I am a full time employee enrolled in a FSA plan. My employer changed my work status from full time to part time with no benefits. Do I need to repay my employer any FSA funds I used and can my employer continue to deduct FSA funds from pay check?

thank you. 

Hi

Sole prop, started biz 7/30/2023, over age 50.

Wants a 401k plan for 2023 (ok under SECURE 2.0)

Made 125k of net c for 2023. Assume after SE tax adjustment

I think I can make the plan effective 1/1/2023 and get the full 30k as deferral, correct?

If I start the plan, do I need to prorate the 30 to 5/12th?

For PS I can do max 25k and is this doable with either full or short plan year?

Thanks

Long time listener - first time caller...

Not my issue, but a question came up in the office.  Participant has Pre-tax and Roth 401k dollars.  In 2024 the participant is turning 73 and wants to wait until 2025 for 1st time RMD.  However, participant requests a source level distribution of only Roth 401k.  Secure 2.0 states Roth 401k is not part of RMD.

Regular RMD rules state first distribution from your 401k needs to be your RMD, if applicable.  However, if you are only taking a Roth 401k distribution, would you need to take an RMD from your pre-tax money?  Prior to 2024, I would agree that any distribution would be subject to RMD first.  However, now that Roth 401k is not required to be part of the RMD, why would you need to take a pre-tax RMD first?

Any guidance would be appreciated - maybe this is something that needs to be clarified or corrected?

Hi!

I am working through a minimum and maximum illustration for a profit sharing contribution. I hope I have an easy question here.

The plan is NOT top heavy. They give the 3% SHNEC. The allocation conditions for the PS are last day and 1000 hours of service. I have two NHCE's who terminated in 2023 and I have one HCE who was employed on 12/31/2023 but did not work 1000 hours. Can I completely remove the three of them from the New Comp testing? OR do I still need to include them in New Comp testing? If I keep them in I have to give them some PS in order to pass Gateway and/or Nondiscrimination testing.

Thank you

Am I understanding correctly, when filing the Form 5500, the Schedule R is now required for plans even without distributions in the plan year? This just to accommodate the new compliance questions?  2022 instructions for the Schedule R listed additional exceptions for plans without distributions that seem to have been left off of the 2023 instructions. 

This is probably stupid but this client deposited $4,300 too much.  They asked if they could allocate it as a PS contribution instead of returning it to the company.  The plan is a straight SH Match, they don't make PS contributions (it's allowed, they just don't).  Problem is, 5 participants who don't defer would receive the PS contribution.  No big deal.  But the plan has individual brokerage accounts at American Funds.  Each of these 5 participants would  need an account of which their balance would range from $125 to $236.  Hardly worth it..agree?  

• Could these 5 participants share one pooled account?
• Would it be best to just pay the overage back to the company?

Thanks

First time I've seen this...

Client sends me a Quickbook payroll detail with a line for Tuition Assistance in the "Employer Taxes and Contributions" section (the section that shows things the ER pays, like the company part of medicare, the company part of SS, 401k match, etc.

I asked about it, and the client said that this was the up to $5,250 that the ee can get without being taxed.  This was new to me, so I did some research and found this (I didn't keep where I found it, though; I just copy/pasted it to a Word doc):
 

Quote

An employer can reimburse employees up to $5,250 annually without this amount being taxed.  While more can be offered in a tuition reimbursement program, any amount above the allotted amount will be seen as a fringe benefit and will be subject to taxes.  Employers can also deduct the maximum of $5,250 per employee from their taxes each year, making tuition reimbursement cost-effective for all parties involved.  For tuition reimbursement to stay tax free, the money can only go towards tuition, fees, and school supplies, such as books.  Additionally, graduate courses are tax-exempt only if the employee is in a research of work-study position.

Anyone familiar with this kind of thing?

"Reimbursement" is what I'm focusing on.  The client has three employees getting this, all over the $5,250 threshold.  Let's say one of them is at $7,000.  Do I need to count $7,000 or $1,750 somewhere?  I'm thinking "no", and I'd like to assume (ha! I will try and confirm) that no part of this is in the Gross Pay.

