Jim Chad

Was this form to "request" amendment signed by the Employer or Trustee? Could this just be "flowery" wording by someone who is even more verbose than me?

In my experience, the taxes plus 10% penalty discourage hardship withdrawels, sufficiently.

The problem with a Uni k Plan and having employees is not legal, but practical. They are often written with immediate eligibility and 100% vesting. It may be a very simple (cheap) document which does not allow integration, safe harbor, vesting or other common features of a 401(k) Plan. A question for the Employer that I am not sure you will like the answer to is:"Were any of the employees eligible under the old Doc, the last year the Uni k was funded?" If the anwer is yes, was there an employer contribution and was it allocated correctly?

I think Harwood said it right. You can't report earnings on a w-2. You would use a 1099r to report distributions to correct every form of paying an amount over the legal limit. This is one of them. Since this 1099 will be issued in January of 2006 and use a cope P to report it taxable in 2004, you might want to warn the employee to report the income now on his 2004 tax return so he will not need to amend his return. We do this with a letter and we suggest he give the letter to his tax preparer. This seems to work well for us.

EFTPS (Electronic filing) can be required based on the amount withheld under that EIN. And it does not take much to get there. Many of our small employers are required to electronically file their payroll taxes. So far, I have avoided this by having the Plan get a seperate EIN. According to the ERISA Outline 2003 page 7.131 the threshold was raised from $50,000 to $200,000 in 2000

To Pensions in Paradise ( by the way, I have wanted to ask you for years, Is that Hawaii?) On Friday, I could not remember, but I found it today. Late 2003 The DOL Published FAB 2003-3. I haven't found a copy yet, But in the Corbel Newletter. This example is on Page 8. Terminated Participants. Many employers are willing to pay the plan's administrative expenses for active participants, but object to paying plan expenses related to a terminated participant who elects to leave his/her account in the plan. FAB 2003-3 provides that a plan may charge reasonable plan expenses to the vested accounts of terminated participants, regardless of whether the same or any such charges are assessed against the accounts of active participants. The DOL also indicates that a plan may charge such terminated participant fees pro rate or per capita to the terminated participant accounts and without regard to whether a terminated participant had the option under the plan terms at severence from employment to receive distribution of his or her account or to roll over the funds to another plan or to an IRA. See possible conflict with IRS below. The column later talks about how the IRS says you cannot have a significant detriment to accounts of people who have severed employment. The IRS has mentioned that limiting investment options is a significant detriment. The article than says "However the Revenue Service also has indicated that disparate treatment does not in and of itself mean the plan is imposing a significant detriment provided the employer can demonstrate a valid business purpose for the disparate treatment. " This is from NOv, 2003. Can anyone add anything to this?

I think I read that the DOL will let me charge the "per Particiapant" fee to terminated Particiapants, while the Employer pays the fee of those still employed. Furthermore, I think I read that you can charge these terminated Participants a higher fee if there is a good business reason for it. The time involved in taking the money out of the Participants account, would make me want to charge about $50 or $60/year. This is considerably higher than the $20 to $35/year I charge employed Participants. Any thoughts on this idea?

Corbel's Prototype Adoption Agreement has a question in it that asks if the person needs to be a Participant to do a rollover in. I think this is like having immediate eligibility for deferring and a one year wait for Match contributions. I would think this would be a benefit, right or feature which must be nondiscriminatory.

You might check to see if the document addresses this. But it is my understanding that all service with this employer counts whether a person is in an eligible or excluded classification of employees.

Was anyone shortchanged? Could this money be used to make them whole? Also: was this money sent to the investment company in Decermber or January? If in January, is it possible to account for it as a 2005 contribution? Do you charge extra for doing administration on Plans that do this? I'm thinking we should.

I have been involved in a few demutualizations and I always received a list of how many shares and partial shares were from each policy. I would think the insurance company would still have these records. Then, it will be necesary to follow the dividends and interest earned from 2001 to now and allocate it to each Participant based on their shares. I don't think it is completely accurate to say the Premiums were paid into a group policy. They were Paid to the insurance company and if they know the cash value for each Participant enough to calculate a Paid-up Policy, they should know this information on per Participant basis. Good luck.

