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!

If a DB plan is non-compliant (either a discriminatory benefit formula or failed 401(a)(4)) may it still terminate under PBGC if the assets are sufficient? We understand that a plan may potentially be disqualified, but does the PBGC care or is it only concerned with sufficiency?

Case in point floor/offset  plan, but the sponsor did not correctly fund the DC plan to meet aggregated testing. They want to terminate the DB plan. We are reluctant until they get the combo compliant. They dispute the need for additional contributions to the DC plan in order to terminate the otherwise sufficient DB plan. If we warn the sponsor of consequences, will the PBGC allow the termination without regard to testing?

A client had an employee who was not paid out for a couple of years (she kept him in the plan thinking maybe some work would come up and he would be back in).  Over the summer the employee died.  The plan states that vesting does not count if someone dies or becomes disabled.  The employee died and had a break in service prior to their death.  

Is the deceased terminated employee 100% vested?
Or do I pay him out based on his vested % at the time he terminated?

Thanks

A new client was not taken care of in the past.  I went back a few years and discovered that in 2020 the 2 HCEs didn't receive the full 3% NEC.  The 2 NHCEs did but not the 2 HCEs.  During COVID the business didn't make a PS contribution but regardless of that the plan called for a 3% SH NEC so everyone needed to get it, right?  I ask, there is no exception is there?

Thanks

I've having a difficult time finding a clear answer on whether DFVCP may be used to eliminate IRS penalties for a late 5500 after the IRS has already imposed a penalty. The available IRS late-filer relief guidance does not seem to address this squarely. It says that IRS will waive penalties if, among other things, the filer complies with DFVCP. The DFVCP FAQs say an "IRS late-filer letter" will not disqualify a plan from using DFVCP, but it doesn't address a situation where the IRS has already imposed a penalty. There has been no correspondence from the DOL on the late 5500. 

My initial reaction is that using DFVCP now probably would not automatically waive the IRS penalties already imposed (but that it may be a good idea to minimize further DOL liability) and that a separate reasonable cause statement would need to be filed with the IRS requesting abatement of the penalties.

Am I off base?

Relatedly, the penalty is imposed on a Letter CP283, which I have understood to be specific to a 5500-EZ. The plan at issue files a 5500-SF reporting around 50 participants. Is this the typical form letter for a non-EZ Form 5500?

Hi!

My employer failed to correct the contributions to my 401k until after I left the company, so they paid a 50% QNEC.

However, I elected Roth and they paid pre-tax. This seems wrong to me since it's way less money ultimately going to me.

Can somebody verify?

(There's another thread suggesting an in-plan rollover, but that doesn't make sense since it's a taxable event and will immediately show how much less the pre-tax amount is compared to the same roth amount

Best,
Andrew

I was wondering if anyone could provide the name of a dc recordkeeper only for a 401k/cash balance

combo plan for a small employer(< 20 participants) preferably not too pricey. Thank you.

I have been reading through the text, as well as some articles on the credits. My question is specifically about the start-up plan employer contribution credit (not the admin cost credit or auto enroll etc). 

I understand it creation is through an addition /modification to §45E. 

One ASPPA article in particular says this: 

*If the employer maintained a 401(a), 403(a), SIMPLE, or SEP plan in the three taxable years immediately preceding the tax year in which the plan is adopted, the employer cannot take a deduction for the year of adoption, but is eligible for tax credits in the next four tax years.

https://www.asppa.org/news/where-credit-due-tax-credits-small-employer-plans-under-secure-20

Can some explain where that reasoning comes from? 

If I have a SIMPLE for a year, then terminate and switch to a 401(k), wouldn't I be precluded for the first three years of the 401(k)? And is there clarification somewhere about how to apply this credit if I maintained (but discontinued mid-year) a SIMPLE or one of the other types listed in the ASPPA article?

Just because I'm in year two of my new 401(k) plan, I would have still had a SIMPLE in the preceding 3 years, so how would I be an 'eligible employer'? 

