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In case anyone not aware--all parts of Florida are extended until 2/15/23.

"Seemingly" being the operative word there. Snark aside, I googled the quoted bit and found the website being referenced. To be fair to them, the page does include a a brief discussion of what a floor-offset arrangement really is. It doesn't go into detail about the various pitfalls and unintended consequences that come along with floor-offsets, but that's to be expected from a marketing perspective. All this does, however, highlight the dangers of using language loosely like that - it's very easy for people to take quotes and re-post them without context, which can change their perceived meaning and lead to misunderstandings.

Can we just please not use floor offset plans. They are at best difficult for sponsors and at worst administrative nightmares for anyone involved. Asking for a friend.

Sounds like they met statutory eligibility, and assuming no BIS, can't have their service wiped away. Any contribution expected for 2022? If not, you have a discontinuance and will need to make sure the participant is 100% vested as of 12/31/22. And yes, stuck with 5500/SF, no EZ allowed while they're still employed.

Yes, the 5500EZ instructions say that the SB must be completed before the filing due date, not the filing date itself. "If the plan is a defined benefit plan, the enrolled actuary must complete and sign the 2021 Schedule SB (Form 5500) and forward it no later than the filing due date to the person responsible for filing Form 5500-EZ." You may have to amend based on your reported 10a vs the completed SB.

My recollection from looking into it with regard to last year's hurricane Ida relief is that the relief is available if a plan's service provider is located in the declared disaster area, however, the plan administrator should be prepared to receive correspondence from the government agencies and to provide evidence (or at least a statement) that the disaster actually prevented them from filing timely. In other words, the extension is not automatic; if the plan administrator could have filed timely, then the extension would not be automatically granted merely because the service provider was located in the disaster area. Presumably the relief for hurricane Ian is granted under similar principles. It's interesting to note that the relief granted for Form 5500 filers is actually retroactive - it extends to returns due on or after September 15, even though the disaster did not occur until September 23. https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-hurricane-ian-in-florida

The CB plan will need two Schedule SBs for 2022's filing, but otherwise, the SECURE act does let you skip the first year's filing on a post-year-end adoption.

The freezing of the plan would have had to freeze eligibility for participation, too, as opposed to just new contributions. I think you've got an actual participant there in the employee. Did newly freezing the plan also put the employee into an ineligible class?

If you are asking if they can be excluded from your testing and pretend like they don't exist the answer is no. If you are asking how to cover them, Peter has better guidance above.

But doesn't Sec 1.411(d)-4 - 411(d)(6) protected benefits, A-2(e) provide an exception that allows the ad-hoc optional form to be eliminated as long as the single-sum form of benefit is available? (e) Permitted plan amendments affecting alternative forms of payment under defined contribution plans - (1) General rule. A defined contribution plan does not violate the requirements of section 411(d)(6) merely because the plan is amended to eliminate or restrict the ability of a participant to receive payment of accrued benefits under a particular optional form of benefit for distributions with annuity starting dates after the date the amendment is adopted if, after the plan amendment is effective with respect to the participant, the alternative forms of payment available to the participant include payment in a single-sum distribution form that is otherwise identical to the optional form of benefit that is being eliminated or restricted. (2) Otherwise identical single-sum distribution. For purposes of this paragraph (e), a single-sum distribution form is otherwise identical to an optional form of benefit that is eliminated or restricted pursuant to paragraph (e)(1) of this Q&A-2 only if the single-sum distribution form is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the participant) except with respect to the timing of payments after commencement. For example, a single-sum distribution form is not otherwise identical to a specified installment form of benefit if the single-sum distribution form is not available for distribution on the date on which the installment form would have been available for commencement, is not available in the same medium of distribution as the installment form, or imposes any condition of eligibility that did not apply to the installment form. However, an otherwise identical distribution form need not retain rights or features of the optional form of benefit that is eliminated or restricted to the extent that those rights or features would not be protected from elimination or restriction under section 411(d)(6) or this section.

