Source: https://401kmrs.com/index.php/reports_controller/get_faq
Timestamp: 2019-04-25 14:43:25+00:00

Document:
Employers and Advisers can choose any investment provider they wish for the 401k plan, but here is a good example of what using Mrs401k with self-directed brokerage accounts at TD Ameritrade would look like. TD Ameritrade, Inc., member FINRA/SIPC and Mrs401k are separate and unaffiliated companies, and are not responsible for one another’s information, opinions, policies or services.
Here is a Tampa, FL area employer that wants to reinstate a former TPA for their expertise after using a bundled record keeper for four years and an IRS agent describing the 60 day rollover rule.
This table shows you the IRS dollar limits for a given plan year such as the maximum an employee can contribute (the 'elective deferral maximum'), the maximum you can add overall to your plan annually (the 'annual addition limitation') and the maximum compensation that may be considered when calculating contributions and allocations ('the annual compensation limitation) etc. Please note that if you are age 50 or older, the maximum you can add overall to your plan annually is the 'annual addition limitation' plus the catchup deferral maximum. Click on the magnifying glass on the right for more detail.
Here are some answers to frequently asked questions about our Solo & Company 401k plans: Click here for more information about ROTH 401k contributions. To search this page, press CTRL-F.
Q: How much can I contribute to my 401k plan each year?
A: For any given year, the maximum employee and employer contributions combined may not exceed the annual addition limitation amount (if you are under 50) and the annual addition limitation plus the catchup deferral amount if you are older than 50 (or if you turn 50 during the tax year).
Solo 401k plans, please feel free to use our calculator.
For any given year, employees under 50 can contribute up to 100% of their earnings (not to exceed the elective deferral maximum as an employee contribution to their 401k plan. (Employees who are older than 50 (or who turn 50 during the tax year) can also contribute in addition, the catchup deferral maximum as an employee contribution to their 401k plan.
Q: What is the maximum I can contribute as an employer each year?
Incorporated employers can contribute up to	25% of their W-2 earnings as an employer contribution to their 401k plan. You may not make an employer contribution or employer profit sharing or employer matching contribution to a ROTH 401k account.
Unincorporated employers can contribute up to 20% of their self-employment income* as an employer contribution to their 401k plan (in addition to the allowable employee contributions (see above). (*Self employment income is not the exact same number as your profit or loss on Schedule C, line 31. To calculate your "self-employment income" based on your profit on Schedule C line 31, deduct one half of your social security tax from your profit on Schedule C line 31 or use our calculator to make the precise calculation. You may not make an employer contribution or employer profit sharing or employer matching contribution to a ROTH 401k account.
Q: Who offers and	maintains this plan?
A: These Solo 401k	& Company 401k plans are offered exclusively by 401kBrokers.com and	administered by our wholly owned subsidiary, 401kAdministrators.com.	You may invest in thousands of mutual funds, stocks, bonds and options and even take loans from your account if desired.
Q. Who is the	custodian of the assets?
You can choose	just about any mutual fund company, fund supermarket, brokerage	house or custodian you wish to serve as the custodian of the assets	in your 401k plan. Email us at info@401kadministrators.com if you have any	questions. All checks	are made payable to your chosen custodian and all rollover money goes directly to	that custodian.
Q. Who is the	Administrator of the 401k plan?
A: You are the	"Plan Administrator" as that term is used in the Federal Law known	as "ERISA". 401kAdministrators.com serves as	the Third Party Administrator ("TPA") providing technical and	administrative support services including qualified plan establishment,	recordkeeping, reporting, compliance, loan administration and	processing.
We have setup kits	for our Solo & Company 401k plans at TD Ameritrade, Fidelity, Schwab and Vanguard among many others (if you do not see your favorite brokerage or	custodian listed here, simply request it from us. You can also choose just about any mutual fund company, fund supermarket, brokerage house or custodian you wish, to serve as the custodian of the assets in your 401k plan. To see a list of possible custodians, login as a demo user and go to Plan Admin >> Accounts. Click on Search and then the pencil icon (update) to see a drop down list of custodians. You may also email us at info@401kadministrators.com.
Our Solo & Company	401k Plans are not available directly from these custodians. In order to participate in	a Solo 401k, you must have established	a qualified employer sponsored retirement plan before opening	an investment account.	That is where we come in. We set up and service your qualified	employer sponsored retirement plan (401k plan) that then allows	you to become eligible to participate in the various retirement	investment accounts. If have one or more employees and you would	like open a Company 401k plan, you may email us at info@401kadministrators.com,	or submit a plan design questionnaire or your current basic plan document, adoption agreement & summary plan description (SPD).
Q. Where do I mail	the account enrollment forms?
A:	401kAdministrators, 1205 Prospect St., Suite 400, La Jolla, CA	92037.
Q: I am a	Subchapter S Corporation. Can I have a Solo 401k?
A: Yes. Sole	proprietors, partnerships, corporations (including S-corporations),	LLC’s, and LLP’s may all establish	401k plans.
Q: What about tax returns for the 401k plan, who handles those?
A: We prepare your 401k plan tax return at no additional charge. (Although it is an IRS form, (IRS Form 5500SF) since no tax is due, it is actually an "informational return" and it is filed with the Department of Labor). (For the 2016 plan year, an informational return is required if the plan assets exceed $250,000, or have ever exceeded $250,000 but have since fallen in value, or you have one or more eligible employees or a non-spouse participant or you have a non-standard asset in your 401k plan (such as real estate or some asset not readily capable of being valued without a price opinion or an appraisal). When the plan assets exceed $250,000, 401kAdministrators.com prepares the IRS Form 5500SF and accompanying schedules for you to sign and submit.
(If you had to prepare the Form 5500 yourself bear in mind that the IRS estimates the average time to complete and file a Form 5500 is 18 hours and 10 minutes for recordkeeping, 2 hours and 49 minutes for learning about the law or the form, 5 hours and 6 minutes preparing the form and 32 minutes for copying, assembling and sending the	form. That is a total of 26 hours and 37 minutes. We prepare	your plan informational return for you at no additional charge.
Q: Is there an	additional fee for the preparation of the Form or Form	5500EZ?
Q: Can my spouse	participate in my Solo 401k plan?
A: If your spouse	earns income from your business, your spouse can participate.
Q: Is there an	additional fee for my spouse to participate in my Solo 401k plan?
A: There is no set	up fee or termination fee, just the annual 25 basis points fee (1/4th	of one percent) with no minimum fee in a Company 401k Plan. Each	participant in a Solo 401k plan incurs the annual 25 basis points	fee (1/4th of one percent) with a minimum annual fee of	$100.
Q: What about tax	or informational returns if my spouse participates in my Solo 401k?
A: Unlike the case	of employing your child, (see below) when you employ only your	spouse, informational returns are	currently not required until the plan assets exceed $250,000. When the plan	assets exceed $250,000, 401kAdministrators.com prepares the IRS Form	5500 (or Form 5500 EZ) for you to sign and submit.	The Pension Protection Act of 2006 (signed into law in August of	2006) states, "The Secretary of the Treasury is directed to modify	the annual return filing requirements with respect to a	one-participant plan to provide that if the total value of the plan	assets of such a plan as of the end of the plan year does not exceed	$250,000, the plan administrator is not required to file a return.	This provision relating to one-participant retirement plans is	effective for plan years beginning on or after January 1, 2007.
Q: What if I have	partners? Can I still have a Solo 401k plan?
A: You can have a	401kBrokers.com Solo 401k plan with just one or more business partners and no other	employees. It will not be subject to top heavy testing, and the	anti-discrimination rules as long as your partners are 5% or	greater owners or are "highly compensated" and you have no other	employees other than your partners.
Q: What about the tax or informational return (Form 5500 or 5500EZ) if I have	partners?
A: For purposes of filing Form 5500EZ, a one-participant retirement	plan is a plan that covers: 1. Only the participant and/or spouse of	a business (incorporated or unincorporated) that is wholly owned by	the participant and/or the spouse; or 2. Only partners of a	partnership and/or their spouses. Thus, Form 5500EZ cannot be filed	by a corporation with more than one stockholder unless the only	other stockholder is the spouse.
Q: What if I	employ my child in my business? Can I still have a 401k plan?
A: You can	still have a 401k plan, but it won't be a "Solo" 401k plan per se as	you will now be subject to top heavy testing, and the anti-discrimination rules unless your child is a 5% or greater owner or is "highly compensated" and you have no other employees other than your spouse.
Q: If I employ my	child in my business does this affect the plan tax	returns?
A: Yes. Tax returns are	now required even if the plan assets are less than $100,000.	(A full IRS Form 5500 is required not just a	Form 5500 EZ).
Q: Can a non-profit sponsor a 401k, including a Solo 401k?
