An individual owned his own business as a sole prop for 5+ years.  No employees.  No retirement plan.

Within the past year, he switched to an LLC.  I'm not sure if he has a new EIN or not.

He also hired an employee after the LLC was created.

He would like to start a SEP, but would like to keep the new employee out, at least for a few years per SEP eligibility.  

But can he be immediately eligible taking account of his sole prop service?  Can a SEP count prior service with, in this case, the predecessor business entity?

Thank you

Hello- Looking for some guidance here as i cannot seem to find the answer. If an ineligible employee (NHCE) defers for a Plan year and the Plan Sponsor  allows them to keep deferrals in Plan via a retroactive amendment - would this ineligible employee ( an NHCE) also receive the Safe Harbor 3% and/or profit sharing?  Or would they essentially only be allowed to defer and receive a Top Heavy? 

I just applied for a TIN for a 401k plan than with an effective date of 1/1/2020.  The plan did not previously have a TIN.  There was one participant, the owner, with a brokerage account.  They plan will have 2 more owner participants in 2024.  I took over the plan from a prior TPA and applied for the TIN online. 

The confirmation letter says "Based on the information received from you, you must file the following forms by the dates shown:  Form 945, 3/19/2024. After our review of your information, we have determined that you have not filed tax returns for the above mentioned tax period(s) dating as far back as 2021.  Please file your returns(s) by 4/3/2024."

WHAT?!?!  This plan has never had a distribution and no withholding required.  What did I do wrong?  Did I get this guy in trouble?  His personal and business taxes are all ok.  Help please!!!

Let’s say company A is a related and participating employer in Plan X which is a safe harbor plan with the basic match formula.  Company A is purchased mid 2024 in an asset sale so all employees will be terminated from Company A. They have a distributable event. If the buyer has their own 401k plan that is not safe harbor, are there any spin off options mid year for that portion of Company X plan that is attributable to employees of A? Do we have safe harbor  concerns where we should suggest a spin off as of end of plan year in order to not violate 2024 safe harbor status.
Thank you for any comments!

We have a Cash Balance Plan that is terminating in 2024.  I believe we still need to complete the Cycle 3 restatement document, since we are already in the window, but I just wanted to confirm.

Thanks in advance!

Hello all, 

Thank you in advance for reading my post and sharing any thoughts on what seems like a strange situation we find ourselves in.  We have a small S-Corp with a 50+ year history and have offered a SIMPLE plan to our employees for over 10 years.  This was at Fidelity for most of that time, but mid-2023 they cancelled our plan and would not accept any additional deposits.  We asked what we did wrong or why we would be cancelled and got no answer. 

During the 5 months it took to setup an account at Schwab, the business withheld the funds for employees that were earmarked for Simple contributions.  This was done with each employee's written approval.

In Feb-2024 we finally got Schwab all setup and employees established accounts.  We were able to send the 5 months of back contributions, and current payroll cycle, and now we have received another plan-cancellation letter.  In reaching to Schwab, again no reason provided.  

We are at a loss about what the issue is, but we appear to be on some type of "black-list" that plan administrators don't want as customers, but we have no idea how to move forward.

Does anyone have any suggestions on what could be causing this?  

Is there any other way our business can help our employees fund their retirement.  We went the Simple route since it was low cost to setup and manage.  Are there other types of plans we should explore, or are their retirement consultant agencies that might be retained to get answers from Fidelity / Schwab on what this issue is.

Thank you again for your thoughts,

Rick

If a client is paying out of pocket (not from plan assets) for a whole life policy, but for some reason has named the plan as primary beneficiary of the policy, is the plan entitled to the cash surrender value?  Do any loans from the policy need to be reported?  I've seen plans buy life insurance before but never have seen someone buy life insurance and name the plan so I'm not sure what the reporting requirements are.  

This has probably been asked previously, but I can not locate.

This concerns a sole proprietor that maintains a 401(k)/PSP for the benefit of his company.

Of the net income derived from the sole proprietorship, stepping aside the calculation of any profit sharing for the non-owners, how can one determine what the owner's deferrals are (if there are any), vs if the contribution is to be considered an employer contribution (profit sharing)?

Why am I thinking that unless the sole proprietor makes an election, prior to 12/31, the contribution must be considered an employer contribution??

Any other references or thoughts on this subject?

