Hi

CB plan excludes non-owner HCEs.

Joe has been an employee/participant for the past 3 years and getting CB pay credit.

He becomes an HCE for 2023 under lookback rules.

This means, for 2023, Joe does not get a pay credit, correct?

Top heavy provided under DC plan.

Thanks

Lets say I have some one age 83 what would max Lump sum be? Assume all RMDs have been made and distribution will comply with MASD based on prior RMDs. Will check that separately.  Trying to make sure my software is calculating max lump sum since participant is close to limit.

3 year high salary $200K

Plan AE 5% and current 417(e) table so 2023 Applicable Mortality Table. APR 6.44 * 200K = 1,288,000

But I also need to check against 5.5% and 417(e) Table which would be the same 2023 Applicable Mortality Table correct?

So APR drops to 6.30 and lump sum limit would then be 6.30 * 200K = 1,260,000

Do I have that right?

The IRS is not able to answer this question for me.  If a Plan Administrator is responsible for several ERISA plans, do they need to apply for a Plan Administrator EIN (thru SS-4) for each plan? Or does the Plan Administrator just receive a single EIN which is then used for all plans they administer?

Thank  you!

Marty Wayne

MartyWayne@ColonialFundingLLC.net

Direct: 847-971-1057

I did see other posts about this question but still need clarification.

We have a handful of large plan audits that fell under 100 participants with an acct balance as of 1/1/2023 but still have more than 80. All the plans in question filed as a large plan in 2022 (Schedule H audit etc). Based on our understanding of the 80-120 rule these clients can choose to continue to file as a large plan and file an audit OR they can choose to file as a small plan for 2023 and going forward until they go back up to 121 participants with a balance which will trigger an audit again.

We highly doubt the clients in question will want to continue as a large plan to avoid the cost of an audit and therefore will want to file as a small plan starting in 2023. Our concern is the few that fell right under 100 (lets say 90-99). They may have to go back to an audit soon once they hit 121 again so we want to make this clear to them.

We understand if they fall under to 79 they must file as small plan.

Is our understanding correct?

We administer an Owners Only 401k plan. Contributions for 2022 were $20,500 to Roth 401k and $40,500 in after-tax voluntary contributions.
Participant now wants to do an in-plan conversion of after-tax voluntary contribution to a Roth account.

1) How should this transaction documented? Does the plan issue a 1099-R showing a total distribution of the current after-tax balance, with only the earnings portion as taxable ?

2) Assets are held a Schwab. Does a separate sub-account need to be set-up for the various types of in-plan conversions e.g., after tax, employer match, profit sharing etc. or can they all be "lumped" into one account?

Thank you

I received an inquiry regarding taxation of distribution (more specifically ways to defer taxation) from a non qualified deferred comp plan (409a) - I have limited experience working with these plans.   However, I have what I think is a straightforward question 

What strategies are available (if any) to defer taxation from a plan distribution?  I am aware a IRA rollover is not permitted. 

Thank you in advance

It's a small business with 10 employees.  I spoke with my possible future advisor, and she said I had to merge the funds from my simple into the 401k.  Can I not just keep the funds where they are and start a new 401k?  I've read some rules, but I'm not clear.  It says you employer cannot have any other retirement plans.  I would only have one active retirement plan, but two accounts where funds are located.  She works for ascensus, but I want to make sure she is correct.  Thanks!

A US based employer has an employee who is working abroad; the employee quits and is remaining in that foreign country to live.  

1. What are our client's obligations in terms of offering coverage to this employee, considering their current international residence?
2. Does the issuance of a COBRA rights letter in this scenario entail any legal or compliance risks for our client, given the employee's non-U.S. residency?
3. Are there any specific steps our client should take to rectify this situation and ensure compliance with both U.S. and international regulations?

Thank you!

We have a typical situation where a participant went delinquent on his loan.  We would normally correct by reamortizing the loan over the remainder of the loan term, but in this case, the loan term (which is the statutory term) is recently expired.  According to EPCRS, if the statutory loan term is expired, the loan should be treated as a deemed distribution, not corrected according to the correction procedure.

The problem is, we are a big cause of the delinquency.  The 401(k) Plan under which the loan was granted was terminated (in connection with the employer/plan sponsor being acquired).  The purchaser in the transaction is allowing all plan loans under the 401(k) Plan to be transferred to the purchaser's plan.  Payment of loans was put on hold during the transition, the loan went into default, and now the loan term is expired.  The Loan currently sits in the purchaser's plan, in default, and now past its term.

Is there anything we can do?

We administer a Safe Harbor 401(k) plan sponsored by a partnership with 15 physicians and 5 nhces. The 3% safe harbor employer contribution is provided only to nhces and hce non-keys.

The issue here is that every year, one of the 5 nhces become a partner (often with less than a 5% interest). The odd thing is that these partners are often considered nhces because the prior year they were an employee making $80k. This would then force the less than 5% partners to fund their own 3% safe harbor contributions as well as at least an additional 2% employer contribution to meet the minimum gateway.

With this odd scenario happening, the managing partner wondered if they could have language in their partnership agreements indicating that any partner nhce will be responsible to fund their own safe harbor and other employer contributions

A large Company’s pay date is Friday.

The Company 401k contributions can be reasonably segregated on Friday.

Current practice for contributions is a wire order entered on Thursday and executed on Friday, so that the money is pulled from the Company general assets on Friday and the amounts are allocated to participant accounts on Friday before the market close.

