Employer erroneously withheld (and made) Roth deferral elections for a few years.  Participant did not realize but question is what is the correction?  No Code (402(g), 415, etc.) violation but if the amounts are distributed, would the entire balance be taxable or just the earnings?  Assume not subject to 10% excise tax on early withdrawals as it would be a corrective distribution.  Better approach would seem to be to have the participant make an election going forward but interested in any other thoughts from those who have seen this before.      

Hi. We are in the process of terminating our 401k plan. We have several participants with really small balances (many are under $1.00). Is there a de minimis amount ($1.00, $5.00, etc.) under which it is permissible to move those really small balances into forfeitures instead of forcing the participant to take action? Or are we required to send all of these small balances to IRAs? I thought that there was a rule where if the cost or burden to the plan sponsor exceeded the account balance, then the government allowed such a forfeiture. Thanks for any thoughts. 

In the situation where you have a control group that use one plan.... It seams to reason that each company pays the contribution required for it's own employees... right?  I'm talking a straight forward 3% SHNEC.

Can Company-A pay Company-B's 3% SHNEC?  (curious with this question)

Just need confirmation, thanks

I have a small 401(k)/SH Match plan with two K-1 partners.  One is a general partner (GP) and doesn't contribute to the plan, and the other is a limited partner (LP) who does contribute to the plan.  They have a handful of W-2 employees as well.  The SH Match is a year-end calculation.  I finally received the 2023 K-1 (Form 1065) from the accountant for the LP (which is already final and filed) and am trying to calculate his eligible plan compensation.  On the K-1, Line 14 equals guaranteed payments (line 4a), and according to the accountant the guaranteed payments were for services provided to the partnership, so all would be considered subject to SE tax.  The K-1's are final as I mentioned, and they plan on claiming the deduction for the 2023 SH Match contributions in 2024. So, I have a few questions.  First, even if they would be deducting the 2023 SH match in 2023, given that the LP would never share in any gains/losses because their only taxable income is from Gtd Pymts, would we need to deduct their "share" of the W-2 employees' SH match from their Line 14 number before calculating their eligible plan compensation?  Does your answer change since they are not deducting until 2024?  And also, would we need to do the circular calculation for their share of the SH match for the same reason (only Gtd Pymts)?  Maybe I'm overthinking all of this, but I couldn't find any info that speaks directly to this situation.  Thanks for any help!

Feel free to point me to a different group if this isn't the right place for this...

I work for an organization where we implemented a policy to increase the employer contribution to people's 401K the longer they are at the org.  We're trying to change our 401K to our PEO's 401K, and they said they can't implement this policy BUT they can do "a cross-tested PS formula.  This wouldn’t exactly be a tiered option based on years of service, and the gateway minimums for a cross-tested PS formula would still apply.  This is the closest option available."

I have no idea what this means, or how I can use it for longevity.  All my googling implies that cross-tested plans *may* have to do with people's ages, but also may not??  I can't find a simple definition of what this is, and how one can use it (and can I use it for our longevity policy)?

Assume a contribution was made to a DB plan in excess of the 404(o) limit in December 2023. The contribution was made prior to the end of they plan year so it cannot be attributed to the 2024 plan year. The plan now has a nondeductible contribution in the plan. After electing the 4972(c)(7) exemption from excise tax on the nondeductible contribution, the contribution will be able to be deducted in the following year.

My question is, does the nondeductible contribution get reported on the 2023 5500 or on the 2024 5500?

Thank you for any help.

Hopefully a simple question for a Friday.  Owner-only plan.  Accountant was taking 401(k) deductions from payroll for the owner.  Owner was not depositing the deferrals.  Question...do the late deposit rules apply to an owner-only plan?  We can certainly work up some lost earnings and prepare a 5330, but is it required in this instance?

Thanks very much.

Hi

I am 79% owner of a c-corp, other 21% owned by my siblings

I am also a 100% owner of an LLC

I am not a CG, correct? It is not relevant how the LLC is taxed.

No ASG issues.

Thanks

Have a publicly traded C Corp ESOP Plan that has been doing your regular run of the mill Dividend Pass through process for awhile now on their quarterly cash dividend.  Was recently notified that last year they filed multiple 8937's and the dividends for the past year were actually Return of Capital Cash Dividends.  Never had this occur in any of my C Corp Plans in 25+ years of ESOP Administration.  What impact would this have on the Dividend Pass through process if any?  Is this type of Dividend even eligible for the 404(k) deduction and to be passed through to participants?

