A client (sole-proprietorship, one person, income way over IRS comp limit) has decided to install a CB plan for 2023.  Unfortunately, he has already  fully funded his "solo 401(k)" plan at full $66,000.  So now he has to remove the excess of $23,700 (plus earnings).   His "solo 401(k)" is with one of the Big 3 (Schwab, Fidelity, Vanguagrd) using their simplified "solo 401(k)" documents which does not allow for "voluntary after-tax" nor for in-plan Roth conversion.   Is the following approach available (all done before December 31st):

1) Restate his plan using the customized plan document which will allow for VAT and In-Plan Roth conversion

2) Treat the excess of $23,700 as after-tax deposit

3) Do In-Plan Roth conversion of $23,700 (plus earnings)

Normally, I would say no on account of timing of the deposit being made before the provision is in the document.  However, I am wondering if the sole-proprietorship nature of the business changes the answer since all the compensation is deemed to be earned on December 31st?

my divorce decree states we agreed that I would receive 50% of 15yrs of my ex-spouses retirement.   He just retired and I was told that when he passes I will no longer receive the retirement.  If my divorce decree says differently than what was worded in the qudro is there a chance of amending it. Because why would I agree to only having the retirement while he was alive. It is well documented in the court hearing that he was a severe alcoholic and it would catch up to him. I was looking for lifetime. It seems useless to have it until he passes which at the rate he drinks won't take long.

We have a 401(k) plan in which we need to make a corrective distribution to an employee who made 401(k) deferrals in 2021, 2022 and 2023 but we have now determined was not eligible to make the 401(k) deferrals to the plan in those years. I understand that we have to calculate the gains on those deferrals and include them in the distribution but does each year's correction need to be reported on a separate 1099-R for that year or would the entire corrective distribution be reported on a 2023 1099-R?

Er Contribution for 2023 funded in 2024.  The tax credit is towards 2023 taxes, right?

When a plan allows for in-service distributions, and the owner participant has already taken their RMD, the additional distribution is subject to the mandatory 20% federal tax withholding.

Is there an exception that if you are over RMD age, the additional distribution is not subject to the 20% tax requirement?

Participant with a loan terminated and was rehired 6 weeks later.  Loan program specifies that the loan is in default upon termination, however, the loan has not yet been defaulted with the recordkeeper and there was no distribution of the remaining balance.  Is there any loophole that would allow the loan to be reinstated and the employee to continue repayment?  Does the Tax Cuts and Jobs Act allowing until the due date of the employee's tax return for repayment after termination come into play?

Oh, how I wish I was old enough to retire! My old brain can't handle these SECURE 2.0 items!

I have 2 plans that exclude per diem employees. Under the LTPT rules becoming effective soon, would these per diem employees now be allowed to participate in the plan?

Recall back in August the erroneous 8955-SSA penalty letters sent by the IRS.  Both ftwilliam and Relius (perhaps others, too) provided template language for plan sponsors to use in requesting the IRS abate the penalties as their Forms 8955-SSA were timely filed (or didn't file).  My client just forwarded me a notice CP138 for their corporate 1120 tax return that they are due a refund, but their refund has been reduced for the erroneous penalties!  It's as though the IRS completely ignored their own mistake and my client's rebuttal to their mistake.  Has anyone else seen this?  In searching the internet this morning I cannot find anything.  Many thanks in advance for your thoughts.

Which vendor is accomodating the prototype plan document services for municipal defined benefit plans?  

According to the National Employee Services Center (NESC) and the MyFordBenefits website husband's former spouse is listed as 100% Beneficiary and NESC stated as of last communication 8/11/2023 "current spouse is not entitled to any benefit"  I have had numerous interactions with NESC to determine beneficiary of the General Retirement Plan (GRP). My husband has dementia---I have POA approved by Ford---and have acted on his behalf.

