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? 

Our Mom passed away just after receiving two 401k rollover checks made out to a new IRA account FBO her name. My sister and I are named beneficiaries on both accounts. We have the checks in hand.

One plan is adamant that because it's a qualified distribution a new check can only be made out to the estate. The other plan is considering reclaiming the check and issuing out proper beneficiary distributions to us but remains to be seen.

It's my understanding that the distribution is a plan asset and ERISA, DOL, IRS would urge fiduciaries to work in our favor? I hope there's some more legal guidance on this that I've missed in researching. These aren't uncashed checks because we're missing or mailed to the wrong address. I know there's been a ruling and chatter from the agencies about taxes on uncashed checks and what to do with them if they stay unclaimed but... This should in theory be straightforward to fix and honor. 

Any thoughts to change their mind?

sole-prop, taxes for 2023 have been already filed.   I am thinking of still implementing a CB plan retroactively to 1/1/2023, funding it now but taking a full deduction for 2024.  Thus, for 2024 there will be doubled-up deduction.  Income is very high so the numbers fit in.  Am I missing anything here besides the additional level of complexity of decoupling 430 and 404 numbers for a year or two?  Had a crazy week so I am afraid I might be overlooking something.

This question is not exactly on point, but here goes:

An old SEP which was established incorrectly, into which an individual made contributions over many years totaling $66k improperly, but for which the accountant never took deductions (because he had advised his client NOT to make the contributions in the first place.) To clarify, the individual is a 1% partner in an LLC, and all of his income is from this LLC, which sponsors a 401(k) Plan for the partners and employees.

Client now wants to withdraw the $$ from the SEP, but custodian is insisting that they must issue a 1099, since the money is theoretically in a SEP.

Can anyone think of a way to convince the custodian not to issue the 1099?.

A plan came to me asking what is the next step.  They received an IRS notice with a penalty.  A response was sent in April 2023.  The IRS never responded and no follow up notices were ever received.  Should the client assume the IRS closed the case?  Should they call the IRS?  

Something I would have been sure of yesterday, but now...

Plan has been around forever and fails ACP this year.  The 2023 match has not been deposited yet, but the affected HCE has plenty of match source money from previous years.  The platform is refusing to process the refund because the contribution to which it refers has not been deposited.  is that a reasonable position to take?

Thanks.

Hello All,

As you know, effective 1/1/2024 most employers are required to file Form 5330 electronically using the IRS Modernized e-File (MeF) System through an Authorized e-file Provider (AEP).  The IRS has a listing of AEPs on its website (even though the link says individuals, it’s for individuals and businesses):

https://www.irs.gov/e-file-providers/authorized-irs-e-file-providers-for-individuals

I've contacted some of those listed and they actually are NOT registered to file Form 5330.  I've also contacted some mid-size and large accounting firms and TPA firms we work with as well as Empower and have found that while they are set up to file as an AEP, they are NOT registered for Form 5330.  According to Empower, they are ultimately going to be able to file, but there is no ETA at this time.

I’m struggling to advise clients how to file electronically other than contacting one of these random providers.  I can’t find anything online addressing the practicalities of this or whether the IRS is even really ready to accept these electronically.  However, per the 5330 instructions, if a paper return is filed when electronic is required, the return will be considered as not filed by IRS.

Right now, I have two clients who need to file, one of which is a $1.7B plan.  I can't tell them to go to the nearest H&R Block listed on the IRS website (which probably is not even registered for 5330).  

What am I missing here?  What is everybody else doing?  Any help is appreciated!

I have a unique client problem. Client (ex-wife) was divorced in 2009. Ex-husband's attorney drafted a QDRO and submitted it to Putnam, the IRA provider, in 2010. Putnam will only give us the QDRO from the file, and states it requested a signature from the ex-spouses on a form letter of instruction in 2010 but ex-husband never signed or did anything further. Client does not recall ever getting a request to sign anything. Further, Putnam told her in 2010 that the amount owed to ex-husband was on "hold" in her account.  At the time she thought little of it. Ex-husband died 4 years ago. Client recently tried to access the funds sitting in her account, but Putnam says there is a hold due to the language in the QDRO that says if the AP dies prior to receiving all the funds and does not designate a beneficiary "such amount shall be paid to the Alternate Payee's estate."

The client gets statements from Putnam that are titled "IRA Rollover for Mary Smith" -- the funds have never been separated into deceased husband's name.  She has no idea if he had an estate, an executor, or anything else. (They had no kids so there was no connection after divorce.) Putnam is telling her the executor can submit forms to request the funds. I am getting nowhere with them. 

For starters, I don't know why the QDRO would govern since this is an IRA (yes, some IRAs accept QDROs but this provider clearly needed other documents to process the division). I don't see what right they have to hold this money in limbo when the ex-husband never signed what was needed to separate the funds. Anyone have any suggestions about how to proceed?

Hello All, one of plan has After tax contribution and there are allocation conditions for match (1000 hours for Active & last day requirement). In ACP test do we need to include all, irrespective of the allocation conditions as everyone is eligible to make after tax contributions which are tested under ACP test. Thanks!

Employer sponsored a 401(k) that allowed union employees to participate.

About 5 years ago ( approx), the Union started their own 401(k) Plan.  Union employees now participate under the Union Plan.

Several of the union employees have a balance in the original plan.

Question,

1. Can the current plan spin the union employees out to their Union Plan?

2. Union employees want access to their funds in the original plan, want to transfer to Union or maybe take a distribution.

3. The Union employees are treated as ineligible class and therefore are not eligible for a distribution ( not 59 1/2, not terminated).

Trying to figure out  a way to get the funds to the Union plan and they can take funds as allowed under that plan.

thoughts??

I have a plan that for the last couple years was required to be audited due to creeping over the 120 eligible participant threshold.  They've never had more than 50-60 with a balance in the plan.  After filing 5500SFs for several years, the last couple years they've had to perform an audit and file the regular 5500 along with an auditor's report.  With the change in regulation counting only participants with a balance and less than 100 participants with a balance, and an audit no longer required, can they just revert back to filing the 5500SF?  Is there anything else that needs to be filed? 

Thanks in advance!