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You are past the time to make a 2021 PS allocation.

Safe harbor is required by statute within 12 months of the plan year end. So 2021 SH amounts may be deposited currently. Tax deductible deposits are due by the extended corporate tax deadline. So a contribution now for the 2021 SH can't be deducted on the 2021 return. Annual additions for the prior year are due within 30 days of the extended tax deadline. So if these SH amounts are going in now, they can't be 2021 annual additions, either. But hey, maybe having 2 years' worth of SH amounts in your annual additions helps this year. (And good luck if it was meant to be there as 2021 annual additions for that year's testing.) And I punt on the issue of someone not having any 2022 415 comp but needing a 2021 SH amount to post as a 2022 annual addition. Punting works better than a schoolyard lateral play.

Yes, absolutely do this if you want to be in the headlines for the next big cybersecurity breach lawsuit.

I do not believe that a distribution process could be done entirely over the phone, because IRC sec. 402(f) explicitly requires a written notice of the participant's rollover rights. Assuming that the participant can be adequately supplied with the written notice, the rest of the election could feasibly be done over the phone. Earlier this year, the IRS released a draft of Pub. 15-A for 2023. The draft publication includes a script for accepting telephonic submission of Form W-4R. While Form W-4R is not a complete distribution election, it is an integral part of a distribution election, and I do not think the IRS would have provided scripts for accepting W-4R over the phone unless they expect distribution elections to be done over the phone.

We sent in extensions for both 2/28 and 3/31 and so far at least one in each batch was rejected even though we are 100% certain we mailed them in at least a few days before the due date. Anyone having the same issue?

YES! We had two 5500 extension denials that were issued on the same day (12/5/22) for two plans that had extensions postmarked in October. One was PYE 2/28 and the other was PYE 5/31. The 5/31 plan hadn't even reached it's original due date yet of 12/31 so we removed the 5558 selection and filed. The other one is working with the IRS to figure out why they denied it since they won't speak to us as the TPA without a power of attorney.

I never heard it called the popcorn method but you can assume a 3% prior year NHCE rate and thus do 5% in the first year.

They're great to include in the testing with an allocation/accrual rate of infinity. Hard to fail with that kind of math!

Some plans furnish participants a § 402(f) notice in the summary plan description or with every quarter-year’s account statement (or both). A rule allows speaking an oral summary of a § 402(f) notice, referring to the previously furnished notice, and offering to furnish again the whole notice. See 26 C.F.R. § 1.402(f)-1, Q&A-2, Q&A-5 example 3 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.402(f)-1. My description above about what might be possible assumes that many steps might require furnishing writings (often in paper form, if electronic delivery was not assented to) and waiting a reasonable and prudent time before proceeding with the requested distribution.

The key would be how comfortable is the recordkeeper’s counsel that the: identity control, address control, tightly scripting and supervising the call-center workers, record-making, distributee confirmations, plan administrator’s actual or implied approvals, records retention, fraud safeguards, other controls, and internal audit are strong enough to meet ERISA and Internal Revenue Code requirements, the service agreement’s obligations and conditions, and remove any discretion the recordkeeper does not want. With careful attention to technology, software, and detailed procedures, it’s possible to design and maintain a regime; but it’s work! In my experience, it works only when the recordkeeper’s counsel (whether inside, outside, or a combined effort) has deep experience with a recordkeeper’s operations, and the recordkeeper’s executives do not resist the needed protocols.

I'll be interested to hear how the resolution to this suggestion might parallel the typical advisor office's voicemail message saying that trades left on voicemail can not be acted upon.

I agree with msmith, severance pay or pay that you are getting because you are no longer working here, is not considered plan compensation. If you are creating a short plan year, you will have to pro-rate the 305,000 and the Drs compensation will be less than that for SH %.

If this is an issue of "true" severance compensation, such as: we are closing down, everyone gets $5,000.00 or some amount, it is not 415 compensation and not included for Plan contribution purposes.

If it is a 402g excess there should be no need to revise the 2021 taxes. No matter how much you contribute, you can only defer taxation up to the 402g limit. Box 12 will show the amount contributed but Box 1 will only reduce income by deferrals up to the 402g limit. The excess is already included as taxable income on the 2021 return. The IRS will square the excess deferral on the W-2 with the 1099-R with a code P.

Thanks, and thank you for your patience.

Both of the people who answered made it clear the document has to allow a stock distribution. This is qualified plan 101 and it applies to ESOP and other plans- you have to follow the plan document. So if the document requires cash distributions there isn't an NUA possibility.

Agree with Nate S.--in fact, the mortgage company or bank will in our experience be absolutely detail-anal in requesting documentation as to where the amount came from, to that point, even statements from 60-90 before showing where it came from. Just went through that a month ago for a client.

If the document clearly states that all distributions must be in the form of cash, why is this distribution being paid in the form of stock? You are correct, lump sum cash distributions are NOT eligible for NUA treatment, lump sum stock distributions ARE eligible for NUA treatment (regardless of whether the shares are retired by the company or repurchased by the ESOP's trust). As ESOP Guy stated, S corporation stock cost basis is adjusted for income before the NUA calculation can be finalized. But I think it is best to be clear on whether the distribution was in the form of stock or cash. The participant would have signed something "putting" his shares back to either the company or the trust in order to receive payment for the shares. Although the shares are only owned for "1 second," there would still be a put option by the participant. If there is no put option, then it seems more likely this was a cash distribution.

Without defending the weak conduct of any recordkeeper: And without knowing what the retirement plan allows or precludes: The surviving spouse might consider that asking a recordkeeper to do something it seems not tooled-up to do could lead to poor service. The surviving spouse might prefer to direct a rollover to an eligible retirement plan that’s ready to receive the rollover contribution.

