Offering employees the ability to pay for their share of health premiums on an after-tax basis is administratively burdensome, and it would be advantageous to eliminate it. Doing so of course raises several issues, the most immediate ones I can think of:

1. Can a benefits wrap plan that incudes section 125 limit the payment of medical and dental to pretax only so long as the plan otherwise offers participants a choice between taxable and nontaxable on some other benefit(s), such as disability premium payments?

2. Other than the possibility that some employees might benefit from an income tax deduction on their premium payments if paid on an after-tax basis, are there any other potential benefits to employees by making after-tax benefits available?

3. Can this be eliminated mid-year or is it better to have it take effect the following year?

4. What other issues might be lurking for the unwary?

Thanks in advance for any insights!

I am working with a single employer pension plan that is looking to terminate their plan. The plan is PBGC covered and will be terminating as part of a standard termination. The plan provides for an annual post-retirement COLA based on CPI and capped at 4.0%. I know that typically a COLA such as this is considered part of the accrued benefit and cannot be amended out. The catch is that the definition of the COLA in the plan document states that the COLA will cease on plan termination. As best I can tell this language has always been in the document and they have received FDLs. I will be pointing them to their attorney for a final opinion, but has anyone come across this? Any thoughts or opinions on whether it is permissible to stop the COLA at plan termination?

Hi

Asking for a friend as I do not work with plans that have union employees

DC/CB combo.

Union employees excluded from CB

Union employees only eligible for 401k deferral+SH and excluded from PS (both union and non-union are covered under one plan)

Does union employee get a gateway?

Can they be tested totally separately?

Any insights are appreciated.

Thanks

If neither an appropriation nor a continuing resolution is enacted by March 8, the Treasury department’s government-shutdown plan takes effect.

That includes no work on writing regulations or nonrule guidance.

That further slows guidance on SECURE 2022, SECURE 2019, and open projects unrelated to either SECURE Act.

Also, a shutdown affects IRS customer service.

Hi, I am doing calculations for contributions to a solo 401(k) for the first time. While I followed the rules for these calculations, I am still not sure if I did them correctly or if I am missing anything. I have a Qualified Joint Venture (QJV) with my spouse, and I also have a full-time job with a 401(k) there. Our goal is to maximize contributions to the solo traditional 401(k) and make mega-backdoor Roth contributions for the rest of the funds.

Contributions to 401k from my full time W2 job are the following: 
Employee Contributions: $21,531.52 (aggregated across retirement plans)
Employer Contributions: $8,074.32 (does not aggregated across retirement plans)

Spouse does not have W2 job but materially participate in QJV. 

QJV income (before any taxes) for me and my spouse: $167,462 

QJV income for each of us: $167,462 / 2 = $83,731.00
Earnings subject to self-employment tax: $83,731 * 0.9235 = $77,325.58 
One-half of the self-employment tax: $77,325.58 *  0.0765 = $5,915.41 
Net earnings from QJV income:  $83,731.00 -  $5,915.41 = $77,815.59 

And here are calculations for contributions:

Are those look correct? Do I miss something? Thank you in advance for any help.

Plan A is a 401(k) with a SHNE contribution.

Participant A terminated in 2020 and returned to work for the same employer 12/3/2023 and client wants a cite that the SHNE must be made for this individual, who is now a participant as of his date of hire.

Are the contribution that qualify for the employer contribution portion of the Start-up contribution tax credit based on:

1. Contributions actually made during the tax year you are taking the credit for (2023 credit uses only eligible employer contribution actually paid prior to 12/31/2023)

2. Contributions applicable to the 2023 regardless of when they are paid. (Inclusion of contribution for 2023 that are either paid in 2023 or as a receivable payment in 2024)

The draft instructions for form 8881 which were just released this month would not seem to be clear.  The instructions use the language "made by an eligible employer for the first tax year during which the plan becomes effective with respect to the eligible employer and the succeeding 4 tax years." 