A: Yes. I.R.C. §401(k)(B)(i) pertaining to eligibility of state and local	governments and tax-exempt organizations specifically makes tax-exempts eligible sponsors	of 401k retirement plans. "...Except as provided in	clause (ii), any organization exempt from tax under this	subtitle may include a qualified cash or deferred arrangement as	part of a plan maintained by it..."
Q: Is there an online area for me to check and make changes to my account?
A: Yes, Mrs401k.com has online acccess for employers and advisors to view and edit employee accounts in the plan and each custodian of assets has an online area for employees to check and make changes to their accounts 24/7.
Q: Can I make my contributions online?
Q: Can I set up an auto debit of my	contributions from a checking account?
Q: Is there a mandatory minimum that I must contribute?
A: No. Contribution amounts are completely	flexible. If you had a good year, you can put in more, up to the	limits. You can always put in less or nothing at all.
Q: How much to open an account?
A: TD Ameritrade does not have an account opening fee or minimum balance requirement. You may be required to meet minimum initial contributions for particular funds however. Schwab and Vanguard also require first time investments in certain fund to meet initial fund minimums (mostly $3,000 at Vanguard, although one Vanguard fund has a $1,000 minimum, the Star Fund). Once you have opened your account and met the initial minimum for a particular fund, you may thereafter invest less than the initial minimum.
Q: Do I have to the ability to alter the amount I contribute at any time?
Q: Where do I send contribution or	rollover checks?
Vanguard: Small Business Services	Dept. 8C1, P.O. Box 1106, Valley Forge, PA 19482-1106. You	should include your name and account number on the check or in a	cover letter or with an invest by mail slip from your account	statements. For overnight delivery, mail	to The Vanguard Group, Small Business Services, 455 Devon Park	Drive, Wayne, PA 19087-1815.
TD Ameritrade: Make your check payable to "TD Ameritrade FBO [your name]" and mail it to TD Ameritrade: PO Box 2760, Omaha, NE 68103-2760. Reference your account number on the check or on a cover letter.
TD Ameritrade Institutional: Make your check payable to "TD Ameritrade FBO [your name]" and mail it to TD Ameritrade Institutional: PO Box 650567, Dallas, TX 75265. Call 1-800-431-3500 with any questions. Reference your account number on the check or on a cover letter.
Schwab: Checks should be mailed to your	nearest Schwab Operations Center, either: Charles Schwab & Co.,	Inc., P.O. Box 628291, Orlando, FL 32862-8291 or Charles Schwab & Co., Inc., P.O. Box 52114, Phoenix, AZ 85072-2114. (By mail or electronically).
Q. Who is the	trustee and account owner?
A: You are the	trustee and account owner.
Q: Do 401k Plan Trustees need to be bonded?
(A Solo 401k Plan Trustee need not be bonded).	A Company 401k Plan itself (as opposed to the plan sponsor or	administrator) may be a named insured under a fidelity bond from an	approved surety covering plan officials and that protects the plan	as described in 29 CFR Part 2580. Generally, every plan official of	an employee benefit plan who ‘‘handles’’ funds or other property of	such plan must be bonded.
Generally, a person shall be deemed to be	‘‘handling’’ funds or other property of a plan, so as to require	bonding, whenever his or her other duties or activities with respect	to given funds are such that there is a risk that such funds could	be lost in the event of fraud or dishonesty on the part of such	person, acting either alone or in collusion with others.
Section 412 of ERISA provides that persons that	handle plan funds or other property generally must be covered by a	fidelity bond in an amount no less than 10 percent of the amount of	funds the person handles, and that in no case shall such bond be	less than $1,000 nor is it required to be more than $500,000.
Section 412 of ERISA and DOL regulations 29 CFR	2580 provide the bonding requirements, including the definition of	‘‘handling’’ (29 CFR 2580.412-6), the permissible forms of bonds	(29 CFR 2580.412-10), the amount of the bond (29 CFR 2580, subpart	C), and certain exemptions such as the exemption for unfunded plans,	certain banks and insurance companies (ERISA section 412), and the	exemption allowing plan officials to purchase bonds from surety	companies authorized by the Secretary of the Treasury as acceptable	reinsurers on Federal bonds (29 CFR 2580.412-23).
Plans are permitted under certain conditions to	purchase fiduciary liability insurance. These policies do not	protect the plan from dishonest acts.
Q: Do I need to have an Company Employer Identification Number ("EIN")	(also known as a Taxpayer Identification Number "TIN") to open a	Solo 401k or, as a Sole Proprietor can I use my Social Security	Number?
A: Vanguard and Schwab now require you to have an IRS issued Employer Identification Number ("EIN") if you will be selecting Vanguard< or as the custodian of your 401kBrokers.com 401k. (You may no longer allow you use your Social Security Number as the "Plan Tax Id"). If you choose TD Ameritrade as your custodian, you can still open a Solo 401k plan with your Social Security Number.
You can apply for a Company "EIN" or a Plan "EIN" (a tax	identification number specifically for you 401k plan) online here or at https://sa.www4.irs.gov/sa_vign/newFormSS4.do. As	part of our administrative service, at no additional cost to you, we	will apply for a plan EIN on your behalf. (The EIN can be for	the 401k plan itself or for the company).
In any event, you must have a	Company EIN or a Plan EIN if a tax return must be filed for your plan as the IRS does not allow the plan tax return to be filed under a Social Security Number.
Q. Who makes the	investment decisions?
A: You or your	advisors make the investment decisions. 401kAdministrators.com does not make investment	decisions for you.
Q: What are the	total fees and costs?
A: There is no	set up fee for any	of our 401k plans.
For Solo 401k plans, (including spouses) our total administrative fee is a quarter point of the value of the 401k plan each year. A quarter point is also expressed as one fourth of one percent (¼ of	1%) or (¼%)	or (.25%) or (25 basis points) of the 401k plan value. This is a yearly administrative fee payable to 401kAdministrators.com as the Third Party Administrator ("TPA").	(For every $10,000 in plan assets it is a $25	annual fee and for every $100,000 in plan assets it is a $250 annual	fee. There is a minimum fee of $100 per participant annually).
For 2+ employee 401k plans,	(meaning the owner and at least one non-spouse employee)	our	total administrative fee	is a quarter point of the value of the 401k plan each year plus a	flat fee of $1,000 per year. There is no minimum fee per participant	on Company 401k Plans.
There are no additional fees.	We personally answer	questions, provide plan design and plan document establishment,	amendments, and modifications, plan administration, tax reporting,	monitoring, compliance, discrimination testing, maximum contribution calculations, arrange loans, and we prepare IRS Form 1099's and	Form 5500's (plan tax returns) at no additional charge.
The annual fees are pro-rated and assessed quarterly. One fourth (1/16th of one percent (.0625%))	is charged each quarter.
There are no fees to purchase certain mutual funds such as the Vanguard mutual funds. (Mutual fund managers do charge to manage all mutual funds and you will incur	additional costs using the Vanguard or other Brokerage Services to purchase other mutual fund families, stocks, bonds, options etc. Check with your asset custodian or brokerage directly as their fees may change.
Q: How does 401kBrokers.com	get paid?
A: 401kBrokers.com	markets the program on behalf of our wholly owned subsidiary,	401kAdministrators.com, the Third Party Administrator on the 401k	plan, who receives the annual administrative fee. We are paid from	that fee.
Q: How are the administrative fees actually paid?
A: The Plan Sponsor	(the self-employed person opening the Solo 401k) pays the	administrative fees directly to 401k Administrators via ACH bank	transfer, Visa, Mastercard, Discover or American Express or by	Paypal. The administrative fees do not come from the 401k plan	assets and do not reduce investment returns or contribution amounts.
Q: Are the administrative fees a deductible business expense?
Yes. The	administrative fees are a deductible business expense and in certain	instances may qualify for a tax credit.
Q. Does	TD Ameritrade, Schwab or Vanguard	pay 401kBrokers.com or 401kAdministrators.com?
A: None of the	custodian of assets pay 401kBrokers.com or	401kAdministrators.com any commissions,	compensation, fees, or money of any sort. Your 401k plan assets are	never reduced to pay our fees.
Q. Are there other	commissions or service fees?
A: To purchase certain muutual funds, such as Vanguard mutual funds, there are no service fees or brokerage	charges or commissions. (Using the Vanguard Brokerage Services to	purchase other fund families, stocks, bonds, options etc., will	incur fees).
401kBrokers.com	does not charge anything more than the 25 basis points (1/4th of 1%) administrative fee, not even	if you want a loan from your 401k ($0 setup and $0 each year the	loan remains outstanding).
Q: Is my Solo 401k or Company 401k	protected from my creditors?
