Tom Poje

instructions for the 5500 line 2f (schedule H and I, 8e on the SF) says: include on this line all distributions paid during the plan year of excess deferrals under code section 402(g)... so if the problem happened in 2010, but the excess deferral was corrected in 2011 I wouldn't think you would show it as a liability in 2010 on the 5500 - you are going to show it as a distribution in 2011 on the 5500. In addition, excess deferrals of HCEs (unless they are catch ups) are required to be used in the ADP test. now, how you show things on the participant's statement is up to you. If for instance you were using an asset import into your software, you also wouldn't show a distribution until the following year - unless you make a manual adjsutment. and then the following year you'd have to make another adjustment to reverse what you did in the prior year. again, its up to you what you want to show to the participant

hello Grand Rapids! see example 2 (along with the note below example 4) (I guess) http://www.relius.net/News/TechnicalUpdates.aspx?ID=434

some earlier posts have indicated that some documents may contain language that says the match doesn't have to be made. I haven't seen such an animal, but I am not saying the don't exist. so check the document just in case. Personally I'm uncomfortable with the strategy of not making the full match. If you allocate the full match and the plan fails ACP then you have taken $ from the particular individual which doesn't seem correct. If plan didn't fail ACP but you have related match, then you would have had forfeitures that had to be realloacted to people, so that doesn't seem fair either. If some of the HCE people are catch up eligbile and others aren't, it would also seem a bit odd to calculate a match on the full fdeferral but not on others. by the way, you said 'excess deferrals' were distributed within 2 1/2 months. I assume you mean excess contributions. Excess deferrals are above the deferral limit (or I guess a plan imposed limit), not failed ADP test.

You could start with the following rev proc which clearly states discretionary plan amendments must be in place before plan year end. (Because of law changes, there are required amendments that could be adopted at a later date but those would be for existing plans) Rev Proc 2005-66 5.05(3) An employer (or a sponsor or a practitioner, if applicable) will be considered to have timely adopted a discretionary plan amendment (that is, a plan amendment not described in section 5.01), if the plan amendment is adopted by the end of the plan year in which the plan amendment is effective The IRS Publication 560 words it as follows: Set-up deadline. To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar year employers). the one exception to the rule would be a SEP, notes from the DOL website: SEP Retirement Plans For Small Businesses A SEP may be established as late as the due date (including extensions) of the company’s income tax return for the year you want to establish the plan. For example, if your business’s fiscal year (a corporate entity) ends on December 31 and you filed for the automatic 6-month extension, the company’s tax return for the year ending December 31, 2009, would be due on September 15, 2010, allowing you to make the initial SEP contribution no later than September 15, 2010.

and no change. oh well, have to wait another year and see if the spreadsheet works if the TWB changes.

more specific info needed, you merely said plan failed compensation test. lets say I alloacted a 5% profit sharing to all employees based on comp excluding bonuses. failed comp test. so now I run the nondiscrim test using the 5% alloaction but using total comp for testing comp. might still pass testing, simply not enough info. if plan fails at that point, then yes, you have 9 1/2 months after plan year end to fix, and can name specific people to receive enough extra contribution to pass nondiscrim testing.

when you perform coverage testing, you have 3 tests 1. 401k 2. 401m 3. nonelective so for deferral purposes, since the person could have deferred he is considered benefiting whether or not he deferred. you cant have an hours or last day rule for deferrals. for 401m if there were no hours for the match, they would be benefiting even though they didn't defer and therefore didn't physically receive a match. doesn't matter if you termed or not., because they could actually receive a match. for nonelective, since they received no nonelective so they are not benefiting. if they termed with less than 500 hours they could be excluded from that test (though that is an option) if its HCEs it might help to include those bodies.

