I tried to find this topic addressed, but was unsuccessful.  It seems obvious to me, but what do I know.

Leveraged ESOP, closely held stock, has only one tranche of stock acquired with the proceeds of a single ESOP loan that has not been renegotiated.  Dividends on unallocated shares are used to pay a portion of the stock loan.  In the third year of the loan, 50,000 shares are released per the amortization schedule.  The loan payment was $500,000, of which $100,000 was from unallocated dividends and $400,000 was an employer contribution. There are a few forfeitures that resulted from participants leaving who were less than fully vested.  Therefore, active participants were allocated shares as a result of the loan payment as well as reallocation of forfeitures.  However, only the shares that were released by virtue of the loan payment are using the cost basis of the shares when the loan was funded; the shares released as a result of using unallocated dividends and forfeitures are allocated with a cost basis of the FMV as of the end of the year.  I had always understood that all shares acquired with the proceeds of a stock loan carry the basis at which they were acquired, regardless of release of shares or reallocation of forfeitures.  Am I wrong here?  

Thanks to any all for their wisdom and insight!

I understand that a participant can opt out of the plan .   And that if they do they can not return.  If a participant opts out, they no longer are part of plan testing.... correct?

EDIT:  I meant "Waive out"

And Dang... meant to mention this.... This guy has 2 daughters.  Would they be considered HCEs due to attribution?  I'm guessing they are both older than 18. 
My thought was they may screw up testing so have them waive out... take them out of the equation.  But if they are HCEs by attribution then no issue if they defer very little or nothing at all. 

Still seems funny not having Tom remind us of this. Tom, if you are lurking out there, Happy Pi Day.

Benefits dept found that an employee had overcontributed to FSA ( 2022 )because of an employer error (having 2 deductions  for FSA, 1 was not end-dated). It is now 2024, how does payroll refund the employee?  

We have someone with an old SEP IRA plan that they are looking to roll the money into a Cash Balance Plan?  The value of the SEP is around $1.1 million, just for reference.

Thanks in advance!

I had a CPA ask this question (which is really his responsibility to find the answer) about a predecessor employer:

Dentist A sells practice to dentist B.  Dentist B decides to assume sponsorship even though I recommended that not be the case because the financial advisor did not want to complete new plan setup forms, deal with rollovers, etc.  The question: can dentist B take the new plan credits since this is a new plan adoption for his business EIN?  

Another situation like the above except the selling and purchasing dentist formed a partnership for one year.  So the plan adoption went from Dentist A, to Dentists AB partnership, and then to dentists B for 2023.  A CPA is asking about this one also.   With the partnership in the middle, I told him the credit would not be available in my opinion even though the sponsorship for 2023 is under a new business EIN and this a "new" plan for that entity.  But I told him I'd ask.

I'd be surprised if the IRS would give any attention to this credit given the massive PPP and ERC funds given away.

Thank you in advance.

Tom

Question I'm not clearly understanding. I know that you cannot include LTPT in testing for some purposes, and not for others. Basically "all or nothing" - that is, 401(a)(4),ADP/ACP. 410(b), etc.

What I'm not clear about is, for example, suppose the employer provides that LTPT who defer will also receive a match. Can the employer STILL exclude the LTPT employees, for all the above testing purposes, or must they all now be included for all of the testing? 

I think it is the former, although it seems counterintuitive, but I'm not certain. (P.S. - I base my theory that it is the former on the proposed Regs, and nearly at the end under Section f(3)(i) Example 1((a) and (B).)

Is the new SECURE 2.0 requirement that allows employers to terminate a Simple IRA mid year but only if the employer “establishes and maintains (as of the day after the termination date)” a SH 401k plan to replace the terminated Simple IRA arrangement intended to cover M&A situations (where the SH 401k plan is maintained by Buyer and has been in existence long before the SIMPLE IRA)?   Or does the employer need to initially “establish” the SH 401k plan as of the day after the SIMPLE IRA termination date to rely on this mid-year termination exception?

Thanks.  Apologies if this is addressed elsewhere on the Board.  

Hello there everyone, we have a safe harbor 401k that allows employee after-tax contributions, so I am running some calculations on what the 2024 test results for our plan would look like under various scenarios. I know that in general, if the ADP test passes with room to spare but the ACP test fails then one can shift / borrow from the ADP test to the ACP test to help pass the ACP test. However, how does this work, if at all, in the case of a safe harbor 401k, since it ordinarily automatically passes the ADP test? Would this tactic not be allowed (and hence constitute a significant disadvantage of being a safe harbor 401k), or would it be allowed to calculate what the ADP test would show and shift / borrow based on those numbers should the ACP test fail? I tried looking around but haven't found an answer since it's kind of a corner case.

Secure 2.0 allows mid-year Simple to 401k but is that a two way street?

Section 332, Employers allowed to replace SIMPLE retirement accounts with safe harbor 401(k) plans during a year. Section 332 allows an employer to replace a SIMPLE IRA plan with a SIMPLE 401(k) plan or other 401(k) plan that requires mandatory employer contributions during a plan year, and is effective for plan years beginning after December 31, 2023.