Also, the written terms of the certificate of deposit might make the CD nontransferable and nonassignable.

My two cents - I found this on the IRS website. Example: Employer X maintains a 401(k) plan that has 21 participants and plan assets of $715,000. For calendar year 2020, Ann deferred $20,000 to the plan. None of the elective deferrals were designated as Roth contributions. Ann is under age 50 and isn't eligible to make catch-up contributions. Ann has excess deferrals of $500 because $19,500 is the 402(g) maximum amount permitted for 2020. Employer X didn't discover this mistake until after April 15, 2021. On November 1, 2021, X distributed the excess deferral (plus earnings of $10, totaling $510) to Ann. For 2020 (year of deferral), Ann must include $500 in gross income. For 2021 (year of distribution), Ann must include $510 in gross income. Employer X would report this amount on Form 1099-R. In addition, Ann must pay the additional 10% early distribution tax under IRC Section 72(t). Therefore in your example I think the $1000 from 2021 is reported on a 2022 1099-R with a code "P" (taxable in previous year). The $1020 is also reported on a 2022 1099-R with a Code "8" (taxable in current year). Two 1099-R forms and then it's up to the participant to revise their 2021 taxes as applicable -

You can do share distributions of S Corp shares, if the plan allows but most likely prohibits you keeping the shares, and then the shares are bought by the company or plan. You can get NUA treatment at that point. The IRS has ruled this "1 second" ownership of the S Corp shares doesn't blows the S Corp election, creates too many shareholders....... I see it all the time. In fact there are all these rules on how you adjust the cost basis of S Corp stock for the pass through income and how that will effect the NUA calculation. My point being if you have to worry about cost like that it is because you can get NUA treatment if set up right.

I think you will find these useful:

No, they should be able to provide a copy of the offer showing at least the loan value will be paid in cash. If it's financed, then almost assuredly the mortgage company will ask for a letter of explanation as to the source of the funds. And if close to closing, the closing agreement/reconciliation should show the loan as either itself as a source of funding, or the participant bringing at least that much cash. I think the PA still needs to prudently act like a commercial lender; hardship doesn't get repaid, so self-certify made sense since ability to repay is not relevant, and an employee's personal needs are not the business of the sponsor.

Not sure of VOYA's reasoning on that... For a work around what if the spouse requested rollover of the death benefit, payable to VOYA and then rolled it back into the plan into her account as a rollover using the VOYA rollover form?

Does the guy's W-2 show all 20,500 that was deducted? There's a 1,000 over-deduction which is then offset by the issuing of the 1099-R. (As opposed to "fixing" the W-2 to show just 19,500 in the first place...)

One shortcut is to transfer the loan proceeds to the closing escrow for the house. This is also a procedure for a hardship distribution for purchase of principal residence, with the advantage that if the transaction does not close, I believe the unwinding of the escrow by return of the funds obviates the question about "reversing" the distribution - the distribution is contingent and does not occur. Is it a principal residence? I will leave that to others.

Commissioner v. Keystone Consol. Industries, Inc., 508 U.S. 152, 159-162, 16 Empl. Benefits Cas. (BL) 2121 (May 24, 1993) (The Court construed ERISA title II’s parallel text, Internal Revenue Code § 4975(f)(3), as extending, but not limiting, the reach of § 4975(c)(1)(A) [ERISA § 406(a)(1)(A)] to include as such a prohibited sale or exchange a contribution of encumbered property, even if that contribution is not used to meet a funding obligation. The Court held a contribution of property other than money—even assuming the property was unencumbered, and the contribution was valued at the property’s fair market value—was a prohibited transaction.) The Labor department’s Pension and Welfare Benefits Administration further interpreted this in Interpretive bulletin [94-3] relating to in-kind contributions to employee benefit plans (Dec. 21, 1994), 59 Fed. Reg. 66736 (Dec. 28, 1994), reprinted in 29 C.F.R. § 2509.94-3, https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-A/part-2509/section-2509.94-3.

Correct.

No for DBPs and only cash is cash.

I think the AP needs to complete the IRS "W-8Ben" form as a non-citizen AP.

Are you talking about a PENSION plan, or a purely discretionary Profit Sharing Plan? At any rate, I think you want DOL regulation 2509.94-3, (c). P.s. - the (c) is if it as a PS plan. If you are actually talking about a DB plan, then it would be paragraph (b). But as to whether a CD could be considered "cash" - I'd opine, for what little it is worth, that it's verboten. I lean towards conservatism on such issues. Ultimately an ERISA counsel question as far as I'm concerned.

Sounds like the -11g amendment is getting adopted more than 2.5 months after the end of the plan year, so you would indeed not see it in the valuation results for year X.

Read the document. What you are asking is allowable and should be addressed in your plan document as to who will receive a QNEC/QMAC and how it will be done.

I have became aware of recent bulletins from the insurance regulators in several states that appear to require health insurers to cover treatment (and testing) related to monkeypox without cost-sharing during the public health emergency (PHE) declared by the federal government for monkeypox. I am not aware that the federal PHE declaration for monkeypox requires insurers to cover testing and treatment for monkeypox, so this appears to be an action initiated by state regulators. Unfortunately, some of these bulletins provide no exception for HSA-qualified plans so I'm concerned that both bulletins are problematic for HSA account owners with state-regulated HDHPs. Has anyone else come across these situations? CA All Plan Letter 22-019 - Health Plan Coverage of Monkeypox Testing, Vaccinations, and Therapeutics.pdf NM Bulletin 2022-17 Monkeypox PHE.pdf