Larry Starr

Idr: that's what I would have expected. I want to find the REASON why that is the case (I think there is a requirement in ERISA that applies). I disagree; your plan has no limiting language. That means it does address it: every time you qualify under those provisions, you qualify since there is nothing that limits the application .

Belgarath: go ahead and look it up and prove that there is such a provision. I have never seen such a provision in the thousands of documents I have dealt with over the years. There is something in the back of my mind that says this is not allowed, and I hope to find some time over the weekend to check it out. Every time someone quits and has met the retirement age provisions, I believe he is retiring "once again" and the appropriate provisions apply. Please try to find the specifics; a nice puzzle for the weekend.

JPod: Starr has TWO r's, it's MORE than a bit problematic, and the purpose of my "drama" is EDUCATION (I ain't an ASPPA Educator of the Year for nuthin!). Hopefully, other people who visit these boards will read those comments and remember them the NEXT TIME they are involved in a situation where, for example, a DB client comes to them and wants to invest in XYZ Widgets in their maximized DB plan because it's going to be a big winner. DB Plans Don't Need Big Winners! Return OF INVESTMENT is more important than return ON investment in a DB plan. And all of my speeches have my REAL NAME attached to them, "JPod". :-)

JImK, you need to understand that you DON'T understand the provisions you are discussing. Mike has been very generous with you as his time does not come cheaply. He is right, you did give us a nice chuckle when you gave us your legal interpretation of the code. So many things to cover: 1) If you are working with a "big pension firm", why aren't they advising you on this issue (they should be able to). 2) Why didn't you big pension firm PREVENT you from having the excess assets problem? We monitor that issue for our small, big benefit DB plans extremely closely to avoid just this problem; Looks like you were not served well by your prior advisors (hint: these types of DB plans should not be invested in assets that can have such significant, unexpected returns. Short term bonds make the most sense in maximizing situations though there will be some of my friends who might disagree with me). 3) You are right to look for a good consulting firm that can answer your questions and explain why what you have decided can be done is not actually available to you. Reminds me a sticker I had on my elementary school text book: Brain Surgery: Self Taught! Good luck.

The first individual you mention no longer has any hours of service; zero hours in the year means no eligibility. He is being paid deferred compensation. As to the second individual, he is going to be great for testing purposes. He is still working (how many hours is he being paid for?) so he is an ongoing participant for TH purposes. But he makes $2400 a year?????? So, who cares? Can you do the math at 3%??? :-) Plus, as an NHCE making $2400, very small additional amounts given to him will increase his EBAR enormously for testing purposes (with a -11g amendment). So look at him as a BONUS, not a liability.

There is nothing that prevents a partial distribution of the termination payout with the balance to be paid later. It is not an in-service withdrawal, it's a termination distribution.

Who was watching this plan? Who allowed the client to invest in a hard to value asset in ANY plan? The problem here is the relationship between the client and the consulting firm that is running the DB plan. As to the consequences, he theoretically needs to hire someone who specializes in valuation to let him know how much this is really worth; and he needs to do that every year. And it needs to be someone who's work would stand up to scrutiny (not "his accountant"). One very big reason why it was stupid to do this in the first place. PLUS: private equity is bought for the hope of hitting a home run, and then paying only capital gains rate on the increase in value. Here, he has converted potential capital gain into ordinary income, plus if he did hit a home run, it doesn't provide him any extra benefit (as he would get in a DC plan where the earnings is his). So reality: what will happen? He will probably value it at cost and go on his merry way until something actually blows up. Sheesh!

As usual, I will have a different take on this.... He is not REQUIRED to automatically agree that what he was paid was incorrect (even though we might all understand that is the case). And therefore, he does not HAVE to agree to return those funds. Apparently, he was paid what his benefit statements said he was entitled to. It's not like when his account of $10,000 is paid at the rate of $100,000! The distribution was made from the plan and properly reported. We will agree that the plan admin was done wrong and is being corrected and that the employer has to make everyone whole. As to getting the money back from this guy, if he does not agree, all you can do is bring him to court, and for $8,000, no one is going to go to court! As to hiring him for independent contractor work, there certainly is no legal issue and I would suggest there is no ethical issue. The participants in the plan will be made whole by the employer, so they have no vested interest in whether he returns the money. If the employer thinks the guy is worth hiring for whatever skills he has and will overlook the $8k it cost them, then that is their decision. BTW, you do NOT send revised tax forms; he was paid that amount of money from the plan and he rolled over what he was paid. And that's my two cents...... Larry.

