Morning all - have 403(b) plan that failed ACP.  For a variety of reasons the refunds were not made to the HCES within the 12 month period after the year in which the failure occurred and the CPA audit picked this up.  Keep in mind for 2023, they wouldn't be required to audit because of the new rules with participant counts and balances.    From what I am reading, it looks like correction is make the distributions, which has occurred, but then you also must provide a QNEC to "ALL" NHCEs eligible to defer.  BIG problem.  That alone throws them into an audit for 2023 because participants who 0 balances who we could normally exclude from the participant count will now receive like a $ 20 QNEC and now have a balance.  SOOOO help, am I missing something?  Advice, suggestions.  Anyone else read it other than ALL must receive and maybe just those who would have received that year.  This is one of those crazy cases where one thing leads to something much worse.

Next question, maybe I can figure a way to pass ACP after all.  Is shifting allowed in the 403(b) from ADP to ACP.  If so, how would that work.  ADP isn't required to be tested so can I shift as much as I want to ACP and therefore it would most definitely pass.

Any thoughts would be so appreciated.

Thank you.

My primary question is who is a 5% owner?  We all know the definition means >5%.  Ownership attribution applies.  I believe that means the RMD only applies to a non-direct 5% owner who is 73+.  (Example - child is 100% owner and elderly dad works in the business - dad must take RMD if 73.)  I believe the same logic applies to spouse - attribute ownership but RMD only applies to the non-owner spouse only if the spouse is 73+.

And then there is the former >5% owner.  I believe without researching this again, I recall if someone was a >5% owner at the time of their RBD then they must continue the RMD even after they become <5% owner.  But if sell ownership prior to 73, continue to work, then no RMD.

And fortunately penalties are greatly reduced!

Thank you,

Tom

We are terminating a Pension Plan.  The insurance company we are using to purchase annuities to pay benefits doesn't like our "suspension of benefits" provision.  the provision allows Participants in pay status to suspend benefits for any month during which the employee works at least 80 hours (service, as defined in ERISA Section 203(a)(3)(B)).

Can we remove that provision to make the insurance company happy?  Or is this some sort of protected benefit?

Thank you!

I have to file a late 5500-SF 2021. Due 7/31/2022. I know that the form must be filed electronically with the DFVCP box "X".

How does the client remit the $750.00 penalty electronically?

Any help will be greatly appreciated.

Thanking everyone in advance

DPSRich

I know this has been asked before, but my search capabilities have failed me.  Is there a definition of when a contribution can be credited?

Must it be the date that the contribution has cleared the account or can it be the date that the contribution has left the control of the sponsor?

In this case, the sponsor sent a check on 9/14, was received by the trustee on 9/15, but it did not clear until 9/18.

We have been servicing a rather large plan for many years.  The business went belly up and we terminated the plan.  We even got everyone paid out.  Problem is the 5500, which requires an Accountant's Opinion.  We did the Draft 5500 in March and sent to the CPA who did it in prior years, but they said "no thanks".  They are owed a great deal of money, and will not do any more work until the account is paid up.  We advised the Client of the problem at that time and have been waiting, with intermittent contact, on the need to get us the Opinion to allow for the 2022 filing.  (There will be another 2023 Filing due which will also need an opinion.) So, as you can tell, we are at an impasse.  While our service obligation as defined by service agreement has been completed, we don't want the client to get slammed with late filing penalties.  Thus far, in addition to other contacts, we have sent an email detailing the penalties and availability of DFVCP, given the impending 10/15 deadline.  I have even sent Facebook messages to the profile of the business owner!  I am trying to get an address for a certified mailing, but am not faring well on that.  Any suggestions?

On a self-funded, granfathered plan.  Is it required to have an Open Enrollment period to allow participants to upgrade their benefits?  Or is that not required?

Maybe I'm just being stupid here - seems like an excessive amount of silly work when there's maybe a sensible workaround. Real situation, but first time I've encountered this particular situation.

A MEP. Big "lead employer" (A) and a 3-person (no HCE's) participating employer (B) as a MEP. Participating employer (B) withdrawing, so will no longer be a MEP. Participating employer (B) does not want to maintain the plan, but the employees of (B)  are not terminating employment with (B). 