Client is asking what our process would be to amend the 1099R's for 2023, given that Return of Capital Dividends are non-taxable and reduce basis I believe.  2024's tax history can still be modified at this point.  The Dividends paid quarterly are well below the stock basis on file for each participant. 

Recently we have run into a participant who does not believe she is eligible for benefits from the pension fund. After our review, we believe she is vested. However, we are in receipt of a letter from the participant stating she will not fill out any paperwork and does not believe she is eligible for a pension. Under the terms of the plan, participants are required to make an application for benefits. Additionally, the participant has requested that the pension fund office cease sending her letters and calling her regarding her application (or lack thereof). 

My initial thoughts are that if the participant does not want to make an application, there is no requirement that the NEED to apply. 

An Employer has a pooled PSP that holds, among other assets, raw real estate as well as trust deeds.  She would like to amend the plan to a self-directed 401k with brokerage accounts, however, she would like to keep the RE and trust deeds - is there any way to do this without having any kind of pooled arrangement?  Could she allocate these assets in the brokerage account to all the participants like a stock, or possibly allocate them all to herself if the plan never adds any more of these types of investments going forward?  

Being paranoid here late at night.

Joe owns ABC corp 100%

One of the ABC employees is Joe's adult son, Harry in addition to many other employees.

Joe and Harry started a partnership (LLC) in 2023 50/50 - no employees.

LLC has nothing to do with ABC corp, no business transactions, no income exchange, no nothing.

Do they have controlled group issues as they want to set up a DB plan for the LLC?

DOL initiated audit of a 401k plan.  We have a resolution letter from the DOL.  The DOL calculated the lost earnings on the delinquent deposits and determined that the plan still needs to deposit $2,500 in unpaid contributions.  The delinquencies span several years. The employer (a non-profit) will make the deposits by the end of this week.

(1) The IRS hasn't knocked on the door yet.  Can the plan go through VCP?  The plan is not under IRS investigation but just completed the DOL investigation

(2) Can one VCP filing cover multiple years or do you have to file an application for each year?

(3) Failure to file 5330 - is this eligible for VCP?

(4) Late deposits - is this eligible for VCP?

(5) There is an option on Form 8950 to request a Pre-submission conference request.  Is this more trouble than it's worth?  Should a VCP application and proposed correction be submitted along with the fee and skip the conference? Could the IRS decline a conference and come after the client?

Thank you!

It has been previously asked here whether for a short plan year with a mid month distribution date(final distribution on plan termination) when the 5500 filing is due and the response has been 7  months after the close of the distribution month. Is it also true then that the deadline for a minimum required contribution would be 8.5 months after the close of the distribution month and not 8.5 months after the date of the final distribution? In other words ,could a schedule SB show a contribution 8.5 months after the close of the final distribution month?

I am writing to seek clarification regarding the enrollment restrictions for 401(a) retirement plans. My HR department at a NON-Profit has informed me that, according to IRS guidelines, I am only eligible to enroll in a 401(a) plan within the first 12 months of my employment. They have also indicated that I would not be able to enroll during any open enrollment periods thereafter due to these IRS restrictions.

I also was never told about the 401(a) company guidelines of enrollment as i never had to complete orientation which had the class where it would have been the only time your notified about this. as per my instructions of my manager (it not important you can do it later) that was 2 years ago still haven't. 

I am seeking your assistance to verify the accuracy of this information. Could you please confirm if there is an IRS guideline that restricts 401(a) plan enrollment to the first 12 months of employment? If such a guideline exists, could you kindly provide me with the specific reference or documentation that outlines this rule?

So if an employer with a 401(k) or 403(b) signs on with a PEP mid-year, I assume when the employer's plan is merged into the PEP, there is no required nondiscrimination testing for the period prior to the merger - in other words, the coverage/nondiscrimination testing is performed for for the entire year, and would be done by the PEP provider?

Hi All,

Thank you for all the insights and valuable knowledge always.

A DB Plan, owner only,  had the assets held in a checking account for about 15 years. It was a checking account in the name of the plan..ie John Inc. DB Plan, and the corporate EIN. The bank now sent a letter that they are converting the account from busniess account to a personal account and in a separate email the bank states that the EIN will be taken off the account and the owner's Social Security number will be used on the new account. Question: Can this be deemed a taxable distribution ( even though it was does against his will), and is it a problem to keep the new account as is with the Social Security number, if the account is still labeled Defined Benefit Plan?  Thank you.