A: Yes. On	April 20th, 2005 the President signed the Bankruptcy Abuse	Prevention and Consumer Protection Act of 2005 (“Act”). The Act	makes significant changes in the bankruptcy rules, including adding	specific protections for retirement plans. The Act goes into effect	for bankruptcy petitions filed after October 16, 2005.The new law	exempts from the bankruptcy estate assets held by a qualified plan	(Solo 401k or Company 401k), 403(b) plan, 457 plan or IRA	(traditional, Roth, SEP and SIMPLE). The effect of the exemption is	to place retirement plan assets beyond the reach of creditors during or after a bankruptcy proceeding. The exemption for	retirement plan assets applies irrespective of whether the debtor	elects the federal or state bankruptcy exemptions. However, the new	law contains an exception for federal tax liens and limits the	application of the exemption for IRAs to $1,000,000. The new law	imposes no dollar limitation on the exemption for other retirement	plans (Solo 401k or Company 401k). Amounts directly rolled over to	another retirement plan (i.e. into a Solo 401k or Company 401k) or	IRA qualify for the exemption as do amounts distributed and rolled	over within the 60-day rollover period.
Q: Must a participant in bankruptcy repay a 401(k) loan?
One of your employees has informed you that it is possible she will have to declare bankruptcy. She took out a $20,000 loan last year on her 401(k) plan, with a five-year repayment plan. Can she stop making loan repayments or renegotiate her repayments?
Generally, no. The failure of an active employee to make required loan repayments will result in a taxable distribution. A loan made to a participant from a qualified 401(k) plan (with the exception of loans used to acquire, but not refinance, a principal residence) that is not required to be repaid within five years from the date on which the loan is made is automatically treated as a distribution. The Bankruptcy Code generally prohibits a creditor from attempting to collect on a debt after a debtor files for bankruptcy. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) clarified that participant loans in 401(k) plans are not discharged in bankruptcy, and ongoing loan repayments by payroll deduction are permitted to avoid a loan default and resulting taxation.
Loan extension. A loan may be extended beyond the original repayment date, but only if the original loan period was less than five years. For a five-year repayment period that is later extended past the original five years, the outstanding balance at the time of extension is treated as a distribution at the time of extension.
Source: Internal Revenue Code Secs. 401(k) and 72(p)(2)(B), as reported in Employee Benefits Management Directions, Issue No. 530, January 29, 2013.
Q: How do I report to the IRS the	contributions I make as an employee each year?
A: Employee contributions are totaled and inserted on	line 28 of your own personal 1040 form.	You may take a tax	deduction for the amounts contributed to the traditional pre-tax	401k account but you may not take a tax deduction for the	amounts contributed to the ROTH 401k account.	Your W-2 Box 1	does not include your pre-tax elective deferrals. It is reported	in W-2 Box 12 and W-2 Box 13 should be checked "Retirement	Plan". For additional guidance, please see pages 7 & 9 of the http://www.irs.gov/pub/irs-pdf/iw2w3.pdf IRS W-2 instructions.
Q: Since designated Roth contributions are already included as part	of wages, tips & other compensation on the Form W-2, must	the amount contributed as designated Roth contributions be	identified on the Form W-2 as well?
Yes, contributions to a designated Roth account must also	be separately reported on Form W–2, “Wage and Tax	Statement,” in accordance with the W2	instructions. The Act requires separate reporting of the	yearly designated Roth contributions. Designated Roth	contributions to 401(k) plans will be reported using code AA	in box 12.
Q: How do I report to the IRS the contributions I make as an employer each year?
A: If you are a corporation: Employer contributions	are totaled and inserted on line 24 of the corporate 1120 tax	return form. You may take a tax	deduction for the amounts contributed to the traditional pre-tax	401k account but you may not take a tax deduction for the	amounts contributed to the ROTH 401k account. If you are a sole proprietor: Contributions made by you as an employer on behalf of any	other participant other than yourself or your spouse are totaled	and inserted on line 19 of your Schedule C tax return form. If filing jointly with your	spouse, do not put any 401k contributions made on your own	behalf or on behalf of your spouse on line 19 of your Schedule	C, add both together and along with your combined employee	contributions, put them all as one number on line 28 of your	1040).
Enter contributions made as an	employer on your own behalf (and your spouse's behalf if filing	jointly) on Form 1040 line 28, not on	Schedule C. You may take a tax	deduction for the amounts contributed to the traditional pre-tax	401k account but you may not take a tax deduction for the	amounts contributed to the ROTH 401k account.
If you are an LLC: Please	review IRS	publication 3402 as the tax return you file depends on your	particular LLC.
Q: What amounts are subject to FICA (Federal Insurance Contribution Act) withholding?
A:	Elective contributions (Employee salary deferral) to a 401k plan are subject to FICA withholding at the time contributions are made (up to the "taxable wage	base").
In the company 401k context, Employer Matching	Contributions and Employer Profit Sharing Contributions	are not subject to FICA withholding, either at the time	the contributions are made or at the time a distribution	is made to a participant. See Internal Revenue Code	Section 3121 (a)(5)(A).
This is also true for Employer contributions in Solo	401k's where the sponsoring entity is a corporation and	the wages are paid under a W-2. This is also true for	for Employer contributions in Solo 401k's where the	sponsoring entity is a sole proprietor and the employer	contribution is made on behalf of another (in a Solo	401k, that is typically just the spouse), because in	this instance the employer contribution is a line item	expense entered on the Schedule C and therefore is not	subject to FICA (SE Tax).
Where the sponsoring entity is a sole proprietor and	the employer contribution is made on behalf of	oneself, the employer contribution	does not appear as an expense on the Schedule C and	therefore is subject to FICA (SE Tax).
The employer contribution is calculated based	on net earned income for Sole Proprietors and on W-2	wages for Corporations. The net earned income and the	W-2 wages themselves are always subject to FICA, but the	employer contribution is not subject to FICA unless the	sponsoring entity is a sole proprietor and the employer	contribution is made on behalf of oneself.
In other words, where the sponsoring entity is a	sole proprietor and the employer contribution is made on	behalf of oneself, the employer contribution is also	subject to FICA.
A: As with FICA, elective	contributions (Employee salary deferral) to a 401k plan are subject to FUTA withholding but matching contributions or profit sharing contributions	(Employer contributions) are not subject to	FUTA withholding. (The maximum amount of wages paid	to an employee during any calendar year that may be subject to	FUTA tax is $7,000 (in 2004) but this amount may be periodically	adjusted through legislative amendment).
Q: As a Subchapter "S" Corporation, can I contribute 25% of the	income distributed to me as profit at the end of the year (K1) or is	it only 25% of my W-2 wages.
A: You may not base the 25% on income	distributed to you as profit at the end of the year (K1).	You may only base the 25% on W-2 wages (plus any other wages	subject to Social Security Tax (bonuses, overtime etc.)).
Q: As a partner in a partnership (or LLC taxed as a partnership), can I contribute 20% of the	income distributed to me as profit at the end of the year (K1) as my	profit sharing contribution or is	it only 20% of my W-2 wages.
A: You may base the 20% on income	distributed to you as profit at the end of the year (K1)	because in the partnership context, as long as you	materially participated in the management of the company, your K1 distribution is subject to Social Security Tax.	You may only base the profit sharing on compensation subject to Social Security Tax.
Q: When do I have to make my contributions by?
A: Employee salary deferrals have a different deadline	than employer contributions and Solo 401k plans have a different	deadline than Company 401k Plans. See I.R.C. §404(a)(6).
Solo 401k Plans (defined as 401k plans with no non-owner employees who work more than 1,000 hours a	year and consisting of just one or more business owners (each owner having 5% or greater	ownership) and/or their spouses): No Sole Proprietors and LLC single member	disregarded entities May be deposited into	the plan up until the filing of your 1040 tax return	with Schedule C, including extensions. May be deposited into	the plan up until the filing of your 1040 tax return	with Schedule C, including extensions. May be deposited into	the plan up until the filing of your 1040 tax return	with Schedule C, including extensions.
Solo 401k Plans (defined as	401k plans with no non-owner	employees who work 1,000 or more hours a year and	consisting of just one or more business owners (each owner having 5% or greater	ownership) and/or their spouses): Yes Sole Proprietors and LLC single member	disregarded entities, LLC's taxed as a Partnership or as	a C-Corporation or an S-Corporation. Employee salary	deferrals will need to be withheld from wages paid in	the tax year you wish to make a contribution for and	deposited into the plan by the filing of the company tax	return, including extensions. May be deposited into	the plan up until the filing of the company tax return,	including extensions. May be deposited into	the plan up until the filing of your company tax return,	including extensions.
Company 401k Plans (defined as	401k plans with any non-owner	no-spouse employees who work 1,000 or more hours a year: Yes Sole Proprietors,	C-Corporations, Subchapter S-Corporations, Partnerships	and single member LLC's and LLC's taxed as a	C-Corporation or S-Corporation. Employee salary	deferrals will need to be withheld from wages actually	paid in the tax year you wish to make a contribution for	and deposited into the 401k account immediately, in no	event later than the fifteenth business day of the	following month after withheld from pay. See [DOL Regulation	§2510.3-102(a)]. For matching	contributions, your plan document specifies whether	these should be deposited each pay period, monthly,	quarterly or at the end of the year. Please refer to	your specific 401k plan document for guidance. The IRS	deadline is up until the filing of the company tax	return, including extensions, and the ERISA safe harbor	matching contribution deadline is 12 months after the	close of the plan year.
