This is a bit of a weird question, but would anyone be able to cite IRS code that dictates the 20% mandatory withholding policy?  There is a participant that has immense medical expenses that are itemized on their return and will not owe any taxes.  The CPA wants to know why I can't waive the mandatory withholding.  They've sent over a W-4R and explained that according to the IRS, this form will allow the election of 0% withheld.

I'm certain that this does not allow the withholding to be lower than 20%, but I can't find a good citation to express this.  I am aware of topic No. 412, but they are caught up on the 'lump sum' 'entire account balance' language.  The plan allows the participant to take a partial distribution, but I'm pretty sure this mandatory withholding rule would still apply.

The company I was working for was acquired back in March.  The health and welfare benefit plan runs on a calendar year.

Acquiring company is moving all employees to the new company's benefit plan effective 7/1 (also calendar year).  We are shutting down all existing benefit plans on 6/30.

For HCFSA contribution limits, would we treat these 2 plans as affiliated/same control group plans...meaning that between the 2 plans, participants could not elect more than the annual 2024 annual limit of $3200?  How do we treat employees who may have overspent their accounts?  (Employee elected $3200, only contributed $1600, but already received $3200 in reimbursements?) Can they make an election with the acquiring company, if so, how much? 

TIA

Is there a listing place of potential books of business for sale or a specific person that I should reach out to? 
 

I am looking to purchase a book- does not matter the size- to start as a base for my potential firm. 
 

Any and all recommendations welcomed. 

An employer’s § 401(a)-(k) plan would have these provisions:

Elective deferrals, up to § 402(g) and § 414(v) limits

Safe-harbor matching contribution—100% on first 3% and 50% on next 2%

Safe-harbor notices; no restraint on opportunity to elect a deferral from pay not yet available

No participant loan; no hardship or other early-out distribution

No small-balance ($7,000) involuntary distribution.

No distribution until end of service and normal retirement age (65 or the latest permitted).

Considering those plan-design elements:

Does anything about the absence of ways to get money before normal retirement result in the plan losing a safe-harbor treatment for excuses from ADP and ACP tests?

For States’ laws that call an employer to maintain a retirement plan or facilitate payroll contributions to Individual Retirement Accounts, is the plan described above sufficient to avoid the State’s arrangement?

Good morning!  I just wanted to confirm what, if any, non-discrimination testing is necessary for a 403(b) Plan?

Thanks in advance!

Haven't come across this one before but just trying to get the timing right with the PBGC and required participant notification-

Small Cash Balance Plan fewer than 10 current and former participants with balance, owner died last year, his widow inherited the shares (she is now the 100% owner and the Plan Trustee she also has a pending death benefit as beneficiary) and the business has been running under a prior contract but that contact is running out so all employees remaining employees were given notice and end of June will be the last payroll.

The company is staying in business through the end of the year at least to wrap any loose ends and such and for compliance reasons terminating effective December 31 might make the most sense from a compliance and testing standpoint. The plan allows for distributions upon termination of employment so what happens if we pay out all the participants before we go through a formal PBGC termination?

The plan is well funded all PBGC premiums are up to date and there is a small surplus that will be allocated to participants per the document. I've never done a PBGC termination after all participants are paid out, assuming they can get all terminated employees paid out relatively quickly. Is that going to be a problem with the PBGC?

I know you are not suppose to payout active employees during the PBGC review and termination process but these will all be terminated vested as of 6/30/24. So it seems we could pay them all out.

Dentist Sue owns 100% of LLC(1) and dentist Bill works PT for this LLC.  14 eligible covered employees in Sue's LLC(1) plan.

Dentist Sue and Bill purchase a practice about 10 miles away, they form LLC(2) with Sue owning 80% and Bill 19%.  I assume they will both see patients at both locations.  LLC(2) will co-sponsor Sue's LLC(1) existing 401(k) plan.  This will add 8 covered employees for then a total of 22. 

Dentist Bill also owns 100% of dental practice LLC(3) 15-20 miles away.  Sue has no ownership, nor does she work there.  LLC(3) has no 401(k) plan.  They are asking if they must cover these employees in the plan shared by LLC(1) and (2).  The easy answer is 22/30 covered = 73%.  Assuming my estimated coverage is correct, LLC(3) need not be covered.  I realiz this will have to be carefully reviewed every year.  

But, does anyone see an ASG here?  I don't believe there will be any association of patients between LLC(2) and (3) for dentist Bill.  The practices are distant enough, patients won't associate one with the other.  

Does that seem reasonable?  Thank you!

Automatic Enrollment question:  Plan is starting ACA at 3% for all new EEs plus anyone who is currently deferring less than 3% of pay.  How do you treat those who have chosen a dollar amount instead of a percentage?

I recently took a class where we were told repeatedly, "if you sell your family farm, you can put that money in a trust or self-directed IRA and Roth IRA to avoid paying capital gains tax. Today I started calling around and was told we would have to pay capital gains taxes unless we do a 1031 exchange.  We can't buy a like property and live in it if we do a 1031 exchange.  So that's out.  We were told to let the trust own the house and pay for everything out of the trust.  So, what IS a way we can avoid paying so much in capital gains?  The farm's been in the family over 200 years, the tax base is only $1000 but we should profit about $3M on the sale.  It's now in an S-Corp and will be divided between all the siblings.

It's so frustrating trying to get the same answer twice.

Our employer offers early retirement packages to qualified employees.  One of the benefits is a substantial medical waiver payment in lieu of retiree health insurance.  The employee gets the waiver for three years and then is offered the option to join the health insurance at the same benefit they would have had at retirement.

