Our software for minimum gateway purposes uses 414(s) comp for the 1/3 test and 415(c)(3) comp for the 5% test.

Example: employee became eligible 7/1/2023 -total wages for the year $50,000 of which $25,000 was earned after the plan entry date.  The person terminated so top heavy does not apply.  The plan defines compensation as W-2 wages.  But the person has to get the minimum gateway as the plan is cross-tested.

The Question: Is $25,000 compensation used for both the 1/3 test and the 5% test or must $50,000 be used for the 5% test.  The software seems to indicate $25,000 is used for the 1/3 test and $50,000 is used for the 5% test. This could be an input error.   I didn't check the system comp fields, only the output report.  

Thank you for any help in clarifying this!

50,000 in a has-a-ticker-symbol MM fund transferred in kind to a owner-only DB plan last month as a calendar year plan's 2023 deposit.  Smells bad because it's not really cash.  Am I right? 

(And what's the way out of it?  I read a bunch of past threads here and it sounded like "sell it at arm's length" but who's gonna pay this guy's plan 50,000 in actual cash to buy his plan's mutual fund?)

Thanks!

--bri

Plan excludes fringe benefits from definition of compensation.  Is jury duty pay included or excluded from plan compensation?  I have not been able to find anything definitive.  Thanks!

Has anyone talked to Relius about when the 2024 specimen plan termination amendment is going to be available? I've just spent a very frustrating 1/2 hour trying to navigate their "ticket" system and telephone support when I couldn't get the ticket system to work.  And the telephone option didn't work either...

I miss the old days.

Just to be 100% on this so 5500s are not rejected.  I know our plan letter serial number.  I assume the date of the letter is as below 6/30/2020, NOT the date of submission which was in 2018.

Thanks

I think this might be a no brainer. But then there are so many nit-picky rules.   A potential new client is asking questions.  Within the email I received there is a bullet item "Rollover funds entirely".  I asked for clarity, wanted to know what the intention was.  I know they can't just dig into their plan balance and roll out employer contributions whenever they want.  That said, if they rolled money into the plan into a designated rollover account from an IRA or a balance they had as a participant in another qualified plan, can they take a distribution from those plan accounts at any time? 

Thanks

Please forgive the very basic question, but in the case of a DB plan lump sum window, does the lump sum payment need to be the greater of the plan's actuarial equivalence factors and the 417(e) factors? If so, does this hold true in all circumstances and for all participants (i.e., after NRA, ER eligible, not ER eligible, etc.)? Thanks in advance. 

Plan is terminating due to Stock sale and the sale date is 01/31/2024 and the termination date is 01/30/2024.  The pay period is until  01/31/2024, the Plan sponsor will deduct the employee contribution on 01/29/2024 which will include the 01/31/2024 contribution, can the contribution for 01/31 be included though they are deducting the contribution before the termination date? the reason I ask is 01/31 is the sale date as well and since its a stock sale I believe they should be deducting only up to the termination date which 01/30/2024. 

Is anyone familiar with any guidance dictating the proper handling of automatically enrolled participants who never made a subsequent affirmative election when the plan is amended to cease auto enrollment (assuming the plan document is silent)? My inclination is to leave their current deferral rate as is, but I’m also aware of a school of thought that says their deferrals must stop unless/until an affirmative election is made. 

Finally got my system updated and confirmed my suspicions but want to ask out there as well.

Looks like at 65, the APR is lower for 2024 then 2023 and for someone at age 65 with full 415 limit, the 415 lumpsum dropped by approximately 33.9k, ouch

All agree?

Hi Everyone, 

Here is what happened: my client would like to change the profit-sharing formula mid-year. The current plan profit sharing is 8% to eligible employees. There is no age, no service required, and no last-day service requirements for the profit-sharing contribution, and the contribution is being funded per payroll. There are 1000 hours for vesting. 

Now, the client would like to change the formula to lower it based on age.

If age 45 or less: 4%

   Age 46-59: 6%,

  Age 60 and above: 8%.

They like to make it effective mid-year.  From my understanding is the formula was already set for the plan year 2024, the client cannot change it anymore. I understand they can amend the plan to have it effective 01/01/2025. 

My question: Is it possible to change the PS formula mid-year 2024 in this case? if yes, what are the consequences that we need to know? 

Thanks in advance for all the input!

A plan with Roth can have an in-plan rollover to the Roth account.  Notice 2014-54 says an after-tax account can have its after-tax employee contributions sent to a Roth IRA and its pre-tax investment return sent to a traditional IRA. Participant does not want to pay income tax on his after-tax account in-plan rollover.

