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!

I tried to find this topic addressed, but was unsuccessful.  It seems obvious to me, but what do I know.

Leveraged ESOP, closely held stock, has only one tranche of stock acquired with the proceeds of a single ESOP loan that has not been renegotiated.  Dividends on unallocated shares are used to pay a portion of the stock loan.  In the third year of the loan, 50,000 shares are released per the amortization schedule.  The loan payment was $500,000, of which $100,000 was from unallocated dividends and $400,000 was an employer contribution. There are a few forfeitures that resulted from participants leaving who were less than fully vested.  Therefore, active participants were allocated shares as a result of the loan payment as well as reallocation of forfeitures.  However, only the shares that were released by virtue of the loan payment are using the cost basis of the shares when the loan was funded; the shares released as a result of using unallocated dividends and forfeitures are allocated with a cost basis of the FMV as of the end of the year.  I had always understood that all shares acquired with the proceeds of a stock loan carry the basis at which they were acquired, regardless of release of shares or reallocation of forfeitures.  Am I wrong here?  

Thanks to any all for their wisdom and insight!

I understand that a participant can opt out of the plan .   And that if they do they can not return.  If a participant opts out, they no longer are part of plan testing.... correct?

EDIT:  I meant "Waive out"

And Dang... meant to mention this.... This guy has 2 daughters.  Would they be considered HCEs due to attribution?  I'm guessing they are both older than 18. 
My thought was they may screw up testing so have them waive out... take them out of the equation.  But if they are HCEs by attribution then no issue if they defer very little or nothing at all. 

Still seems funny not having Tom remind us of this. Tom, if you are lurking out there, Happy Pi Day.

Benefits dept found that an employee had overcontributed to FSA ( 2022 )because of an employer error (having 2 deductions  for FSA, 1 was not end-dated). It is now 2024, how does payroll refund the employee?  

We have someone with an old SEP IRA plan that they are looking to roll the money into a Cash Balance Plan?  The value of the SEP is around $1.1 million, just for reference.

Thanks in advance!

I had a CPA ask this question (which is really his responsibility to find the answer) about a predecessor employer:

Dentist A sells practice to dentist B.  Dentist B decides to assume sponsorship even though I recommended that not be the case because the financial advisor did not want to complete new plan setup forms, deal with rollovers, etc.  The question: can dentist B take the new plan credits since this is a new plan adoption for his business EIN?  

Another situation like the above except the selling and purchasing dentist formed a partnership for one year.  So the plan adoption went from Dentist A, to Dentists AB partnership, and then to dentists B for 2023.  A CPA is asking about this one also.   With the partnership in the middle, I told him the credit would not be available in my opinion even though the sponsorship for 2023 is under a new business EIN and this a "new" plan for that entity.  But I told him I'd ask.

I'd be surprised if the IRS would give any attention to this credit given the massive PPP and ERC funds given away.

Thank you in advance.

Tom

Question I'm not clearly understanding. I know that you cannot include LTPT in testing for some purposes, and not for others. Basically "all or nothing" - that is, 401(a)(4),ADP/ACP. 410(b), etc.

What I'm not clear about is, for example, suppose the employer provides that LTPT who defer will also receive a match. Can the employer STILL exclude the LTPT employees, for all the above testing purposes, or must they all now be included for all of the testing? 

I think it is the former, although it seems counterintuitive, but I'm not certain. (P.S. - I base my theory that it is the former on the proposed Regs, and nearly at the end under Section f(3)(i) Example 1((a) and (B).)

Is the new SECURE 2.0 requirement that allows employers to terminate a Simple IRA mid year but only if the employer “establishes and maintains (as of the day after the termination date)” a SH 401k plan to replace the terminated Simple IRA arrangement intended to cover M&A situations (where the SH 401k plan is maintained by Buyer and has been in existence long before the SIMPLE IRA)?   Or does the employer need to initially “establish” the SH 401k plan as of the day after the SIMPLE IRA termination date to rely on this mid-year termination exception?

Thanks.  Apologies if this is addressed elsewhere on the Board.  

