doombuggy

We sent the forms to the plan sponsor twice (plan valued annually) and as it turns out, the ee did not get their RMD (a whopping $113). I am trying to make the correction by having her take it asap, along with her RMd for 2008, but I am going in circles about the correction. TAG Data says to fill out form 5329 and to see if the IRS will grant a waiver of the 50% excise tax, but I am confused. This form is dated 2007, but would this be the correct year for the form? The instructions I got were: With regard to filing Form 5329 for exemption from the 50% excise tax, the instructions to Form 5329 (2007) provide the following: Waiver of tax. The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking appropriate steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows. Complete lines 50 and 51 as instructed. Enter “RC” and the amount you want waived in parentheses on the dotted line next to line 52. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 52. Complete line 53 as instructed. You must pay any tax due that is reported on line 53. The IRS will review the information you provide and decide whether to grant your request for a waiver. The third paragraph throws me - I'm confused; I had incorrectly reported to TAG that the woman turned 70 1/2 in 2006, when it was actually in 2007. i put $113.26 on line 50 (amt required) and $0 on the next line (amt pd in 2007), so line 52 would be $113.26. 50% is 56.63, but the tax should be waved. I'll bet the form is still sitting in the valuation binder and the trustee never gave it to her (his mom). I emailed it to them again last fall, but who knows? Thoughts?

We sent the 2007 and 2008 Form 5500 filings to this former client in February, as he terminated the plan and it was fully paid out in January. The 2007 is due by 7/31 and the 2008 is due by 8/31. I faxed him a reminder, as we never received a signed copy back from his office (so did he ever mail the original?). He left me a message saying he wasn't sure if he mailed them, can I "check the internet (nothing on FreeErisa) or something?" Or give him new ones to send in? My boss seems to think there is a phone number to contact the EBSA to see if they received these forms. Anyone know of this?

We have a client with a plan that was amended in March 2006 to allow for Roth deferrals. They were signed and filed away in 2006. Should these have been redone last year? I seem to be getting some conflicting info. Help! I have already been sick this week....

Yes, I thought the same thing when I read it on Tuesday. Since we don't use this document, I wasn't sure if this was selelcted by the client, or standard. I submitted the question to TAG, and I think they were telling me in a roundabout way that the plan can't have both the safe harbor standards and the facts & circumstances. The worst part is that this client is a law firm, and apparently they have been looking this over and think it's ok....

Plan has a partiicpant who is interested in taking a hardship to pay back taxes. This plan has the AccuDraft prototype 401(k) (Basic Plan 01). The plan allows for hardships for the typical reasons, outlined in Section 5.19(b): medical, post-secondary ed, to purchase primary residence, to prevent evection or foreclosure on primary residence, funerals, and "any other immediate & heavy financial need as determined by the administrator in a uniform non-discriminatory manner." I asked TAG if this participant's request could be granted, as per above, and the response I got was no. I think what TAG is trying to tell me is that the plan should not have both the safe harbor standards and a facts & circumstance option. Tag cited announcement 94-101. This plan document, while not created by us, was dated 1/1/04. Anyone out there use this document, and if so, would this request be permissable? Thanks, gang!

Bravo! And Tom, be sure to bring some sunglasses to the ASPPA conference so that you can sign this new song and make Ray Charles proud....

Thanks, gang. I was feeling that the $50k ceiling was correct, but you don't want to tell the boss he's wrong......I think it's the $500 that's throwing him.

I am running some preliminary calculations for a client and I have been asked to run the max for the owner who is over 50. The plan is a 401(k) PSP with a non-elective safe harbor. Owner's comp for 2006 (they asked me to use the 2006 comp for the estimate) was over the limit, and still is, so that's ok. They indicated that he would maximize his deferrals (401(k) feature was added in 2007) to $20,500. My boss checks everything that goes out, and I have the owner's total of P/S, Deferrals & S/H at $50,000. He thinks it should be $50,500. Who's correct?

Good, thanks Janet ~ it's been awhile and I couldn't quite remember and I work at a different place, so I can't go back and look at my last one... Thanks again!

Company is owed by two peole; they decide to seperate and one of them is going to keep the plan. They did this as of 3/31/07 and changed the company name to reflect this. Four of the eleven plan participants were let go as a result (including the one owner). The remaining owner and employees are keeping the plan. So, I have to do an amendment to change the company name, plan name, and remove one of the trustees. Doesn't a particial termination require an amendment, or do we just generate the distribution packets when the time comes? It's been a long time shince I have done a partial termination, so I apreciate the insight...

