Internal Revenue Code of 1986 (26 U.S.C.) § 401(a)(9)(C)(v) provides:

“(I) In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73.

(II) In the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75.”

This morning’s notice of a final rule to interpret § 401(a)(9) reserves how to interpret that ambiguity, and refers to this morning’s notice of proposed rulemaking. Footnote 7 on page 58891, page 58911 (publishing to-be-codified 26 C.F.R. § 1.401(a)(9)–2(b)(2)(v) [Reserved]).

In that notice, the Treasury department proposes to set the applicable age for someone born in 1959 as 73. But the notice explains no reason for Treasury’s choice of 73, rather than 75.

BenefitsLink neighbors, if it were your job in the Treasury department to choose 73 or 75 (or something else) and to write a reasoning that explains your choice as the best interpretation of the statute, would you choose:

73?

75?

74?

And, most important, why?

If you could ground your choice on a canon of statutory construction, which would you use?

And if not some legal-sounding reasoning, what explanation could you give that still respects the idea that the Treasury department must seek to give effect to Congress’s intent?

FYI, the IRS posted Public Inspection Documents from Internal Revenue Service for final regs and proposed regs.  Final regs are effective 60 days after they are posted in the Federal Register, and there is a comment period for the proposed regs that is open for 60 days after posting.

For your summer reading enjoyment, the final regs document has 260 pages, while the sequel in the proposed regs is a mere 36 pages.

Enjoy!

Does anyone know of a recordkeeper provider who can provide call center assistance in Mandarin and Cantonese?

Is 2% shareholder S-Corp medical included in the definition of compensation for Cash Balance plan purposes?  I include it for 401k plan purposes but does a CB plan exclude it?  I'm getting some conflicting information from some TPAs.   

Thank you!

I can't find guidance in the 5500 instructions or the 5500 Preparer's Manual, so I'm looking for opinions - or maybe something I've missed.  Two questions:

1. If the only loans in a self-directed 401(k) plan have been deemed distributed in a prior plan year (not offset), is 10g answered yes or no?  For example, the only loan in the 401(k) plan was deemed distributed in 2022 - should 10g be yes on the 2023 Form 5500-SF?

2. Do outstanding balances for loans that have been deemed distributed (not offset) continue to be included in the amount on line 10g?

I'm leaning towards yes, and yes, but I have nothing to back me up. Even though they are deemed, they are still participant loans, but since they are no longer reported as assets on the 5500... I'm torn.

Have been using Dater for the past few years, but am looking for some software that can illustrate DB and 412(e)(3) plans specifically. We used BlazeSSI's PENDEAS for years and it worked great for 412(e)(3) plans and was affordable. Moved to PlanGen and it was ok, then back to PENDEAS. With them closing a few years ago we moved to Datair, but it's a very cumbersome system to use.

Any recommendations out there for something more... modern?

Not actually a 5500 question - is there any penalty relief program for late or non-filing of the 8955-SSA for ESOP plans, similar to the programs for late 5500 forms? 

Nope. 

22. Is there a delinquent filer program for late filers of Form 8955-SSA?

There is no delinquent filer program where only the Form 8955-SSA (or schedule SSA) is delinquent. Notice 2014-35, however, provides penalty relief in cases where the Form 5500 series return is also delinquent and the filer is eligible for and satisfies the requirements of the Department of Labor's Delinquent Filer Voluntary Compliance Program. See IRS Penalty Relief for DOL DFVC Filers of Late Annual Reports.

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P.S. it appears that no SSA reporting would be required for participants in pay status - e.g. receiving payments over 5 years, etc. - but I'm not aware of any dispensation for not filing the form if, for example, they must have a 5-year break in service, or reach age 65, etc..., or if a participant elects to postpone distributions.

A TPA client was told by an investment provider that in order for the provider to reveal information about mutual clients they have to be an authorized TPA and in order to do so they have to complete a form that the TPA deems intrusive because it asks about their book of business, revenue, insurance policies etc. etc.