Hello there everyone, we have a safe harbor 401k that allows employee after-tax contributions, so I am running some calculations on what the 2024 test results for our plan would look like under various scenarios. I know that in general, if the ADP test passes with room to spare but the ACP test fails then one can shift / borrow from the ADP test to the ACP test to help pass the ACP test. However, how does this work, if at all, in the case of a safe harbor 401k, since it ordinarily automatically passes the ADP test? Would this tactic not be allowed (and hence constitute a significant disadvantage of being a safe harbor 401k), or would it be allowed to calculate what the ADP test would show and shift / borrow based on those numbers should the ACP test fail? I tried looking around but haven't found an answer since it's kind of a corner case.

Secure 2.0 allows mid-year Simple to 401k but is that a two way street?

Section 332, Employers allowed to replace SIMPLE retirement accounts with safe harbor 401(k) plans during a year. Section 332 allows an employer to replace a SIMPLE IRA plan with a SIMPLE 401(k) plan or other 401(k) plan that requires mandatory employer contributions during a plan year, and is effective for plan years beginning after December 31, 2023.

Can I terminate a SH 401k and replace with a Simple in the same year?  

This is new for 2023 and it is covered in the 5500 instructions.  In case I missed something, I thought I'd ask - it isn't optional right?   

Thanks Tom

A 403b  has received a request from a non-resident alien (NRA) to do a direct rollover of his account to an IRA. Up until this point the 403(b) has only had cash withdrawals by NRAs, of which it withholds 30% and reports the distribution on Form 1042-S.

Because this is a direct rollover and assumedly no withholding applies, the 403(b) is wondering how it needs to report this. Does it issue a Form 1042-S? If so, what is the tax withholding exemption code for box 4a? Any direction on this is appreciated. TIA.

These are probably a silly questions, but with such an astronomical penalty, I want to ensure I get this right.

1. Box 1A. reads "This return is: (1) the first return filed for the plan (2) an amended return (3) the final return filed for the plan (4) a short plan year return (less than 12 months)"

For each return, would "(1)the first return filed for the plan" be checked, or does this mean only for the very first return? I.e., does this mean for the plan year being filed, or ever? It sounds like this would only apply to the very first year being filed, but on the form, it looks like this should be checked each year, since this is not an amended return or final return. The instructions say "First Return Check box A(1) if this is the first filing for this plan. Do not check this box if you have ever filed for this plan, even if it was a different form (for example, Form 5500)." But lets say, for example, I file 2021 as the first plan year, and now I'm filling out 2022. I guess another way to ask this question, is it ok to leave Box A blank?

2. When submitting the late return, if box D is available, do I still need to write in red “Delinquent Return Filed under Rev. Proc. 2015-32, Eligible for Penalty Relief” at the top of the return? 

3. If I'm sending these in now, in March, would it be prudent to wait until closer to the July 31 deadline to file for the last plan year electronically, which is not currently delinquent, to avoid triggering a notice for the previous years, if it takes them awhile to process these?

Announced this morning at EA Meeting that Joint Board will eliminate physical presence requirement for continuing education retro to  beginning of this cycle.

https://www.federalregister.gov/public-inspection/2024-05240/regulations-for-continuing-professional-education-requirements-of-the-joint-board-for-the-enrollment

Client was submitting their 1094-C filings with the IRS electronically and two employees’ names kept getting rejected.  The client learned that they were not authorized to work in the U.S. so the client had to let them go.  The client isn’t sure what to do next; I suppose the filing must be incomplete. Any suggestions on how to make sure their 1094C filings are accepted?

I found a somewhat related post here, but what I've got is a little different.

One-person plan, Roth deferrals and profit sharing.  The sole prop (who is age 50+) has 2023 net Schedule C income of $29,000, and he wants to max.  My pension software tells me that his 1/2 FICA is $2,100 (rounding), therefore net compensation is $26,900.

Can he do the entire $29,000 as Roth deferrals?  I think it triggers the catch up rule that it can't cause a failure in the year allocated... but I've never seen it applied to 100% of compensation.

If not, I can split it and make some as profit sharing, but it would be simpler to be able to have it all one money type.

Thanks!

I was recently informed my client "switched to a PEO in December."

I recall this is something like outsourcing.

I think the PEO is the "employer" but wouldn't I use the client's EIN?

I would assume this is just another way AP or PayChex can "offer" their 401(k) administration to the client.