In the case of a controlled group where one company is covered by the plan and the other is not.  Is it the case that as long as we pass coverage, the 2nd company can be excluded?

I believe I understood Ilene Ferenczy to say that if a LTPT employee exists, and chooses not to participate, the plan is subject to ERISA and can no longer file a 5500EZ in 2024 if it otherwise qualified to file as an EZ filer in past years.  So if the plan is subject to ERISA, the plan is also now subject to the bonding rules in 2024.

Case in point:  Husband/wife plan only with an ineligible part-time employee for many years.  Part-time employee is defined as LTPT employee on 1/1/24; chooses not to participate.  Plan holds $5 million in non-qualifying assets.  Now they have to get a bond in place on 1/1/24 for $5 million to bond their OWN assets (as if they would steal the assets from themselves, seriously!) or subject themselves to an audit for 2024.  And they also have to disclose to the DOL, and the public, information about their plan.

Any thoughts?   I think I would choose to terminate the plan at this point.  

I know a payroll-based SH Match must be deposited by the end of the calendar quarter after the quarter in which the deferrals were taken.

Obviously, for a calendar year plan, those QE dates are 3/31, 6/30, 9/30, 12/31.

What about for off-calendar plans?

For a PY that starts on 3/1, do they still adhere to calendar quarter dates?  Or do they use 5/31, 8/31, 11/30 and 2/28?

I'm getting conflicting opinions on this issue.  The plan document needs to be signed by 9/30/23, but does an account need to be established by 9/30/23?

My client, owner only, wants to do a safe harbor 401(k) for 2023.  American Funds is telling him they need at least 30 days to set up an account on their system, and they are telling him it is too late to do a safe harbor 401(k) as they can't set the plan up by 9/30.

I believe he would be better served to go with a 401(k)/profit sharing plan, effective 1/1/23, sign the document 9/30/2023, with deferrals to start 10/1/23 and remitted at least on a monthly basis?

Hello! Just recently found this forum and there are some good thinkers floating around.

We have a plan where the ER match was incorrectly being applied to both Pre-Tax Employee Contributions and Roth Contributions. Essentially, they match 50% up to 6% of employee compensation, but an additional 1.5% was being additionally (and incorrectly) applied to the Roth contributions above the 6% mark. What are the proposed fixes for this for purposes of the audit? We were initially thinking potential corrective distributions or some kind of reversal of the match by offsetting future ER contributions. Are there any other thoughts on how to apply a fix to this? 

Thanks! 

Participant (80 yo) took an RMD in 2022 and a total distribution in 2022.  His 2022 profit sharing deposit went in in August 2023. Now rolling that amount out of the plan.  No 2022 balance to calculate his 2023 RMD prior to the rollover. What's the procedure?   

TYIA! 

New Plan Sponsor has joined Controlled Group which includes many 5500-EZ filings (legacy style perhaps).

Although the new Plan Sponsor has assets under $250K, they must file due to the Characteristic Code 3H situation.

The other 5500-EZ's are filed on an accrued basis.

So here's the question - EOY had zero assets (cash basis). Contribution was made after EOY. Need to file for prior year, or just wait until the current year ends?

We are a small TPA firm and each year we prepare about 40 1099Rs on behalf of our clients.  We currently use FT William to prepare paper forms.

I was looking into the IRIS system and was wondering if anyone has had any experience in using the system to prepare 1099s for their clients.  

Thank you.

Does a person need to be enrolled to sign the 5500 for a Client, assuming that the Client has provided (1) proper written authorization for the TPA to sign for this Client, and (2) the Client provides the TPA with a hard copy form (as PDF attached to an email) which is signed and dated by the Plan Sponsor?  Our normal practice is for the Client to login to our portal and push a button that enters their DOL Credentials, and then push another button to submit to the DOL.  Unfortunately, we have ONE client that find that too complicated, so I am considering options.  Thanks for any feedback!!!

What do folks think "substantially same employees" works out to be in real life? 

§45E(c)(2) Such term shall not include an employer if, during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allowable for a qualified employer plan of the employer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan.

Example A: ER has SEP - covers only the owner because the other employees don't have enough service. Starts 401(k), due to shorter service requirements, 10 employees (including the owner) are part of the 401(k). 

Would that be different employees because the employees weren't covered by the SEP? or because they could have been covered by the SEP if they had more services, they are considered substantially the same because they could have been covered? I think they are different, they didn't actually have any benefit in the SEP so don't count. see "contributions were made, or benefits accrued" So I think for Example A, the full gamut of tax credits would apply. Do others agree?

What if the ratios were different? say the existing program covers 30% of existing employees, new plan covers 50% of employees? Anyone have thoughts on the cut off or what reasonable math test to use? Is there guidance somewhere? (probably laughable, I know, but I figured it can't hurt to ask). 