Can a new small employer claim the tax credit for qualified start-up costs in the first year of the company's existence?

Assume - Employer begins operation in 2023 (No employees prior to 1/1/2023)

Employer starts their new plan during 2023 and pays start-up costs for plan design, documents and plan installation during 2023

Can this employer take a start-up plan tax credit for 2023 for qualifying start-up costs?

Concern is that one of the requirements to take the credit for qualified start-up costs is that you have to use the number of employees of the employer who received at least $5,000 of compensation from the employer during the tax year preceding the first credit year.  A new employer has no preceding tax year to make this determination.

Would seem to be two options:

1. There is no credit available in the first year if a new employer establishes a new plan in its first year of existence.

2. For new employers you would use the current year to make the determination since there is no preceding year.

It would seem without some revision to the instructions or other guidance from the IRS that the credit would not be available for the first year.  This would not seem to be the intent of the law but how it should be applied based on how for form 8881 and instructions were drafted.

This post's inquiry entails if § 416 minimum contributions routinely have § 404(a)(3) limits waived. 

https://www.irs.gov/pub/irs-tege/epche903.pdf

I'm struggling to locate a copy or link for Bulletin 95-1.  Can anyone help?

In the case of an owner of multiple IRAs who was receiving RMDs from her IRA accounts before death, can the IRAs be aggregated after death, as allowed during lifetime, so as to permit payment of the total RMD amount for all the IRAs to be made from a single IRA account? 

We have a client who had an employee contribute $6,750 to their HSA and $800 into the FSA in 2023. The FSA contribution was meant to go into a limited purpose account, but they just learned that there was no limited purpose account set up, and the funds were coming from the full-purpose FSA.

Prior to this, they had a rule set up in their system, which prevented the enrollment. The only reason they allowed the election to pass was because they thought it was a limited purpose account.

We are currently working with the carrier to set up the limited purpose account so this will be corrected going forward.

The employer did instruct the employee at the time that the FSA was to be used for dental and vision only. How should we advise the client for what occurred in 2023?

We're taking over a plan with deferrals and SHM only, and the sponsor is refusing to provide us with the SSN of participants who are not deferring.  They initially didn't want to give us ANY data on them, saying that we didn't need it (sigh), but they are really digging their heels in with the SSNs.  "We've asked the employees, and they don't want us to provide them".

Is there an argument that we MUST get them?  Obviously, we need some kind of entry to put into our pension software... but I suppose that could be a dummy number.  I don't like the sound of that.

I've outlined the main reasons that we would need the SSN (consistency in tracking, possible corrections, possible use of fund platform notice distribution services, it's just What It Is), but I have to admit that if I was an obstinate employer, they aren't exactly convincing that there's nothing a specific kind of random identifier number couldn't handle just as well.

Any suggestions? Thanks.

An IRA owner who had begun receiving required minimum distributions (RMDs) during her lifetime died, following which a dispute ensued among beneficiary claimants to the IRA.  Litigation commenced in 2023 under an interpleader action by custodian bank, involving the decedent's 3 children on the one hand and her late husband's 2 children from a prior marriage on the other.  The latter had earlier in the IRA owner's lifetime been designated as co-beneficiaries of the IRA along with decedent's children.  However, husband's 2 children were removed as co-beneficiaries in an asserted "deathbed" change to the IRA owner's beneficiary designation wrought by alleged undue influence of her daughter at a time when the owner supposedly lacked capacity to make such a change.

Custodian bank advised the feuding beneficiary claimants that payment of the 2023 RMD needed to be made by 12/31/2023, suggesting the claimants work out an agreement under which the RMD would be distributed to one or more of them so as to avoid a missed RMD, with the distribution amount being reapportioned later, once the litigation concluded and the rightful beneficiaries were determined.  No agreement was reached, so the RMD wasn't paid.  Trial is scheduled for late 2024, and it appears probable that the case will not be resolved before 2025, raising the prospect of a missed RMD for 2024.

