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If 2012-13-14-15-16 were five one-year Breaks in Service in a row, then I suspect the Plan Administrator did exactly what was supposed to happen. The agent won't question that - just let them know that the 100 percent refers to being vested in "the rest" of their balance after the forfeiture at the 5 BiS point.

Exactly, although I would expect an IRS agent to recognize that situation on their own.

And what filing is due 5 months after plan year end???

The suspense account belongs to the plan unless and until the money in it actually reverts to the employer. The outcome will depend on the structure of the company sale and the benefits structure. If it's a stock sale, and the plan continues to be maintained after closing, the existing plan sponsor will continue to be the plan sponsor. If it's an asset sale, and the buyer assumes the plan, the suspense account remains with the plan. If the plan is terminated, the remaining suspense account must be allocated up to the 415 limits, with any excess reverting to the plan sponsor. The statute imposes the tax on a reversion on "the employer maintaining the plan" so if terminated pre-closing any reversion would seem to belong to the seller. A lot of variables.

Those agents started to retire in the 2000's... As for this current crop, they have their checklists to satisfy...😵

Does the plan document say that match and "profit sharing" (why is this in quotes?) will be deposited each pay period? If so you have an operational failure due to failure to follow the plan document, and you can self-correct under the terms of EPCRS - which requires earnings. If the plan document doesn't say that contributions will be deposited each pay period, then I think you should still consider whether you have a potential 401(a)(4) issue, taking into consideration that the right to earnings on contributions is a benefit, right or feature that has to be available on a non-discriminatory basis.

You can have J&S options for non-spousal beneficiaries, but there are restrictions and adjustments based on the age differences. A good place to start would be Treasury Regulation section 1.401 (a)(9)-6)

S-corp dividends are considered a return on investment and not subject to FICA/Medicare tax, so would be excluded from retirement plan compensation. Here is the link from the IRS Retirement Plans FAQ: https://www.irs.gov/retirement-plans/retirement-plan-faqs-regarding-contributions-s-corporation

414(q) defines an HCE as a 5% owner. It's a status. I don't think you have to be a employed by an entity to be an HCE of it under the definition. If the services performed by B can be categorized as management services, you would have a 414(m)(5) management services group as well, apart from the HCE issue.

Really? Who would ever think that is a good idea...other than the salesperson? Why would a plan sponsor want to burden themselves with this? Why not just pay a lump sum and if the person really wants a variable annuity, they can buy one outside the plan.

Did the participant elect out of withholding? Is his state one where withholding is mandatory? RMDs don't necessarily have to have withholding. And absent an election, the FITW is generally 10%, but could have been waived by the participant. In which case there may indeed be no free throws pending.

And whichever way your client, the law firm, decides, do what lawyers do for everyone else—insist on “get it in writing” (whether their writing to you, or your email to confirm what you were told) so the plan’s administrator bears responsibility.

"...it seems the client is leaving us." Did the client say as much and direct you to share this data? Maybe chalk it up to a "phishing" scam and tell the client you're ignoring it for their protection! 😇

For terminating plans, we're doing the C3 and then a plan term CARES/SECURE amendment package provided by our document provider. It's a comfort thing. Especially if the client doesn't want to go in for a letter, which they never do.

The Cycle 3 restatement does not include CARES and SECURE unless your provider has bundled them into "Good-faith" add-ons. If the Plan will be "Final" by 7/31/2022, then Cycle 3 is not required, but CARES & SECURE must be adopted within 6(???) months of the Final date and not later than 12/31/2022.

I'm not Mike, but.... 1. No penalty, it's a corrective distribution with no "adverse" consequences other than not being able to keep the funds sheltered. 2. The associated earnings on the contributions through 12-31 must come out, too. (Or, investment losses would reduce the amount to refund.) 3. It can't stay as a 401(k) contribution - there were no wages to defer from. So if it's going to stay as a contribution to the plan it would be a nondeductible employer contribution, subject to a 10% excise tax to pay and remit via Form 5330. And it will continue to be subject to the tax every year until it can be absorbed under a future year's deduction limit. (If he ends up with a loss in 2022 he'll owe the penalty again.) --bri

Restatement of terminating plan is not required but plan must be up to date for all laws (including SECURES, CARES et al) - so best way to ensure that would be a cycle 3 restatement. Not sure on timing, if you do before you distribute assets I think you're safe. Do not think stock or asset sale matters.