May be deposited into	the plan up until the filing of your company tax return,	including extensions. See I.R.C. §404(a)(6).
Q: Can a salary deferral only be	made from income after the 401k is established?
Q: If you are a cash basis taxpayer when is	the income deemed to have been received?
A: According	to Mary Anne Boyker of the IRS in Customer Service, ID3103130, "...for	Sole proprietors, because of how the income flow works, they are deemed to have received their entire income as of the last	day of the year. So if the Solo 401k plan is setup in	December, then they can still defer based on December 31st as being	the date they earned it all..." The IRS toll free number is	877-829-5500.
A: It means that if you are a Sole Proprietor	and you set up your 401k plan before December 31st, you can still add the maximum employee salary deferral amount ($15,500 in 2007) even if you didn't actually	receive any income between the date the plan is established	and December 31st...(as long as you received at least that much that	year).
Since employer profit sharing	contributions can be made after year end based on the entire year's income (even if the plan was set up, say, in late	December)...sole proprietors can fully utilize both components of	contribution as long as they set their plan up before the last day	of the year..
Q: If a Sole Proprietor is considered to	not receive their income until the end of the year, can they still	make employee salary deferral contributions before year end?
A: Yes, a self-employed sole proprietor may defer (contribute to the	401k plan) on cash advance payments made during the plan year and	before earned income is finally determined. The cash advance	payments must be based on the value of the self-employed	individual's services prior to the date of payment and must not	exceed a reasonable estimate of earned income for the self-employed	individual's taxable year. In addition the self-employed individual	must have made a cash or deferred election before amounts are withheld from the cash advance payments. Treas.	Reg. Sec. 1.401(k)-1(a)(6)(iv).
Q: What if I am a Partner in a Partnership	receiving a year end K1 distribution but no W2 wages, when can I	contribute?
A: A partner may defer (contribute to the 401k plan) on cash advance	payments made during the plan year and before earned income is	finally determined. The cash advance payments must be based on the	value of the partner's services prior to the date of payment and	must not exceed a reasonable estimate of earned income for the	individual's taxable year. In addition the partner must have made a cash or	deferred election before amounts are	withheld from the cash advance payments. Treas. Reg. Sec.	1.401(k)-1(a)(6)(iv).
Q:	What happens if I over contribute to my plan?
A: If the contributions made for you during	the year exceed the limits, the excess is taxable to you.
Q:	Can I make corrective distributions of excess plan contributions?
A: To correct over funding, the plan administrator may distribute	the excess plan contributions (along with any income earned on the	excess). The corrective distributions are reported on Form 1099-R	and are still taxable. They cannot be rolled over into another plan,	but are not subject to the additional tax on early distributions as	follows.
If it is less than $100 and is distributed with income within 2.5 months	after the close of the plan year, such excess contributions are taxed in the	year of distribution rather than the taxable year in which the first	elective contributions were made. [Treas. Reg. 1.401(k)-1(f)(4)(v)(b)].
If excess contributions are distributed more than 2.5 months following the	close of the plan year (but before the close of the next plan year) the	employer is subject to a 10 percent excise tax [Treas Reg. 1.401-1(f)(6)(i)].
If excess contributions are not distributed within 12 months following the	close of the plan year, the plan is subject to disqualification. [Treas Reg.	1.401-1(f)(6)(ii)].
Q: Can I take out any amount from my 401k plan	for any purpose as long as I return it within 60 days to avoid	taxation?
A: No. The 60 day rule is not	meant to be a short term loan. It pertains to distributions	taken in cash from one plan that is then deposited into another	qualified plan within 60 days to avoid taxation. See http://www.irs.gov/faqs/faq-kw7.html 5.5 Pensions	and Annuities: Rollovers. How long do I have to roll over a	retirement distribution?
You must complete	the rollover by the 60th day following the day on which you	receive the distribution. (This 60-day period is extended	for the period during which the distribution is in a frozen	deposit in a financial institution). The IRS may waive the	60 day requirement where failure to do so would be against	equity or good conscience, such as in the event of a	casualty, disaster, or other event beyond your reasonable	control. To obtain the waiver in most cases, a request for a	letter ruling must be made which include the applicable user	fee. Refer to Internal Revenue Bulletin 2006-01 to get the Internal Revenue Procedure for	requesting a letter ruling. A written explanation of	rollover must be given to you by the issuer making the	distribution. For information on distributions which qualify	for rollover treatment, refer to Tax Topic 413, Rollovers from Retirement Plans. For	information on the Direct Rollover Option, refer to Chapter	1 of Publication 590, Individual Retirement Arrangements (IRA's).
Q: What	about loans from my 401k plan?
A: Loans are	available at all of our custodians up to 50% of the account balance not to exceed $50,000.	The interest rate is a commercially reasonable rate. Rates	considered reasonable by the Department of Labor range from a	certificate of deposit rate plus 2% to the prime rate plus 1%. The rate is fixed and fully amortized.	(Under our 401k program, you can	have no more than two loans outstanding at any one time.) General	purpose loans have a 5 year repayment period while loans for the	acquisition of a primary residence can have a longer repayment period.	A plan loan must be repaid within five years unless the loan is	used, within a reasonable period of time, to acquire a principal	residence of the participant.
Q: Is the consent of my spouse required to	take out a loan from my 401k?
A: For plan loans over $5,000 (from plans which	are subject to the spousal annuity requirements), the spouse must	give written consent within 90 days prior to the date the loan is	made. Treas. Reg. 1.401(a)-20, Q&A 24(a) (1).
Q: How do I actually request a loan?
You sign a promissory note we prepare and you request a	"redemption" from your custodian of your 401k account You may receive the loan proceeds by	mail or with some asset custodians, for example Vanguard, you	may link a bank account to your 401k to receive the proceeds of a loan	electronically. With respect to repayment, you will set this up	automatically from your linked bank account (at Vanguard) or	through an online bill pay service at your bank (at TD Ameritrade	and others).
After you fund your 401k plan, simply email us and tell us the	amount you want to borrow and we will custom prepare a	promissory note for you. When you (and your spouse, if any) sign	the promissory note and you have your bank account linked and	the funds are "seasoned" (at least ten days old),	you or us may execute your loan and set up your automatic	repayment. Once your loan/redemption is executed, the Custodian	such as Vanguard	electronically transfers to your bank the following day and your	bank usually credits you the day after that.
Q: Can you walk me through the loan process step-by step in	more detail?
A: Here is an example of how it	works when Vanguard is the asset custodian, but it works much	the same way with all custodians. Because the 401k plan we	provide has provisions allowing loans, loans are available	regardless of where you custody your money. The actual mechanics	of loan funding and repayment vary slightly by custodian (as	some custodians do not permit electronic transfers. If the	custodian does not permit electronic transfers, you would	arrange to receive a paper "redemption" check by mail from the	custodian for the loan proceeds and you would mail send a paper	check to the custodian for the loan repayments. You can automate	the loan repayment by using an online bill bay system or setting	up your bank to send a paper check each month for you). (Loan	funding is really a "redemption" or a "withdrawal". You are	actually "borrowing" the money in your own 401k account, you are	not "pledging" the money in your account in order to borrow	someone else's money).
At Vanguard, in order to obtain your loan	funds electronically and set up	your automatic repayments by "ACH" or "EFT" (Electronic Funds	Transfer), you will need to link your bank	account to your 401k Plan. You can do this online at Vanguard. After you open	your account and go into account options, you will see a drop	down box with a bank account already listed. That bank account	will have the same name as your company or 401k plan. If you do not have a bank account so entitled, or wish	to use a different bank account, you will need to fill out the Vanguard Money Transfer Options Kit, get your signature guaranteed by	your bank and mail the completed form to Vanguard at The Vanguard Group, Small Business Services Dept. 8C1,	P.O. Box 1106, Valley Forge, PA 19482-1106.
Once your return the promissory note to us	and your bank account is linked to your 401k plan and the	account and funds are seasoned (the funds have been deposited	for 10 or more days),	you arrange directly with the custodian of assets to obtain a	redemption of your account. Most custodians will require a	written request from the Trustee to obtain a redemption (along	with the promissory note we generate for you online at http://mrs401k.com you will also receive a generic written request for	a redemption that you may complete and forward to your custodian	to obtain the redemption. Check with your custodian to ensure that there	are no short-term redemption fees on the fund you are	withdrawing the funds from.
