An employee goes on a leave of absence and chooses to continue having their HCFSA deduction taken from paid portion of leave but does not return to work. Does the HCFSA eligibility end as of the last day worked prior to the leave, or does it tie to the health insurance plan end date, which is last day of the month in which the employee notified us that they would not be returning to work? If eligibility ends as of the last day worked prior to the leave, how do you handle HCFSA reimbursements made while on leave?   

Anyone else received one of these? Client submitted a fully completed and signed 5330 for late deposits of 401(k) deferrals. Client received an IRS letter, from Ogden. No form #. The letter states that the 5330 was unsigned,, doesn't say whether the PT was Discrete or other than Discrete, didn't give the amount of the PT, doesn't indicate whether you corrected all of the PT's. Of course, ALL of these items were completed, and completed properly.

They give you the option of checking the boxes and completing a couple of items, and signing a declaration that the form is true, correct, and complete. BUT, they tell you NOT to include a copy of the original for 5330, unless you are correcting/amending it, which of course you aren't, because it was correct and complete in the first place.

So, you are left with the choice of completing their form, or calling, which is likely to take hours and probably get wrong info anyway...

If this was an automobile, I'd be suffering from road rage...

If a nongovernmental and nonchurch charitable organization prefers to make available voluntary-only wage-reduction arrangements to buy a contract with Internal Revenue Code § 403(b) Federal income tax treatment and do so without establishing or maintaining a plan that would be ERISA-governed, such an employer prefers to avoid discretionary decision-making.

That includes avoiding discretion about whether a participant has a hardship withing the meaning of § 403(b)(7)(A)(i)(V) or § 403(b)(11)(B).

Many public-school employers too prefer to avoid involvement in those decisions.

Are 403(b) insurers and custodians allowing a participant to self-certify her hardship?

Does allowing self-certification help remove not only an employer but also an insurer or custodian from discretionary decisions about hardships?

What’s happening in the real world?

Does anyone have a form for the beneficiary. He must select form of payment from a DB plan,

Hi. We have a participant that wants to take multiple in-service distributions within a calendar year. In early 2023, he took an in-service distribution against his 2022 principal credit. He recently received his 2023 principal credit and now wants to take another in-service distribution. He is in his mid-60s and I can't find anything in the plan document that prohibits this (the document is silent on this topic other than to say in-service distributions are permitted). But it just doesn't feel right to me. Does anyone know if this is legal?

Plan provides for nonelective employer contributions and permits an election with respect to the time and form of payment.  For a newly eligible employee, it seems the 30-day rule would apply to permit an election regarding time and form of payment within 30 days of initial eligibility.  

The 30-day rule includes the requirement that the deferral election can only apply to compensation paid for services performed after the election.  

If the only contributions are nonelective employer contributions (thus the employee can't choose whether or not to defer it to the plan), does the requirement that the election apply to compensation paid for services performed after the election have any application?  In other words, if the employee becomes eligible on March 1 and makes a time and form of payment election within 30 days of March 1, and the employer makes a $5,000 discretionary contribution on November 1 - is the time and form of payment election applicable to all of the $5,000 discretionary contribution?  It seems that it would be.   

I am trying to understand which event triggers taxation - vesting or when the SRF lapses. For instance, if the document states a participant is 0% vested until attainment of Normal Retirement Age (age 65 in the document) and also that the participant will forfeit 100% of the account if no longer employed on 1/1/2026, when is the participant taxed if the participant is age 52 as of 1/1/2026 and still employed as of 1/1/2026. On the one hand, I think he's taxed because the SRF lapsed on 1/1/2026; on the other, he isn't vested in the funds yet because he hasn't attained NRA (but he will no longer lose the right to the funds, since the SRF lapsed. He's merely got to wait until he reaches age 65).

Note, I did not write this document.

I have a client asking about the mechanics of making the employer matching contribution as Roth, as allowed under Secure 2.0.  In particular how the taxes are being handled.  Is the Match being put through payroll, or are companies paying the taxes independently?