I'd suspect that such a plan is top heavy, and the 2% paycredit would be insufficient to satisfy 2% accrual requirement as well.

not excludable. one of the requirements under the terminee rule is: 1.410(b)-6(f)(i) the employee does not benefit under the plan for the plan year and see also (iv) this person is also eligible for any gateway.

since the TWB didn't change, I don't think there will be any change to the table from the prior year. about all I recall, things are projected out over 35 years, and we are stuck on 106,800 at the moment. Based on this idea, I had tried creating an excel sheet to perform the calculation, I think this sheet works, at least the values that I managed to calculate from the past match the historical data, so somehow this spreadsheet seems to work, but its been way too long since I created it, how I figured out to truncate things properly I have no clue, those brain cells are far too old. maybe someday someone can explain to me how I managed this, especially with the years when the SSRA switched from 65 to 66 to 67.

yes - no - maybe so - well... Derrin Watson, the guru of gurus on such issues, has the following comments, which can be found here: http://www.employerbook.com/WTE3/

this is ASPPAs latest note (hopefully they are not offeneded by my posting of this message. I guess I could have simply said ASPPA has been talking with IRS officials and they have indicated they may withdraw their request for the PTIN requirement. Of course, as they indicate, nothing is guaranteed at this point in time)The ASPPA note did carry the following note: This email (including any attachments) is confidential and may contain privileged or proprietary information. It is meant solely for the use of the intended recipient. If you are not the intended recipient, any unauthorized disclosure, copying, distribution or use of the email (or any attachment) is prohibited. If you have received this email in error, please notify us immediately by replying to the sender and then delete this copy and the reply from your system. Thank you for your cooperation.Since I was the intended recipient and am passing it on for information purposes I assume I meet the criteria intended. Happy Holidays everyone. As you know, the IRS has been indicating in public comments that the PTIN registration requirements will apply to preparers of the Form 5500. Consequently, we have been engaged in ongoing conversations with the IRS on exactly how that would work. In addition to testifying at a public hearing, we have had several private meetings with them to discuss the significant problems that could result from the over broad application of a preparer registration requirement to the Form 5500. In these meetings, we have been emphasizing the information return nature of the form and the relatively limited amount of information on the form that actually impacts a tax return. Most significantly, we have been pressing the point that if too many staff are required to register it will ultimately result in an unnecessary increase in administrative costs to the detriment of retirement plan participants. As these conversations have continued, including some back and forth on the challenging issues involved, we are beginning to believe that senior IRS officials are starting to conclude that it would simply be easier to exempt the Form 5500 from the registration requirement. Because of this, we are no longer recommending that service providers register their staff in order to take advantage of the education grandfathering rule, because we believe, at this point, that it is more likely than not that the Form 5500 will be exempt. Let me emphasize that we have not received anything official from the IRS, and it is certainly possible that they could change their mind again. If we sense anything different, we will let you know immediately. We also recognize that many of you incurred costs to register your staff and we are very mindful of that. We based that prior recommendation on what we were being told emphatically by the IRS at the time, namely that preparers of the Form 5500 would be subject to the registration requirements, and we wanted to make sure that people were in a position to take advantage of the grandfathering that applied to the educational requirements.

if only they had rolled it before the start of the 'previous' year. once in the ROTH IRA there are no future RMDs, which is probably what they are thinking of, but its all in the timing.

that's correct, any corrective amendment has to be made within 9 1/2 months.

and that 'rule' does become important. for instance if another HCE defers 10,000 and is not catch up eligible, via the top down method that HCE will have to take a refund as oppossed to treating all $5500 as a catch up for the one HCE.

according to your comments the NHCEs only received 3% which was insufficient to satisfy the gateway minimum. this means you could not cross-test, but would test on an alloaction basis, which obviously would fail. This is a demographic failure which is only correctable under VCP (9 1/2 months after plan year end) If the document contains gateway language, can you argue it is an operational failure - e.g. failure to follow the terms of the document to provide the gateway? I'm not so sure. There is no requirement to cross test - if you are going to then you had to provide the gateway, which wasn't done. Also, if you can simply 'self-correct' at anytime then the 9 1/2 month rule is entirely tossed out the window. ......... as a side note, at the last ASPPA Conference, posed the following question: plan has 2 classes of employees HCEs and NHCEs. plan provides 5% gateway to the NHCEs and maxes out the HCEs plan fails testing. is the only option to increase the NHCEs (or decerease the HCEs) The IRS officials indicated you could out in a corrective amenment an increase just selected NHCEs as well.

so the sched C income is after the employee tax is taken out? I plead complete ignorance in regards to this area.