Request that the	custodian or your bank or online bill pay	service set up an automatic repayment (in the amount	listed on the promissory note) from your bank account	your 401k account. Set up the automatic	repayments to begin 30 days after the loan is funded and end 60	months (5 years) later (if a 5 year loan-or for however many	months is indicated in your promissory note). Do not execute the loan yourself until you	have signed and returned or uploaded to your file cabinet at http://mrs401k.com the signed promissory note. Doing so may result in a "deemed distribution" which	will trigger a 1099-R and cause you to be liable for income	taxes and penalties on the entire amount of the loan.
Q: How frequently must the 401k loan repayments be made by law?
A: 401k loans require repayments to be made at least quarterly. IRC	Section 72(p)(2)(C). If a loan does not call for at least quarterly	payments, the entire loan is deemed a distribution at the time the	loan is made. Treas. Reg. 1.72(p)-1.
Q: Who do	I pay the interest on the loan to?
A: You pay it back into your own	401k account and you keep it.
Q: Is the	interest on the loan tax deductible?
A: No. The interest paid is generally nondeductible.	(However, if the loan is secured by a participant's principal	residence, the interest is deductible as long as the	participant is not a key employee. I.R.C. §72(p)(3). Key	employees are officers with annual compensation in excess of	$130,000, a more than 1% owner with annual compensation in excess of	$150,000 or a more than 5% owner).
Q: Is there an	additional fee for taking a loan?
A: No.($0 setup	and $0 each year the loan remains outstanding).
Q: Does the loan	appear on my credit report?
A: No.	"The	consumer is borrowing his or her own money, and the loans are not	reported to the credit-reporting agencies," says David Rubinger,	vice-president of communications for Equifax, one of the major	credit bureaus.
Q: What if I don't or can't payback the loan?
A: You'll owe income taxes on the money and could get hit with a 10%	early withdrawal penalty.
Q: Is the	quarterly administrative fee assessed on outstanding loan balances?
Q: When do participant loans become taxable	to a participant?
Q: If a participant loan becomes taxable,	does the obligation to the 401 (k) plan still exist?
A: Yes. From the trustee's perspective, the	fact that all or a portion of the loan is taxed to the participant	does not remove the participant's obligation to the plan. The	participant is still responsible for paying interest on the loan and	repaying principal.
Q: May a participant loan ever be converted	to a distribution?
A: Yes. If the plan permits withdrawals after	age 59½, and the participant is older than age 59½, the outstanding	loan may be converted to a distribution and no further obligation to	the plan will exist. Similarly, if the loan was taken from an	account other than a salary deferral account and in-service	withdrawals are permitted from those accounts, foreclosure and	distribution can occur. If the loan is still outstanding at the time	of retirement or severance of employment, the obligation may be	extinguished by reducing the participant's account balance by the	outstanding loan. It is important to note that the loan will not be	taxed twice. Once the loan is treated as taxable, it represents part	of the participant's cost basis [investment in the contract).
Q: How is a taxable loan reported?
A: The amount of the default or the amount in	excess of the TEFRA limits is reported on Form 1099R in the year of	default or in the year the excess loan is made.
Q: If I take out a 401K loan and then after awhile can't make	payments, then the loan goes into default. At that point, it	sounds like the 10% penalty is due and you are taxed on the full	loan amount.
A: You are taxed and penalized on the then outstanding loan	amount..
Q: After a default on the loan occurs, is there still a	requirement to pay the loan back? If so, why and by when would	the loan need to be repaid?
Q: My spouse does not earn income	from my business but we would like to roll over his 401K into my	Solo 401K plan in order to take out a loan. Is this allowed?
A: No, your husband (or wife) would have to be a bona fide	employee to open a participant 401k account, rollover into	it, and borrow against it. Also, you may never roll over his	401k plan account into your 401k plan account, they must be	maintained as separate accounts, not commingled, each	subject to their own loan limitations.
Q: Other than loans, when can I take a distribution of the	money in my 401k plan without penalty?
Unlike SEP's and	SIMPLE retirement accounts, where funds held for a participant	may be withdrawn by the participant at any time, 401k plans are	subject to rules that restrict a participant's access to her	401k plan accounts.
Whether accounts are accessible in other situations depends on	the type of contribution used to fund a particular account. In	general, accounts attributable to elective contributions are,	under the law, less accessible to participants than accounts	funded with other types of employer contributions. According to	regulations employer non-elective contributions may be distributed after a fixed number of years, the attainment	of a stated age, or upon the occurrence or some event as layoff	or illness. [Treas. Reg. 1.401-1(b)(ii)] These regulations apply	to a 401k plan that is part of a profit sharing or stock bonus	plan.
1) Attainment of age 59.5 (profit sharing or stock bonus plan	only).
2) Hardship (a distribution made in response to an immediate and	heavy financial need and is is necessary to satisfy that need).
3) Termination of the plan.
4) Sale or other disposition of substantially all (at least 85%	of) the assets used by a corporation in a trade or business to	an unrelated corporation.
5) Sale or other disposition by a corporation of its interest in	a subsidiary to an unrelated individual or entity. [Treas. Reg.	1.401-1(k)(1)(d)(1)(ii), 1.401-1(k)(1)(d)(1)(iii),	1.401-1(k)(1)(d)(1)(iv), 1.401-1(k)(1)(d)(1)(v)].
Under EGTRRA, distributions of elective contributions can be	made after December 31, 2001, if there is a severance of	employment, which occurs when a participant ceases to employed	by a the employer that maintains the plan.
Q: What does the term "normal retirement age" mean?
b) The first day of the plan year in which occurs the	fifth anniversary of the date a participant commences	participation in the plan. See I.R.C. Section 411 (a)(8);	Treas. Reg. 1.411(a)-7(b).
Q: What is the "earliest retirement age"?
A: The earliest retirement age under a 401k plan is the	earliest age at which a participant may elect to receive	benefits under the plan. In no event, however, may the	earliest retirement age be later than the early	retirement age determined under the provisions of the	plan, or, if there is no early retirement provision, the	plan's normal retirement date. See Treas. Reg.	1.401(a)-20, Q&A 17(b).
Q: I will be 70 1/2 this year, it is my understanding	that as long as I still continue to work I do not have to	start the RMD this year and can continue to make	contributions to my Solo 401 K yearly as long as I continue	working. Is this correct?
A: In a company 401k setting where you are an employee	who owns less than 5% of the company this would be true,	(the "Required Beginning Date" [for required minimum	distributions or "RMD's"] means the later of the April 1 of	the calendar year following the calendar year in which the	Participant attains age 70-1/2 or retires).
However for Solo 401k plans, benefit distributions to a	more than 5% owner must commence by the April 1 of the	calendar year following the calendar year in which the	Participant attains age 70-1/2. You may continue to make	contributions to your 401k plan from earned income even if	you are taking RMD's.
Q:	Who can rollover the proceeds of the 401k?
A: A participant and their	surviving spouse can rollover to an IRA, a non-spouse	beneficiary cannot rollover to an IRA. I.R.C. §402(c)(9);	Treas. Reg. §1.402(c)-2.
Q: I would like to know the tax consequences of the	distribution of my 401(k) upon my death if my adult son is	designated as the beneficiary. Does he have to take the	entire amount as a lump-sum distribution, or can he take the	payout over a five-year period? If a trust is designated as	the beneficiary, what are the tax rules?
Beneficiaries usually may withdraw	the entire 401(k) in a lump sum if they choose, says	Internal Revenue Service spokesman Jesse Weller according to	Arthur M. Louis. If they prefer installments, there are	generally minimum amounts that must be withdrawn.
It's extremely important to follow the	rules, because there is a 50 percent penalty tax applied to	any amount that should be distributed in a given year but	isn't.
If you start receiving required,	periodic distributions before you die, the distributions to	your beneficiary must continue at least as rapidly after you	die.
If you have not begun receiving such	distributions before your death, your beneficiary will	either have to receive distributions of the full account by	Dec. 31 of the fifth year following the year you die or	receive annual distributions based on the beneficiary's life	expectancy.
Any rules spelled out in your 401(k)	plan will determine which method the beneficiary may choose.	Furthermore, the choice is supposed to be made before the	next required distribution -- usually, Dec. 31 of the year	following your death.
If a trust is your beneficiary, and it	meets certain requirements, the beneficiaries of the trust	will be treated as beneficiaries of the 401(k) for tax	purposes, and the payouts are usually pegged to their life	expectancies.
If the trust does not meet the	requirements, and you had started receiving distributions,	the payments must be made within five years after your	death. If payments had not begun, they would have to be made	over your remaining life expectancy (even though you are	dead!). You should consult your trust attorney if you want	to name your trust as beneficiary.
Federal law	has always allowed a spouse who inherits a 401(k) account to	put the money into his or her own retirement savings account	without penalty. But anyone else — including a child of the	deceased — typically has been required to withdraw all funds	from the account and pay taxes on the income within a matter	of months. Such an inheritance also has forced some	survivors into a higher tax bracket, further increasing	their tax burden.
