Hi

Calendar 401k/SH/PS plan with 21/1 and dual entry as eligibility

EE DOH 1/1/2023.

Apparently deferred during 2023 (no idea when started deferring).

Just got an amendment signed in 2024 stating as the employee deferred during 2023, for this particular employee eligibility is waived effective 1/1/2023.

Does this sound right?

Thank you

IRA funds were drained by the owner's son hacking into her IRA account online. Son took the money, a police report was filed, and son is facing felony theft charges under state law. The money is gone; used to pay off gambling debts.

The IRA custodial institutions were notified. They are investigating. The IRA owner has now received from those institutions Forms 1099-R reporting the funds taken by the son as taxable income to the IRA owner (the parent). It would be adding insult to injury if the IRA owner has to pay the income taxes due on the stolen funds.

Any suggestions on how to handle these Forms 1099-R with the IRS?

Hello, I wondered if anyone may know - Is the Plan year in the Form 5500 and the Form M1 to match? The instructions in the Form M1 do not provide instruction on this. On page two the instructions note to use the same identifying information but do not classify  if the Plan year is to be included in this case. Any insight would be valuable. Many thanks! 

Looking for a interpretation of the below from the 1099-r instructions.

If someone separated from service earlier in 2024 and takes a distribution now but are only age 54.  Are they exempt from the 10% early distribution penalty because they will turn 55 later in 2024?

Thank you, Tom

I am a Paralegal and I am assisting a homeless woman divorcing her husband. In the Domestic Relations Order, should I include the total months of marriage and total months of employment so that the Plan Administrator will know how to divide benefits?

I’ve had a Safe Harbor plan for a few years under my small business going smoothly. Small group plan, with 6 participants, and me as owner of the S-Corp. 
 

In April of 2023, I purchased an existing Laundry business (different industry than the S Corp business) and from day 1 have been using a PEO for the 3 employees of the laundry biz. The PEO offers benefits including retirement savings options that I’m not too familiar with. 
 

Since my wife and I own the laundry business LLC 50/50, and are not employees with the PEO (just owners), is the controlled group definition going to be a mess? I am sole owner of the S Corp business with the established Safe Harbor plan. 

So my company failed  Section 125 Nondiscrimination Testing and a decision was made to change all pre-tax benefits for Highly compensated employees to taxable income immediately  ending the FSA program for 2024.   Company is refunding all the contributions made to the date.  If an employee already made payout on the FSA account, are they legally required to pay back? What happens if they don’t?

This is a weird ...A client would like to exclude bonuses from deferrals but not match. In short, they are finding it a pain to set up the deferral's deductions via payroll, so they don't' want to allow participants to be able to defer from their bonus but don't mind matching on bonus compensation. Is this permissible.

The match formula is 33% up to 6% funded annually, I believe for anyone that defers over 6% it doesn't matter that they can't defer on bonus they will get match on the total gross.

However, if they defer less than 6% then there's nothing to match on. I feel like this set up may be discriminatory. Do you see anything wrong with this set up?  Overthinker here so sorry if this is a stupid question.

Here are the match examples:

10% deferrals (more than 6% example)

Base Compensation $125,000 Bonus Compensation $10,000 Gross $135,000 - participant defers $12,500 which is 10% of their base salary, they cannot defer on the $10k bonus. Calculating the match in this example if match includes bonus would mean the match is $2673. ($12,500/$135,000=9.26% deferral % they are deferring more than 6% so 135k*.6%*33% =2673). It doesn't matter if they had deferred the 10% on the bonus the match would still be the same.

5% of deferrals (less than 6% example)

Base Compensation $125,000 Bonus Compensation $10,000 Gross $135,000 - participant defers $6,250 which is 5% of their base salary, again they cannot defer on the $10k bonus. Calculating the match in this example if match includes bonus would mean the match is $2,062.50 ($6250/$135,000=4.63% deferral % they are deferring less than 6% so 135k*.4.36%*33% =2062.50)

However, in above example let's assume they were able to defer on bonus, the match would be $2227.50 (6750/135000=5%) 135k*5%*.33=2227.50.

Again we/I may be overthinking this but if they defer less than 6% and cannot defer on bonus, they truly get less of a match than if they deferred more than 6% they end up benefiting even though they can't defer from bonus.

So, for the new compliance questions, 14a, 14b, 15. (5500-SF)

The DOL instructions seem a bit ambiguous to me. Is a 403(b) plan required to input the opinion letter # on line 15? 

For 14a, as unlikely as it probably is, a 403(b) plan may use a qualified plan to pass 410(b), although the reverse is not true. So this could be checked "no."

