penalty apply to the WHOLE distribution amount or just the taxable (earnings) amount?

Probably a very simple question here, but I couldn't find too much guidance on the IRS site. If the plan was terminated in 2014 and all the distributions were done by, let's say September 10th, should the ending date on the Form 5500 be reported as 9/10/2014 or should it be the end of the month in which the distributions happened, so 9/30/2014? The end result is the same as the filing is due 7 months after the month of last distribution. Just wanted to see if there's a requirement to do it one way or the other.

Let's say the Form 5500 is prepared on accrual rather than cash basis for a 401k plan. If a recordkeeping invoice (that was payable for 2014) is paid from forfeitures after year end (in 2015), should that amount be counted in ending balance for 2014? Basically, let's say the ending balance on cash basis is $1,000,000 and the invoice for 2014 that was paid from forfeitures (with the actual payment date in 2015) is $10,000. Should the ending balance be $1,000,000 or $990,000?

We have a plan that failed the ADP test. Corrective distributions have been done and everything is wrapped up at this point. Now, we hear from one of the participants (an NHCE) and he's telling us that he exceeded the 402(g) limit for the year, due to the fact that he switched companies and did not track the fact that he exceeded the yearly $17,500 deferral limit. Now, we have to do an excess deferral distribution for him and forfeit the match for that portion of the deferrals. Question: how does this affect testing? Does it reduce his ADR/ACR?

We have a participant in the plan who just turned 70 1/2 earlier this month, so he's required to take an RMD for 2015 year (by April 1st, 2016). However, he requested to rollover the entire account balance to an IRA. My thinking is that we must issue an RMD and then rollover the remainder into the IRA. However, would it be possible to rollover the entire amount and have the Rollover Institution do a distribution? We could send them the balance as of 12/31/2014 to calculate the RMD. What do you think? Is that allowed?

Buffys, Actually, the keys never contributed to the plan since it was set up. What you're saying does make sense though. Since they were never given the chance to participate, it's too late now to amend the document and include them in the 2014 ADP test.

Buffys Redrum, Yes, that's exactly the situation. Key employees did not defer anything and with them included in the ADP test, it would pass. Kevin, Thanks for providing that section. However, it is my understanding that the part you highlighted does not really relate to the issue at hand. There are no "additional allocations or accruals" to be tested, as there were none made to the key employees. The way I look at it is that it's not a material modification, so I don't see why it can't be made retroactively. Am I missing something?

I'm running testing right now for one of our plans and it specifically states in the document that it excludes key employees from participation (there are 3 key employees). However, because we're excluding these employees from testing, the ADP test is failing. If they were included in testing, the ADP test would pass because there would be 3 extra participants with 0% ADR which would lower the HCE ADP. Question: can the document be amended retroactively (for 2014 plan year) to not exclude the key employees?