How do we (plan sponsor) handle orphan accounts? Per Rev Proc 2007-71, the IRS has indicated the following participant accounts can be excluded (the grandfather effect) from capturing information for reporting purposes.(read more...)

Important Message: 457(b) and 457(f) plans for tax exempt employers can be complicated. If you are a not familiar with 457 plans and are helping a client with a qualified plan design issue or executive compensation; please include a consultant or attorney that has experience with 457 plans.(read more...)

Important Message: 457(b) and 457(f) plans for tax exempt employers can be complicated. If you are a not familiar with 457 plans and are helping a client with a qualified plan design issue or executive compensation; please include a consultant or attorney that has experience with 457 plans.(read more...)

This FAQ applies only to 457(b) plans for governments. If you are inquiring about a tax exempt plan, please see the separate FAQ posted on this site or contact us.(read more...)

How do we handle owners with Schedule C or K1 income when it comes to providing compensation information on the annual census request OR for purposes of participating in the 401(k) plan? For most plans that use the W-2 definition of compensation, compensation includes all earned income.(read more...)

01/311099R's Due to the Participants (From Trustee/Custodian). The custodian/directed trustee of the plan delivers the 1099R's direct to the participants. Please note, some custodian/directed trustees deliver the 1099R attached to the check.(read more...)

The government has created three key non discrimination tests to ensure plans do not favor highly compensated employees (HCE’s): Coverage Testing, ADP/ACP Testing and Top Heavy.(read more...)

When is the required Sarbanes Oxley Notice required to be sent? The notice must be sent to all eligible participants in the plan as well as anyone with a balance (including those that have left the company) at least 30 days before the current recordkeeping service provider shuts off access to the recordkeeping system for any inquiry services or transactions for three consecutive days.(read more...)

In a nutshell, the test ensures an appropriate number of employees are covered under the plan as defined by the government (or simply stated a significant percentage of NHCE's are covered (or eligible) for the plan). In order for the plan to remain qualified, the plan must pass either the ratio percentage test or the average benefit test for each account type utilized (401(k), company match, and profit sharing).(read more...)

Both the IRS and DOL consider it a top priority to make sure that contributions employees make to their 401(k) and 403(b) plans are deposited on a timely basis. The first part of this article provides FAQs on the deadlines for depositing employee contributions. The second section reviews the steps required to correct late deposits. (read more...)

This article describes the deadlines for depositing employer contributions to the plan.(read more...)

This section provides answers for frequently asked questions from plan sponsors, investment advisors, and recordkeeping platforms.(read more...)

Beginning with the plan year 2009, plan sponsors of employee benefit plans are required to file their Form 5500 electronically using EFAST2. This Q&A will address the electronic procedures and the Form 5500 from the plan sponsors perspective.(read more...)

Plan sponsors have several variables when creating their plan document, including: At inception of the plan, you can select 'amnesty' - this means everyone is eligible to for the plan if they are working on the amnesty date (regardless of years worked or hours in the current year)(read more...)

Family attribution has a major impact on determining key employees for the top heavy test (and highly compensated employees for the ADP test). You are considered an owner (at the same percentage) through family attribution (per Section 318) if you are (as compared to the anchor person or owner):(read more...)

Is a Fidelity Bond Required? Per ERISA §412 and DOL Regulation 2580.412-1all defined contribution ‘plan officials’ who ‘handle’ plan funds must be adequately bonded against loss by reason of acts of fraud or dishonesty. (read more...)

You are a fiduciary if you exercise any discretionary authority/control related to the management of the plan. For small plans, the CEO or owner (s) is a fiduciary, as they are typically making the decisions on the company’s behalf (regardless if they believe an outside trustee or advisor has been hired). (read more...)

When a partially vested participant terminates employment and takes a distribution of his or her vested balance, the amount left behind is called a forfeiture. Plan sponsors have some latitude in how they use forfeitures, but there are important timing restrictions. If those deadlines are not observed, amounts that can otherwise help employers reduce plan costs can create expensive compliance headaches. This article provides answers to some of the more common questions regarding the timing and use of forfeitures.(read more...)

