We're currently on hold with our client and a platform that I'll call This Retirement Platform.  The plan has a terminated participant who has a less than $5,000 vested balance.  It's an ERISA plan (there are ER contributions).

It has taken us several DAYS to get someone to accept that this is legal.  I wish I was kidding.

Currently, TRP (by which I mean This Retirement Platform, of course, not naming names) is telling us that such an transaction (a) has to be medallion guaranteed due to "some 2020 law", and (b) must have 20% withheld because it's leaving the 403b plan - yes, even if we're sending it to a rollover IRA.  They can't cite the actual authority for either of these positions oddly enough.

Has anyone dealt with a retirement platform that has tried these tactics before?  Any success pathways (other than "no, give me your manager") or tips to share?  Thank you for allowing me to spill the Tea; it's a hard Row here, but I guess the Price was good at some point.

Thanks.

Question regarding a participant being out on suspension from their job in terms of their loan repayments.

The plan states that repayments have to be made through payroll deduction, so obviously if they are out on suspension no repayments will be made.  There are two options that I see:

1) Re-amortize the loan to increase the weekly repayments
2) Have the employee makeup the missed payments and leave the schedule the same

Is #1 a viable option, or would that not be allowed?  I know we can do it if someone is on a leave of absence, but can we do it for a suspension?

Thanks!

A church, which is recognized as a 501(c)(3) organization, sponsors a 403(b) plan and wants to establish a nonqualified deferred compensation plan for its senior pastor.  The NQDC plan will be designed to comply with Internal Revenue Code Section 409A.

Are contributions to the church's NQDC plan taxable upon vesting, as typically occurs with non-church tax-exempt organization NQDC plans?

If an S Corp has net income of $364,600 and the owner does not take a salary, how much can be contributed to a pension plan? 

Must a COAP be a stand-alone court order like a QDRO? Or could the provisions be incorporated as a section in the divorce judgment and decree? 

Asking for a friend, do not have more details but a general question.

Joe owns 81% of the company.

Joe and his wife Mary were both the in the plan.

Joe stops taking salary and also no longer in the plan but Mary is.

Is Mary still an HCE under attribution rules?

I say yes.

Any comments appreciated.

For an individual-account retirement plan that provides participant-directed investment, an employer seeks a mutual-fund-only window.

It’s okay if the window is provided through self-directed brokerage accounts. But it must be limited to funds, and must preclude individual stocks, bonds, and securities other than shares of registered-investment-company mutual funds.

The selection of mutual funds must not be limited by anything beyond the recordkeeper’s and the broker-dealer’s operations constraints.

Which recordkeepers offer this?

I worked for a non-profit hospital with an ERISA 403(b) Retirement Plan from 06/29/2020 to 07/10/2023.

The employer does not want to vest the total amount in my plan. They say that:

-       In 2020, I worked 968 hours

From 06/29/2020 to 12/31/2020 I worked more than 1,000 hours, but hours worked during the last 11 days of the year were paid in the first paycheck of 2021.

-       In 2021, I worked 1,647 hours

-       In 2022, I worked 1,931 hours

-       In 2023, I worked 762 hours

The SPD for the 403(b) Employee Retirement Plan says:

“Year of Service means a payroll calendar year during which you are credited for at least 1,000 hours of service. For this purpose, an “hour of service” generally means any hour for which you are paid for working for Baptist Health, including payment for vacation, holiday and paid time off hours.”

Regarding vesting:

My question is: How are the years of service calculated in this particular case?

§ 2530.203-2 Vesting computation period.

(a) Designation of vesting computation periods. Except as provided in paragraph (b) of this section, a plan may designate any 12-consecutive-month period as the vesting computation period. The period so designated must apply equally to all participants. This requirement may be satisfied even though the actual 12-consecutive-month periods are not the same for all employees (e.g., if the designated vesting computation period is the 12-consecutive-month period beginning on an employee's employment commencement date and anniversaries of that date). The plan is prohibited, however, from using any period that would result in artificial postponement of vesting credit, such as a period meassured by anniversaries of the date four months following the employment commencement date.

(b) Plans with 3-year 100 percent vesting. For rules regarding when a participant has a nonforfeitable right to his accrued benefit, see section 202(a)(1)(B)(i) of the Act and section 410(a)(1)(B)(i) of the Code and regulations issued thereunder.

I know this has been asked 1,000+ times, but I'm still not clear on the correct way to start the calculation of an individual's net earned income in this situation:

• LLC taxed as a partnership
• Schedule K-1 Line 14A = self-employment earnings (starting point)

Is then Section 179 deduction on Line 12 of the K-1 backed out from Line 14A, or no?  There are no oil and gas depletion expenses, nor unreimbursed partnership expenses from Schedule E according to the CPA.

Plan excludes bonuses. Plan passes 414(s) test, even excluding bonuses - HCES take big bonuses. Plan passes ADP testing excluding bonuses.

Question has been asked as to whether the plan can run ADP test based on full compensation. Well, it CAN, (plan operationally allows for employer to elect any other definition of comp as long as it passes 414(s))  but why would they want to do that? Any ideas as to why this might be beneficial? I'm not seeing it offhand... maybe allowing some shifting to the ACP test by creating more room under the ADP test? 

Participant ina plan took a distribution in early 2023 from his account with Provider 1.  Never cashed the check.  In the interim, the plan transferred to provider 2.