Hey Peter- Completely agree with your view but in the example you provided, IRA holder sold the asset for FMV. There was no self dealing in which the soon to spouse received special benefits from the purchase of the property. To me it would be no different if the client took an in-kind distribution of the property and reassigned the property into his own name at FMV. Now, say that the soon to be spouse obtained the funds from a loan that was in her and the client's name, that's a different story and I would view that as a PT but if the soon to be spouse obtained the funds by her merits only and purchased the asset at FMV, there is no PT because there is no disqualified party involved in the transaction and no self-dealing. DOL Opinion Letter 88-018A allowed allowed the IRA owner to issue promissory notes to a company that the IRA owner was 48% owner in. The DOL did caution the self-dealing aspect b/c of the IRA owners large ownership in the company that was receiving the loan but allowed the transaction to the LLC despite the fact the IRA owner was 48% owner of the LLC. Greenlee v Commissioner, T.C. Memo 1996-378 also discusses the disqualified party matter (Greenlee was 18% owner and an independent advisor was used to determine the terms of the loan). Based on these these and other cases, it seems like the DOL is pretty firm in its application of a disqualified person and a soon to be spouse would not be a disqualified person. But what might make this a PT would be if there is any self-dealing for the client (e.g. did he or is he part of the funding used to purchase the property, is he giving her a deal) but if self-dealing is not present, than I don't see PT in this case.

Look at CFR Sec 1.411(d)-4 - 411(d)(6) protected benefits, A-1 (3)optional forms of benefit and the extensive examples in (b) optional forms of benefit. My reading says this is a 411(d)(6) protected benefit.

I personally would recommend erring on the side of caution, partially for the reason you point out, Peter. Even if you don't have a prohibited sale of property under 4975(c)(1)(A) or transfer under (c)(1)(D), which you might at least indirectly, I think arguably you run into a problem under (c)(1)(E) prohibiting a fiduciary from dealing with plan assets directly or indirectly in his own interest. The DOL's interpretation is fairly broad: "Whether the proposed transaction would violate sections 4975(c)(1)(D) and (E) of the Code raises questions of a factual nature upon which the Department will not issue an opinion. A violation of section 4975(c)(1)(D) and (E) would occur if the transaction was part of an agreement, arrangement or understanding in which the fiduciary caused plan assets to be used in a manner designed to benefit such fiduciary (or any person which such fiduciary had an interest which would affect the exercise of his best judgment as a fiduciary).... [T]he Department further notes that if an IRA fiduciary causes the IRA to enter into a transaction where, by the terms or nature of that transaction, a conflict of interest between the IRA and the fiduciary (or persons in which the fiduciary has an interest) exists or will arise in the future, that transaction would violate either 4975(c)(1)(D) or (E) of the Code." I guess you could argue the transaction is not intended to "benefit" the soon-to-be spouse as fair value would be paid. And that there is no conflict of interest, but it seems to me that argument would be more difficult when the IRA owner and fiance(e) (a person in whom the IRA owner clearly has "an interest") are on opposite sides of a real estate transaction. The excerpt is from DOL Adv. Op. 2000-10A, which, interestingly, involved an IRA owner attempting to meet the minimum investment threshold to invest with one Bernard L. Madoff Investment Securities. ("You further represent that Mr. Adler believes that Madoff would effectively manage assets for the IRA....")

I'm not a lawyer nor an accountant, but here is my layman's take. Paraphrasing the facts as I understand them: an IRA purchased a home/real estate as an investment, the IRA owner did not use such property (either rented or maybe planned to flip), but the now engaged IRA owner plans to live in the property at some future point (after marriage) and so the IRA needs to divest/sell this property. The contemplated buyer is not currently related to the IRA owner, so I see no issue with the transaction provided any other rules for such are satisfied. If this was a friend, a cousin, a stranger, would there be any issue? I don't think so. An engagement for marriage is not a legal status as far as I know - it does not guarantee that a marriage actually occurs, and some engagements last years while others dissolve. What if he/she was just a boy/girlfriend, they did the transaction and then decided to live together without getting married. Something of this magnitude should be steered to a qualified tax attorney, but this was my not legal opinion.