• Can a participant send after-tax employee contributions to the Plan's Roth Account and leave the investment return in the After-Tax Account under the plan?  
• Is Notice 2014-54 insufficient relief such that the investment return has to be sent to a traditional IRA, instead of being left in the Plan?  With the traditional IRA being rolled back into the Plan as a third step.
• Could the investment return just be rolled to the Plan's own rollover account (assuming all rights are preserved) in order to skip the IRA two-step dance?

Assume an individually designed plan that can be drafted/amended in any legal manner for a qualified plan.

Hi

A sole prop can now set up a 401k plan retro to 2023 and make a deferral, correct?

No employees and must be set up prior to 4/15/24 (no extension allowed)

SECURE 2.0 - effective date was for plan years beginning after 12/29/2022

Am I wrong?

Plan administrator switched in the middle of the QDRO process with my old employer. HR at my old company says new plan administrator wants everything re-done. Do I need re-do QDRO, get court submission / approval done again, and then resubmit to HR? My retirement assets were basically frozen when I submitted it, but HR says it has to be redone: new plan administrator wouldn't process it due to gains losses unknown because it was with old plans administrator,  said qdro needs redone and plan name changed to new plan adminstrator since it was converted.

thank you

Does anyone know when the IRS will have the fill-in version of the 2023 Form 5500-EZ posted to their website? The information I found stated after January 1, 2024. I have been checking the website daily since in previous years they were available within a week after the new year. I can see from the informational version, (attached) that a question was added, which is likely the cause of the delay. However, it would be helpful to know when the fill-in version is expected to be posted.  

2023-ez-instructions.pdf 2023-form-5500-ez.pdf

A small corporation (just a business owner) started a business 5 years ago. Worked very hard all of those years and now the company is profitable enough to sponsor a defined benefit plan. In 2023 his W-2 salary was $300,000. In all previous years of the company he did not take a salary. As it turns out, 2023 was the first year that revenue exceeded expenses. He is currently age 71.

According to the business owner, he has always worked more than 1,000 hours and in years 1-4 he believes he worked more than 3,000 hours per year.

My question is with the 415 limit calculation.

Our understanding is that for 415 purposes, his 415 limit is the lesser of the following:

1. The dollar limit:   $265,000 / 12 months = $22,083.33 X 1 /10 = $2,208.33 but in this case increased to $4,866.13 because of age 76 retirement.

2. Service limit: $330,000 /12 months = $27,500.00 X 10% per year of service. $27,500 X 10% X 5 years of service = $13,750.

So his first year accrued benefit will be limited to $4,866.13.

My question is this: even though he did not draw salary for years 1-4, are we able to count those years in our service part of the calculation (#2 above)?

Thanks!

I received a "Potential Private Retirement Benefit Information" letter from the SSA.  My ex-employer, was bought out and the plan was terminated back in 2010.

I never received a distribution or notification.  I contacted the company listed on form 5500, they administered the plan after the buy out.

They told me they have no idea what happened to any funds not distributed from the plan.  

Do I have any recourse with this matter?

Thanks,

Keith

We have a profit sharing plan (no 401(k)) that has 1 owner and 1 employee. 

The owner's compensation is $330,000.  The employee's compensation is $200,000.  Total compensation is $530,000.  Maximum deductible contribution is $132,500. 

The Plan provisions state the profit sharing contribution is allocated on a pro-rata basis based on compensation.

The owner wants to provide himself and the employee with the maximum annual addition of $66,000 or a total contribution of $132,000 or 24.90566% of payroll.

In order to provide the employee with a total allocation of $66,000, the pro-rata allocation percentage must be 33% of compensation.  However, providing the owner with an allocation of 33% of compensation or $108,900 will violate 415 for the owner.  Can we limit the owner's allocation to $66,000 and still provide the employee with an allocation of $66,000 or 33% of compensation.  I am concerned the IRS would say the terms of the Plan are not being followed because the ending allocation is not pro-rata based on compensation.

The Plan states the following in the 415 limitation section: 

"If the Employer contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed such maximum permissible amount, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the maximum permissible amount."

This language seems to indicate we can reduce the allocation for the owner to $66,000 and still provide the employee with $66,000. 

Thoughts?    

I have not encountered this problem previously. 

An employee elected $3,050 for 2023 FSA.  During 2023, the employer began using direct deposit for payroll.  The result of the direct deposit is that the payroll company processed the 01/01/2024 payroll early, December 29, 2023.  The 01/01/2024 compensation and deductions are now included for all purposes in 2023.  So the participant that elected the $3,050 FSA for 2023 has now deferred $3,200 for 2023.  

It seems to me this is an excess contribution. Does it need to be distributed to the participant as such? 

Thank you. 

Does anyone file IRS form 945 electronically?  If so, what do you use.  We are filing paper again for 2023 since the deadline is approaching.  We e-file our 1099-Rs.

Thank you