Mike is right; in a non-pbgc plan, you SHOULD have language that says the distributions are made "to the extent funded". Just make sure your plan has that language (I bet it does) and take all the funds and buy the biggest benefit you can that does not exceed the 415 limit.

Mike says the participant is right; I'm not sure that is true. The participant was due an RMD in 2017. He never took it. Instead, he took a distribution and rolled 100% of it over to an IRA. If you have someone who is due an RMD, the very first distribution in that year is the RMD (or part of it if not large enough on its own). The problem is that he rolled over his RMD and THAT is not allowed. Luckily, there were enough funds in the plan (because of the additional contribution) to correct the distribution by making a secondary payment that is equal to the RMD, and I think that is a fine way to correct. It doesn't matter what he did with his IRA and any distribution from that does not count as the RMD from the plan. Stand your ground; the plan is now correct and the participant is wrong. The ESOP guy is correct; there should have been two checks in July and the RMD should have been one of them and that amount was not able to be rolled over. The participant says he took the RMD from the IRA prior to the rollover? NOT POSSIBLE! RMDs cannot be aggregated between plans and IRAs. I disagree with Mike that the disgorgement from the IRA of the excess contribution is adequate to correct since it is the PLAN that must make the RMD. That he took money out of the IRA (and before the rollover????) is of no consequence to the requirement of the plan to do the RMD. STAND YOUR GROUND.

Here's the scoop: NAEA has received numerous inquiries from members on a new "policy" at IRS where IRS assistors serving the Practitioner Priority Service line have been asking members with powers of attorney on file for taxpayers to provide an unknown assortment of the following items for verification before the IRS assistor will help the practitioner with the power of attorney on file: the practitioner's Social Security number (SSN); the practitioner's date of birth; CAF number; the greatest source of income from the practitioner's last filed 1040; the address and filing status from the practitioner's last filed 1040; and potentially, the SSN of someone on the practitioner's last filed 1040 who is not the practitioner. NAEA recently received a partner bulletin from IRS relaying the following message on this new procedural change: The IRS continues to review its procedures to better protect sensitive taxpayer data. As part of this effort, the IRS will request additional information from tax professionals who contact us through the Practitioner Priority Service or any toll-free IRS telephone number. This procedural change will require tax practitioners to provide personal information so that our customer service representatives may confirm their identities. This additional information may include data such as your Social Security number and your date of birth. This personal information, in addition to the CAF number, is necessary to verify the identities of the person to whom we are releasing taxpayer information. We've also made an update to Form 2848, Power of Attorney, and Form 8821, Tax Information Authorization, that will require you to inform your client if you are using an Intermediate Service Provider to access client transcripts via the Transcript Delivery System. A box must be checked if you are using a third party. We define Intermediate Service Providers as privately owned companies that offer subscriptions to their software and/or services that the taxpayer's authorized representative can use to retrieve, store, and display tax return data (personal or business) instead of obtaining tax information directly from the IRS. The IRS must know who is using our tools; and taxpayers must know when a party other than their authorized representative is involved in accessing their sensitive data. We realize there have been a number of changes for tax professionals in recent weeks. But each change is intended to enhance protections for you and your clients. Unfortunately, business as usual is no longer an option. Cybercriminals are well-funded, persistent and adept at stealing data from outside the IRS and using it to eventually file fraudulent tax returns. As cybercriminals evolve, so must we. As part of our efforts, we also have strengthened protections for IRS e-Services. If you are an e-Services account holder, we urge you to immediately upgrade your account through our new two-factor identity verification process. Some of you may need to complete this process by mail which could add 10 days or more to the process. Please, do not wait until the start of filing season or until you have an urgent need for one of the e-Services tools before updating your account. In the future, we will be asking each e-Service user to sign a new user agreement intended to ensure that all tax professionals understand their security obligations. We will share this information with you in advance. Protecting you and your clients from identity theft is a paramount issue for us. But we can't do it alone. We need your help and your understanding as we continue to review and enhance our procedures. NAEA will continue to update the membership on any new updates to this procedural change. Please also continue to monitor the IRS's Newsroom webpage for updates on this new policy.

That's exactly the purpose! the ability to close out the plan.

I have tons of active POAs as an Enrolled Agent. None of them have my ss number on them. If this is a "recent procedure", simply ask the agent to provide a copy of any official document that says that is the new rule before you provide ss number. Such a DRAMATIC change would have to be publicly announced before it could be implemented. See my later post below with the reason IRS is now asking for additional info; looks like it is real!