Is the 2009 Form 5500 the year of the increased fee and revenue disclosures? What are the new questions related to compensation? (read more...)

Update June 21st: The IRS listened! The Form 8895-SSA is due the later of January 17, 2012 and the due date that generally applies for filing the Form 8895-SSA. For the 2009 and 2010 filing, the due date is January 17, 2012 (no extensions allowed).(read more...)

Detailed information on contribution limitations for calendar and non-calendar year plans.(read more...)

In recent years, IRS and DOL audits have placed an increased emphasis on participant loans. Specifically, they have focused on making sure active participants continue to make their loan repayments in a timely manner, loans are processed according to Section 72(p) and the plans loan policy, as well as ensuring loans are defaulted properly.(read more...)

Since a plan sponsor can not force out a participant without an acknowledgment, what are the requirements prescribed by the IRS for Search 'Lost Participants'?(read more...)

From time-to-time, all qualified retirement plans are required to be updated to reflect recent legislative and/or regulatory changes. Some of these updates are made through plan amendments, but others require plan documents to be completely re-written (a process know as 'restating' the plan). The following is a list of the various amendments and restatements that have been required since 2003.(read more...)

Plan sponsors of defined contribution plans have a plethora of compliance and administration requirements, but those plans that decide to use an off calendar year end face additional compliance/administration issues.(read more...)

What is permanency? The IRS wants to make sure the plan was created/started for the benefit of all employees and not created as a short term or temporary program to benefit owners or senior managers (think corporate or individual tax impact).(read more...)

This section is strictly for review purposes. It is not to be used as a legal or consultative opinion as to the decisions you make regarding plan design, service providers, or the termination process.(read more...)

Profit sharing plan designs include the following: Traditional Profit Sharing Formula, Integrated Profit Sharing Formula, Age Weighted Profit Sharing Formula and New Comparability (Cross Tested) Profit Sharing Formula(read more...)

Who is required to receive a required minimum distribution from a qualified plan? Qualified plans are required to distribute an annual minimum distribution to terminated participants who are at least age 70.5 and active participants who own more than 5% of the company who are at least age 70.5.(read more...)

Can a plan cease/stop its safe harbor NEC mid-year?Historically (pre 2009), plans with a safe harbor non-elective contribution can not back out of their 3% committment mid-year unless the company was ceasing to exist (as the IRS considers the safe harbor non-elective contribution as a required contribution at year end).(read more...)

The four safe harbor plan design options are categorized as: Traditional – Participants must enroll in the 401(k) feature (as in make the decision to defer into the plan)(read more...)

What is a SEP-IRA? A Simplified Employee Pension (SEP) is an IRA plan that is initiated by completing Form 5305-SEP for any employer with one or more employees.(read more...)

Please note, if you are making this comparison with a profit sharing safe harbor 401(k) plan in place already; it is rare for a company to transition to a SIMPLE IRA. This is simply because the plan sponsor retains more corporate tax flexibility in addition all participants can defer more to a traditional profit sharing 401(k) plan.(read more...)

Solok plans are popular for one person business plans as they can maximize the benefits of a defined contribution plan ($49,000 in 2009 if under age 50 and $54,500 if over age 50) or defined benefit plan without having to worry about compliance tests or completing the Form 5500 if the plan has assets of $250,000.(read more...)

What is the top heavy test and how is the top heavy test calculated? The top heavy test is one of the major compliance tests required by the government. This is the only test that is not performed on data for the plan year, it is a cumulutive test that compares the total account balances of the key employees versus the non key employees.(read more...)

What are the vesting methodologies? Plans typically choose elapsed time or hours. Elapsed time is the easiest to administer, as with each hiring anniversary, the participant is credited with a year service. The downside to this approach:(read more...)