How do other TPA firms deal with this - do you simply provide the requested information?  Thanks.

Client has FSA that allows rollover of unused FSA balance up to IRS maximum.  Plan year is 7/1 - 6/30.  For 2023 PY, employee had unused funds that rolled over 7/1/24; however, employee did not elect to make contributions for 2024 PY (and there are no employer contributions to the FSA).  Can the employee use the rollover from 2023 PY for expenses incurred in 2024 PY?  My initial reaction is the employee is not a participant in the FSA for the 2024 PY so they cannot submit for reimbursement of expenses in 2024 PY.  Do we treat the employee similar to a terminated employee and allow a run-out period to spend down their rollover balance?  Any thoughts (as citation to official guidance, etc.) are appreciated!

Hi

Thank you as always for the insights. We need to Efile a 2020 5500 for a DB PLAN with the DFVCP. The new rules say we must efile 2020, and prior years,  using the 2023 forms. I noticed on line that however, for the SB the correct year form can be used and signed and  attached as a pdf to the e-filing and to label it other attachment. 

Question. Does this mean that we only file the 23 5500 and the sb is only filed as a pdf attachment? OR IS the 23 SB filled out for the 20 year, and efiled along with the 5500sf. And then  2 sb attachments will be attached. One attachment being a pdf of the signed  23 sb(with the 2020 on it obviously) that is labeled mb sb actuary signature and then we must attach a pdf of the signed copy of the 2019 year sb labeled other attachment?

Thank you.

Hi Everyone, 

I've read through this link 

but its an older one, and I just want to make sure I'm understanding it correctly for a plan's situation. 

Profit Sharing only plan - plan document specifies pro-rata allocation method, so I recognize it is relying on the allocation method safe harbor, rather than general testing, 401a4. 

Plan has a 1,000 hours and last day requirement, and most years there are a few part-time folks who are required to receive only the top heavy minimum. 

The 70% test does pass if those folks are included as benefiting. It does not if they are not counted as benefiting. Based on my reading of the link above - it sounds like I can't include them as benefiting? 

The plan document does not have the 410(b) fail safe language, so if allocation conditions need to be waived for anything other the top heavy min, a corrective amendment will be needed. 

Or, the plan would have to move on to more general testing and see if it passes, if it still doesn't pass, then then aforementioned amendment comes into play. 

Am I understanding this correctly? 

Do you include top heavy min only participants as benefiting in the regular ratio percentage test?

Our company has made a plan restatement of our Top Hat Plan. 
After this restatement, do we need to file a statement of this change with the DOL?  i.e. using this online filing tool?  https://www.askebsa.dol.gov/tophatplansearch

I am surprised I have never had this issue.  I have a client who deposited funds the  profit sharing allocations of the participants into their safe harbor accounts and safe harbor allocations into profit sharing accounts.  The funds are held at John Hancock. Is there a way to correct this?  I just want to transfer the difference between the accounts.  Should there be an effort to estimate the earnings and move those funds as well?  I do not recall reading about corrective measures in this situation.

I have a situation where I have a closed MEP that includes Company A and Company B.    Company A has different ownership than Company B.  The owner of Company B is over age 72 and has an account balance in the plan derived from being an employee at Company A (in which he has no ownership).   Is he required to take an RMD since he is an 5% owner in ONE of the companies that sponsors the plan?

I found this, but that is all I can find.   I told him he does have to take an RMD and he wants additional documentation and I understand his argument. 

Retirement plan and IRA Required Minimum Distributions FAQs | Internal Revenue Service (irs.gov)

This may have already been shared - but I didn't see if offhand, so thought I would pass it along. 

Exclusion from electronic filing requirement for Form 5330 is available now | Internal Revenue Service (irs.gov)

The IRS has decided paper filing is okay, just document that the reason for the paper filing is lack of authorized vendors. 