14b - seems like it shouldn't need to be checked at all, but perhaps "N/A" would be appropriate, even if unnecessary.

15 - the instructions seem to exclude an opinion letter on a 403(b) plan. 

What are y'all doing on these? P.S. the EBSA electronic filing system "accepts" the 5500 on a 403(b) whether you fill these out or not... don't know whether there will be a kickback/inquiry at some future date depending upon how you complete it, or not...

We as a plan sponsor place a "hold" on a participant's benefits to prevent distributions when we receive notice that a DRO is being drafted.  Our record-keeper freezes benefits for a maximum of 6 months, but we have DROs that are submitted and qualified as long as four YEARS after we first receive notice that a DRO is being drafted.  How many times can we renew a freeze before we give up?  We send model DROs to the parties for their use but we have had changes in recordkeepers and fund lineups and if any of these years-old DROs come in based on obsolete models we are going to have a difficult time complying, not to mention that participants can still manage their investments and may no longer hold the funds they held at the time the DRO was first discussed.  

Our own DRO procedures do not contain a specific time that a hold will be in place.  It just states that the hold will last until the earlier of certain evens occurs--receipt of a DRO, notification that a DRO will not be requested, etc.  I am not sure this is compliant.

Thoughts would be appreciated.

Participant defers $30,000 all Roth across two plans in 2023.  Age 35.  ($15k each plan, say)

It's too late to take out the excess.

So does that mean the earnings on the excess will stay in there and get earnings on top of that and come out tax free in 40-50 years?

I sadly have to inform this group that Mike Preston unexpectedly passed away Sunday 5/5 from natural causes.

He was knowledgeable and generous with his time.

Sorry, I another question regarding the Form 5500 and filing late.  If the client sponsors multiple plans (for instance of DB & DC Plan) and they are late on both plans are the fines separate?  Or if it's under the same EIN do they just have to pay one fine for the late filing for all plans sponsored by their EIN?

Thanks in advance!

Should the dates of a Common Law marriage be included in Domestic Relations Order for a Pension Plan?

Can someone explain and simplify what this means for me in a QDRO? Can someone map out what the mathematic equations would look like:

The Marital Share: This Order assigns to the Alternate Payee as a shared interest in an amount equal to fifty percent (50%) of the martial share of the Participant’s Accrued Benefit under the Plan.  The martial share to the former spouse shall be computed by multiplying the monthly annuity of the Defendant by 50% and by multiplying the product thus derived by a fraction.  The fraction shall have a numerator and shall include all months of the parties’ marriage from August 23, 1982, through November 11, 2009, and the denominator shall be the total number of months that the Participant accrued benefits under the Plan in order to first become eligible for Retirement Benefits under the Plan.

Our company was acquired earlier this year.  We have been told that the existing benefits will terminate on 6/30 and that employees will be given the option to enroll in the New/Acquiring company's benefits.  I am getting several questions from FSA participants wanting to know if they can stop contributing to their FSAs given that the plan is scheduled to terminate on 6/30 (normally the plan year is 1/1-12/31.) Participants are being told that they must incur expenses prior to 6/30 and some are claiming that this isn't fair because they had intended to use the money later in the year and they shouldn't be forced to keep contributing, knowing that the plan will end early.

I have never dealt with a situation like this and can't find anything that specifically addresses the situation.  Can participants make a mid-year election change because the plan has been altered to end early?

TIA

In 2023, EE deferred 7,000 to plan A and 22,000 to plan B.  Neither plan had excess contributions under 401(a)(30).  Nor, individually had an excess over the 402(g) limit.

Is it too late to correct the participant's excess deferrals?

If so, where can I find that language?  I looked in the EOB, but didn't see it.  Is it in the code somewhere, too?

I have a participant that is requesting a loan.

He indicated it is for a divorce.

The plan does not require spousal consent

We do not have a DRO.

is there anything that would restrict him from taking the loan at this time?

Thank you!

Plan Sponsor currently files all H&W benefits in separate 5500's.

Plan Sponsor is going to adopt a wrap plan document effective 1/1 of current plan year.

Prior plan year 5500 has not been filed.

I'm getting dizzy thinking about this - how to include Schedule A's and incorporate counts to make the change.

I'm thinking:

• Prior Year - because wrap plan not yet effective, file as normal, with counts reflected at eoy
• Current Year - all individual plans will file as Final and show both beginning and end of year counts of 0 and no Sched A's. New Plan will have an opening participant count and all Sched A's in the new plan