I would appreciate any thought from the Pension Guru's out there.

Here is a little backgroud information:

I have a somewhat large Profit Sharing 401(k) Plan where everyone has individual accounts.  The Participants all have an investment account (with Advisor X)where their profit sharing and deferral contributions are deposited.  More than 50% of the Participants also have individual advisors with separate accounts at other financial institutions.  Periodically the assets are moved from the Advisor X accounts to their separate individual advisor accounts.  The Plan Sponsor is thinking of doing away with the individual advisors and forcing all Participants to house their assets under a single platform provider.  This will most likely meet with some resistance so they want to allow individuals to periodically take in-servive distributions in order to rollover their assets to an IRA with their individual advisor.   

The biggest issue with In-Service is that about 5 years ago the Plan Sponsor merged their old Money Purchase Plan into the Profit Sharing Plan.  The old Money Purchase accounts have been maintained separately from any of the Profit Sharing Accounts and we have always restricted In-Service to those age 62 and over.

Is there anyway, short of terminating the entire Plan, to get the Money Purchase Accounts out of the Plan?

Can the Profit Sharing 401(k) Plan be terminated and only allow the Profit Sharing and Deferral money sources to be rolled directly into a new 401(k) Plan?

Any ideas would be helpful.

new plan as of 01/01/2020.  Plan set up with auto enrollment features.  client wants to remove the auto enroll features from the plan.  client currently has 11 active employees. Is this permissible?

Thanks in advance.

Working on the dark here but trying to find a resolution. When a partner from a firm retires, I am assuming they receive some sort of retirement benefits from the firm. from what I understand, these payments are similar to 409(a) payments but not 409(a) payments. 
 

if a retired partner returns to work as an employee but still receiving retirement benefits under a retired partner, what is their eligibility for 401(k). Employees and partners are eligible to participate in 401(k) though both have a different ways to contribute and being auto enrolled.

The plan document has no specific mention of being excluding if retired partner is rehired as an employee. It’s the retirement benefits they may be receiving is what is throwing this off. 
 

thank you. 
 

Is there any scenario where it is ok to have a match in a plan only for a select group of employees?

We have a plan with a plan year that ends 6/30. This year 6/30 is a Sunday. The contributions has a last day requirement. Would 6/28 Friday be the last day in this situation? This is the last pay date in June. Thanks for any help.

Hi, 

As per the revised age for participants to receive RMD for those who reach age 72 after Dec. 31, 2022 and age 73 before Jan. 1, 2033, the RMD age would be 73. For terminating plans how should the RMD be handled? 

1) Is the RMD processed based on the status? if the participant is terminated or retired should the RMD be processed? though they can be employed by the acquiring company or can the participant defer it. 

2) The forced distribution to the unresponsive participants I believe the RMD should be processed first and then the full distribution should be processed.  What in case if the RMD is not processed what would be the repercussion. 

Thank you. 

on the new question line 14b of the 5500-SF are you marking N/A if the plan isn't a 401k or leaving it blank?  Instructions seem to indicate to mark N/A if testing wouldn't be used such as only HCEs or No HCEs.  Our thought was if it's a PS only plan that you would leave that questions blank.

With the question worded: 14b If this is a Code section 401(k) plan, check all boxes that apply to indicate how the plan is intended to satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions (as applicable) under Code sections 401(k)(3) and 401(m)(2).

A participant's wife is applying for SSDI.   In the meantime the participant wants to take a hardship distribution of close to his plan balance.  He has roughly -

• 1/3 ROTH deferral account
• 1/3 SH Match
• 1/3 PS

100% vested in all accounts. 

1 - I would think he qualifies for a hardship dist... right?
2- If the dist happens, he must cease his deferrals for 6 months?  Was that repealed? (well, you would think if he needs the $ he would stop deferring)
3- Taxes must be withheld (20%) and the 1099R would be coded as premature so will be subject to the 10% excise tax.

What am I missing?

We have a plan where only 1 person (100% owner) was a participant. The plan's assets never exceeded $250k, so no Form 5500 has been filed in the past. The plan terminated on 12/31/2023 and the owner took a full distribution in April of 2024. We'll file one Final Form 5500-EZ - for 2024.

I have a couple questions:

1) Since the owner technically has a termination date of 12/31/2023 (plan's termination date), is 8955-SSA form required for 2023? Is the 8955-SSA form required for 2024?

2) The SAR is not required for any year (including 2024) because this is a Solo 401(k), correct?

Thanks!

In the past when assisting a client with a late deposit correction we would prepare a paper Form 5330 for the client to sign and mail to the IRS with a check for their excise tax payment.

Now I understand that for most employers the 5330 will need to be filed electronically.  We have received the proper credentials to use the IRS's IRIS filing site (and have already filed 2023 1099Rs.)

Question is, how do we coordinate the client's payment of the excise tax with the e-filing of the 5330?  Can anyone share any insight on that process?

Thank you very much.