In the past 2 weeks 2 clients have received plan audit notices.  Thankfully they are only PS plans, nothing more. But get this....I just received a call from the 2nd client who got the audit notice.   He is in the hospital following a blind fall down the stairs in the dark in the middle of the night.  He is in rehab with a concussion, 2 fractured vertebrae, and cracked ribs.  Poor guy, he just retired last month! 80 years old! 

So he called the agent conducting the audit explained the situation and  requested the audit be postponed and the agent said no!  He said to give someone power of attorney.  Is it unreasonable to request the audit be postponed?  Is this normal that the IRS would not grant a postponement based on these circumstances?

Is there a reason we have to abide by the 25% DC Comp deductibility limit when the plan is a 403(b) and the sponsor is a church which does not pay taxes?

Thanks!

Patricia Neal Jensen, JD, SME

FuturePlan by Ascensus

Patricia.Jensen@FuturePlan.com

We have a business with only one eligible employee other than the owner. . For 2022 this employees was fully covered by the 3% nonelective safe harbor and profit sharing.  For 2023, the person worked about 50 hours and earned $1,000 and terminated before the end of 2023.  So the employee will get the safe harbor.  What about the rule - if terminated and less than 501 hours can be excluded from coverage testing?   The question is profit sharing.  The owner is getting high PS%.  I know PS for this employee is miniscule.  Still for my own knowledge, what is the rule here?  I know if  I put this into our admin system it will say fail 401(a)(4).  So the term with <501 hours apparently does not apply to 401(a)(4).  That's fine.  I just wanted to nail down this rule.  It could be more meaningful rule in a larger plan to exempt this one person from 401(b) but still be able to pass 401(a)(4) due to all the other employees receiving PS.

Thanks

Retired participant had reached RBD in the later 20-teens and began taking RMDs on schedule. He passed away in 2021 and his wife elected to leave the funds in an account in the plan in her name until she could decide what to do with them. As she was not yet RMD age, she did not take RMDS in '21, '22, and 23. She is now 73 years of age and wants to roll her funds out of the plan into an IRA. 

We're of two minds on exactly which RMDs are missed. On one side, it is argued that only '21 is missed, as since he was in pay status that year's RMD should have still come out, and she'll need one '24 since she is now of RMD age. On the other side, it is argued that '21, '22, and '23 were all missed, as since he was in pay status at the time of his death in 2021.

Anyone feel particularly strongly about either side? The Plan Document does not appear to provide a definite answer to this specific situation.

My father was a state employee and participant in a 457(b) plan. When he passed away my sister and I were named beneficiaries. We each inherited 50% of our father's account. I rolled my account over to Vanguard. My sister kept her account with the plan. We both received RMDs each year due to my father's age. The plan proactively asked my sister for a beneficiary designation. My sister responded and named me as her beneficiary. On every quarterly statement my sister received I was listed as her beneficiary. Unfortunately, my sister passed away. She was never married and without children. She was ill for a number of years before she passed. I was her caregiver.

My sister has a will and a living trust. She also has a document that lists accounts where I was listed as her beneficiary. Her inherited 457(b) account is on that list and I am listed as her beneficiary. When I called the plan to notify them of my sister's passing the plan confirmed on multiple recorded calls that my sister named me as her beneficiary and the plan accepted her beneficiary designation. Again, her beneficiary designation appears on every quarterly statement. I had planned to roll this account over to Vanguard. I called the plan with a couple of questions about the withdrawal form. The form is a mess (I have since learned that the withdrawal form doesn't conform with the terms of the plan document.) A supervisor called to respond to my questions about the withdrawal form and told me that the plan doesn't allow for a beneficiary to name a beneficiary. The terms of the plan state that a lump sum will be paid to my sister's estate. I was upset by this new info from the plan. 

How can anyone do any meaningful estate planning if the plan accepts a beneficiary designation that it won't honor? I reminded the plan that my sister had passed away. The time to correct the plan's error was before she had passed so that my sister could've acted on the information the plan provided. My sister was aware of the benefits of tax deferred money. She could've rolled the account over to an inherited 401(k) outside of the plan to preserve the tax deferred status of the account and also name me as her beneficiary.  My sister reasonably relied on the information she received from the plan when they solicited her beneficiary designation and published it on her statements. The plans errors led to this issue.

