We have a plan sponsor who failed to start deferrals at 3% (plan has immediate participation) and has auto-increase (1% per year.)  I don't know how long or how many employees this involves.  We have a conference call Thursday at 10:00 am.  Of course the HR person involved is gone.  I'm thinking the correction is to fund 50% of the missed deferral and/or deferral increase and 100% of the match plus earnings on both.

I almost think I saw someone post on here one time to propose a one-time bonus grossed up for the tax liability.

Thank you in advance for your comments.

Tom

A client is about to turn 62 with a serious health issue that may or may not be terminal.  Spouse is 5 years younger.  Client has plenty of assets to live off of.  What are the implications of him taking social security at 62 as opposed to waiting?  If he waits will his spouse receive the benefit he would have gotten (if he dies in the next year) when he turns 66 or 67 (or 70 for that matter).  Is there any advantage in this scenario to him starting the benefits at 62?

All members of the controlled group participate in the plan. Safe Harbor Match equal to 100% up to 4%

some of the participating employers want to increase their match to 100% up to 6%.  Is this even possible?  Don't all participating members have to use the same safe harbor formula?

Guessing they could elect a discretionary match for a specific group of employees, assuming it is below 4% and still remain safe harbor.  However, allocating a discretionary to only a small group of employees would require additional converge testing - correct??

Should form 5500EZ be filed if it currently covers only the owner. But had common law paid out participants in the earlier years?

An accountant just presented a very old problem.  His client adopted an HR-10 prototype with Equitable in 1986 when purchasing an annuity and life insurance.  Contributions/premium payments have been made every year, and Form 5500EZ has been filed.  But there have been no document updates.  The only thing they can find is the original adoption agreement...not even the basic plan document is available.  The insurance agent has been in contact with Equitable but nothing has surfaced.  Equitable has kept the document up to date with IRS but apparently the client hasn't adopted any restatements.

If they go into VCP, will the IRS require all the missing restatements?  Form 14568-B Schedule 2 only lists the EGTRRA, PPA and Cycle 3 documents in the identification of failures (but does have a later catch-all section for "late amender failures not listed above").  I'm trying to remember back to 1986 -- would a document adopted then have been compliant with TEFRA/DEFRA/REA or did those documents come on the scene later?  Obviously the TRA'86 documents would have been later.  I'm trying to figure out how many restatements are missing.

Thanks to all.

Is anyone else having trouble with the program not responding when trying to e-sign or print?  It's spinning and spinning.  I was able to work with it this morning as it was slow and this afternoon I can't print a long form for an auditor not can I e-sign a couple returns.  Just curious.  This has not been a problem in the past.

Do some third-party-administrator businesses get malpractice or errors-and-omissions insurance?

Without saying anything about how much the premium is (or what coverage limits are available):

Which errors are insured?

Does it include incorrect or incomplete advice (or a failure to advise) about the Internal Revenue Code?

Does it include incorrect or incomplete advice (or a failure to advise) about ERISA’s (nontax) title I?

Which errors are not insured?

Which liabilities are excluded?

(My query does not relate to any client; it’s to support my charitable and educational work with young people preparing to enter the business.)

Hi

For an s-corp that is owned 50/50 by 2 unrelated partners (no other employees), trying to determine if 5500-EZ is ok to file - I think it is but wanted to double check. What say you?

-----------------------------------------

From 5500-EZ instructions

Who can file 5500-EZ

2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner); and

3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses).

From IRC §1372 (a) &(b)

(a) General rule

For purposes of applying the provisions of this subtitle which relate to employee fringe benefits—

(1) the S corporation shall be treated as a partnership, and

(2) any 2-percent shareholder of the S corporation shall be treated as a partner of such partnership.

(b) 2-percent shareholder defined

For purposes of this section, the term "2-percent shareholder" means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation.

We had an issue where our fees were disclosed to participants incorrectly (404(c) issue).  Revenue sharing is allocated to participants in relation to the revenue sharing produced by their investments.  Our disclosures say revenue sharing the the plan as a whole is allocated among all participants, pro rata, no matter their investments.

This is only affecting pennies per Participant.  What does this mean for us?

• Are we subject to some penalty?
• Do we need to send out corrected disclosures?
• Is there some sort of "de minimis" exception, where we don't have to worry about penalties or corrected disclosures, and we can just correct disclosures going forward?

Thank you!

For those grappling with an absence of Internal Revenue Service guidance about how to interpret 2019 and 2022 changes to ERISA and the Internal Revenue Code about a long-term-part-time employee’s eligibility, here’s another wrinkle:

Who decides?

If a participating employer excludes from elective deferrals under a pooled-employer plan (or other multiple-employer plan) an employee the pooled-plan provider or administrator decides ought to be included, what corrective steps and remedies must or should the pooled-plan provider or administrator pursue?

Or imagine a single-employer plan has a § 3(16) administrator unaffiliated with the employer, and that administrator’s responsibility includes deciding which employees are eligible (for each kind of participation, including elective deferrals):

If the employer excludes from elective deferrals an employee the administrator decides ought to be included, what corrective steps and remedies must or should the administrator pursue?

Are there circumstances in which an administrator may defer to an employer’s interpretation about which long-term-part-time employees need not be eligible? Or would that be an abdication of the fiduciary's responsibility?