Hello,

I am hoping someone here can kindly help me figure out what’s going on with my 401k. I have a total balance of $1,936, with a vested balance of $1,483. I currently have an outstanding loan balance of $727, which was the highest outstanding loan for this plan of $830. I just paid off a second loan 11 days ago. My statement with an end date of 12/31/2023 reflects a vested balance of $1,702, minus the $830 loan, with a “vested account valance less outstanding loan of $847.”  Despite paying back a second very small loan after this of only $52 the beginning of February (please don’t judge- I had some medical things going on with my child) and paid it back nearly two weeks ago, my vested balance has decreased. As of right now, my “vested account balance less outstanding loan” as of April 1st statement is $730. I have ADD and I’m having a really hard time understanding the numbers on the vested balance part. If I paid back my loan, and I’m continuing to make payments on the first loan of $830, why did my vested balance decrease nearly $300? Why could I take a loan out for $52 before but now after paying it back and increasing my contribution percentage and making payments on the $830 loan, but now the vested balance is so low that if I take 50 percent of that $730 and subtract my outstanding balance, I’m in the negative? I assume it is because the rate of return went down? Again, I am kindly asking you not to judge; I am aware taking a loan isn’t a good idea. But an explanation on what causes the vested balance to decrease significantly would be insightful since I can’t seem to easily find any answers by researching. Thank you. 

Hi, guys--

I seem to have lost my copy of the famous/infamous Jim Holland letter that discussed using the 2/rds rule for life insurance in a DB plan (also known as the envelope method).  I have found it discussed in various books, but there's no citation (and i think that's because it was a relatively informal letter and not necessarily binding precedent.

Can anyone shoot me a copy of that letter?  I need it desperately for an expert witness opinion that i have to send out later today.

Thanks so much in advance.  My email is ilene@ferenczylaw.com.

Can a plan loan policy have a provision that per diem employees are not eligible to take a loan?

I've got a plan where they often move employees to per diem (I don't know the mechanisms or legality behind that, but let's assume it's kosher), so participants who are still considered active will want to access their money.  So they take a loan... and then don't work again for three months, so the loan gets behind and eventually far enough behind to need to be defaulted.

Defaulting a loan is a process, and something that no one wants to deal with.  Plus, there's the question of was it really a valid loan in the first place (the situation that brought this to light is one where the participant was told she was being changed to per diem and then requested a loan immediately) if the Loan Administrator know that it couldn't be paid back through regular payroll deductions. Maybe it was a fiduciary breach by the plan sponsor, maybe it was an intent to get around the distribution rules by the participant.

So that's what led to the question.  My gut reaction is no, but then is it OK for the plan administrator to continually deny loans to per diem employees and therefore create a de facto exclusion?

[If it matters, we are in New York State, where participants have the right to request that their loan stop being paid through payroll deduction, regardless of what the loan policy says.  This is not something that we recommend our clients make known.]

Thanks.

Section 101 modifies IRC 414 with the new 414A requirement. Specifically regarding paragraph(b)(3)(A)(ii), does the language require that the participant must make a new election each year, or if they make an election other than the auto enrollment percentage in 2025, does that election carry forward, if the plan so provides, until such time as the participants makes a new election? I believe it is the latter, but I'm not 100% certain.

Instructions for 5500-SF say 'Have 100% of its assets invested in certain secure investments with a readily determinable fair value...'.  I have a client who has an investment in https://truelinecapital.com/.  We get statements showing the value is unchanged and all interest payments are deposited to another plan account.  I'm wondering if I should be using the long form given the nature of this investment.  Any thoughts?

I had a client that made a mistake and never filed the 1099-R and 1096 to the IRS (they were sent to the participants timely).  Does anyone know what the penalty is for filing them late?  I just want to be able to let the client know.

Thanks!

Would the payment of COBRA premiums (in full or subsidized) in addition to salary continuation benefits be counted toward determining the amount applied to the 'twice compensation' limit in §2510.3-2(b) of the Department of Labor regulations? 

I have a situation where one company was bought.  Both have plans, one being a safe harbor match plan and the other discretionary match.  They have apparently missed the deadline to merge the plans/make the plans equal with same benefits.  Is it possible to elect safe harbor option for the non safe harbor plan before the end of the year (each plan is calander year) given that the plan is out of compliance or do we need to wait until the start of the next plan year with notifications provided in the 4th quarter?  Any thoughts are appreciated.  

Can New Company start a 401k plan effective 1/1/24?
New Company with new EIN - owned 100% by one of the partners of Old Company.
Old Company - owned 50/50 with a partner. They split up and dissolved the company (12/1/23) and each started their own company. Employees went with them mostly. Old Company had a 401kPS and DB plan. Both plans are terminated (December 2023) but not fully paid out yet.

Plan has 6-month waiting period for deferrals with entry on the first of the following month.  I know I can exclude those with less than a 12-month wait but I am wondering about the entry date.  The plan has monthly entry date for deferrals and match (no SH nor PS).  I'd like to apply the semi-annual date which would remove lots of zero NHCEs. I know it would be more conservative to use semi-annual. 

Thoughts?  Thank you