Yes that makes sense. Just be careful if some of those are HCEs (like owner's family just hired).

kmhaab, when you asked about a plan that has no participants, I guessed you used the word participant not for a technical or legal meaning under ERISA or the Internal Revenue Code, but the way many people use it, especially about § 401(k) arrangements, to refer to those who make an elective-deferral contribution. ERISA § 3(7) defines participant to include an employee “who is or may become eligible to receive a benefit[.]” The Form 5500 Instructions (hyperlink above) include in a count of a retirement plan’s participants “individuals who are eligible to elect to have the employer make payments [elective-deferral contributions] under a Code section 401(k) qualified cash or deferred arrangement.”

No, the FSA cannot reimburse expenses incurred prior to the employee's period of coverage. In your example, that period of coverage does not begin until 11/1 when the employee becomes a participant. So only expenses incurred 11/1/22 - 12/31/22 are reimbursable in that example. Full details: https://www.newfront.com/blog/when-fsa-expenses-are-incurred General Rule: Expenses Must be Incurred in the Period of Coverage An FSA can reimburse only expenses incurred during the participant’s period of coverage. The period of coverage is the period of the FSA plan year in which the employee is enrolled (including any grace period for such plan year). This means that any expenses incurred before or after the employee’s FSA period of coverage are not reimbursable. Allowing an expense incurred outside the period of coverage to be reimbursed by the FSA would be a plan operational failure. The Section 125 regulations provide that operational failures can result in the entire Section 125 cafeteria plan being disqualified if discovered by the IRS—which would result in all cafeteria plan elections becoming taxable for all employees. Example 1: Tim incurs $240 in glasses expenses in March 2020. Tim changes jobs and is a new hire with a new employer in May 2020. The new employer maintains a calendar plan year health FSA. Tim enrolls in the health FSA, making a $1,000 election for coverage beginning June 2020 through the end of the plan year. Result 1: Tim’s March 2020 glasses expenses are not reimbursable under the FSA because the expenses were incurred prior to his period of coverage. Only health expenses incurred from June through December 2020 (plus any associated grace period) are within his period of coverage for the 2020 plan year. ... Regulations Prop. Treas. Reg. §1.125-5(a)(1): (a) Definition of flexible spending arrangement. (1) In general. In general. An FSA generally is a benefit program that provides employees with coverage which reimburses specified, incurred expenses (subject to reimbursement maximums and any other reasonable conditions). An expense for qualified benefits must not be reimbursed from the FSA unless it is incurred during a period of coverage. See paragraph (e) of this section. After an expense for a qualified benefit has been incurred, the expense must first be substantiated before the expense is reimbursed. See paragraphs (a) through (f) in §1.125-6. Prop. Treas. Reg. §1.125-6(a)(2): (2) Expenses incurred. (i) Employees’ medical expenses must be incurred during the period of coverage. In order for reimbursements to be excludible from gross income under section 105(b), the medical expenses reimbursed by an accident and health plan elected through a cafeteria plan must be incurred during the period when the participant is covered by the accident and health plan. A participant’s period of coverage includes COBRA coverage. See §54.4980B-2 of this chapter. Medical expenses incurred before the later of the effective date of the plan and the date the employee is enrolled in the plan are not incurred during the period for which the employee is covered by the plan. However, the actual reimbursement of covered medical care expenses may be made after the applicable period of coverage. (ii) When medical expenses are incurred. For purposes of this rule, medical expenses are incurred when the employee (or the employee’s spouse or dependents) is provided with the medical care that gives rise to the medical expenses, and not when the employee is formally billed, charged for, or pays for the medical care.

Do you really have no participants or do you have participants with a $0 balance?

Even presuming consistency rules for all an employer’s employee-benefit plans (of those that seek to meet a tax law condition that refers to Internal Revenue Code of 1986 § 414(q)): The Treasury department’s temporary rule (adopted February 19, 1988, and last amended June 27, 1994) interprets § 414(q) as it was in effect for 1996 and earlier years. Under that rule, § 414(q)’s definition for a highly-compensated employee applies if another Internal Revenue Code section refers to § 414(q). 26 C.F.R. § 1.414(q)-1T https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.414(q)-1T About health, other welfare, and fringe-benefit plans, that § 414(q) temporary rule lists sections 89, 106, 117(d), 125, 129, 132, 274, 423(b), 501(c)(17)-(18), and 505. Section 223—Health Savings Accounts states no reference to § 414(q). Does some coverage or nondiscrimination rule apply intermediately or indirectly?