I would not call it the 2005 test. It is the 12-31-04 Plan Year End test. It tells us whether or not we need to jump through certain hoops the next year based on Top Heavy Status or not. If you look at it this way, it is easier to remember to use the $130,000 for 2004. (Of course, if this is the first Plan Year, it tells us what hoops we have to jump through for 2004).

My understanding is that the 3% SHNEC can serve several purposes, but it cannot be the base contribution in the allocation of a contribution using permitted disparity.

A Client with $300,000 in a 20 year old Plan is moving from Ohio National to another carrier. They were notified that their $146,000 fixed account will be decreased to about $120,000. This is called a market adjustment, not a withdrawel charge. I have seen market adjustments in fixed accounts before, but this seems way too high. Does anyone have any suggestions?

An attorney called today with this problem looking for ideas. Participant is in prison and both father and wife have gone to employer with a power of attorney to withdraw full account balance. The father than came back with a letter from the Participant stating that he had cancelled his wife's power-of-Attorney. No divorce is in progress that we know of. Does anyone have any suggestions for him?

The "solo-K" plan may refer to a prototype document that is so simple it has no eligibilty provisions. Some brokerage houses have a document of 4 or 5 pages. These would not work well if there were other w-2 employees you would like to keep out based on age or service.

I also work for a CPA firm and do admin for 86 small DC plans, mostly 401(k). I have been using Relius for 10 years and like it. I can often get data from the accountants in Excel format. Loading this electronically saves me a lot of data entry time. I go to Indianapolis for the user groups and I can't say enough good about those meetings. If you don't go, I can't see how anyone could figure out how to get their money's worth from the system. The prevoious reply mentions changes in how things are done with each system update. I agree these are a pain in the neck. But how can you grow and get better without change? I want continuous improvement so I accept this pain easily. ( though people will tell you I have been known to gripe from time to time.) I also like the document system and government forms systems. I think they are very time efficient. If you are the only one or one of the few "Pension experts" in the firm all the burdon of quality control is on your shoulders. This system is the best I know for helping you watch rules. And support, even during the busy times is excellant.

The owner signed a letter saying he was resigning, did the paperwork to take out everything, profit sharing and deferrals, then came back to work the next day. He never missed a paycheck. He was age 55, he paid taxes and 10% surtax and spent the money (over $200,000). It is a large Plan and the CPA wants to note this as a prohibited transaction on the audit they will file with the 5500. Is this required? I do not have a copy of the document, but I think it did not allow in service withdrawels. Would it matter if it did, since deferrals and gains were taken too? (Not a hardship situation) Would you note this on the 5500 any where? Would you go to the IRS and file under one of the correction programs? Would the IRS require him to pay it back? Does anyone have any guess as to what penalties and costs might be?

The distribution was in cash with 20% withheld. It was reported on a 1099r. The employee has spent the money and it cannot be recovered.

In Spring of 2002 a distibution ( aobut $11,500) was made. This emmployer had a seperate company account using the same 3 mutual funds as the 401(k). He made the distribution from the company account. The accounts have different EIN's and I'm concerned that moving the money from the 401(k) to the employer account would be a prohibited transaction. Does anyone have any thoughts on this?

I have a 401(k) plan with pooled accounting. I provide quarterly valuation and statements. Participants can only make invesment changes, take loans and take distributions quarterly. We are changing mutual fund families. Is a black out notice needed?

Sec. 404 is an Employer level limit. Even though Partner's tax burdon flows through to the indiviidual return, the partnership is still the entity subject to Sec. 404.

Calendar year employer is swiiching his 401(k) from 6-30 to 12-31. using a short plan year 7-1-01 to 12-31-01. He will be near 15% for short year and 6-30-01 year. He makes near $170,000. In calculating what he can deduct for 2001 can I use his $170,000 for 6-30-01 PYE + $85,000 for 12-31-01 PYE?

The notice I use and the SPD from Corbel both say pretty much what you said. However the adoption agreement says defintely this is or is not a safe harbor plan. Are there other prototypes that are "grey" enough that they could be filled out to cover both scenarios?

The Previous posting said this could be done each year. I was under the impression the plan had to be amended each year the safe harbor contribution was made and then amended again the next year it was not made. Does anyone have any thoughts on this or on what the IRS thinks about amending every year to turn this off and back on?