Ok, its cold here in Florida and my brain is frozen. Schedule C income = 200,000. I used to take 200,000 * .9235 (I guess that is really 1 - .0765) = 184,700 lesser of this value or Taxable wage base * 7.65% [106,800 * 7.65% = 8,170.20] comp in excess of TWB * 1.45% [77,900 * 1.045% = 1,129.55] 9299.75 for the FICA. Beginning in 2011 the employee tax rate is 4.2%, how does this change the calculation.

ok, I even added a few of my alternative answers. hope this doesn't get me off the 'hate' list. The Grinch likes being on that list. :angry: :angry: :angry:

actually, if you understand the rules, in a roundabout way I think they do make sense. remember, if QNECs are involved, a plan must pass a(4) testing with and without the QNEC, so if you are going to test w/o the QNEC how is it possible to apply that towards the gateway?

remember, the 30 day rule is so participants can make an 'informed' decision. Is less than 30 days sufficient time if you issue a notice saying the plan won't be a safe harbor? The IRS has somewhat implied yes, at least in the case of a 3% SHNEC in comments they made about late notices. Years ago at the ASPPA Conference the question was posed "What if the company issues a notice but the plan was never amended to be a safe harobr?" The IRS response was you follow the terms of the document, therefore the plan is not safe harbor. (Basically solve your own problems if people grumble) in the case of a 'maybe' notice you provide 30 days notice of what will happen for the year, but the plan could be amended as late as 12/31. what happens if you provided the maybe notice late? No guidance available I know of. Personally, I think the answer to your particular question is not clear, at least at this time. If you had a money purchase or a DB plan and you amended to cease accruals before the start of the new year, I don't think you are on the hook for anything. once the plan year starts I think you have that 30 days or whatever to fund things. Again, in the case of a safe harbor, the notice is not the document. it is a piece of infomation to make an uinformed decision. If the safe harbor was the 3% shnec, does that effect how much someone is going to defer? I have my leanings that say "no', but those are my opinions only.

Austin, in theory that might work, but if the person stops deferring during the year, then what? and don't say it would never happen.

A plan has deferral only, but also has loans, so employer involvement, so needs the 5500. just received a letter from a firm that implied no audit is needed in this situation. (assume large plan, over 100 employees) I didn't think this was true.

since I was asked this, and I don't deal with these, I'll go to the experts. Can a husband and wife who own a business but pay themselves via a 1099 put in a SEP? If so, can they contribute the maximum ?

you look like such a nice little kid, how much grief do you want? to quote Norm Levinrad "you’d project to 62 at the plan’s crediting rate and the normalize from there to 65 at the testing assumptions" ......................................... this was for a cash balnce plan. so figured one set of E-Bars to age 62 using the cash balance interest rate of , lets say 4.10% to age 62. then took that e-bar and increased at the DC interest rate of 8.5% for 3 more years. gave me a head ache, heartache, pain in the side, pain in the rear and all other sorts of bah humbug that could turn anyone into a scrooge or even a grinch. I'd make life easy and amend the NRA in the DC plan to match that of the DB. even then you would still have to make some adjustments for those ees currently age 57 or older - because they would enter the plan at age (lets say age 60) so have a retirement age of 65 for the DB, but now the DC plan is age 62, so you'd have to priject out at the DB int rate for those few folks. but I'd rather adjust a few folks than the whole lot.