Meanwhile, the check got stale dated and Provider 1 sent the proceeds to Provider 2 who put it in their Unclaimed assets account.  Subsequently, the funds got paid out to his IRA.

The participant is looking for a 1099-R. 

Neither company is claiming responsibility for the 1099-R. Provider said because the check went stale dated, they have no responsibility.  Provider 2 is saying they won’t doing it either since the distribution didn’t happen on their system.

Any idea whose responsibility this is?

normally in those situations we recommend establishing a separate subaccount for Roth money, and conversion is done by election with accompanying physical movement of funds into a separate Roth account within the same plan.  Is there a problem with keeping all sources (both Roth and non-Roth) within a signle account and the "segregation" being done on the recordkeeping level only.  I think it is OK but wanted to hear the wisdom of other practitioners.  Are there any considerations I need to be thinking about?

I'm wondering whether a radio station would be considered a "service organization" for these purposes. I think it is not. There is a substantial investment in equipment, transmitters, etc., etc., and there's no personal service performed by "one or more individuals."

Any other thoughts?

I am a full time employee enrolled in a FSA plan. My employer changed my work status from full time to part time with no benefits. Do I need to repay my employer any FSA funds I used and can my employer continue to deduct FSA funds from pay check?

thank you. 

Hi

Sole prop, started biz 7/30/2023, over age 50.

Wants a 401k plan for 2023 (ok under SECURE 2.0)

Made 125k of net c for 2023. Assume after SE tax adjustment

I think I can make the plan effective 1/1/2023 and get the full 30k as deferral, correct?

If I start the plan, do I need to prorate the 30 to 5/12th?

For PS I can do max 25k and is this doable with either full or short plan year?

Thanks

Long time listener - first time caller...

Not my issue, but a question came up in the office.  Participant has Pre-tax and Roth 401k dollars.  In 2024 the participant is turning 73 and wants to wait until 2025 for 1st time RMD.  However, participant requests a source level distribution of only Roth 401k.  Secure 2.0 states Roth 401k is not part of RMD.

Regular RMD rules state first distribution from your 401k needs to be your RMD, if applicable.  However, if you are only taking a Roth 401k distribution, would you need to take an RMD from your pre-tax money?  Prior to 2024, I would agree that any distribution would be subject to RMD first.  However, now that Roth 401k is not required to be part of the RMD, why would you need to take a pre-tax RMD first?

Any guidance would be appreciated - maybe this is something that needs to be clarified or corrected?

Hi!

I am working through a minimum and maximum illustration for a profit sharing contribution. I hope I have an easy question here.

The plan is NOT top heavy. They give the 3% SHNEC. The allocation conditions for the PS are last day and 1000 hours of service. I have two NHCE's who terminated in 2023 and I have one HCE who was employed on 12/31/2023 but did not work 1000 hours. Can I completely remove the three of them from the New Comp testing? OR do I still need to include them in New Comp testing? If I keep them in I have to give them some PS in order to pass Gateway and/or Nondiscrimination testing.

Thank you

Am I understanding correctly, when filing the Form 5500, the Schedule R is now required for plans even without distributions in the plan year? This just to accommodate the new compliance questions?  2022 instructions for the Schedule R listed additional exceptions for plans without distributions that seem to have been left off of the 2023 instructions. 

This is probably stupid but this client deposited $4,300 too much.  They asked if they could allocate it as a PS contribution instead of returning it to the company.  The plan is a straight SH Match, they don't make PS contributions (it's allowed, they just don't).  Problem is, 5 participants who don't defer would receive the PS contribution.  No big deal.  But the plan has individual brokerage accounts at American Funds.  Each of these 5 participants would  need an account of which their balance would range from $125 to $236.  Hardly worth it..agree?  

• Could these 5 participants share one pooled account?
• Would it be best to just pay the overage back to the company?

Thanks

First time I've seen this...

Client sends me a Quickbook payroll detail with a line for Tuition Assistance in the "Employer Taxes and Contributions" section (the section that shows things the ER pays, like the company part of medicare, the company part of SS, 401k match, etc.

I asked about it, and the client said that this was the up to $5,250 that the ee can get without being taxed.  This was new to me, so I did some research and found this (I didn't keep where I found it, though; I just copy/pasted it to a Word doc):
 

Quote

An employer can reimburse employees up to $5,250 annually without this amount being taxed.  While more can be offered in a tuition reimbursement program, any amount above the allotted amount will be seen as a fringe benefit and will be subject to taxes.  Employers can also deduct the maximum of $5,250 per employee from their taxes each year, making tuition reimbursement cost-effective for all parties involved.  For tuition reimbursement to stay tax free, the money can only go towards tuition, fees, and school supplies, such as books.  Additionally, graduate courses are tax-exempt only if the employee is in a research of work-study position.

Anyone familiar with this kind of thing?

"Reimbursement" is what I'm focusing on.  The client has three employees getting this, all over the $5,250 threshold.  Let's say one of them is at $7,000.  Do I need to count $7,000 or $1,750 somewhere?  I'm thinking "no", and I'd like to assume (ha! I will try and confirm) that no part of this is in the Gross Pay.

If it matters, the plan uses W-2 comp and also excludes "taxable employee benefits" from comp.

Any guidance is appreciated, thanks.