Medical waiver while employed is fully taxable to the employee.  Is it still so taxed as a non-employee benefit.  There is a Cafeteria 125 plan in effect but it doesn't address this issue.

A company has several ex-employees who were promised they could stay on the employer's group health plan until death or, in the alternative, be reimbursed for cost of substantially similar coverage until death. The insurer finally caught on and kicked these people off the group health plan. Company does not want to reimburse these people every year for the next 20+ years and wants to buy out this privilege in a lump sum. They used actuarial calculations for various people's expected demise, and also certain assumptions about how insurance costs will increase over the next 20 years, to come up with rather significant lump sum payouts ranging from $50,000 to $500,000. They want to make these payments to non-employees without paying any tax on them. They asked me to structure it as a legal settlement, and I declined to do so.

I advised this lifetime payment stream was deferred comp and absolutely subject to taxation (after the first 18 months of COBRA, which I understand can be provided tax free). I also advised that by paying a lump sum, they are accelerating the benefits in violation of Section 409A so these people getting a $500,000 check are going to owe self-employment tax, income tax, and an additional 20% excise tax.  Does anybody disagree with this assessment?

So then the employer said they'd bump up the lump sum to cover all the taxes, so that one individual (who is in a 35% tax bracket and a 10% state bracket) would get a 35% fed + 10% state + 20% excise + 15% FICA bump for a cool buy out of $900,000. 

I've been trying to figure out how the employer should report this? I've seen that deferred comp is reported on Box 1 of 1099-NEC. But I've also seen that Section 409A failures and penalty are to be reported on Box 15 of 1099-MISC. Are these people going to get 2 different 1099s? And in my example, would the 1099-NEC show the full $900,000 but the 1099-MISC only report the $500,000 (prior to the bump up for taxes)?

A bit of a long shot here, but here goes: If a plan sponsor had a board resolution in place by the 2 1/2 months after the end of the plan indicating their intent to amend the plan, but the amendment itself has not been signed, can you reflect the "amendment" in the valuation"? Lets assume the board resolution is very clear on what should be changed in the plan. 

Yes, you read that right. Apx 10 years ago plan sponsor adopted an amendment to freeze contributions to a money purchase pension plan, but the intent was to cease contributions to  the profit sharing plan instead. The plan sponsor has been operating and making contributions to the pension plan as if it were not frozen and has made no contributions to the profit sharing plan since that time. Thoughts on whether this can be corrected through VCP by retroactively amending the pension plan to revoke or rescind the freeze amendment?  The plan was operated as if it were not frozen, participants' expectations were that it was not frozen, and I believe revoking the freeze amendment increases the benefits to participants (as they are entitled to $0 with the freeze amendment in place). 

(The profit sharing plan has a discretionary contribution and a freeze amendment was not necessary to effectively cease contributions, so the profit sharing plan has been operated correctly.)

Thanks in advance for any insights. 

Assume there is a 401(k) that does not provide for QJSA/QPSA as the plan contains no contribution sources requiring such nor does the plan include the annuity options electively.

A 401(k) plan primary beneficiary must be the spouse unless the spouse consents to an alternative.  Assume the participant wishes to take in in-service distribution.  Do TPAs typically look up the beneficiary before approving a distribution to confirm the spouse is the primary beneficiary or that the spouse consented to an alternative? 

If a non-spouse was named without spousal consent, then that would be in invalid designation and the spouse would remain primary beneficiary.  So it would seem distributions can be approved without reviewing beneficiary designations?

I am halfway through a bankruptcy and I am looking to take a 401K withdrawal to pay off the balance. Can I qualify to take without 10% penalty?

Can I have the taxes withheld now so I don't take a hit in April?

Some service providers offer a “fiduciary warranty” that a customer plan’s menu of investment funds meets ERISA § 404(c)’s broad-range condition and is prudently selected. This warranty sometimes is, or is described as, an indemnity.

Has any holder of a fiduciary warranty been sued or threatened?

Has any service provider paid a loss or expense on its fiduciary warranty?

This may be an odd question, but I'm having issues with finding clear language on timing of amendments.  I typically only deal with situations where the plan is being amended starting at the beginning of the next plan year.  Are there limitations on amending the plan mid-year?  I know that there are, but my understanding is that the permissible amendments must increase benefit to participants (Ex: Introduction of mid-year safe harbor plans).  Otherwise, the change must be made prior to start of the plan year.

The sponsor would like to allow after-tax contributions and change the PS allocation from SS integration to new comparability.  I believe the after-tax could happen mid-year, but not the allocation method change.  Would anyone know where I can find more detailed language on mid-year amendments?

I'm getting push back from an employer who doesn't want to allow an in-service distribution for a participant with an outstanding loan, since the distribution will make it so the loan is more than 50% of the current account balance.

Is there anything in the regs that would allow it?  I know there isn't an issue, I just need something to show the client.

Have a  new take-over client with a PPA pre-approved VS document effective 1/1/21.  The plan sponsor says the prior TPA was very difficult to work with, never available, never responsive, etc., etc.  The plan sponsor also indicates that he never received a Cycle 3 restatement from the prior TPA.  I'm not surprised since I don't know why the TPA would have used a PPA document for the initial adoption back in December 2021.  Anyway, we are to provide a Cycle 3 document to correct.

The IRS guidance for late amenders is to treat the plan as individually designed and adopt an amendment for the missing provisions; then restate onto a Cycle 3 document.  Does anyone know of an amendment template that would pick up the required provisions since PPA to the present?  The document provider I use did publish an amendment for the final Hardship Distribution regulations, as well as CARES/SECURE.  What more would have to be added?

Thanks.