Background:

Husband took an Early Retirement effective:   January 1, 2003  "Total monthly pension benefit $4306.19" 

At age 62 +1 month (2010) Pension Benefit After Temporary Benefit Ends was $3,146.04

Husband and former spouse were divorced:   May 11, 2006

Husband and current spouse were married:    July 24, 2010 

In 2013 Ford Motor Company offered a lump sum payment to salaried retirees. Both my husband and his former spouse were offered separate election kits and election kit for husband stated four options:

Option 1:  Lump Sum Payment Option

Option 2:  Single Life Monthly Pension Benefit Payment (only available to single retirees)

Option 3:  65% Joint & Survivor Monthly Pension Benefit Payment (only available to retirees married at least 12 months)

Option 4:  75% Joint & Survivor Monthly Pension Benefit Payment (only available to retirees married at least 12 months)

The Benefit Election Kit stated:  "Our records indicated that you have a Qualified Domestic Relations order (QDRO) on file with the Company as of March 2013. The pension amounts shown in this Election Kit reflect a corresponding reduction for a pension benefit payable to an alternate payee under the terms of the QDRO."  His former spouse has a QDRO to receive survivor benefits when the "participant" (husband) dies.

Husband took Option 3.  Your Monthly Benefit Effective December 1, 2013----Total Monthly Benefit $2,857.28; Benefit to Spouse After Your Death $1,857.23.  My birthdate appears on page 14 of the Election Kit paperwork.

On or about 2018-2019 Ford Motor Company transitioned from Fidelity Service Center for Ford Motor Company to Alight Solutions. The MyFordBenefits website states that "If you submitted beneficiary choices on paper before April 1, 2019, your choices are on file but won't appear on this site unless you enter them again."  There are documents in our files that indicate my husband was in contact with NESC to make sure that I was designated as a beneficiary of the GRP.

My questions:   If the former spouse did indeed take the lump sum payment, would she have had to sign some sort of form to recind the provisions in the QDRO?  In other words, if she did elect to take the lump sum, has she exhausted her right to survivor benefits...in other words, what is the status of the QDRO? Does an amended QDRO need to be filed?

NESC seems unable to help in finding verification of beneficiary. Do I need to hire a QDRO attorney who can contact Ford Motor Company to verify that I am the beneficiary of the 65% Joint & Survivor Monthly Pension Benefit which my husband submitted with the Election Kit in 2013.

Thank you for any assistance regarding these questions.

Are there any resources to find 1099-R's or other proof that a benefit was paid out to a participant?

This client doesn't have his old records.  Plan was terminated years ago before they became our client.

Which vendor is accomodating the prototype plan document services for municipal defined benefit plans?  

Can someone refer me to a document provider that offers a 457(b) document on a plan-by-plan basis (i.e., not a subscription)?  I use ftwilliam for qualified plans but I don't see 457(b) as an offering.

Thanks.

This is something that came up in the proposal process and probably would never be designed this way, but it's become a curiosity. Let's say you have a SH match plan, and HCEs are excluded from the SHM. But the plan is TH, and Keys (small company so Keys and HCEs are the same) are not excluded from TH. Every NHCE contributes and gets the max SH match. Keys are getting TH (at least in the proposal system) so it winds up that HCEs are getting 3% nonelective and NHCEs get nothing, but the system is showing keys getting 0% nonelective for testing purposes (I guess because it isn't specifically elected as a PS contribution) so it is passing nondiscrimination testing.

My take on this is that SH match is deemed to satisfy TH, so the keys should not get a TH contribution. That is, I don't think it is an optional position to say that SH match is deemed to satisfy TH; it does, period.

That puts the kibosh on the whole thing, but I still think the TH contributions, if made, should be tested for nondiscrimination (and would fail). Any disagreement on that?

A potential client has a SIMPLE IRA plan for their business.  They are continuing the SIMPLE, covering all employees and making the required contributions, but the owner wants to establish a solok and rollover SIMPLE balance into the solok only to take advantage of other investments not offered in the SIMPLE.  The owner does not intend to ever make contributions to the solok.  The  SIMPLE plan has been in existence for more than 2 years. Would this be allowed?

