Leaderboard

The member reputation stat was lost during a recent upgrade, meaning it was no longer appearing under the member's name (in any message posted by the member). I've done some rewiring, and it's back now. Sure sorry for the unexpected change. I hate it when an upgrade causes some existing tool on the message boards to disappear or to be moved to a new location.

Generally, related employers are those that are in a control group or affiliated service group of employers. You consider the related employers as a single employer when applying the qualified plan rules for such things as coverage and nondiscrimination. Example, A is parent company that owns 100% of subsidiaries B & C and sponsors a 401(k) in which employees of A, B & C are all eligible to participate. This is considered a single employer plan. A multiple employer plan is a plan in which more than one unrelated employer participates. Example, companies A, B & C are each owned 100% by three separate unrelated individuals who are friends from college and decide to adopt the same 401(k) plan for their employees to gain economies of scale. This would be a multiple employer plan.

There was no late deposit, because there was nothing withheld.

50% QNEC for missed amount. Earnings. Plus full match on missed amount, if any.

No, apply to 2021 as an annual addition. If it exceeds 415 due to little or no compensation, then shrug your shoulders and move on. If it exceeds 415 because significant contributions are being made in 2021, well, I'm not sure because I've never seen it. (I'm giving a very technical answer above but I guess to be honest, in our admin system, everything would be going in as a 2020 annual addition. I wouldn't know how to split them out to 2021, except manually. I can think of one plan that consistently does SH late every following year and we just know that they never do more than the SH and don't worry about it.) Luke Bailey may very well be correct about the proper treatment - distributing as taxable income - but I suspect they (IRS) are aware of the issue and choose not to give guidance because they'd just as soon not create such a hassle for such a tiny thing.

The CPI-U for September 2021 was published moments ago with a value of 274.310. Based on Tom Poje's spreadsheet, the dollar limits for 2022 are projected to be: Increased: Deferral limit: $20,500 (up from $19,500) Compensation Limit: $305,000 (up from $290,000) Annual Addition Limit: $61,000 (up from $58,000) DB Limit: $245,000 (up from $230,000) HCE: $135,000 (up from $130,000) Key Employee: $200,000 (up from $185,000) Unchanged: Catchup: $6,500 Just for reference, the unrounded figures are: Catchup: $6,949.50 Deferral limit: $20,848.50 Compensation Limit: $307,840 Annual Addition Limit: $61,568 DB Limit: $246,272 HCE: $139,104 Key Employee: $200,096

You need to attach an explanation of reasonable cause for why it is late. They will cash your check and likely send a letter for penalties and interest. Instructions for Form 5330 (12/2020) | Internal Revenue Service (irs.gov)

I've always thought of it that way too. I don't think you can get away with not giving the SH just because someone terminated and you made the contribution in the approved 12 month window but not in time for prior year annual addition. And I'm pretty sure if the IRS did have any issue with it because of the conflicting rules they would treat it as self correction under EPCRS. Though I don't its ever been specifically addressed in any IRS guidance.

No, that's an "issue" that I don't think Congress understood when they said SH was due 12/31 of the following year. Technically if someone had no income in the following year they shouldn't get a contribution due to 415 (if deposited more than 30 days after extended due date) but SH rules say they have to get it, so the general thinking is that the SH rules control.

My understanding is the same as yours. For 2020 deduction by due date of tax return with extension. Which you state as 9/15. For 2020 annual addition no later than 30 days after the tax return with extension. So if deposited by 10/15 30 days after 9/15 then 2020 annual addition, if deposited between 10/16 and 12/31 2021 annual addition. To meet 12 month Safe Harbor deposit deadline deposit by December 31, 2021. In scenario 1 yes deposit it by 12/31/2021 and deduct it in 2021 but get it in by 10/15 if you want it as 2020 annual addition. In scenario 2 yes if they want to make PS contrib to 2020 annual addition it would need to be deposited by 10/15 and designate as 2020 contribution. If 3% deposited by 10/15 would be 2020 annual addition if done after 2021 annual addition. I'd make sure the client keeps good records about what is what if they split it deposits before and after 10/15 but all of it would be against 2021 deduction limit

Even if ERISA and the plan’s governing documents do not otherwise preclude an adjustment of mistaken allocations, read (or suggest that your client’s lawyer read) the annuity contracts and custodial-account agreements. The employer/administrator might have no right and no power to unravel amounts credited under those contracts.

They could retroactively amend the plan to allow those ineligible employees to become eligible and keep the contributions. But, more specific to your question, isn't this similar to a correction of an "Excess Allocation" (employer contribution beyond what was permitted under the terms of the plan) under EPCRS that requires using the "Reduction of Account Balance Correction Method" in section 6.06(2)?

That's a pre-programmed feature of the software -- if you click on the number, you can see the sum of the "like" and "laugh" and "thanks" reactions that have been added by other members to all of the messages you've posted to date. (Those are the "heart", "smiley face," and "trophy" icons in the lower right corner of each message, which other members can click on.)

If you are calculating the match on a payroll basis (don't confuse calculation with deposit), then you will never use compensation over the limit, unless the pay for that period is in excess of $285,000 (I want that job!). If the comp did go over the limit that pay period, you should restrict the compensation to the limit for that pay period. Also, it is good policy to put match caps in place in your payroll system. If it's dollar for dollar up to 5% of pay, you instruct the program to cap the match at $14,250. If you are calculating the match on an annual basis, then you are already (or should be) capping the formula with the max comp. Kevin, what would you do in the case of someone who makes $$600,000 a year and decides to put in her deferral in the last payroll of the year, or out of the late-September bonus check? Does she not get the match b/c she passed the cap sometime in July?

We've had 5 extensions denied in a batch of 15 that were sent in; 2 approved, and haven't heard from the other clients yet. I FINALLY got through to the IRS. Clearly a breakdown in IRS correspondence because she told me the address to send the appeal to was on the CP216H. If it was, I wouldn't have called. So, to save you all some hold time on the IRS (took 4 days of "call back the next business day" + 15 minute hold today), You have to send a copy of the extension plus proof of timely filing to Internal Revenue Service, Attn: EP Accounts Unit, MS: 6552, Ogden, UT 84201 or fax to 877-792-2864