As I understand it, there needs to be a spinoff plan with (B) as the sponsor. It is (B's) intention to have the assets transferred to the new spinoff plan, and immediately terminate. (B) does not want to allow any deferrals or contributions to the spinoff plan.

Since the existing plan permits Roth deferrals, one of the participants has Roth deferral account.

Trying to figure out if the new plan can accept this Roth deferral account if the spinoff plan doesn't allow deferrals at all, so that there is technically no "designated Roth account" - and/or is there another way around this that isn't penetrating my skull? Am I worrying about nothing? 

I have a client that maintains a 401(k) plan with 500+ lives.  The plan assets are with a large insurance company who also provides the TPA services.  The insurance company just notified the sponsor that 8 people violated their 402(g) limits.  Corrections were not made by the April deadline as the sponsor's accounting department tracks annual deferrals and, according to their records, no employee was over the limit (except for eligible catch-up contributions).  The sponsor provided their calculations to the TPA and asked why the TPA was getting a different answer than they got.  It turns out the TPA was treating the first pay date in 2022 as 2021 deferrals and the first pay date in 2023 as 2022 deferrals.  Using this calculation method, the TPA came up with the excess deferrals.  The pay dates in question did represent the payment of wages for a pay period that ended in the prior year (paid on 1/5 for pay period ended 12/31).

The pay and deferrals for the 1/5 pay date is reflected on the employees W-2 for the calendar year in which the pay was received by the employee (i.e., 1/5/23 pay and deferrals are reflected on the 2023 W-2).

Per my reading of Tres. Reg. 1.402(g)-1(b), I interpret the definition of an elective deferral for 402(g) purposes to be an amount that would be taxable in the year, except for the fact that it was an elective deferral into a 401(k) plan (SARSEP, SIMPLE, Roth, 403(b) as well).  If I am interpreting that correctly, a deferral from a 1/5/23 paycheck would have been taxable compensation in 2023, except for the fact it was deferred into a 401(k) plan, and thus it counts as an elective deferral for 2023 for 402(g) purposes.  Not 2022 as the TPA is contending.  Am I missing something?

Thanks in advance for your help.

Medical professional #1 runs a stand alone business.  No employees, only the owner.  She has a solo 401k for herself.

Medical professional #2 also runs a stand alone business.  No employees, only the owner.  She also has a solo 401k for herself.

#1 and #2 form a separate company to handle administrative work for both companies.  Assume 50/50 ownership.  They plan to hire 1 individual to handle the admin duties that pertain to the other 2 companies.

With 50/50 ownership I don't see a controlled group here.  But this would appear to be an Affiliated Service Groups ("ASG").

If an ASG, what are the 401k plan implications:

(1) Assuming full time employment, will the employee of the new company eventually be eligible to participate in one or both of the solo 401k plans?

(2) Can #1 and #2 still maintain separate plans, different benefit structures, etc  if they start the new company?  is there any required aggregation?

Thank you

Hi

Someone I work with told me that line 19 - discounted contributions - attachment is not required unless the plan is subject to quarterly payments i.e. if less than 100% funded in the prior year.

I reread the instructions on SB and seems to be supporting this.

I always attach to avoid any misses.

Any comments are appreciated.

Getting pushback from an advisor (CPA) on this, and while I'm always ready to consider that I'm wrong, I don't THINK I am on this. 

For a 1-person plan (sole prop, corp, whatever) the CPA is saying the lifetime income illustration is required. I say otherwise. SECURE amended ERISA 105(a) to add this requirement. ERISA 105(a)(1)(A) exempts the pension benefit statement requirement for one participant plans described in ERISA 101(i)(8)(B). The lifetime income disclosure under 105(a)(2)(B)(III)(iii) falls under 105(a)(2)(B) in general, which refers to statements required under clause (i) or (ii) of paragraph (1)(A) which as stated above, exempts the one-participant plans.

Am, I missing anything?

I've got a MEP where two of the adopters have to leave the MEP immediately.  It's a 3% safe harbor plan.  Do they make the 3% SH based on 1/1-9/30 compensation to the MEP, or can it be set up so that the entire 2023 SH is made to the spinoff plan?  Thanks.

Just looking for advice on a new Plan setup.

We are installing a new Safe Harbor 401(k) Plan with automatic enrollment and automatic increases.  Generally, in the past when we've installed a new plan we've always gone with the first day of the Plan being January 1, even if it was signed during the Plan Year.