At least since 1960, the Treasury department has a rule: “A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees[.]” 26 C.F.R. § 1.401-1(a)(2) (emphasis added) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401-1#p-1.401-1(a)(2) The tax-law worry is that a plan isn’t really a plan if employees beyond the owner or top executives don’t know the plan exists. Whatever ostensibly non-discriminatory provisions a plan has aren’t practically real if employees don’t know they have legally enforceable rights. Since the late 1970s, IRS examiners have looked to delivery of a summary plan description as a way (and perhaps a presumed normal way) to “communicate” a plan. Also, an accrued benefit statement might be another way an employee could learn about a plan’s existence and her potential right under the plan. The Internal Revenue Service might consider the quoted rule (and some related tax-law rules) as supporting some information requests that otherwise lack a particular tax-treatment hook. And even for unsupported information requests, your client will want your advice about whether it’s wise or unwise to object. An ERISA rule confirms that “in-hand delivery to an employee at his or her worksite is acceptable.” 29 C.F.R. § 2520.104b-1(b)(1) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104b-1 If some SPDs, benefit statements, and other communications were hand-delivered, your client might want your help in drafting or editing an affidavit that states what your client did. And an affidavit might describe the employer/administrator’s regular practice for mailing communications not delivered in the worksite.

No. 5% of compensation, not deferrals. Otherwise in your example of $4,000 in deferrals, the match would only be $200 (5% of $4,000). True-ups are simple. You calculate the match under the formula on an annual basis (ie, you treat the year as one big payroll). Since the plan does not exclude pre-participation compensation, you use full year pay. Divide deferrals by comp then apply the match formula. Then look at how much match was deposited and make up the difference. I'm having trouble with the wording on the match: it matches 100% of first 4% of pay and then half of the next 2%. To me, that goes up to 6%. But it seems to be saying the deferrals are capped at 5% for match purposes. I'm guessing it is supposed to mean that the MATCH is capped at 5% of pay (4 + 1/2 + 1/2 = 5), but it says the "Elective Deferral amount does not exceed 5%..."

Not a typo. The match in your example is capped at 5%. The match is based on her deferrals, and done each payroll, so if she was hired on 1/1/2022 and was eligible to defer on 2/1/2022 then her match starts on 2/1/2022. You can't give a matching contribution to someone who is not deferring. If they do a true up she may get more. If her compensation is $50,000 and she deferred $4,000 then her total match would be capped at 5% of deferrals-$2,500. So they would true up the difference between that and what she actually received. She should talk to her company if she needs clarification.

Notwithstanding the fact that you can use compensation only earned by those who have adopted the plan, you must use all three for section 415 purposes.

No.

Here’s two relevant texts from the regulations: “Exempt Employer” means an Employer that . . . (ii) maintains or contributes to a Tax-Qualified Retirement Plan[.] “Tax-Qualified Retirement Plan” means a retirement plan that qualifies for favorable federal income tax treatment under Sections 401(a), 401(k), 403(a), 403(b), 408(k), or 408(p) of Title 26 of the United States Code. An employer-provided payroll deduction IRA program that does not provide for automatic enrollment is not a Tax-Qualified Retirement Plan. https://www.treasurer.ca.gov/calsavers/regulations/final-regulations.pdf

Prior years should be amended to report the assets on the correct line, remove Sch A and correct the plan funding arrangement. Circular 230a requires you to advise the plan sponsor of an error and the plan sponsor signed the Form 5500 stating it was true, correct and complete.

See 1.401-10(b)(2) below. You will only use company X's net self employment income unless companies Y & Z have adopted the plan. § 1.401-10 Definitions relating to plans covering self-employed individuals. (b) Treatment of a self-employed individual as an employee. (1) For purposes of section 401, a self-employed individual who receives earned income from an employer during a taxable year of such employer beginning after December 31, 1962, shall be considered an employee of such employer for such taxable year. Moreover, such an individual will be considered an employee for a taxable year if he would otherwise be treated as an employee but for the fact that the employer did not have net profits for that taxable year. Accordingly, the employer may cover such an individual under a qualified plan during years of the plan beginning with or within a taxable year of the employer beginning after December 31, 1962. (2) If a self-employed individual is engaged in more than one trade or business, each such trade or business shall be considered a separate employer for purposes of applying the provisions of sections 401 through 404 to such individual. Thus, if a qualified plan is established for one trade or business but not the others, the individual will be considered an employee only if he received earned income with respect to such trade or business and only the amount of such earned income derived from that trade or business shall be taken into account for purposes of the qualified plan.