We have discovered that a client put in too much safe harbor match (SHM) into a participant's account for 2006, probably because they didn't pay attention to his compensation amount (he made $330,300 for last year). They use the regular SHM formula and this participant contributed $15,000 in deferrals. I am ok with his deferrals, but they deposited $12, 004.04 in SHM (after his rec'ble for 2005), and he shouldn't get more than $8800 (to top it off, the client reported this participant's match to be $13,285.20). The excess will need to be removed from his account, and after speaking with John Hancock about how they would like to handle this issue, they sent me an excess withdrawal form. I don't think this is correct. The money shouldn't be returned to the participant, it needs to go back to the company, or at least held at JH to use towards the next safe harbor payment they need to make (they make them during the year). Thoughts?

I actually have an older version of this info provided in belgarath's link (in book form). The plan is valued quarterly, and as of 3/31/07, the partiicpant had more in his account that the order amount. I am thinking that perhaps the DRO needs to specify a date that is closer on actually a quarter end date? Lets say they go with the 3/31/07 - as it is now early June, the DRO would have to specify how to calulate earnings, or just call it a day? We are talking about $1.6 m here..... I really think we need a distribution form. The plan allows for QDRO distribuitons at any time, and she is requesting a r/o which the plan allows (she will probably roll in-kind at the same investment carrier, State Street).

I have been asked by a client to look over a DRO to see if it is qualified. Currently, it is not signed, so I consider it a draft. It specifies a specific dollar amount, but no "as of" date. I used to do a lot of these but it's been awhile - shouldn't there be a date there (Amount of Benefit to be Paid to Alt Payee section). The next section talks about timing and form of payment. The timing is fine ("as soon as practicable after the Order is qualified") but it just indicates that the "alt payee has elected to make a direct rollover into a qualified plan and directs the Plan Administrator to directly transfer her funds to [alt payee's name]'s IRA account at [alt payee's investment carrier]." Should an account number be listed here? The reason why I ask is b/c I have been told that a distribution form is not needed to process the distribution to the alt payee. Like I said, it's been awhile (at least 3 years) since I did a QDRO, and my thought is that she DOES need to complete a form so the trustee can sign it. The QDRO is not signed by the trustee (of course), but I think they need to sign off. Or does the fact that they deem it to be qualified is an automatic consent to the distribution. Maybe I am thinking about this too much, but it is a lot of money, so I want it to be correct...... Thanks for your thoughts, guys.....

I have never done a loan refinance in all the years I have done distributions. We have taken over a plan recently that allows for 2 loans at a time and this person has requested a new loan of $2500 plus his outstanding balance on loan #1, $1500. He has plenty of money in the account, so the limit is not an issue. My question has to do with the due date of the loan. Loan #1 is due 12/26/07. He is requesting 2 years on his new loan, and the date he wrote on the Handcock form is 12/26/09. He is adding that additional 2 years of the end of loan #1. Is that ok to do? My thoughts would be that the 2 year period has to start from now, not December. Loan #1 was taken out last December and was for a period of one year. So what should the lenght of his loan be?

I forgot to mention that he would have turned 70 1.2 in 2006, and as such would need to receive his first RMD by 4/1/07. So this distribuiton needs to be completed by then, yes?

Ok, I just received confirmation from the plan sponsor/trustee/owner that his dad died in 1994. We became the TPA of this plan back in 2003, but we were never given any info that this partiicpant was dec'd - he is just listed as retired and we have no death cert on file. The estate atty of the trustee has told him that the bene (the dec'd's spouse) can roll the account into her account in the plan (she used to work there too). I don't have a problem doing this - my concern is that he has been dead for 12 years - I thought this needed to be done within 5 years? Would there be any repercussions if the plan was ever audited? The plan is a P/S plan that is valued annually and is pooled. So techincally, it would have earned the same interest or losses whether is was listed as the account of "M" as it would have as listed as the rollover of "A," the spouse. Am I worring over nothing?

We talked to the HR mgr Tuesday and advised her that she could correct thru VCP (at $1000 IRS fee) and hope for the cheaper correction, or self correct at 100% (meaning the $40 twice per month and the safe harbor match plus earnings). She was going to talk to the partners about it, but it sounds like they will go with the self correction. She is on the ball, and NOT the one who was there at the beginning of the year when this error happened. She told me that she invited this partiicpant to a group meeting with the broker this month, and that is when the participant mentioned that the deferrals weren't bing with held. When Mags asked the participant why she didn't say anthing, she received an idiotic response along the lines of "I assumed that payroll knew what it was doing - I trusted you." Huh? I don't think she really understood the whole deduction thing. I recommended to the HR manager that in the future she might want to suggest that each new participant look at the pay stub the first time they get the 401k deduction. Believe it or not, the time I enrolled in a plan, mine was incorrect. As it turns out, the company I worked for did my enrollment form incorrectly! I won't name the company, but it is a large firm in PA.... Thanks for your help guys!