Good Morning,

i think i know the answer, but rehires always get me... 

ee worked 4/15/2021-6/17/2021

Rehired 12/10/2023

 on FTW document. 6 e is marked for 6 months of service, elapsed time.  With monthly entry dates.

Neither Rule of parity or one year hold out are marked.

Since he was gone more than 12 months and he didn't meet eligibility, does his 6 months start over and his entry date would be 7/1/2024?

Appreciate your input!  Thanks!

How do your plans handle the situation in which a divorce decree grants an ex-spouse an interest in retirement benefits, but the ex-spouse dies before a QDRO is filed with the Plan? In this case, the participant is nowhere close to retirement age. It seems the estate should be put on notice and given a time frame to file a posthumous QDRO, but would appreciate thoughts.

I do not work enough with after-tax contributions and came across a question for an owner-only sole prop where the owner wants to contribution profit sharing and after-tax.

(1) The owner has gross income for the year is $100,000.  Minus expenses (not counting plan contributions), this his net compensation down to $80,000.

(2) He is looking to contribute 20% profit sharing and, as much after-tax as he can (under age 50 FWIW)

Do we determine the PS amount first and then subtract the after-tax or after-tax first and then PS?

Thank you

Mike

I feel like I should know the answer to this one but I don't.  We sponsor a 403(b) and one of our participants deferred the maximum to both our plan and his former employer's 401(k) plan in 2022.  (Yes, 2022.)  He is now (December 2023) requesting a refund from us.  Can we do it?  He is active and under 59 1/2 and we do not consider him to otherwise have had a distributable event.  If this were a 401(k) I would say "no" but I am unsure about the 403(b) aspect.

Sometimes when you overthink something it makes you crazy and unsure of the obvious.

I have a participant who has terminated.  She had Roth and pre-tax money in her account.

Can only one 1099-R be prepared or do I need to prepare one for each money type?  Am I reading the 1099-R instructions correctly, do I put the total being distributed in box 1 and in box 5 that is where I indicate her ROTH and/or after tax voluntary contribution distribution? 

Example...  Suzie terminated and took all her money.  Her $10,000 Roth account rolled into a rollover Roth IRA.  Her $20,000 employer money into a rollover IRA

Box 1, total of all distributions  -  $30,000
Box 2, taxable money  - $20,000
Box 5, Roth and after-tax voluntary contributions  - $10,000
Box 7, Distribution code(s)  - code G and code H

Her 1st Roth salary deferral was more than 5 years ago (2012)

Or do I need to prepare 2 form 1099-Rs.

There is a small professional DB Plan not subject to PBGC in closedown. All benefits have been paid except the 2 principals and the principals' child. The principals' child is in the middle of separation from spouse. There is no QDRO in place and the separation is being drawn out. Future ex-spouse won't sign the spousal consent so that the money can be distributed. The company is being acquired with one condition being that this plan has been fully closed and distributed by end of the year. Participant is on the younger side with Lump Sum in the few hundred thousand $ range. Is there any ground to be able to waive the spousal consent because of plan closedown? What is the best course of action?

1) Give the money to PBGC? (not ideal for anyone)

2) set up a generic IRA as if the participant was being forced out/couldn't be located? 

3) Waive the spousal consent and distribute to the participants IRA?

4) Distribute it out under participant election and correct under EPCRS once consent can be obtained?

I appreciate any help.

On the old Schedule SSA, reporting terminated participants with unpaid vested benefits was mandatory but reporting them after they had received a distribution was optional.  So, we never did it.  Now we have a little over 2,000 people who were probably reported as term vesteds with a balance and never removed upon subsequent payment.  Their payment dates were from 1994 to 2005.

The problem we have now is that these people are receiving letters from the Social Security Administration reporting that they may have a benefit due. It is sometimes difficult to convince people that they were paid.  After all, a government agency is telling them to contact us.   We have the check number, amount, and payment date, and even in most cases signed distribution election forms, but we no longer have the canceled checks so people don't always believe us.  And much of our information is on microfilm which requires in-person research, which is a bit of a hassle.