Under the new provision, other heirs besides spouses will be	able to roll an inherited 401(k) account into an individual	retirement account and not pay taxes on the income	immediately, perhaps not for many years. A non-spouse heir's	tax payment schedule will be tied to the age of the	account's former owner.
Experts say the rule, which takes effect next year, could	save many heirs tens of thousands of dollars each in taxes.
Q: Can I designate my estate or a	trust as a beneficiary of my 401k plan?
4. A copy of the trust instrument or	a certified list of beneficiaries is provided to the plan.
[Treas. Reg 1.401(a) (9)-4 Q&A 5].
Q: Can I participate in a workplace or company 401k and also sponsor my own Solo 401k plan at the same time?
A: Yes you can. The contributions to your Solo 401k will be based on your self-employment income and not on income earned as an employee of another company. However, the two plans are treated as one for purposes of determining your maximum contribution limits. As an employee, you may not defer more than the maximum employer deferral amount into both plans combined.
For example, you may not defer the maximum as an employee at work and then another amount into your Solo 401k as an employee of your own company. If you defer (contribute) say $6,000 as an	employee at work, you can defer (contribute) up to $9,500 as an	employee into your Solo 401k (as long as you have earned income	from self-employment of at least that amount).
The real advantage comes in on the profit sharing side, where if your employer does not contribute the maximum remaining on your behalf as an employer contribution (over and above the amounts you have deferred as an employee) you may contribute up to the annual addition limitation if under age 50. (If 50 or over, you can exceed the annual addition limitation by the catchup deferral amount). Your compensation from self-employment must be large enough to justify the employer contribution (employers may contribute roughly 20% of net earned income for Solo Proprietors and 25% of W-2 wages for corporations).
Q: Can I have a Solo 401k plan and a traditional IRA at the same time?
A: Yes you can. However, the two are related in that if you are an active participant in a qualified plan (say, for example, a	Solo 401k plan) limits are placed on the amount of a contribution to	a traditional IRA that is deductible. For single individuals and	heads of households, the part of the contribution to a traditional	IRA that is deductible phases out ratably if MAGI is more than	$45,000 and less than $55,000 in 2004. In 2005, it phases out	ratably if MAGI is more than $50,000 and less than $60,000. However,	the amount deductible will be at least $200 if the MAGI is less than	the high end of the phase out range.
Q: Can I have a Solo 401k plan and a ROTH IRA at the same time?
A: Yes you can. The two are not related. They each have their own	contribution limits and contributing to one does not reduce the	contributions you can make to the other. However, the right to make	contributions to a ROTH IRA phases out if MAGI exceeds certain	specified limits, regardless of whether the individual is an active	participant in a qualified plan.
A: Yes you can. The two are unrelated. They each have their own	contribution conditions and limits and contributing to one does not reduce the	contributions you can make to the other. The citation for this	authority is a telephone message left on our voice mail on 2-21-2007	at 9:52 a.m. by Don Curlzyk of the IRS, in response to an email we	sent to retirementplanquestions@irs.gov. Mr. Curlzyk's telephone number	is 513-263-3573.
Q: Can I have a SEP-IRA and a Solo 401k plan at the same time?
A: Yes you can but the two plans are treated as one for purposes of	determining your maximum contribution limits. Since the Solo	401k allows for greater deductions on less income, having both may not make the most sense. Further, according to	Mr. Boldragini ID#31-08350 of the IRS if you want to have both a	SEP-IRA and a Solo 401k, you may not contribute to both in a	given tax year unless you used a plan document other than	the IRS model	document for the SEP-IRA (i.e. IRS Form	"5305-SEP"). You must have used a	prototype plan document or an individually designed plan document for the SEP-IRA, which allows for multiple	plans and apportionment and aggregation of contributions. However, you do not need to terminate the SEP-IRA in order to open or	maintain a Solo 401k, (you simply cannot contribute to the	SEP-IRA in the same tax year as your contributions to a Solo 401k).	You can keep an existing SEP-IRA dormant (no contributions)	alongside a Solo 401k. (This true even if the dormant SEP-IRA is the	IRS model	document for the SEP-IRA (i.e. IRS Form	"5305-SEP").
Q: Can I have a SIMPLE-IRA and a Solo 401k plan at the same time?
A: No you may not. Because SIMPLE plans often have exclusive plan rules, they	are generally not allowed alongside a Solo 401k.	However, you can easily terminate your SIMPLE plan and start and	contribute to a Solo 401k for this year. Here is where you can find	information about SIMPLE plans and how the IRS says to	terminate the SIMPLE. http://www.irs.gov/retirement/article/0,,id=111420,00.html If you are employed and your company, which you do not own,	sponsors a SIMPLE, your participation in it does not preclude	you from opening a Solo 401k with separate earned income from	self-employment.
Q: Can I roll a SIMPLE-IRA into a Solo 401k plan?
"After the two year	period, amounts in a SIMPLE IRA can be rolled over or	transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax sheltered	annuity plan (Section 403(b), or deferred compensation plan of a	state or local government." (emphasis added). Since a Solo 401k	plan is a "qualified plan", so yes you can roll a SIMPLE IRA into a	SOLO 401k after two years.
Q: Is an IRA subject to the distribution rules provided in section 401(a)(9)for qualified plans?
A: (a) Yes, an IRA is subject to the requiredminimum distribution rules provided in section 401(a)(9). In order to satisfysection 401(a)(9) for purposes of determining required minimum distributions forcalendar years beginning on or after January 1, 2003, the rules of Sec. Sec.1.401(a)(9)-1 through 1.401(a)(9)-9 and 1.401(a)(9)-6 for defined contributionplans must be applied, except as otherwise provided in this section.
Q: Is the required minimum distribution fromone IRA of an owner permitted to be distributed from another IRA in order tosatisfy section 401(a)(9)?
A: Yes, the required minimum distribution must becalculated separately for each IRA. The separately calculated amounts may thenbe totaled and the total distribution taken from any one or more of theindividual's IRAs under the rules set forth in this A-9.
Generally, only amounts in IRAs that anindividual holds as the IRA owner may be aggregated. However, amounts in IRAsthat an individual holds as a beneficiary of the same decedent and which arebeing distributed under the life expectancy rule in section 401(a)(9)(B)(iii) or(iv) may be aggregated, but such amounts may not be aggregated with amounts heldin IRAs that the individual holds as the IRA owner or as the beneficiary ofanother decedent. Distributions from section 403(b) contracts or accounts willnot satisfy the distribution requirements from IRAs, nor will distributions fromIRAs satisfy the distribution requirements from section 403(b) contracts oraccounts. Distributions from Roth IRAs (defined in section 408A) will notsatisfy the distribution requirements applicable to IRAs or section 403(b)accounts or contracts and distributions from IRAs or section 403(b) contracts oraccounts will not satisfy the distribution requirements from Roth IRAs.
Q: Icurrently have a money purchase pension plan that does not allow you to borrowagainst your balance. I would like to start a new 401K that does allowloans and roll the money from the money purchase pension into it so I will havetwo retirement funds. Please let me know if this is possible.
A: To satisfy IRC Section 401(a), the assets andliabilities transferred from Plan A to Plan B must remain subject to therestrictions on distributions applicable to a qualified money purchase pensionplan. In order to remain qualified, any plan provision applicable to the accruedbenefits derived from Plan A must not permit distributions prior to retirement,death, disability, severance of employment, or termination of the plan.
Money Purchase plans have the same deduction	limitations as the profit sharing portion of 401k plans, so in most cases	there is no need for an employer to maintain both plans to achieve its	retirement plan objectives. As a result, many employers either terminate	their money purchase plans or merge them into their 401k plans. So, yes, you	can merge the two, but you need to keep the money purchase money in a	separate 401k account, subject to the joint and survivor rules, inside of	your 401k.
In-service distributions, available under 401k	plan would not be available to the money inside the money purchase separate	401k. Rev. Rul. 94-76 provides that, under § 414(l), the transfer of	assets and liabilities from a money purchase pension plan to a	profit-sharing plan is considered a spinoff of those assets and liabilities	from the money purchase pension plan and a merger of those assets and	liabilities with the assets and liabilities of the profit-sharing plan. The	merger does not divest the assets and liabilities of the money purchase	pension plan of their attributes as money purchase pension plan assets and	liabilities. The holding in Rev. Rul. 94-76 is applicable when an employer	converts a money purchase pension plan into a profit-sharing plan.
If you have employees there are other issues	such as vesting, notice, reduction of benefits etc. to address. Click here to read Rev. Rul.	94-76 on Rollovers from Money Purchase Plan.