You have received some good advice here. While it will probably cost you some to get the attorney to work this out for you, I think it will be worth it - you sound very stressed and upset. Investment carriers like Fidelity usually do not keep beneficiary records. They are straight talking you there. Ahile back when I worked for a large TPA firm in PA, I had a similar situation happen to a partiicpant in a plan for which I processed distributions. The participant died in a suspious auto accident. The paperwork the co had for him listed him as single and he designated his sons as the benes. Apparently, he was actually married, and she was a "person of interest" in the accident. Both the children and the estranged (or rather strange) wife were claiming the benefits. We advised the client (the company) to get council. You have legal documents that indicate he was divorced. You mentioned that the divorce decree discussed the handling of the 401k with Delta. There was no QDRO? It sounds like there was not, since she did not receive any money from the 401k at the time of the divorce. I think the biggest proplem you have here is that you are talking to so many people (which can happen with a big company like Delta). Maybe you need to go online, find out who the HR director or VP is and have your attorney send him/her a certified letter! Good luck to you, Sandy, and have a blessed holiday season. I know it will be tough for you, but try to keep good thoughts...your bro is in a better place, especially without that ex-wife...

Bumping...lots are looking but no one has an opinion. I am leaning more towards the 50% that I see in the rev. proc. This participant has to shoulder some of the burden...she has to be getting somekind of paper notice of what's taken out of her paycheck, whether it's direct deposited or not....... Thanks for your help, guys...

A client contacted me earlier this week to let me know that they have not been removing deferrals from soneones paycheck - since January! The new firm administrator let this woman know about an plan meeting and the partiicpant mentioned the fact that no deferrals have been coming out of her check. Anyway, as much as I want to go the "to bad, so sad" route, we are looking at EPCRS to fix this mess. I just got a copy of her enrollment form (which was sent to Hancock in a timly fashion) and she elected to defer $40 per pay. This plan has a safe harbor match with the 100% to 3% & 50% on the next 2%. I have a list of her gross pay per pay period, and it varies each period, but the $40 is around 3%. Opinions: Should the company make up the $40 for each pay plus the SHM? (citing 2006 TEOB page 15.647 Issue 16) OR Should the company make up 50% of the deferral plus the SHM (Rev Proc 2006-27 Appendix A page 60 ©) I am having a hard time wrapping my brain around the fact that this woman went months without noticing that she was not deferring........ Your thoughts are appreciated.

I tried to edit my original post in that RMD thread I started, but couldn't. I found out yesterday that the guy I was working on the RMD calcs for is actually dead and has been for many years! Apparently, he died in 1994. The TPA firm I work for started the R/K for this plan in 2004; this is my first year assigned to this plan. My boss just called from the broker's office asking why I sent out an RMD form for a dead person (well, duh, i didn't know he was pushing up daisies). She mentioned that the account belonged to his wife (the owner's mom). Then why is he listed?? This plan is not daily, btw, it is a profit sharing plan that is valued annually and the money is pooled. I always thought (over the past 16 years) that you had to disburse a dead participant's account in a plan of this type within 5 years. If the account has been "retitled" to his spouse, I have no record of such. Is that doable? I think she may also be a former employee, but I am not sure. What can I do to fix this mess that was dumped on me....any thoughts? Sorry for the rant, I can't help being mad right now....

That's what I thought. He is also retired, so he has to take it no matter what. I was reading The ERISA Outline book and I think I am confusing myself. He turned 70 1/2 in 2006 and the plan is going to be valued for 9/30/06. I should be using the 9/30/05 balance for this distribution, whihc he must take by 4/1/07 - right? (insert cross-eyed emoticon here)

Ok, I have been doing distributions for many years but I am drawing a blank right now (it must be because I have been waiting on some nationwide reports for the better part of an hour...) I have an plan that has a 9/30 PYE who has a participant that turned 70 1/2 this year. I think this partiicpant is the father of the owner, but I will need to verify this. Would he be required to take the RMD due to the atribution of ownership?

Thanks for your opinion! I prepared the loan paperwork according to the loan policy which states that the loans need to be repaid thru payroll. The participant (who is a shareholder and doctor) keeps pushing the issue that he can pay by personal check, as he did on a previous loan. I can't tell if the loan was done under their old document at their prior R/K or here (before mey time). I have given this to my supervisor to handle. Thanks again!

The loan policy and the prom note I drafted for a participant who recently requested a $50,000 loan states that they need to make repayments thru the payroll. This guy wants to write a personla check for each payment. I have never had anything but loan repayments made thru payroll (one exception was a termined ee making payments on 2 o/s loans - don't even get me started on that guy...) I have told this client and the advisor/broker that he needs to follow the prom note (and the loan policy) and make the payments thru payroll. The loan policy is in the SPD - wouldn't they need to amend the doc if they want to allow him to write a personal check to repay the loan?