My question is, under the new Secure 2.0 rules is there a reason not to use a 1/1 start date and instead use 11/1 for a short Plan Year?

Thank everyone!

Hello! This is my first time posting, so apologies for mistakes. I was wondering if anyone has any knowledge to share on how to properly do the following below. I've been unable to get any clarity from our TPA of the FSA plan, nor from the CPA (perhaps this is a legal compliance issue I'm concerned with and maybe it's beyond their scope). 

We have an existing FSA plan with a plan year of 4/1-3/31, which is the same time line for our health plans' plan year. We merged (acquired) w/ another company earlier this year, and they have a Jan 1-Dec 31 plan year for their health plans, and didn't have an FSA. Our company has decided to restructure the plans so company wide the plan year would be Jan 1-Dec 31 for all offices, with the same plan year and enrollment periods for all health & dental, and FSA. 

Questions I have are: 

1. If we close the FSA plan by Dec 31, this year, do we have to notify staff? If so, how soon? Is there a blackout period? 

2. If we close FSA by Dec 31, some employees have fully utilized their Health Care FSA balances already, so the company would lose the missed premium that the employee would have normally contributed during the Jan Feb Mar payrolls. Is this correct? Can we ask them to contribute those funds they would have normally contributed in Jan/Feb/Mar?

3. To avoid any more of the situation in above #2, are we allowed to ASK employees to only use up to the amount they would have contributed through Dec 31? Or is this unlawful? 

4. For employees who have the Dependent Care FSA, and were anticipating using the full amount, will now be cut short by 3 months. Can they contribute a higher amount? Is this change-over of the plan year possibly considered a QLE/Qualifying Event? 

Any information would be greatly appreciated!

A dental practice was sold in an asset sale.  Original plan is terminated however the seller has outstanding employer contributions to be made including a profit share determined on payroll information up to the sale/termination date.  The new entity is telling the seller that they cannot make any more contributions to the terminated plan since the participants are now all active in the new entity plan.

Can anyone assist with cites that support the notion that outstanding Employer contributions can most certainly be made to the seller's terminated plan?   The client will be asking the new entity for cites as well.

Thanks in advance.

I've got two questions relative to non-governmental 457(b) Plans.  As a TPA firm, we have historically only assisted with plan documents for a few top hat plans, but I find myself needing to get more involved in reviewing assets and generally have more oversight on what is actually transpiring within one or two of the plans.

1)  Two clients have all of the 457(b) assets in brokerage accounts that in the name of plan and FBO the participant.  There are 4 or 5 participants.  This seems to completely negate the requirement that these plans be "unfunded".  There is a rabbi trust, but that does not change the fact that these should not be SDBAs in the participant name, correct?  

2) A participant took a distribution earlier this year after terminating employment.  The timing was in accordance with the document.  The employer understands that they need to have the distribution reported on the 2023 W-2.  That participant took the entire account balance as a cash distribution and had no taxes withheld.  Since payroll taxes apply, I take it this is wrong, but how can we fix?  Do we have the client run the distribution of deferred compensation through payroll to determine how much in taxes is due and ask for the money back from the participant?

It seems like it would be cleaner to never have a distribution paid directly from an account to a participant and have the account balance instead paid to the employer (since it company assets until paid anyway) and then have them run through payroll and issue the distribution in the same manner as a paycheck (aside from applying FICA if already withheld). Is that what you all are doing?  

Thank you!!!

Is there an election change event that would allow the employee who enrolled in VA benefits to drop employer coverage mid-year? 

Our client maintains a DB plan.  A participant was receiving a J&S payment and then died.  The plan sponsor tried reaching out to the (non-spouse) beneficiary for years and never received a response.  Now the beneficiary has died.  Presumably the missed payments are still owed to the beneficiary's estate.  However, is the sponsor required to include an interest adjustment where they made every effort to pay during the beneficiary's lifetime?

One of my clients is of the belief that they can only designate a spouse as the beneficiary of their Cash Balance Plan.  I think I know the answer, but I just wanted to make sure.

Someone can name a non-spouse their beneficiary, correct?  The only caveat being that if they are married, they need to get spousal consent to elect someone else to be their beneficiary.

Thanks in advance!