A: Prior to the enactment of the Economic Growth and TaxRelief Reconciliation Act of 2001 ("EGTRRA"), Pub. L.107-16, certainrestrictions applied to rollovers by individuals of funds accumulated inretirement plans maintained by their employers or in IRA's maintained by theindividuals. Sections 641 through 643 of EGTRRA (as amended by § 411 of the JobCreation and Worker Assistance Act of 2002, Pub. L. 107-147) substantiallyincreased the rollover opportunities available to individuals, by expanding boththe types of plans eligible to accept rollovers and the types of funds that canbe rolled over.
(1) Section 402(c) provides that if any amount paid from aqualified trust in an eligible rollover distribution is transferred to aneligible retirement plan in a rollover that meets the requirements of thatsection, the amount transferred is not includible in gross income for thetaxable year in which paid. Similar rules apply to § 403(a) annuity plans, §403(b) tax-sheltered annuities, IRAs and § 457 eligible governmental plans.
(2) Section 402(c)(2) provides that the portion of aneligible rollover distribution that would otherwise not be includible in grossincome cannot be rolled over unless such previously taxed amounts aretransferred either (i) in a direct trustee-to-trustee transfer to a definedcontribution plan qualified under § 401(a) that agrees to separately account forsuch amounts or (ii) to an IRA.
(4) Section 408(d)(3)(A) provides that previously taxedamounts distributed from an IRA may only be rolled over to another IRA.
(5) Section 402(c)(10) provides that a § 457 eligiblegovernmental plan may not accept a rollover from another type of eligibleretirement plan unless it separately accounts for such rollover. Section72(t)(9) provides that a distribution from such separate account is subject tothe 10-percent additional tax under § 72(t) as if the distribution were from aplan described in § 401(a).
In many instances, the Code, or Income Tax Regulations orother guidance issued by the Service, provides explicitly for the treatment ofrollover contributions. For example, the survivor annuity requirements of §§401(a)(11) and 417 apply to all "benefits provided under a plan, includingbenefits attributable to rollover contributions" (§ 1.401(a)-20, Q&A-11).
Similarly, pursuant to § 411(a)(11)(D), in determiningwhether an employee's accrued benefit exceeds $5,000 (and thus may not beimmediately distributed without the consent of the employee), a plan may providethat rollover contributions (and attributable earnings) are disregarded.
In other instances, rollovers are implicitly included. Forexample, § 72(t) imposes a 10-percent additional tax on a taxpayer who receives“any amount” from a qualified retirement plan (within the meaning of § 4974(c))except as otherwise provided in § 72(t); the reference to “any amount” and thelack of an exception for amounts attributable to rollover contributions indicatethat § 72(t) is applied without regard to whether the amounts distributed areattributable to rollover contributions.
Q: What if I own part of another company thathas employees yet I also earn self-employment income in my own company. Am Istill eligible for a Solo 401k and do I need to offer the employees of theother company (of which I am a part owner) the opportunity to participatein my Solo 401k?
Q: Can I restrict participation to employees who have worked 2	years with a minimum of 1,000 hours to qualify for a year?
A: A 401k plan may require up to one year of service before	allowing employees to make elective contributions. [Treas. Reg.	Sec. 1-401(k)-1(e)(5)]. (You may also require a minimum of 1,000	hours to qualify for a year.) If a 401k Plan also provides for	employer contributions, employees can be required to complete up	to two years of service before becoming entitled to receive	those contributions. In that case however, the law requires	employees to be 100% vested in their accounts attributable to	employer contributions. [I.R.C. Sec. 410(a)(1)(B)(i)].
Q: What is a Safe Harbor 401k Plan?
Only If you have employees may you need a Safe	Harbor 401k plan. You may need such a plan if the owners (individuals with	more than 5% ownership) and the highly compensated employees (HCE's)	(employees making more than $95,000 per year) put in a disproportionate	amount of money into the 401k plan compared to the non-owner employees and	the non-highly compensated employees (NHCE's).
You can achieve a Safe Harbor plan by making	employer contributions on behalf of all non-highly compensated employees. (Under a Safe Harbor plan, 100% of all	employer contributions are immediately vested).
2) A 3 percent of compensation non elective	contribution. (This is for all "eligible"	employees (participating or not...contributing or not).
To remain exempt from ACP testing, all matching contributions must be	allocated on a nondiscriminatory basis. Placing an allocation restriction,	such as a last-day rule or a 1,000 hours-of-service requirement, on any	matching contribution provided by the plan is discriminatory unless all	non-highly compensated participants satisfy the restrictions.
Under the original safe harbor plan rules,	the only short plan year allowed for safe-harbor plans was the first plan	year. Unless an employer organization was in existence less than three	months, the first plan year had to be at least three months long. The Final	Regulations have added additional opportunities to use a short-plan year (a	plan year of less than 12 months) for safe-harbor plans.
Q: What is an "eligible" employee?
An employee is not considered an eligible employee if,	upon beginning employment or upon first becoming eligible to participate in	the plan, an	employee makes a one-time election not to participate in the plan or any	other 401k plan maintained (presently or in the future) by the Employer.
Otherwise, employees are considered eligible if	they are directly or indirectly eligible to make elective contributions	under the 401k plan for all or any portion of the plan year. (Meaning they	work more than 1,000 hours per year and are not covered by a collective	bargaining agreement (union members) and are over the age of 21.
Your 401k plan can exclude any part time	employees (less than 1,000 hours per year or those that are covered by	collective bargaining (union members) or those under the age of 21.)	Otherwise, you must offer 401k participation to all employees who work more	than 1,000 hours per year and are not covered by a collective bargaining	agreement (union members) and are over the age of 21.
Nevertheless, otherwise eligible employees	can make a	one-time election not to participate in the plan or any other 401k plan	maintained (presently or in the future) by the Employer and will	become non-eligible to defer salary and will not be considered when testing	the 401k side of the plan. However, even employees that make a	one-time election not to participate in the plan or any other 401k plan	maintained (presently or in the future) by the Employer may still be	entitled to a profit sharing allocation.
Q: Our	profit sharing plan (without 401(k)) is currently set up to provide for a 2	yr. waiting period and then 20% vesting per year for any employee who works	over 1,000 hrs. We would prefer not to have to contribute for an employee at	all and are considering using employee leasing (which our plan allows)	rather than have to contribute. Is there ANY plan structure that would allow	us to have an employee who works more than 1000 hrs. and not contribute?	Would a 401(k) allow this?
A: Perhaps, but it is complicated. Taxpayers that utilize the services of	leased employees may request a determination as to whether their plan	qualifies by following the determination letter procedure issued in Notice	83-12, 1983-2 C.B. 412 (relating to procedures for obtaining determination	letters on the qualification of pension, profit-sharing, and stock bonus	plans that have been amended to comply with the changes made by the Tax	Equity and Fiscal Responsibility Act of 1982). TEFRA amended the Internal	Revenue Code to provide that for purposes of certain employee benefit	provisions, a "leased employee" generally shall be treated as an employee of	the person for whom such leased employee performs services (the "recipient"	of the services) even though such individual is a common law employee of the	leasing organization.
A person is considered to have performed services on a substantially	full-time basis for a period of at least one year if: (1) during any	consecutive 12-month period such person has performed at least 1500 hours of	service for the recipient, or (2) during any consecutive 12-month period	such person performs services for the recipient for a number of hours of	service at least equal to 75 percent of the average number of hours that are	customarily performed by an employee of that recipient in the particular	position. The performance of services for a recipient includes the	performance of services for an organization relative to the recipient in	accordance with section 103(b)(6)(C).
For example, assume that Corporation X leases Individual A from Leasing	Company Y to perform bookkeeping duties. Leasing Company Y does not maintain	a retirement plan. It is customary for bookkeepers who are employed by	Corporation X to perform services 35 hours per week or 1820 hours per year.	During the next consecutive 12-month period, A performs 1450 hours of	service for X. A does not meet the first test of "substantially full-time"	because A did not perform 1500 hours of service. However, A does meet the	second test for "substantially full-time" because A performed services for a	number of hours at least equal to 75 percent of the number of hours that are	customarily performed by an employee in that particular position (.75 x 1820	hours = 1365 hours customarily performed). Therefore, A is a "leased	employee" of Corporation X.
Q: What is a principal owner?
Q: What is a Highly Compensated Employee (HCE)?
A: A highly compensated employee (HCE) is a	individual with more than 5% ownership or employees employees making more	than $95,000 per year (in 2005).
Q:	What are the minimum coverage rules?
A: The minimum coverage rules require employers to make a 401kPlan available	to a cross section of employees. Plans that automatically satisfy the	minimum coverage rules include a plan maintained by an employer that has no	non-highly compensated employees at any time during the plan year. [Treas.	Reg. Section 1.410(b)-2(b)(5).
Q: What is the ratio percentage test?
A: The ratio percentage test requires that the	percentage of NHCE's benefiting under the plan be at least 70 percent of the	percentage of HCE's benefiting under the plan. [Treas. Reg. Section	1.410(b)-2(b)(2)].