One of the new items in the SAR model language is the following statement:

“Your plan is a [insert a brief description of the plan based on the plan characteristic codes listed for the plan on the Form 5500, including whether it is a defined contribution or defined benefit plan, and whether the plan is a pooled employer plan, another type of multiple-employer plan or a single-employer plan].”

How are you approaching this?  Does this mean that we need to list out every individual 5500 characteristic code description (or some version of them) as part of this? 

Two clients of ours have received LTR 1072C from the IRS for the plan year ended 12/31/21. These read similarly:

Thank you for your 5500-EZ. Your correct EIN is xx-xxxxxxx. You should use this number when filing Form 5500-series returns or Form 5558.

If you have questions call or write. Keep a copy of this letter.

Cynthia Crowell, Notices/Unpostables Program Manager

**

Does anything need to be done for the year ended 12/31/21?

Does anything need to be done for the year ended 12/31/22, which has already been filed with the same EIN as for 12/31/21?

Thanks for any help.

A key employee began RMDs in 2021.  We have the calculated RMD due 12/31/23.  Before it was taken, the employee passed away.  His spouse is his beneficiary.

Is the spouse required to take the RMD by 12/31/23?  Reading the document below, I interpret this to mean that an RMD is now not due by 12/31/23, but will be due in the year following, or in 2024 (12/31/24).  Does this sound correct?  Plus we would need to calculate a new RMD amount based on the spouse DOB compared to that of the deceased's DOB.  Hoping to get a comment on whether others come to the same conclusion.

Thank you

Death On or After Date Distributions Begin.

                                                 (i)            Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant's designated Beneficiary...

When I make a withdrawal from a 401K they add the federal tax for the tax % I fall into.

The thing I am having a problem understanding is,

If they are making me  pay federal taxes on my withdrawal and adding the taxes to my total withdrawal which becomes taxable income. Then at tax time I am taxed at my total income with includes the taxes they withheld and added to my total withdrawal . How is that not double taxing me for the amount they added to my 401K withdrawal for taxes? seems I am sending the Federal Gov. the taxed for the income % rate of the total withdrawal and then IRS looks at total and I am taxed again???

 I realize they are withholding and sending that to the IRS but it is still being added to my total imncome which is used to determine my taxable income for the year...

Looked around and did not see a similar thread on this issue but apologies if addressed elsewhere and I missed.

Looking for some qucik help on this one.  Employer has self-insured health plan.  One participant depends on prescription drug to stay alive.  The drug is covered under the formulary and normally no issue; however, the drug is in short supply currently and the one network pharmacy for the plan cannot provide on a reliable basis.  The drug can, with some effort, be found elsewhere, including at retail, but is out of network.  Network provider (ASO insurance company) has suggested coverage be extended at member's current benefit level to cover purchases at any pharmacy that has drug available for temporary period while supply is so restricted.   Provider wants employer / plan sponsor to sign an exception form agreeing to cover all costs and also to hold provider harmless, etc.  Employer is eager to help and ok with exception generally and picking up the additional drug costs.  (The added costs have not been great thus far.  They will also clear with their stop loss provider.)

Part of the hold harmless agreement, however, has Plan acknowledge that making benefit exceptions for the group health plan could violate provisions of state and federal law, including ERISA, the Code, HIPAA, COBRA, etc. and result in significant penalties and adverse tax consequences, etc.    Here the member at issue is not a highly compensated individual and the exception being made is tied just to the lack of consistent supply for the drug with the plan's pharmacy network.  The drug is covered under the plan and so not an exception in and of itself.  The Plan / Employer is just trying to find a way to provide a critical drug that it has otherwise promised to provide. 

Plan wants to know if there really are material discrimination concerns or other significant penalties or adverse tax consequences here that could arise.  That seems unlikely but welcome others' thoughts and experiences.