How appropriate would it be, the next time we file the 8955-SSA, to report these people as having been paid out?  Is this a huge red flag?   Would it trigger unwelcome attention from some agency or another?

We have a plan that is terminating with Transamerica.  Several participants will not return their distribution forms.  This is an FIS/PPD DC document.  I know most will say - what does the plan document say?  It is very ambiguous in my opinion.  These are participants with more than $5,000 and they are not "lost."  The plan is not subject to QJSA.  We want to simply roll them to a default IRA with Millennium Trust if they continue to ignore the distribution forms.  The assets are enough where I don't want to take chances - in total about $25,000 for 3 people.

Thank you in advance for your comments.

Tom

Background:

This just got dropped on me this weekend.  Company A has a 401k plan, Company B has a 401k plan.  Both plans with same recordkeeper.  Ownership and plan features are identical for A and B as of 1/1/23, no issue with protected benefits.  Company C is being purchased, has no 401k plan, same ownership.  Holding Company D is being formed to own Companies A, B, C, and any future acquisitions.  All employees of all companies will be employees of Holding Company D as of 1/1/23.  My thought is to keep surviving Company A plan, merge Company B plan into Company A plan, have Holding Company D become the plan sponsor of Company A Plan and add all employees of Company C into the plan as of the closing date of the purchase.  I would file a final 5500 for Company B plan (though not terminate the plan) for 2023 (or 2024 if recordkeeper cannot merage assets as of 1/1/24).  Continue filing 5500s for Company A Plan (Holding Company as new plan sponsor).  On Holding Company 2023 5500 I would list Company A in Part 2 question 4, then on final 5500 for Company B list Holding Company A in Section 7, question 13c.  The timing is obviously tight, but am I missing anything in this strategy?

Thank you for any input!

Situation 1 - Rehire

Full-time employee is eligible and participating in the 403(b).  The employee experiences a separation from service and there is no plan to re-hire employee.

Employee ends up being re-hired later in the same Plan Year, but in an ineligible position (fewer than 20hrs/week).  Does the employee get to participate immediately under the "once-eligible, always eligible" rule?  

Situation 2 - Reclassification

Full-time employee is eligible for the 403(b).  The employee changes from full-time to part time (expected fewer than 20 hrs/week).  Is the employee still eligible under the "once eligible, always eligible" rule, or is the employee now ineligible under the exclusion for employees expected to work fewer than 20 hrs/week?

During the 2022 plan year, the company made the deductions from payroll, but they were never submitted to the recordkeeper.  They were in the process of changing payroll providers.  When the contributions were deposited (late) in 2023, 3 participants were over the 402g excess.  The plan sponsor is now requesting a distribution of these excess amounts.  

The accountant is telling the client remove the 402g excess and report/pay penalty on the form 5330.  I believe they are confusing the late contribution and needing to file a 5330 for that.   Since none of the impacted participants are over 59 1/2, can they distribute the money from the 402g excess?  I realize they will be double taxed (2022) and then in year of distribution.  If they are allowed to distribute, I believe they are subject to the 10% premature distribution penalty.  Can/Should they distribute the money?  I am thinking there is no distributable event to permit the distributions, therefore the money stays in the plan.  Thoughts?

sometimes....we make it so clear to communicate with us at all times about distributions (this has to do with a s/d brokerage type account, not with a recordkeeper), and yet that doesn't happen...

okay enough complaining...

Owner of small plan took an in-service (not hardship) distribution of an in-kind asset. Unfortunately, owner is under 59.5 and this asset is allocated among all money types, including 401k, which is not allowable under 59.5 per my understanding.

First off, so this 401k portion really was not able to be distributed, but for now say it was.  Because new holder of this non-ordinary asset cannot separate this out between two accounts (taxable account vs non-taxable rollover IRA), the brokerage has recommended rolling it back into the plan. It's after 60 days, so I feel like that's it, it was a distribution, which was partially not allowed. They still want to roll it over and treat it as a correction and correct the 1099-R's.

I don't know, trying to figure out a correction.