The plan is pointing to the plan document which they interpret to prohibit a beneficiary from naming a beneficiary. I never submitted a formal claim. I asked questions about the claim process via phone and email. Even though I never completed the withdrawal form nor did I submit a death certificate (the plan states a certified death certificate is required to make a claim on an account over $100k), the plan sent me a denial letter and directed me to communicate with one plan employee. The employee has not responded to my email messages since I've received the denial letter. The denial letter states, "any costs incurred by the plan in defending a legal action related to this claim shall be charged to the Benificiary's remaining funds, to the extent permitted by the law." However, the plan document states, "No Reversion. The Plan shall have no right, title or interest in the assets of the Trust. No part of the assets of the Trust at any time shall revert to or be paid to the Plan, directly or indirectly." 

Does anyone have any advice? My sister intended for me to be able to maintain this account in a tax deferred status. Instead, the plan says it will make a lump sum payment to my sister's estate. I believe the plan's errors led to this issue. In my eyes as a layperson, the denial letter they sent and the plan document are carelessly written. 

I know it has been discussed on many occasions before and I have searched through the prior threads.  But I can't make sense of some elements so I decided to post.  We know that one cannot use Form 5305 SEP if "Currently maintain any other qualified retirement plan. This does not prevent you from maintaining another SEP." 

Q1:  Can anyone explain the logic behind these instructions or give a reference to the legislative history/sections of the Code which resulted in such?

Q2: These instructions clearly indicate you cannot establish the SEP if DB exists but why do practitioners decide it is prohibited to establish a DB plan if SEP already existed? 

Q3: What is the meaning of the word maintain" in this context?  Is it in the context of "existing" or "deduction"?  In other words, is it OK to establish a new DB Plan in 2024 effective for 2023 (when SEP existed) but not take any deductions for contributions made to DB Plan for 2023?

Q4: What are the ramifications if a taxpayer ends up having SEP and DB Plan for 2023 (with no deduction is taken for DB contributions for 2023 tax year)?  What exactly is the nature of the failure and what are the penalties?

Question, Plan is terminating and there is a participant who has an existing loan.  In my experience they have two options:

1) Pay the loan back in full
2) Default on the loan

Someone is asking if they have the option to repay the loan back to their IRA, assuming they are rolling their balance into an IRA.  I know what my gut is telling me, but I just wanted to make sure this isn't a viable option.

Thanks in advance!

Plan sponsor has opted for the loan to be offset, the plan is terminating any idea how the loan offset can be dealt with since some of the participants have taken the distribution and the loan is still outstanding. 

One of the 401k plans that terminated, we were couple deceased participants and since they were no beneficiary the plan sponsor directed to cut a check to the deceased estate.  Although there was no estate set up, a check was cut to the estate of the deceased name.  the check was cut in 2023 and in Feb 2024 the spouse has reached out claiming for benefits, since the spouse wants the money to be rolled over, I'm trying to understanding how the tax that was deducted be handled? 

Hello! We have a client who logged in to HIOS (CMS) to submit their carved out direct contracting RxDC Reporting for 2023. However, the only years available are 2020, 2021 and 2022. Does anyone know if there's a "start date" when you can submit RxDC data for 2023? CMS has launched a ticket but the agent wasn't aware of an opening date. Thanks!

I have about a million questions.  I'm writing this as though I know these to be true but they are only educated guesses...

1) I presume the SIMPLE IRA contributions are from January 1st through let's say May 31st, be they Nonelective or Match.

2) Then, the Safe Harbor 401k contributions, be they Nonelective or Match run from June 1st through December 31st.

3) Profit Sharing / Gateway Minimum / Cross-testing / top-heavy minimums would all be based on comp data from 6/1/2024 through 12/31/2024

4) The 415 regs are crystal clear that ALL defined contribution plans are aggregated for 415 purposes so I would be targeting the 415 limits based on the sum of the above.  My plan doc already says the 415 limitation year is always a 12 month period so no need to prorate the 415 limits. 

5) I suppose I would need to pro rate the comp limit though?  That could be problematic, so I guess I might need to have a 1/1/ effective date after all and just have the 401k safe harbor contriubtions effective June 1, 2024 and determine my top-heavy minimums as 3% of 12 months of pay, offset by any Safe Harbor, and SIMPLE IRA contributions.

I think my point really is, there are so many answers to so many questions.  HAs anyone sat down and tried to figure this out?  Has ASPPA or Ferenczy or ERISApedia answered these questions at this level of detail? These are happening right now so we need a playbook...

I am curious as to any common or recommended disclosures that may be used with deferred compensation plans for participant quarterly statements or on web pages.  

I understand there are no "required" disclosures, but I recommend something that references that the investment shown are not an indication of ownership.

Any thoughts on this?  any suggested statements that you would use on statements or online?