"

Treas. Reg. 54.6011-3(a) requires a taxpayer to file Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, electronically for taxable years ending on or after December 31, 2023, if the filer is required to file at least 10 returns of any type during the calendar year that the Form 5330 is due. Treas. Reg. 54.6011-3 (b) and Instructions for Form 5330 also provide, on an annual basis, exclusions from electronic filing requirements in cases of undue hardship.

Form 5330 can be filed electronically using the IRS Modernized e-File (MeF) System through an IRS authorized Form 5330 e-file provider. Currently, IRS has only one authorized e-filing provider for the Form 5330. As a result of the lack of authorized e-file providers for the Form 5330, the IRS has determined that a filer is permitted to file a paper Form 5330 for the 2024 taxable year. The filer should document that the reason for not filing electronically and filing a paper Form 5330 is the lack of authorized vendors."

How can a company’s owner “use up” his Retained Earnings by utilizing/opening a qualified retirement plan?

I know a tiny bit about accounting, and I have a potential client (architect) who wants to reduce his RE by opening a Profit Sharing/Cash Balance combo.  He's 59 years old.

Advice?  Knowledge?

Thank you!

Hi

Non PBGC covered combo plans

Sponsored by a corporation with the employees and a sole-prop. Joe owns both entities.

Needs to use 31% rule.

Under the corporation satisfied the 31% rule.

Under the sole-prop only deducting CB for Joe only. No DC deduction.

If you combine them for total deduction, fails 31% rule.

However, ss they are separately deducting the contributions, I think it is ok to test deductions separately.

Am I wrong?

Edit: I’m happy to pay a professional to advise on how best to navigate the situation I’ve described below  Would anybody here be willing to take this on? Or be able to refer me to somebody that can? I’ve reached out to a few professionals and unfortunately have not had any luck  Thank you.

Hello, I am self-employed and have been contributing to a solo 401k since 2022, but I think that I’ve made some mistakes that I need help resolving.  I've asked my CPA and his 401k plan administrator, but they are unsure of how to help me.

In January 2022 I opened a Traditional Solo 401k and Roth Solo 401k at ETrade.  When setting up the accounts, I used Plan Numbers 001 and 002 as directed by ETrade.  The Plan Sponsor was my sole proprietorship.  I made zero contributions to the Traditional and $3,000 to the Roth.

A few months later I decided to establish an S-Corp, and I opened up another Solo 401k account at Vanguard with the S-Corp as the sponsor.  For this account I used Plan Number 001.  Since I didn’t plan to operate the sole proprietorship any longer, I closed the two accounts at ETrade and rolled the Roth 401k balance into an existing Roth IRA that I hold at Vanguard.

I am now realizing that I should have filed Form 5500-EZ after closing the ETrade accounts.  I am also wondering if I may have violated the successor plan rule by erroneously considering the sole proprietorship and S-Corp to be separate employers rather than an affiliated / controlled group.

Questions:

1. Will I need to file two separate late returns using Form 5500-EZ and pay the associated $1,000 in penalties for the ETrade accounts that were closed?  Or is it possible that I may only need to file one considering I made zero contributions to the Traditional account?
2. Do the sole proprietorship and the S-Corp qualify as affiliated employers?  If so, did I violate the successor plan rule by opening the Vanguard 401k within 12 months of terminating the ETrade accounts?  What penalties would this incur and how would I rectify this?
3. If the sole prop and S-Corp are affiliated, do I need to amend the plan sequence number on my current Vanguard solo 401k account to be 003?

We have a Safe Harbor Plan that would like to add Automatic Contribution Arrangement (ACA) mid-year for 2024.

I have 2 questions.

1) Can a Safe Harbor Plan add an ACA feature? To me, it seems like a Safe Harbor plan can only be a QACA, so ACA feature cannot be added. Is that correct?

2) If the ACA feature can be added to a Safe Harbor Plan, can the feature be added Mid-Year (I realize that a Safe Harbor plan cannot be changed to QACA mid-year)?

Thanks.

Hi

Currently have a SIMPLE IRA. Wants to add a DB plan for 2024.

I thought cannot do it, what am I missing?