An overfunded 1-life DB plan terminated, with the final return filed for PYE 9/30/22 - all of the assets were distributed in 2022.  An RMD was paid, the assets representing the participant's remaining PVAB were rolled over into her IRA, and the excess assets were transferred to a new 1-life qualified replacement 401(k) plan whose first PYE was 9/30/22.  The excess assets were placed in a suspense account within the QRP, with only a small portion allocated to the participant by 9/30/22.  Is only her 9/30/22 balance used in calculating her 2023 RMD, or do you have to also include the amount that's still in the suspense account for this calc? 

The plan also excludes service before the 10/1/22 effective date of the plan, so she's 0% vested since there's a graded vesting schedule and NRD has the 5 YOP requirement.  I cannot recall - is it DB or DC benefits that are always considered 100% vested for RMD purposes regardless of what the vesting schedule indicates?  If the actual vesting can be used, is she not required to take a 2023 RMD?  I'm also hoping that the terminated DB plan can be disregarded for this purpose.  Has anyone been involved in such a situation?     

The CAA requires, among other things, that a group health plan attest, by December 31, 2023, that it "will not enter into an agreement, and has not, subsequent to December 27, 2020, entered into an agreement" with a service provider that contains a gag clause.

A covered health plan entered into a master services agreement with a carrier (say, Blue Cross) in 2010 that contains an offending gag clause.  The master agreement has not been amended since originally executed, except that the financial terms of the agreement change each year (including in 2021, 2022, and 2023), subject to the parties' agreement on such revised terms.  The parties have agreed each year to the subsequently changed financial terms

Two questions:

1-Do the revised financial terms mean that the services agreement has been amended such that the plan has entered into an agreement after December 27, 2020, so that the plan cannot make the attestation.  Or can the plan make the attestation because the original agreement predates the effective date of the gag rule requirement?

2-If the answer to the first question is that the plan cannot make the attestation due to the changes in financial terms, can an amendment retroactively removing the offending clause even fix the situation?  (Because the plan has, in effect, "entered in an agreement" that contains a gag clause and amending the agreement, even retroactively, doesn't really change that.)

Any thoughts are appreciated.  Thanks!

If (for 2024) a § 401(k), § 403(b), or governmental § 457(b) plan provides many kinds of distributions such a plan may provide without tax-disqualifying the plan, a participant might face a choice of two or more kinds of distributions allowed on the same set of facts. (For now, let’s ignore anything about a § 402A(e) emergency savings account.)

Each kind of distribution might invoke advantages and disadvantages all or some of which would not result from another of the kinds that could be taken in the same set of facts.

This need for a participant to choose which kind of distribution one claims can occur not only before severance from employment but also after severance.

I worry that if a plan’s administration uses a distinct claim form for each kind of distribution, a severed participant might reflexively use the form for a “normal” distribution, and so might miss an opportunity to claim a different kind of distribution with different features. Or a before-severance participant might reflexively use the hardship form, perhaps missing an opportunity to consider another claim that would preserve advantages a hardship distribution lacks.

For example, imagine a 401(k) participant in his 30s or 40s who recently severed from employment. He wants to take $5,000 to help meet expenses. He could get what he wants stating no fact beyond his severance from employment. Yet on his facts, he also could get a qualified birth-or-adoption distribution. Taking that § 72(t)(2)(H) distribution would result in a Form 1099-R coded for the IRS not to look for an extra 10% too-early tax. And it would preserve the distributee’s opportunity to repay the amount into a retirement plan.

If a plan’s administration uses a distinct claim form for each kind of distribution (and the participant had not read carefully the plan’s communications about the several kinds of distributions allowed), how would he know he could choose a qualified birth-or-adoption distribution?

Or imagine a before-severance participant whose need would be met if she claims no more than $1,000 and gets what results after Federal income tax withholding. The participant’s request to the call center says she needs money, but doesn’t mention that $1,000 would be enough. If not carefully scripted and trained, might a call-center worker—facing pressures on his time and attention—reflexively send or point to only the hardship form? How would the participant know that she might want the form for a § 72(t)(2)(I) emergency personal expense distribution?

BenefitsLink neighbors, what do you think:

Should a plan’s administrator—practically, its recordkeeper or third-party administrator—put all the available kinds of distribution on one claim form?

Why or why not? What would be the advantages? What would be the disadvantages or difficulties?

If you think its unwise or impractical to put all or many kinds of distribution on one claim form, what methods would you suggest to inform a participant about one’s opportunity to consider different kinds?