The Bakers helpfully pointed us to Nevin Adams’ alliteratively titled article on a court’s decision that ForUsAll, Inc. can’t sue the U.S. Labor department about EBSA’s “Compliance Assistance Release” about “cryptocurrencies”.

https://www.napa-net.org/news-info/daily-news/401k-crypto-case-crumbles-federal-court;

https://www.napa-net.org/sites/napa-net.org/files/ForUsAll%20Inc.%20v.%20U.S.%20Department%20of%20Labor%20et%20al_082923.pdf;

https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/compliance-assistance-releases/2022-01.pdf.

Judge Christopher Reid Cooper finds that, even if the Employee Benefits Security Administration acted contrary to law by issuing its nonrule document, ordering the Release to be treated legally as a nothing would not relieve the harm ForUsAll asserts because prospective customers would still face the same risks about investigations and enforcement.

Also, the opinion finds that courts do not review a Federal government agency’s nonrule document if it sets no legal right or duty, and no legal consequence flows from the document. The judge found EBSA’s Compliance Release was “informational” and does not compel anyone to do anything. Rather, it suggests fiduciaries “be prepared to explain how [their] actions comport with their duties of prudence and loyalty—whatever those duties are.”

The opinion observes that the law is unsettled about what responsibility a plan’s fiduciary might have regarding an account that is not a designated investment alternative.

A participant in our ESOP got re-married in July and, with intention, sent in a new beneficiary designation form listing an adult child named as 100% primary in June. 

Now that they are married, does the date on the beneficiary form trump the spousal rights under ERISA?

I have a takeover profit sharing plan. The owner turned 72 on 12/31/22 and did not take the RMD.  My understanding is he should have taken the distribution by 4/1/23.  Can someone please explain the consequences of not taking the RMD by the required beginning date and how to best remedy the situation? 

Does anyone know how to get the 5500 participant count out of reports on Amer funds Plan Premier?   If so what is the report name?  My client has a census of 5000 rows+ which includes a couple hundred duplicate rows because employees start and stop at different divisions (McDonalds franchises.)   We can't reasonably combine wages, deferrals, hours and pick earliest DOH and latest DOT etc to get it to load correctly into Relius.  If we could, Relius would provide the participant count.  I phoned Amer Funds who really can't help.  I asked them what would they do if this were bundled and they had to do the 5500?  I know they have the data as the plan sponsor provide a full census file every pay period combined for all divisions. 

Just struggling with this.   I think I can get close by sorting data exports by who has a balance and is not terminated, etc.  Not sure I can get everything though.  Fortunately it is safe harbor match, no profit sharing.  I will probably ask the advisor to take it bundled for 2024 -thinking ahead about LTPT.

Takeover. Many issues. DB with document stating NRA age 50. This would violate §401(a)(14) and §1.401(a)-1(b)(2). We can correct late restatements under SCP, but can we also change the NRA to 62 under SCP as well? This appears to me to be a document issue, which cannot be corrected under SCP. Thoughts?

Also, assuming we have to do this from inception, would we also have to redo the actuarial valuations using the correct NRA (likely resulting in some past non-deductible contributions) or just look at open years?

Group:

I wasn't sure which area to post this.

Brief facts:

Case no. 1:  In June 2022 IRS TEGE issued a notice of plan disqualification for an ESOP client.

The agents notice clearly stated "The plan is disqualified" thereby allowing TP

to timely file in US Tax Court within 90 days.

In Dec. 2022 Govt files to dismiss based on lack of jurisdiction.

Pending USTC Case no. 1 is still pending and no order from USTC.

Pending USTC Case no. 2. - May 2023 IRS TEGE issues a one page notice of disqualification

stating:  The Plan is no longer disqualified under 401a and 501a.  No 886-A

 and no further information.

Q:  Is there a motion you'd file to stay proceedings?  I don't see IRC 6213a applying to retirement plan declaratory actions?

Here is what 6213 a states:  6213(a) states that “no assessment of a deficiency in respect of any

tax . . . and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until

such notice has been mailed to the taxpayer.

I'm looking at guidance for which US Tax Court rule (or Fed Rules) allow me to motion

the Court to stay Case no 1?  other than saying it would deprive petitioner of due process rights

to not allow him to have that matter resolved.

Thoughts and comments appreciated.

I have a large plan that is audited for 2022.  A participant requested a maximum loan ($13000) from his account on a weekend.  The account balance he saw online was $26,406.45.  By the time the loan was approved and processed, his account had fallen to $25,851.50.  It appears that he is over his maximum loan amount by $74.25.

I looked at the IRS Fix-It Guide and found that the participant must repay the excess loan amount and if needed amortize the remaining principle. Is there anything else i need to be doing?

Had a plan subject to audit for 2022, that showed 120 active participants as of 12/31/22, but only 95 with balances. Plan is now fully liquidated this year. How would you report this on a 2022 Form 5500 for the short final year in 2023? Don;t have a box for participants with balances as of 1/1/23.

When a Plan chooses to allow brokerage accounts, is it acceptable for the Plan Sponsor to expect the participants to get them a copy of the statement(s) at the end of the year? Should the Plan Sponsor be receiving a copy of each individual statement monthly or at least quarterly? What are the consequences if they are not keeping copies themselves? 

I would like to get some thoughts on the following:

Assume a plan offers three JSAs: a 50% JSA, a 75% JSA, and a 100% JSA.

The plan designates the 50% JSA as the QJSA.

I assume that means the 75% would be the QOSA. 29 U.S.C. § 1055(d).

Now, I understand that the QJSA and the QOSA must be actuarial equivalent to the offered SLA. 29 U.S.C. § 1055(d).

What about the 100% JSA. Is that also subject to AE requirements?

Thanks for your thoughts and comments!