Can I terminate a SH 401k and replace with a Simple in the same year?  

This is new for 2023 and it is covered in the 5500 instructions.  In case I missed something, I thought I'd ask - it isn't optional right?   

Thanks Tom

A 403b  has received a request from a non-resident alien (NRA) to do a direct rollover of his account to an IRA. Up until this point the 403(b) has only had cash withdrawals by NRAs, of which it withholds 30% and reports the distribution on Form 1042-S.

Because this is a direct rollover and assumedly no withholding applies, the 403(b) is wondering how it needs to report this. Does it issue a Form 1042-S? If so, what is the tax withholding exemption code for box 4a? Any direction on this is appreciated. TIA.

These are probably a silly questions, but with such an astronomical penalty, I want to ensure I get this right.

1. Box 1A. reads "This return is: (1) the first return filed for the plan (2) an amended return (3) the final return filed for the plan (4) a short plan year return (less than 12 months)"

For each return, would "(1)the first return filed for the plan" be checked, or does this mean only for the very first return? I.e., does this mean for the plan year being filed, or ever? It sounds like this would only apply to the very first year being filed, but on the form, it looks like this should be checked each year, since this is not an amended return or final return. The instructions say "First Return Check box A(1) if this is the first filing for this plan. Do not check this box if you have ever filed for this plan, even if it was a different form (for example, Form 5500)." But lets say, for example, I file 2021 as the first plan year, and now I'm filling out 2022. I guess another way to ask this question, is it ok to leave Box A blank?

2. When submitting the late return, if box D is available, do I still need to write in red “Delinquent Return Filed under Rev. Proc. 2015-32, Eligible for Penalty Relief” at the top of the return? 

3. If I'm sending these in now, in March, would it be prudent to wait until closer to the July 31 deadline to file for the last plan year electronically, which is not currently delinquent, to avoid triggering a notice for the previous years, if it takes them awhile to process these?

Announced this morning at EA Meeting that Joint Board will eliminate physical presence requirement for continuing education retro to  beginning of this cycle.

https://www.federalregister.gov/public-inspection/2024-05240/regulations-for-continuing-professional-education-requirements-of-the-joint-board-for-the-enrollment

Client was submitting their 1094-C filings with the IRS electronically and two employees’ names kept getting rejected.  The client learned that they were not authorized to work in the U.S. so the client had to let them go.  The client isn’t sure what to do next; I suppose the filing must be incomplete. Any suggestions on how to make sure their 1094C filings are accepted?

I found a somewhat related post here, but what I've got is a little different.

One-person plan, Roth deferrals and profit sharing.  The sole prop (who is age 50+) has 2023 net Schedule C income of $29,000, and he wants to max.  My pension software tells me that his 1/2 FICA is $2,100 (rounding), therefore net compensation is $26,900.

Can he do the entire $29,000 as Roth deferrals?  I think it triggers the catch up rule that it can't cause a failure in the year allocated... but I've never seen it applied to 100% of compensation.

If not, I can split it and make some as profit sharing, but it would be simpler to be able to have it all one money type.

Thanks!

I was recently informed my client "switched to a PEO in December."

I recall this is something like outsourcing.

I think the PEO is the "employer" but wouldn't I use the client's EIN?

I would assume this is just another way AP or PayChex can "offer" their 401(k) administration to the client.

We're currently on hold with our client and a platform that I'll call This Retirement Platform.  The plan has a terminated participant who has a less than $5,000 vested balance.  It's an ERISA plan (there are ER contributions).

It has taken us several DAYS to get someone to accept that this is legal.  I wish I was kidding.

Currently, TRP (by which I mean This Retirement Platform, of course, not naming names) is telling us that such an transaction (a) has to be medallion guaranteed due to "some 2020 law", and (b) must have 20% withheld because it's leaving the 403b plan - yes, even if we're sending it to a rollover IRA.  They can't cite the actual authority for either of these positions oddly enough.

Has anyone dealt with a retirement platform that has tried these tactics before?  Any success pathways (other than "no, give me your manager") or tips to share?  Thank you for allowing me to spill the Tea; it's a hard Row here, but I guess the Price was good at some point.

Thanks.

Question regarding a participant being out on suspension from their job in terms of their loan repayments.

The plan states that repayments have to be made through payroll deduction, so obviously if they are out on suspension no repayments will be made.  There are two options that I see:

1) Re-amortize the loan to increase the weekly repayments
2) Have the employee makeup the missed payments and leave the schedule the same

Is #1 a viable option, or would that not be allowed?  I know we can do it if someone is on a leave of absence, but can we do it for a suspension?

Thanks!

A church, which is recognized as a 501(c)(3) organization, sponsors a 403(b) plan and wants to establish a nonqualified deferred compensation plan for its senior pastor.  The NQDC plan will be designed to comply with Internal Revenue Code Section 409A.

Are contributions to the church's NQDC plan taxable upon vesting, as typically occurs with non-church tax-exempt organization NQDC plans?