Is it possible to take an HCE's ACP testing refund and have it recharacterized to an after-tax "bucket" within a 403b plan?  I would imagine the plan would need to issue a 1099R reporting the taxable event for the required distribution amount.  

Thanks so much for your assistance!

Secure Act 2.0 contains provisions for Roth contributions to SIMPLE IRAs beginning 2023.  Has anyone seen any documents that offer that option?  I have looked at the IRS website at forms 5304-SIMPLE (Rev. March 2012) and 5305-SIMPLE (Rev March 2002).  Neither has been updated to provide for Roth.  Is that really an option if the federal forms don't offer it?

I am working on preparing notices to clients that sponsor SIMPLE plans and want to make sure I cover the options available.

Thanks.

So, aside from the fact that IRS guidance is badly needed (anyone heard any rumors of app. date?) I have the following item for general thoughts...

If your employers are like many of ours, it is an absolute given that many will screw this up (no matter how much we try to tell them) and will NOT immediately allow deferral opportunities to some people who qualify under the LTPT rules.

So, has anyone heard rumors of any special correction for some of these situations, or will it simply fall under the "normal" EPCRS correction procedures? We're not looking forward to the potential corrections for missed deferrals, some (many?) of which we won't find out about until sometime in 2025...

I'm always more pessimistic on Mondays.

I'm sure this question is somewhere in the archives, but I cannot locate any threads.

Profit Sharing only plan.

A former employee who worked from April 2013 through October 2015 was rehired in 2021.  We are currently trying to find out from the employer whether this participant - although they were eligible for the plan on January 1, 2015 - received an allocation for 2015.

The plan uses the Rule of Parity, which always makes me shudder a bit.  My understanding is that if a participant has more than 5 breaks in service and they were not vested at the time of termination, it is permissible to start from ground zero when they are rehired.

In this particular instance, the participant would have been 20% vested at termination.  She is not likely to have been eligible to receive a Profit Sharing for 2015 due to her termination prior to the end of the year.  (We are waiting for confirmation from employer since we do not have history).

My question:  Would prior vesting service but no vested benefit permit us to rely on the Rule of Parity?  OR was she immediately eligible for the plan on her date of rehire in 2021 because, although she may have never accrued a benefit in the plan, she had nevertheless accumulated vesting service?

Thank you!

The situation has come up before.  5500-SF filed for a sole prop 401K with employees for 2021, extension 10/15.  Not knowing at that time, client incorporated in 2021 .  5500 for 2021 filed under sole prop EIN.

Form 5558 filed for successor for 2022.  Attempting to correct ASAP in order to avoid any IRS love letters, we could amend 2021 under new corp EIN and complete box 4 with info from predecessor plan and move forward to 2022, BUT won’t DOL/IRS look for an extension on the successor sponsor with successor EIN, which had not been file as we were not advised of the error previously??

Employee (E) of Seller (S), a small company with a group health plan covered by Florida mini-COBRA, has twins age 28 on the coverage, thanks to Florida law that requires allowing certain unmarried dependents to remain covered to age 30.  Buyer (B) acquires all of the S stock in mid-July, 2023, and E continues working for S, with the twins remaining on the coverage, as before.  S terminates its group health plan on July 31, and E, along with other S employees and their dependents, enrolls in B's group health plan effective August 1.  Only the twins are left out in the cold.

B's plan is subject to COBRA.  Though operating in Florida, B's coverage is underwritten in Illinois, where it also does business.  The policy does not extend coverage to dependents beyond age 26, consistent with Illinois law.  B refuses to offer continuation coverage to the twins, who lost coverage when the S plan terminated, insisting that the carrier won't allow it because the twins are older than 26. 

In a phone conversation with the Florida Office of Insurance Regulation, I was informed that a company doing business in Florida but "headquartered" in another state does not have to follow Florida's coverage rules, at least insofar as allowing certain dependents to remain on the coverage to age 30.  My contention is that federal law, in the form of COBRA, supersedes whatever state law may have to say on the subject, and that B became responsible to the twins under COBRA when B acquired S, followed by S's termination of its plan.  The twins "aged off" of coverage at that time, thereby experiencing a COBRA qualifying event when they lost coverage due to B's policy failing to pick them up because of its lower age threshold for terminating dependent coverage.

Sound reasonable?  Even if B is unable to enroll the twins on its coverage, isn't B still under some obligation to them for failing to honor their COBRA rights?  Perhaps B can help offset the cost of the twins obtaining Marketplace coverage, for example.

new plan in need of a cpa to prepare financial statements for past couple years as plan was not aware of this.

seems that no local firms have capacity to take what I think is a pretty good revenue raising opportunity.

curious if there are more national firms that might be a better fit?

they understand they will not be filing 5500 for this last year on time.