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Here are the most recently added topics on the BenefitsLink Message Boards:
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HJ created a topic in Defined Benefit Plans, Including Cash Balance
For a S Corp owner making $300k per year, what is his best option in saving money for himself and getting a tax advantage? Is it a qualified plan that involves profit sharing or can there be a NQ plan that gets funded thru a bonus he gives himself? I am looking for answers that include examples using numbers.
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SoCalActuary created a topic in Defined Benefit Plans, Including Cash Balance
Considering a payout by May 31, 2018, or a delay until June. Looking for the April 2018 published rates for 417(e), to see if there is interest rate arbitrage issues.
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Belgarath created a topic in Employee Stock Ownership Plans (ESOPs)
I'm looking at an S-corp ESOP and a 401(k) l-- two separate plans, handled by two separate TPAs. The ESOP TPA is saying there's a 415 violation, and that refunds of $X must be made. I think it's partially true, but I want to make sure I'm not all wet. The allocations under the ESOP, for 415 purposes, are showing as (pick a number -- say, $800,000) but the repayment of principal and interest on the loan, which is the total contribution, is, say, $700,000. As I read Treas. Reg. 1.415(c)-1(f)(2), for 415 purposes only, the allocations under the ESOP should be based on the $700,000, not the $800,000. This would reduce, but not eliminate, the 415 violations. As an aside, share prices are higher than before, so can't use the special exception for using devalued shares. Am I missing anything on this?
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ERISAAPPLE created a topic in Defined Benefit Plans, Including Cash Balance
How do you advise clients to design their CB formula when they don't know their earnings until after year end? I am looking particularly at clients that are not corporations, such as partnerships and LLCs taxed as partnerships. It's a problem because they need to adopt their plan or amend their formula by the end of the year, but they don't really know their earnings until after year end.
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SoCalActuary created a topic in Retirement Plans in General
A plan sponsor starts a plan and makes contributions which turn out to be non-deductible because they turn out to have no earned income. This goes on for two years. Year three and four, they have earned income and can deduct part of the contributions made. IRS audit of personal and business returns results in denial of deduction for years one and two. The letter arrives in year five. How do you determine the refunds, given that the non-deductible amounts have now earned substantial investment returns in the trust? Do you attribute interest to the non-deductible funds? How and where would that interest be reflected? [1] One theory is that the funds were invested in a trust that was not tax exempt during the first two years, so the trust should file taxes for that period only. [2] Another theory is that the trust was tax exempt in intent and did hold tax-deferred assets. So the
non-deductible contributions are the only amounts refunded. [3] Another theory is that the refund includes income attributed to the non-deductible portion and should be refunded as well, and treated as taxable investment return. Because the IRS denial of deduction letter does not instruct how this is to be treated, I invite your opinions and cites!
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katieinny created a topic in Employee Stock Ownership Plans (ESOPs)
A non-publicly traded company that is owned 30% by the ESOP and 70% by the founder is being sold. According to the Plan, Participants are entitled to direct the Trustee to vote their share of company stock in the case of a sale of substantially all assets of the business, so it would seem that the sale must be disclosed sooner rather than later. What does that disclosure consist of? At this stage, we are reluctant to provide more detail than we need to.
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Scuba 401 created a topic in IRAs and Roth IRAs
Two scenarios. [1] Employee-Doctor, who is an officer of the medical practice in which he works, wants to use IRA funds to purchase closely held REIT (owned by other doctors in the practice). Practice would rent office space from the REIT. [2] A 2% owner of the medical practice wants to do the same. Are these prohibited transactions? I think they clearly benefit from the transactions as an officer and an owner of the medical practice, respectively. I do not believe the medical practice is a disqualified person under 4975.
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jeanh created a topic in Defined Benefit Plans, Including Cash Balance
With the DB prototypes finally getting approval letters, what dates should be used for effective date of restatement?
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Flyboyjohn created a topic in 401(k) Plans
Employer fell on hard times and suspended matching contributions but informally promised participants that when its financial situation improved it would make up the missed matching contributions. Employer now is ready to make up the missed matching contributions. Several participants are no longer employed. Is there a 415 problem with making contributions for participants who have no current compensation, if the employer designates the contributions as relating to prior years when compensation would fully support the contributions? This is a tax exempt employer so there's no 404 deduction issue.
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KEB created a topic in 401(k) Plans
I'm pretty new on here. It's a great resource, but I do have a question. Does everyone work alone? I work for a TPA and we ask our manager or other plan administrators when we have a question. It seems like no one else does that from all the questions I see.
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David Rhett Baker, J.D., Editor and Publisher davebaker@benefitslink.com
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