I'm sure there is something simple I'm overlooking or understanding. 

Thank you for your insight!

The question is - if an employer using a 5305 model SEP hasn't contributed for the last three years, and hasn't contributed anything this year, can the employer establish a 401(k) for this year? IRS instruction doesn't truly address this.

Terminating a SEP Plan

Do I need to amend my SEP for the new law before I terminate it?

Generally, the IRS has not required employers to amend their SEPs for new law prior to termination. Check with your plan professional.

Do I have to fund my SEP in the year of termination?

SEPs can be terminated at any time. You can stop funding your plan once it is terminated.

What are the notification requirements when a SEP terminates?

When you terminate your SEP plan, it is a good idea to notify the employees that you are discontinuing the plan. You may need to notify the financial institution that you chose to handle the plan that there will be no more contributions and that you will terminate the contract or agreement with it. Do not notify the IRS of the plan's termination.

Check this out

https://www.irs.gov/pub/irs-drop/n-23-62.pdf

If a plan uses automatic enrollment, are employees that become eligible under the LTPT rules required to be automatically enrolled?  

Another question...has there been any change in the LTPT vesting rules with respect to a former-LTPT who becomes a "regular participant" and the number of hours that they must meet to earn a year of vesting?  Is the hours required still 500 even if the former-LTPT has met the plan's normal eligibility requirements?

Thanks very much.

Question re: self-correction of an employer eligibility failure (governmental entity adopting 401(k) plan).  If the employer will cease contributions to the 401(k) plan (either through a freeze or a termination) within the self-correction deadline and subsequently adopt 457(b) and 401(a) plans, is the appropriate action merging the 401(k) plan into the 401(a) plan?

When is a 401-k plan (safe harbor) required to be audited by an independent CPA Firm?  I know it used to be 100 employees but I think it recently changed to the amount of account balances?  Any information is appreciated.

Maybe because I see this so rarely now, and partially because I mix up my 415c and 402g deadlines, but...

Just got word that a sole prop who had already deposited $27K in pre-tax 401k deferrals for 2022 is going to have a negative Schedule C net income.  This is the double-tax situation, where when it is distributed it's taxed for 2022 and then again in 2023 because it was refunded after 4/15/23... ?

Thanks.

If this was discussed before, my apologies. This is unchartered territory for me.

Helping a CPA friend.

For a new db plan effective 1/1/2022 that is still not adopted as of today.

One of his clients deposited 200k into an account by 4/18/2023 and filed the 2022 tax return without an extension.

I do not understand how the broker accepted this deposit without an executed plan/trust document.

This client's actuary either never told him about the document deadline or did not do it or dropped the ball or there was a miscommunication, who knows. I do not have all the facts.

So, the bottom line, there is no plan document signed by 4/18/2023 and prior to any deposits.

Apparently, the actuary is now trying to file form 5300 for an "advanced determination on the qualification of the plan", whatever that means.

Are there any corrective measures that can be done here? Assume no resolution was signed by 4/18/2023.

Thanks in "advance".

If new small plans have to be auto enroll soon, how long do they have to keep that provision?

Can they set it up for like a month and then take it away?  After the first plan year?  does it have to stay in indefinitely?  Until over 120 poeple?

the age old question - file an incomplete 5500 without a set of audited Financial Statements, with intent to file amended form later?

plan in question - has never filed 5500, multiple years as a large plan. None will be ready by filing of currently due 5500.

I'm thinking don't file, and file the sum total when ready and submit under dfvc.

Currently prime rate is 8.50%.  Moodys Bond rate is 6.17%.  We have a new plan that wants to allow for loans and was questioning whether they could base the plan loan interest rate off of Moodys.  Any thoughts whether that would be acceptable, given the disparity between Moodys and Prime?

Thanks

I'm curious, for plans that set up auto enrollment, is this generally set up with immediate entry, or a longer period, say 3 months? Do participants feel like they are getting a pay decrease when this happens?