If it matters, the plan uses W-2 comp and also excludes "taxable employee benefits" from comp.

Any guidance is appreciated, thanks.

Small profit sharing only plan with incorrect contribution allocation issues(due to inaccurrate compensation figures) needs an ERISA attorney to handle communications/negotiations with the IRS due to plan audit. The TPA can do any calculations, testing, 401(a)(4), etc as needed but isn't a law firm, and the sponsor is at the point of needing to hire formal help. 

They would really like to find one local to them in the New York City / New Jersey metro area. 

Do any of you have specific suggestions for attorneys or firms in that area? Self referrals are welcome. 

Thank you! 

A PS-only plan established in the 1990s wants to add a 401k provision in 2024. They have more than 10 EEs. Must they implement an Automatic Contribution Arrangement?

Everything online seems to indicate "no". But the IRS grab bag notice says the qualified CODA had to have been established before 12/29/22. I also tried searching here but couldn't find the answer. Thanks in advance.

Owners child works part-time and has not met 1,000 hours in 12 months, but they are now an LTPT.  I can exclude LTPTs from ADP testing.  So the kid can contribute 50% of pay, right?

Is this too good to be true?? Maybe there is something that says otherwise but it's something that never even crossed my mind until I saw it happen this morning..

I've got this cute little MEP with two adopting employers - it would be a CG except that they are owned by different brothers.  It would be an ASG except it's a construction business so it can't be.  So MEP it is.

In Co1, two brothers have a partnership that always operates at a loss.  In Co2, all four brothers own an S-corp and earn $500K+ each.

They finally have non-union employees who are becoming eligible.  Presuming they listen to me and only pay them from Co1, then top heavy is a non-issue.  No keys have any benefit in Co1's portion of the plan (because they never have positive income there).  And... the fact that these same partners are putting away the max through Co2 is not a problem.

Or is it?  I've got something nagging at me about maybe there IS aggregation here, but I can't find anything in any MEP resource that supports that.  If I'm only imagining it, that would be great. LOL

A DB plan excludes HCEs (other than the two owners) and requires one year of service for NHCEs.  For 2023 all eligible NHCEs are participating, but the plan needs to include one more participant to satisfy the 40% requirement of (a)(26) minimum participation.  There are several HCEs who would have the one YOS in 2023, and there are several NHCEs who were first hired in 2023 and do not have the one YOS.

If an amendment brings in one HCE retroactively for 2023, would that be a discriminatory amendment under 11(g) standards?  Since the newly hired NHCEs are statutory excludables for 2023, we can ignore them for coverage.  But an amendment granting a meaningful benefit just to one HCE is concerning to me.  We discussed that they can alternatively bring in one NHCE early and grant the benefit (of course, testing under 410(b) would now have to include everyone with that reduced eligibility), but the plan sponsor would like to grant the benefit to this one HCE.

Is this a problem or am I just overthinking this?

Thanks.

I have a plan failing the 414(s) Compensation Test.  They only have deferrals and I am already assuming a 3% De Minimis percentage.

I'm not sure how to correct this since it's not affecting employer contributions.

Would the employer be responsible for "missed deferrals" on the bonus amounts?  Or, if the plan passes the Average Benefit Percentage test will it be deemed to pass?  I'm seeing both options on-line.  We don't have any resource sites or materials in our office to rely on.

Any help/guidance you can provide would be greatly appreciated.

Client forgot to enroll an eligible employee and has missed deferrals in a tax exempt 457(b) plan that the employer participates in. My understanding is that, since there is limited opportunity to submit corrections to the IRS under Section 4.09 of EPCRS, that practitioners interpret that to mean that corrections for 457(b) plans can generally follow those prescribed under EPCRS for qualified plans. So in this case we would corrective contributions for the participant's missed opportunity to make a contribution/invest (e.g., 50% of missed deferral) as under EPCRS. 