Usually, in a situation like that, I inform the client that what they heard is definitely not true, and ask them to have the advisor who they believe said that call me asap so we can talk about it and I can help make sure they aren't giving out bad advice to other clients. It reinforces the relationship with the client and makes them feel good that you are willing to help make sure their other advisor has the right information. FWIW.

I'm surprised there is even a question here; in fact, adding children to the payroll for legitimate purposes and then limiting their contributions to zero actually is a favored method to produce better demographic testing results since the children are HCEs by definition and now we have HCEs with a zero allocation in our various averages and rate group testing. Can be very helpful in in getting better results for general testing.

Correct it with the next paycheck; defer 0% for one check and then back to 3% and you are all set. Don't overthink it. Note; if the checks are not the same from period to period, then do the math so you have the right amount over the two pay periods, but otherwise the same concept. Larry.

Yes; the plan continues to exist; terminated does not mean GONE. It is still in existence and still has to follow the rules. There is nothing that prohibits additional amendments as long as your termination amendment didn't say you couldn't continue amendments, and if it did, just include language in your new amendment that eliminates that language.

As an additional comment, if the sole prop makes his "deferral" contribution before the end of the year, the act of making the contribution to the plan will meet the requirement of a positive election by the year end; no additional paperwork would be necessary. If contribution is NOT made by year end, then absolutely a document should be used to reflect the deferral amount. The election can be (and should be) subject to the actual income when determined is at least that amount elected.

Not a surprise to most, but I disagree! We push the 5310 filing pretty hard if there is any significant amount of money involved for the owner which is going to be rolled over to an IRA. We look at that letter as an insurance policy that the IRS (or any creditor) will never attack that IRA because the funds did come from a qualified retirement plan. Once there is a couple of hundred thousand dollars involved, we are generally going to suggest the IRS letter is the way to go (and our clients almost always do so). We know we are going to get the letter and we tell teh client that; but they also see the fights we have to go through with IRS to prove that all the right things were done along the way (and yes, we use pre-approved volume submitter docs). FWIW. Larry.

More specifically, a 401(k) plan is a profit sharing (there is actually no such thing as a 410(k) plan; they are all profit sharing plans with a 401(k) feature added!). An ESOP is a stock bonus plan by definition. From IRS: https://www.irs.gov/retirement-plans/employee-stock-ownership-plans-esops "An employee stock ownership plan (ESOP) is an IRC section 401(a) qualified defined contribution plan that is a stock bonus plan or a stock bonus/ money purchase plan. " Thus, the answer is clear; they are treated separately. I'd be interested in who is giving you the wrong opinion that you note in you posted question.

Dottie (and everyone else): if you are in this business, you NEED to have the indispensable bible regarding controlled groups and everything around that topic: Derrin Watson's "Who's The Employer". http://www.employerbook.com/ With this book, you ARE an expert! Full Disclosure: Derrin is a partner of mine from years ago and I helped him with developing and marketing the book many years ago. I am included in the dedication, but that should not detract from how fabulous this reference source is!!!! :-)

Simple answer: NO. You can't "fail" the ADP test until you have the necessary information which REQUIRES year end info for all participants. It is that simple. Stopping deferrals now in anticipation of a problem is fine; refunding would be a violation of all kinds of things.

Mike and CF are correct. Stated directly, when you roll over money into a QP it is QP money subject only to QP rules. So, not only can it be borrowed under the plan terms, it also can be distributed after age 55 (not 59 1/2) with no penalty if the participant terminates post age 55. Just another IRA rule that disappears with the rollover. And the other important rule that disappears is the Required Minimum Distribution (RMD) for someone post 70 1/2 who is still working and is not a 5% owner at that age. Larry.

You clearly say that Participating Employer X signed a document in 2015 whereby they ceased participating in the plan. Therefore, they no longer have anything to do with the plan and the current sponsor doesn't need and shouldn't have an ex-participating employer involved in new document execution. Larry.

While the comments are cute, I actually draft most of the QDROs for most of my participants in most of my plans. As such, I require (from the attorney who is hiring me - no, I'm NOT practicing domestic law!) a copy of the pertinent part of the divorce or separation agreement so I can properly draft the order to reflect the division of property. Sometimes, the lawyers have screwed up the division of the property language so bad that they need to go back and modify it to reflect what they actually wanted, and I'm often the one to expose that problem. So, yes, I want and need the divorce/separation decrees.