For the missed 2023 RMD, does it seem likely that the IRS will grant relief from any penalties on the basis of reasonable cause?  Is it possible/advisable to seek a private letter ruling from IRS for the anticipated failure to distribute the 2024 RMD, as the beneficiary claimants again will probably not agree on the disposition of the RMD?

Any other thoughts about how to resolve this RMD conundrum?

Did anyone else see this?! Maybe I'm late to the party!

https://www.irs.gov/instructions/i8881

The way the $1,000 cap and yearly phase out is being applied is different than I understood. In a good way!

For a small employer(less than 50), if its year 5, and they have given everyone (let's say there are 50) who would be credit eligible individual employer contributions of $4,000, say $200,000 total, then the credit would be $50,000, with the remainder as a deduction for $150,000. That's awesome! 

My prior (incorrect) understanding was that the $1,000 cap was applied first, before any phase downs / phase outs. Sounds like that is not the case! I would have though for my example only $12,500 would be the credit. The way I am reading the instructions it would be the $50,000. Anyone else agree? disagree? 

HCE was a W2 employee for the first 4 months in 2023 then became an independant contractor paid via a 1099 (legitimately).   Would they be on the adp test in 2023 with their W2 comp and contributions?

TYIA!   

Husband and Wife were considered control group under pre-secure 2.0 due to both minor child and community property state. They would meet the non-involvement in each others business and are no longer CG as of 1/1/2024. At least that is my understanding.

They both sponsored a single DB through 12/31/2023.

Wife would like to discontinue her participation in the Plan and execute a rollover distribution to IRA (with spousal consent).

Wife will continue business, though income for 2023 was $0 and no W-2 was paid to wife's corp.

Husband is sole employee of husband's sole-prop, Wife is sole employee of wife's corp and is 100% owner of wife's corp.

Can she terminate participation in DB Plan and effect a rollover? Plan is well funded.

Does she need to spin off to a new DB plan in wife corp name and then terminate?

My understanding is she in not terminating service which would make things easier, the business is just currently not profitable.

Wife is too young for in-service distribution and does not meet definition of NRA.

Alternatively can her corp end participation in the DB Plan but she remain a terminated vested participant in the the Plan?

If she remains a terminated vested participant in the Plan, would the Plan now require PBGC coverage?

Has anyone reviewed how the 410(b) transition applies to plans dropping out of CG status due to secure 2.0 change?

When terminating a 401k plan, I confused about when a Notice to Interested Parties is required. Is a Notice required a certain number of days before Form 5310 filed? Or is a Notice required a certain number of days before the Plan is actually amended to terminate? We have adopted a Board Resolution to terminate later in the year. However, we want to file Form 5310 now. So I wasn't sure if a Notice needed to be sent to participants before the 5310 filing or if that Notice can be done in several months, which would be closer to the actual Plan termination date.

Thanks.

Hey there. I have a plan failing coverage. So, I'd like to start pulling in ineligible employees, but I'm stuck on which to add. I don't have any more active employees I can add, so I'm looking at termed EEs. My document says the following:

The problem is, all of the EEs had the same number of hours & termed on the same day (part of the business was sold off). 

Can I start bringing them in based on lowest wages? 

We have a retiring executive in our NQ Plan (subject to 409A) and we have no record of his distribution election.  We know how much we owe him, just not the time and form of payment.

We don't want to allow the executive to make a new election now, for obvious reasons.  Our solution is to pay under the Plan's default rules.  We know this is not perfect, but we don't have another option.  In addition, we are going to allow the participant (if he wants to) to sign an affidavit that confirms (1) my actual election was _____, (2) that election was made timely under the 409A rules (i.e. prior to the year the amount in question was deferred), and (3) in the even the IRS finds this affidavit (and payment thereunder) violates 409A, the company is not responsible for any adverse tax effects.

Obviously, this is a bad situation and no solution is perfect.  Has anyone else run into this and/or do you have a better solution?