Q: What is the average benefits test?
A: The average benefits test consists of two separate tests, both of which	must be satisfied. The two tests are the non-discriminatory classification	test and the average benefit percentage test. [Treas. Reg. Section	1.410(b)-4(a)].
Q: What is the	non-discriminatory classification test?
A: The non-discriminatory classification test requires the 401k plan to	benefit a class of employees established by the employer that is both	reasonable and non-discriminatory. [Treas. Reg. Section 1.410(b)-4(a)].
Q: What is the average benefit percentage test?
A: The average	benefit percentage test is one that requires the average benefit	percentage of the 401k plan for the plan year to be at least 70%. [Treas.	Reg. Section 1.410(b)-5(a)].
Q: How is the average benefit percentage calculated?
A: The average benefit percentage is	determined by dividing the actual benefit percentage of the NHCE's in plans	in the testing group for the testing period by the actual benefit percentage	of the HCE's in the plans in the testing group for the testing period.	[Treas. Reg. Section 1.410(b)-5(b)].
Q: Is the actual deferral	percentage test (ADP) done on an annual basis (once at the end of	the year) or some other time frame?
A: The plan must be tested on a	yearly basis.
Q: Is the actual deferral	percentage test amount based on a percentage or a dollar amount?
2: THE ADP of the eligible HCE's is	not more than 2 percentage points greater than the ADP of the NHCE's	and the ADP of the eligible HCE's is not more than 2 times the ADP	of the eligible NHCE's.
Example 1: If the ADP of the NHCE's is	1.23%, the ADP of the HCE's can be no greater than 1.23 times 2, or	2.46%.
Example 2: If the ADP of the NHCE's is	7.43%, the ADP of the HCE's can be no greater than 7.43 plus 2 or 9.43%.
The ADP for a group of eligible	employees is the average of the actual deferral ratios of the	eligible employees in that group. (Employees are considered eligible	if they are directly or indirectly eligible to make elective	contributions under the 401k plan for all or any portion of the plan	year. (Employees are considered eligible even if their right to make	elective contributions has been temporarily suspended on account of	a plan loan or distribution, or because of an election not to	participate in the plan. However, an employee is not considered an	eligible employee if, upon beginning employment or upon first	becoming eligible to participate in the plan, an employee makes a	onetime election not to participate in the plan or any other 401k	plan maintained (whether presently or in the future) by the	employer).
If the ADP test for a plan year is not	satisfied, there are several mechanisms for correcting an ADP test	that does not meet the requirements of law. For a plan which	involves no mandatory employer contributions, one corrective action	would be to distribute the excess contributions and allocable	income. Corrective distributions distributed within 2.5 months after	the end of the plan year are not subject to the 10% excise tax	penalty for distributions made before age 59.5.
Q: What	is a Top Heavy 401k Plan and what does that mean?
As of the determination date when the aggregate	value of the plan accounts of key employees exceeds 60% of the	aggregate value of the plan accounts of all employees. A key	employee is an employee, who at any time during the plan year	containing the determination date is a more than 5% owner of the	employer or a more than 1% owner of the employer with annual	compensation greater than $150,000 (family attribution rules apply)	or an officer with annual compensation greater than $130,000 (2004)	(This number is indexed: The dollar limit is anticipated to increase	to $135,000 in 2005). The authority of a job is used to determine	“officer” status, rather than officer title. The determination date	is the last day of the preceding plan year. For example, for a	calendar year plan for the 2005 top-heavy test, the determination	date would be December 31, 2004.
For the first plan year, the last day of the	first plan year would be the determination date for both the first	plan year and the second plan year. For example for a calendar year	plan which started in 2004, the 2004 plan year determination date	would be December 31, 2004, and the determination date for the 2005	plan year would also be December 31, 2004.
The top-heavy allocation is provided to all	non-key plan participants who are active employees on the last day	of the plan year regardless of actual hours of service performed.	Thus, there may be no 1,000-hour requirement for a top-heavy	allocation and anyone employed on the last day of the year who is	eligible to participate in the plan is to receive a top-heavy	allocation. A plan document may also call for the top-heavy	contribution to be provided to the key employees also.
A Safe Harbor 401(k) Plan in which the only	allocations made to the plan are elective deferrals and the safe	harbor contribution will avoid top heavy testing. See Rev. Rul.	2004-13. Plans with fewer than 100 employees are the plans most	likely to become top heavy and thus be affected by the top-heavy	rules.
A: As a	Plan Administrator of a Company 401k plan (with multiple W2	employees), what documents to I have to file and furnish?
Obligation to furnish. The administrator of any employee benefit plan	shall furnish annually to each participant of such plan and to each	beneficiary receiving benefits under such plan (other than	beneficiaries under a welfare plan) a summary annual report	conforming to the requirements of this section. Such furnishing of	the summary annual report shall take place in accordance with the	requirements of Sec. 2520.104b-1 of this part. The summary	annual report shall be furnished within nine months after the close	of the plan year.
Contents, style and format. The summary annual report furnished to	participants and beneficiaries of an employee pension benefit plan	shall consist of a completed copy of the form prescribed in	paragraph (d)(3) of this section. The information used to complete	the form shall be based upon information contained in the most	recent annual report of the plan which is required to be filed in	accordance with section 104(a)(1) of the Act.
Form for Summary Annual	Report Relating to Pension Plans.
This is a summary of the annual	report for (name of plan and EIN) for (period covered by this	report). The annual report has been filed with the Pension and	Welfare Benefits Administration, as required under the Employee	Retirement Income Security Act of 1974 (ERISA).
Benefits under the plan are	provided by voluntary contributions of employees and either	discretionary or mandatory contributions by the company. Plan	expenses were ($ ). These expenses included ($ ) in	administrative expenses and ($ ) in benefits paid to participants	and beneficiaries, and ($ ) in other expenses. A total of ( )	persons were participants in or beneficiaries of the plan at the end	of the plan year, although not all of these persons had yet earned	the right to receive benefits.
experienced an (increase)	(decrease) in its net assets of ($ ) This (increase) (decrease)	includes unrealized appreciation or depreciation in the value of	plan assets; that is, the difference between the value of the plan's	assets at the end of the year and the value of the assets at the	beginning of the year or the cost of assets acquired during the	year. The plan had total income of ($ ), including employer	contributions of ($ ), employee contributions of ($ ), (gains)	(losses) of ($ ), from the sale of assets, and earnings from	investments of ($ ).
10. actuarial information	regarding the funding of the plan.
To obtain a copy of the full	annual report, or any part thereof, write or call the office of	(name), who is (state title: e.g., the plan administrator),	(business address and telephone number). The charge to cover copying	costs will be ($ ) for the full annual report, or ($ ) per page	for any part thereof.
You also have the right to	receive from the plan administrator, on request and at no charge, a	statement of the assets and liabilities of the plan and accompanying	notes, or a statement of income and expenses of the plan and	accompanying notes, or both.
If you request a copy of the	full annual report from the plan administrator, these two statements	and accompanying notes will be included as part of that report. The	charge to cover copying costs given above does not include a charge	for the copying of these portions of the report because these	portions are furnished without charge.
You also have the legally	protected right to examine the annual report at the main office of	the plan, at any other location where the report is available for	examination, and at the U.S. Department of Labor in Washington,	D.C., or to obtain a copy from the U.S. Department of Labor upon	payment of copying costs.
Requests to the Department	should be addressed to: Public Disclosure Room, Room N5638, Pension	and Welfare Benefits Administration, U.S. Department of Labor, 200	Constitution Avenue, N.W., Washington, D.C. 20210.
The plan administrator for such	plan shall provide these participants with an English-language	summary annual report which prominently displays a notice, in the	non-English language common to these participants, offering them	assistance. The assistance provided need not involve written	materials, but shall be given in the non-English language common to	these participants. The notice offering assistance shall clearly set	forth any procedures participants must follow to obtain such	assistance.
Furnishing of additional	documents to participants and beneficiaries.
A plan administrator shall	promptly comply with any request by a participant or beneficiary for	additional documents made in accordance with the procedures or	rights described in paragraph (d) of this section.
March 18, 2005	(PLANSPONSOR.com) – Responding to public requests that the Internal	Revenue Service (IRS) disclose more about how it goes about auditing	K plans, the IRS has released an online Examination Process Guide to	clarify the process.
closing and appealing the	examination.
The IRS publication also	provides links to the IRS Web site to help plan sponsors monitor	whether their plans are in compliance (including links to the	examination guidelines and the Employee Plans Compliance Resolution	System).
It includes a compendium of IRS	guidance, forms, and other information applicable to employee plans	examinations and information about getting education materials,	retirement forms and publications for participants, as well as	information for participants regarding their rights.
The document also provides	information on plan compliance in Puerto	Rico, including a comparison chart	highlighting the differences in US and Puerto Rican K plans.

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