Employer withheld premiums for welfare benefits from employees' pay, but only deposited a portion of such premiums into the VEBA/trust. (Reasoning is unclear, but may have been to avoid UBI/UBTI, as VEBA is overfunded.)

Employer held in its general assets the remainder of those employee "premiums" apparently for its own use.

If the "surplus" premiums never went to the VEBA is it a reversion? Does it matter that the contributions were not dictated by the VEBA but rather simply by open enrollment materials? How does one correct an issue like this? Is there a correction program for VEBAs?

Appreciate any thoughts!

I’m 99% retired, but have a couple people I help take care of their EZ filing on their solo k plans.  I understand the feds want the EZ to be filed electronically, and that this is apparently mandatory for many filers for the 2024 returns to be filed in 2025.  But I’ve seen conflicting guidance where some say it’s mandatory if the plan sponsor files at least 10 returns of any type (e.g. payroll, tax, 1099s, etc) in a year, and other sources say this threshold is 250 returns in a year.  Obviously this makes a big difference in who must file the EZ electronically.  Can anyone help clarify this for me?  Thanks.  

Quick question on the 70% coverage testing.  If a client fails, is there any alternative correction method than a QNEC?  I didn't believe so, I just wanted to be 100% sure.

Thanks!

Deleted post - information originally provided to me is incorrect.

P and K divorced 7/29/15. Decree says P is to split 401k from marriage 1997 to divorce w k.  QDRO finally started in 11/23, signed by courts 3/24. 401k plan transferred to IRA by P’s previous Employer. Unknown to both P and K.
 

QDRO relates to 401k not IRA and does not correspond with decree, (K manipulated documents and P signed thinking the had to match decree or courts wouldn’t have signed, not the case) So it’s a blessing that it got transferred to an IRA. When P contacted 401k company-Fidelity to see if QDRO was being processed in March, that is when he found out about it being transferred to Insperia Financial as an IRA. That company does not process QDRO and Ca Labor Retirement Service stated that QDRO is not Valid as it relates to a 401k not and IRA. Insperia Financial says that P and K have to agree on either a percentage or an amount. Funds are locked down until then.

k won’t sign unless the split of the 401k includes Child Support and Alimony as well. K has now levied P bank acct for child support and on Sept 9 a withholding order will take the total child support from his IRA, K is willing to sign for a lump sum agreed amount.
 

Question: Can a settlement agreement be made, staying the they agree on this amount, and that it covers the split, child support, and alimony. Have them both sign with notary. Is that legal to be done? If so do you know someone who could it?

Hi

Another new one for me (usually had multiple schedule c's with 100% ownership)

Joe owns ABC LLP 50/50 with his son - no other employees. K-1 income was $250,000 for each partner.

Joe owns 3 other partnerships, 50% each and other 50% is unrelated. 2 partnerships had $50,000 k-1 losses each for Joe and 1 partnership has $25,000 of k-1 income for Joe.

If want to set up a DB plan for ABC LLP, what is the K-1 I can use?

Thank you for your comments.

Is the Beneficiary desigantion form required to be notarized if the beneficiary is a spouse?   Is it even needed for all practical purposes?  Our plan docs name spouse as a default beneficiary in the pecking order.  Interested to hear thoughts and opinions.....

We have a non-profit church that wants to start a 401k plan.  They will have more than 10 employees.  Are they required to have auto enrollment starting in 2025?  There is an exception for "church" plans.  This is a plan with a church as the plan sponsor.  I do not think that these carry the same meaning and that this 401k plan will need to offer auto enrollment.  

Any comments are appreciated.

I received half of my exes retirement. The QDRO has been sent back twice. In the mean time ex was terminated from job. The agreement to give half was awarded in the final decree. Would plan give him all of retirement because he was fired before the plan approved the QDRO?

We have a multiple employer plan with two companies, Company A and Company B.    Company B is a participating employer in the Plan sponsored by Company A and the document says ADP/ACP testing is using prior year method.

Company B came into existence in 2022, with only one employee who was classified as an HCE.    In 2023, Company now has 2 employees, the one HCE and now one NHCE who transferred over from Company A and was previously eligible under Company A.    The document counts past service between the two Companies.

What is the prior year deferral percentage for the NHCE when testing for 2023 in Company B?  0% or 3% since it is the first year Company B has NHCE employees?    Can Company B elect to change to current year testing or must both Company A and B move to current year testing?

I've broached the topic of an ASG with a client, and of course they want more information before deciding to engage an ERISA attorney.  DWC has a good article on their website about ASG; is there anything else that you've found that is relatively understandable that can be sent to accounants (and/or plan sponsors)?  Thanks.