Employer A sponsors safe harbor plan. Employer B sponsors non-safe harbor plan. B purchases 100% of the stock of A, mid-year. Wants to merge plans more or less immediately. Since 1.401(k)-5 dealing with mergers, etc., is "reserved" there's no solid guidance on this subject. Given that, do you think it is permissible, since plan A uses the "maybe not" notice, to do the merger if the 30-day advance eliminating the Safe Harbor notice is used? Is it permissible to use less than 30 days (I can't really find any support for this, but maybe I'm missing something. Of course, the purchasing employer, in its merger documents and its plan, would have to address all the coverage, nondiscrimination, protected benefits issues, etc.

Both plans are calendar year.

We are the TPA for plan A, and naturally, we weren't told about this in advance, nor did the purchase and sale agreement address ANY employee benefit plan issues. Classic...

Appreciate any thoughts.

edited typo...

And yet another edit - apparently all employees of A have already been moved to B - no further pay from A will be made. And B's plan was already amended to allow immediate eligibility for A's former employees. So a 30 day advance notice ain't possible. It doesn't seem reasonable that in such a merger/acquisition situation that A's safe harbor would be blown and ADP testing required, but again, no firm guidance...

Since this world of non-discrimination testing is so gray, I have a good one for you.  

I work for a large physician group.  The majority of our workforce are HCEs.  We have one health plan with no class distinctions listed in the plan document.  All physicians and employees are eligible for the same plan with the same eligibility rules.  Here is the contribution structure for non-physicians and the CEO:  EE-100%, EE+SP-$400, EE+CH-$250, FAM-$550.  Now this is only for the Employees.  For physicians we pay 100% of all plans including dependents.  Is this plan considered discriminatory?  We have passed 125 testing as we are not required to report the premiums paid if the ER pays 100%.  Now if the physician works less than FT hours, we do charge them for that portion of the ERs cost of their benefits so in a way we are not treating them the same.

In my past life we recommended another physician group to gross up salaries for the physicians so that we show that we are treating everyone the same.  What is your recommendation?  We have never done 105(h) testing and not sure if we need to do so.

Appreciate it!

Jennifer Hagen

I have a client that maintains a Top Hat Plan for certain employees.  They have a Participant that separated from service in January of this year.  The client has no distribution election form on file and the Participant has no recollection of ever being given one.  The Plan is not clear on how distributions are to be made in default of an election.  Here are the provisions on Distributions:

"A.  Provided that the Participant's services with the Employer and all other related employers of the Employer (as determined under section 414 of the IRC) terminates for any reason (other than death), distribution of the amount credited to the Participant's account under this Plan shall commence to, or with respect to, the Participant upon termination of services or at such date elected by the Participant at the time the Participant began participation in the Plan.  Payments shall be made in the number of installments initially elected by the Participant.  Once commenced, the number of installments shall not be changed or accelerated, except by the application of Section VII (Participant election to Modify the Timing of Benefit Payment).  Payments shall be made at such time and in such form as provided in distribution forms provided by the Employer.

     (i)    Participant may elect a distribution of the amount credited to the Participant's account under this Plan in the following form:
        {A) annual installments.
         (B)    single sum
         (C)    annual installment/single sum combination
          (D)    transfer in-kind

B.  Distributions will commence 60 days after severance from employment.  If a Participant should die before distribution of the full amount of the account described in this Plan has been made to the Participant, any remaining amounts shall be distributed to the Participant's beneficiary by the method designated by the Participant on distribution forms provided by the Company at the time the Participant selected the number of distribution installments. The Participant may designate a payment of a lump sum or the continued payment of the Participant's elected number installments to the beneficiary if distribution has begun. If distribution has not begun before death of the Participant, payment to the beneficiary shall be made in a lump sum or not more than five installments. If a Participant has not designated a beneficiary, or if no designated beneficiary is living on the date of distribution, the amount credited to the account shall be distributed to the Participant's estate in a lump sum distribution as soon as administratively feasible following the Participant's death.  The Participant may change the designation of beneficiary in writing delivered to the Company before termination of services to the Company."

Appreciate any thoughts on how payments should be made, whether this is a provision of the Plan that could be amended to provide for an explicit default payment method, and whether there are any issues with delaying commencement of payments after the required 60 days (although, still in same taxable year so maybe not as big of an issue).