Recordkeeper offers a new ACH process. Under the new ACH process, Recordkeeper will initiate the ACH process on Friday and will allocate the contribution amounts to participant accounts on that same Friday before the market deadline. Participants will receive market earnings for Friday.

However, the ACH process pulls the funds from the Company on the next business day. Thus, the contribution amount is pulled from the Company’s general assets on Monday.

Recordkeeper allocates the funds to participants on Friday when the ACH is initiated even though the funds are not pulled from the Company until Monday.

Recordkeeper says this is a common industry practice (to allocate contributions to participants before the contributions are actually remitted to the trust). Is this process OK? Do most recordkeepers allocate the amounts to participant accounts before the funds are actually remitted to the trust?

It appears to be an interest-free loan from the recordkeeper to the plan sponsor (party-in-interest to party-in-interest). Recordkeeper says that if the Company does not make payment when the ACH pulls the funds on the next business day, they will simply reverse the transaction/allocations under the mistake of fact provision. 

We can't find any guidance on loans between parties in interest. Does this violate ERISA? Other concerns? Or is this a common practice/no worries?

I am revising my question. I have Plan A merging into Plan B 12/31/23. Plan A has 4 year graded vesting - less than 2 years 0%, 2 years - 30%, 3 years - 60%, 4 years - 100%. Plan A will merge into successor plan B which has 5 year graded vesting - less than 1 year 0%, 1 year - 20%, 2 years - 40%, 3 years - 60%, 4 years - 80%, 5 years - 100%. For contributions accrued as of 12/31/23, I have to give participants with 3 or more years of service the right to elect to remain on the old schedule correct? What about participants with less than 3 years - can the old schedule continue to apply to accrued benefits even though the new schedule is better at year 1 and year 2? I am looking at the IRS example where they recommend a graded 3 year schedule even for a 0% vested participant in the accrued benefit. Please let me know your thoughts!

Change in Plan Vesting Schedules | Internal Revenue Service (irs.gov)

We have a cash balance plan that set a termination date in September this year. We permissively aggregate the DB and DC plan each year to pass general testing. Does the plan termination date create a short plan year for the DB plan and does that now make the two plans unable to be aggregated due to differing plan years or is amending the plan to terminate 9/30/2023 not creating a short plan year for testing purposes? No assets will be distributed this year and both plans define the limitation year as the plan year.

I don’t believe the regs are concrete on this scenario and that it could be interpreted as being a short plan year. But it could also be interpreted as being a short plan year only during the year when the assets are distributed not necessarily when the plan term date is effective.
 

Secondly If the DC plan is terminated 9/30 as well, I’m thinking it would be reasonable to aggregate them under this scenario?

Thank you!

Hi!

I misfiled a Solo 401k with Schwab. I thought I was a 1099 employee, but I am a K-1. I now need to get the IRS to send Schwab a letter of permission to release the funds. I was directed by Schwab to this website (https://www.irs.gov/retirement-plans/correcting-plan-errors-fix-plan-errors) to fill out a Letter of Instruction and then include the Date of Contribution, Amount of Principle, and How to Pay Back. However, after looking into this further, to submit an explanation to the IRS, I will need to create an account at pay.gov. From here, it looks like I will need to submit form 8950. This form requires a minimum fee of $1,500. Seems really high and can not believe they charge this. I tried to see if there was a way I could get this waived, however I don’t think my plan qualifies for the orphan plan, which is mentioned here (https://www.irs.gov/retirement-plans/voluntary-correction-program-fees).

What is the best way to resolve this? I made a stupid mistake and I can't figure out how to fix this.

Help!

Good Morning!

Plan is terminating due to business closure and there is still once active participant who wants to do a personal contribution strictly from his funds directly into the 401k plan.

Personal contribution (with no funds coming from the Company)  is this permissible? 

Thank you. 

Does anyone use Congruent Solutions for administration/distributions in their TPA office?  Any feedback?  Are there any other companies that offer administration?  Thank you.

Notice 2023-54 provides relief for missed 2021, 2022 and 2023 RMDs for a non-eligible designated beneficiary of an IRA or DC plan. What about a missed RMD for a non-eligible designated beneficiary of a DB plan participant?

I got divorced and had a Qdro written up. My ex-husband works for the city of Chicago and he has been remarried twice after. If I get remarried, do I lose the rights to the money?

Under SECURE 2.0, plan administrators do not have to furnish certain disclosures, notices, or plan documents to unenrolled participants if they provide the unenrolled participant with an annual reminder notice about the participant's eligibility to participate in the plan and any election deadlines.  The unenrolled participant must have received the SPD when initially eligible. 

From what I've read about the unenrolled participant notice, the required content seems to mirror the safe harbor notice.  Would you agree?

With the SECURE 2.0 notice relief, is the 404a5 fee disclosure distributed to only (a) participants with an account balance and (b) newly eligible employees?  Does an unenrolled participant need the 404a5 fee disclosure?

What are your TPA firms doing?  What documents are you telling your clients that they need to distribute by December 1st? 

For a non-safe harbor plan, what needs to be distributed to ongoing participants prior to 1/1 in a non-safe harbor plan?  Just the QDIA (when needed) and fee disclosure?  If the plan doesn't need to give a fee disclosure to an unenrolled participant, does than now create the need to draft a notice to unenrolled participants?

Thank you!

I have a Plan that's terminating.  Can they allocate the Forfeiture Account to any active participant at the time of Plan termination?  They had a few people who had been terminated for at least 6 years, 100% vested, that just refused to take their money from the Plan.  They want to avoid giving money to them from the Forfeiture Account, if possible.

Thanks!