S corporation, two owners - father and son, both are 50% shareholders, no other employees.  Is 5500-EZ or 5500-SF required?  In prior years EZ was filed but I do not think it is correct and SF is required?  Anything else that I might be missing?

Plan uses the top-paid group election because they have very high earners.  A small group of NHCE <1% owners do not want to participate in the plan or receive employer contributions. Assuming we can pass coverage, can they designate certain employee owners to be in this "Excluded Division"?  How do you define the division (or do you need to) when the only real differentiator is that they are partners who can not participate while in that division?  Thanks for any input. 

It seems to me that if a business owner has no employees and has less than $100,000 of compensation they would be eligible for the employer contribution credit.

The admin expense credit would not be available because the cap is based on the number of NHCEs and in this example there are zero. But the only restriction on the employer contribution credit is the 100k of comp limit.
 

Thoughts?

A 100% ESOP-owned company has received a letter of intent to be acquired by a private equity company.  The transaction is expected to be a stock sale about 40% above the 12/31/2023 FMV.  Should the expected sale price be disclosed on the diversification notice?  At least 2 of the diversification eligible participants have or will have knowledge of the sale discussion at the time the notices are scheduled to be distributed, but the rest of the eligible group may not know all the details.  Please assume the diversification is timely based upon the availability of the final FMV, I'm only concerned about the fiduciary responsibility of providing the information necessary to make an appropriate election.

Is there specific guidance anywhere that says Employers should not stop payroll matches when the employee reaches the max compensation during the year?

For example, plan matches dollar for dollar.  I don't see why the Employer should stop (testing reasons notwithstanding).

Or, maybe someone started deferring in March with a 50% of deferrals no more than 6% of comp (for a cap of $10,350 on $345,000 in comp).  They hit $345k in September, but hasn't hit that match cap yet.

We know they are supoosed to keep going until they hit a cap, but is there anywhere that says it outright?

I was always told/taught that receivable profit sharing contributions are due the earlier of:

1) September 15
2) The date you file your tax return

In researching something, I just found this on the IRS website:

For example, if the due date of the employer's calendar-year 2022 Form 1040 or Form 1120 is April 18, 2023, with an extended due date of October 16, 2023 (after the automatic six-month extension), the employer has until October 16, 2023, to make a 2022 profit-sharing contribution and deduct it on their 2022 return.

Have I always been taught the wrong thing?  Or am I confusing two different things?  Now I'm confused, but is this an instance that if the company is a C-Corp you do have until October 15 to fund the contribution?

Thanks in advance!

Employer going out of business that has two plans: 403B and a pension plan (assume 100 participants or more).  The 403B plan year is the calendar year.  The pension plan year ends on June 30.  Is the employer required to have an audit performed for each plan for the following time periods? 403B for CY2024 (plan terminated 7.31) ( I believe YES) and pension plan for plan year ending June 30,2025 (I assume also YES). Thanks.

Hello…I’m trying to create a model to project future balances for our participants but am running into a couple of roadblocks.

In past years, we have had 1 ESOP loan.  I reengineered the allocation calculation from our TPA and it seems that once we have an ESOP only allocation of contributions (after accounting for 415 limits and backing out 401k contributions), the loan is allocated to each participant to reduce the actual contribution amount paid.

Fast forward to 2024 and we will now have 2 loans due to a re-leverage.  When I use the same methodology to allocate the loans to participants, two of our participants have a negative contribution amount.  I’m not getting any clear answers from our TPA on how to handle this.

Similar to how 415 excess amounts are re-allocated to participants, would these negatives be re-allocated until no one is negative?

Furthermore, to make up for the fact that the bulk of our contributions are going toward loan payments, we will be doing an S-Corp Distribution in 2024.  S-Corp Distributions earned on allocated stock are allocated in proportion to participants based on beginning share balances less distributions and S-Corp Distributions earned on shares held in suspense are allocated based on Eligible Compensation.

What I’m unclear about is the timing.  Should contributions be allocated first, then S-Corp distributions, or vice versa?  I was going to model it out using both approaches, but the negatives caused by the loan impacted that original plan.

Thank you for your assistance.

Jeff

One of our clients is running into an issue with the testing due to being an employee owned cooperative (we don't administer this plan, just their retirement plans).  There are 17 employees and all are considered more than 5% owners due to the structure of the business.

The people doing the testing are saying they fail “25% Key Employee Test, 55% Average Benefit Test and 25% Owners Test, since by definition everyone is considered an owner and Key Employee.

Do these tests apply to a Plan under this type of structure?  They are asking me for guidance, but this isn't my forte.

Thanks!