My Divorce Decree says that my ex-wife is entilited to "any benefits under my pension plan"

Does that also mean she is entilited to health care when I retire or a payment I am required to make to pay for part of her health care?

I have a question in the M&A context - company B will be purchased by company A on 5/1.  Company B has a non-safe harbor 401k plan and company A has a safe harbor plan. What are the options mid-year - can the non-safe harbor plan be merged mid-year into the safe harbor plan? I would think best practice is to use the IRC 410(b)(6) transition period at least through end of the 2024 plan year and then merge at end of plan year? Or freeze plan B, allow employees to join plan A and merge at plan year end. Any thoughts? 

Hi!

I have a small plan that has always consisted of only 4 owners. Funding their PS has never been an issue until now when they've started to hire part time employees. The coverage test is failing.

FACTS:

1. Eligibility is 21 and 3 months svc with monthly entry.
2. They exclude part time (PT) employees
3. 3 year Vesting

• PT EE #1 - Hired 5/13/2022. Termed 4/20/23. Excluded PT but met eligibility & could enter 9/1/22
• PT EE #2 - Hired 5/16/2023. Termed 8/7/23. Excluded PT and termed before entry.
• PT EE #3 - Hired 10/11/23. Excluded PT and still working PT. Would enter 2/1/24

PT EE #1 who would have been eligible has terminated and would be 0% vested. 

I guess my question is an 11g amendment required here or could PT EE #1 meet statutory exclusion and be excluded from tests? 

If I have to do an 11g amendment and I need to expand coverage what is the best way to do so? Who would get an allocation? The one possibly eligible PT'er is gone and would be 0% vested. PT EE #2 termed before entry. And PT EE #3 is meeting eligibility in 2024. 

What is the solution here? 

Because of the recent litigation regarding usage of forfeitures, I wanted to get some back up for how this is being viewed in 401(k) and other participant directed account plans.  Forfeitures must be used according to the plan document and most big providers have the standard "pay plan expenses" and reduce employer contributions.  Some also have the prorata allocation.

Given all of that, we have seen it recommended that the forfeitures be used for participant education, specifically financial wellness.  That also being a way to deplete the forfeiture account when the plan sponsor is paying the fees and/or does not have contributions to reduce.

Any thoughts on this being a reasonable "plan expense" noting here that I have reviewed §2550.404a-5 as well as the settlor vs permitted plan expenses the DOL has opined on and it does indicate educational seminars and retirement planning software is permitted. 

So if it is permitted - does the financial education need to be specific to retirement planning or is overall financial wellness ok or is there some gray area?  

Thanks!

I'm finding this subject confusing, particularly due to the fact that some vendors/recordkeepers are handling the process differently, or their information is contradictory/confusing, etc.

So, it is very clear that a QBAD is reported on a 1099 as a Code 1.

A PLESA (which I hope never to encounter anyway) is treated as a qualified Roth distribution, and reported as such.

For other SECURE/2.0 special distributions, it seems like a Code 2 is possible if the "AND YOU KNOW" clause in the 1099 Code 2 instructions is satisfied. Are you allowed to use a Code 1, even if you "know" - or if the employee certification doesn't convince you - you are allowed to rely on it, but are you allowed to REPORT as a Code 1, or MUST you report as a code 2 if you ostensibly "know" it qualifies? 

Other observations? Floundering a bit on this...

Thanks.

Just curious as to what people may be hearing. Remarkably simple income tax return filed electronically end of January - IRS refund website confirms accepted January 31. Refund still not approved/processed. Return has 2 W-2's 2 1099's. That's it, standard deduction.

In the past, these have been processed VERY fast. And everyone I know who filed at the same time this year got their refund processed and received very quickly.

There's no option I'm aware of to actually talk to someone at the IRS who can say what the hold-up is. When I did call, the phone message was the EXACT wording that is on the "Where's my Refund" site. I just wondered if other folks you might know are encountering similar delays. It isn't anything critical - it's not like it is needed to pay bills or get groceries - it is just annoying!