Here's a odd one for this afternoon - We are TPA on a plan that requires the independent audit report for the 5500 due to size.  The plan is with a large recognized national 401k vendor.  The auditors are currently doing a review of selected participant distributions.  They were unable to match the amounts forfeited on two individuals based on the vesting so of course came to me for explanation.  I also could not match the amounts that were paid out/forfeited so I checked both my system and the participant hard copy distribution form.  Both of those reflect the proper vested percentage for each participant.  I then went to the vendor for explanation as to how the vested percentage was computed.  In both cases the participants had taken a Coronavirus withdrawal back in 2020 and the vendor is telling me that affected the final payment and subsequently the forfeitures for each participant.  That would indicate to me that a portion of the Coronavirus distribution was made from non-vested funds.  We're not talking about a lot of money here because this particular client limited the CVD to $3,450 per participant.  Both participants had deferral accounts and for one of them the vendor didn't even take 100% of the deferral account before taking from the Employer sources.  It's pretty confusing to me anyway.

Ultimately I guess my question is - I was unaware that it was even allowed at the time to take non-vested funds as part of the CVD distributions.  Does anyone know if this was a thing?

Thanks in advance!

With the new 2023 forms, this number will be required. The IRS has informally indicated that this will be available as part of the 5500 data sets. So, anyone can look up the opinion letter serial number for a given TPA, and essentially obtain your client list for 5500 filings under each pre-approved plan you sponsor.

Is the ARA raising any hell on this? Seems pretty serious to me! 

Hi. Client is terminating a 401k Plan. There is a sizable amount in the forfeiture account. Even after paying expenses, there will be a balance left over. The document says that forfeitures are allocated first to restore previously forfeited amounts to participant accounts. Thereafter, remaining forfeitures are used to:

• offset Plan expenses
• reduce future matching contributions
• reduce future nonelective contributions

Since we are terminating, and thus there will not be any future contributions, how should we allocate the remaining forfeiture balance? Pro-rata to participants according to??

Thanks.

Looking for a citation for the following:

For a new entrant into the plan who receives the safe harbor contribution for only part of the year, i.e. while a participant, the top heavy contribution should be for the entire year and thus, such a participant would require an additional top heavy contribution.

Participant entered in July, but received a safe harbor from date of participation.

We're having a difference of opinion in my office regarding whether the eventual grant of a meaningful benefit (via an 11(g) amendment after the year ends) is an appropriate actuarial assumption for purposes of running the beginning of year valuation.

For example, when doing the 1/1/23 valuation for a cash balance plan the actuary is aware that less than 40% of participants will be accruing a meaningful benefit.  The actuary determines that 8 additional participants, who would not otherwise accrue any benefit during 2023 (due to a current classification exclusion), will need to accrue a meaningful benefit and includes them in the valuation on the basis that that reflects his best estimate of plan liabilities.  Others believe that the meaningful benefit accrual for those participants should not be reflected as of 1/1/23 since there is no current amendment granting the accrual.  It's possible that when the amendment is adopted the meaningful benefits may be granted to different participants.  As an aside, the increased contribution for the additional normal cost (which is about 10% of the overall normal cost) would still be within the plan's maximum deductible limit even without these benefits.

What do you think?  Opinions and/or specific citations would be appreciated.

Thanks.

Suffering from Friday brain cramp.

John Doe owns 100% of corporation A, Sponsors Plan (X) - calendar year plan. During 2021 calendar year, John sells ASSETS of corporation A to Edward Doe. Edward has corporation B  - keeps the same corporate name, but now under new employer id# (he's 100% owner) and assumes the assets and liabilities of plan X and sponsors the plan. The former owner John Doe continues as a non-owner employee in corporation B.

For 2022, John would appear to be a Key employee, since for part of the PLAN year containing the determination date (2021), he owned 100% of the corporation sponsoring the plan, which was subsequently taken over by corporation B. Have I got that right? Then in 2023, he's a former key, and his balance is excluded from the top heavy test. Have I got that right?

Thjis is probably one of those things where I'll come in on Monday, look at it and say, "Duh, the answer is simple" but I'm chasing my tail at the moment.

Thanks!

I'm supposed to be able to dump into Excel or whatever format a listing of all plan provisions.  It's under "Data Export".  Anyone know how to do that?  I cannot get it to work.  I'm waiting for Relius to provide some direction but figured I would ask y'all!

FYI I am trying to very efficiently figure out which clients dont have Roth or who are affected by LTPT rules.

IRS Publication 560, p. 15-16 says an employer must make salary reduction contributions to a SIMPLE IRA within 30 days after the end of the month in which the amounts would have otherwise been payable to the employee.  Then it says "Certain plans subject to DOL rules may have an earlier due date for salary reduction contributions." What are these "certain" plans? Is this referring to the DOL safe harbor rule that provides the employee contributions deposited to retirement plans with fewer than 100 participants must be deposited within 7 business days following receipt or withholding by employers? When would the latter not apply since SIMPLE plans apply to businesses with 100 or less employees? 

"Simple" question: the instructions in IRS Publication 560, Retirement Plans for Small Businesses, say that contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA.  However, I thought that if you participated in a qualified retirement plan, that affected the deductibility of contributions to a traditional IRA?  

In addition, I have a question re contributions to IRAs. On page 7 of publication 590-A, it says a trustee or custodian generally cannot accept contributions of more than the deductible amount for the year.   But I thought folks may make nondeductible contributions to traditional IRAs, subject to the dollar limits and applicable filing status limits?  

The employer's HSA plan starts September 1, 2023.  Can an employee contribute the maximum allowed HSA contribution for 2023 and 2024? 

Hypothetical : 2022 retroactive CB plan to be set up.  Potential sponsor already filed 2022 corp return but will amend for reasons other than this but wants to include if possible.  In CA we have an automatic extension for all counties due to weather except 2 (client located in county under extension).  We have time to file 5558 still.  Rev Rule 66-144; 1966-1 C.B 91 seems to support this:

"Section 404(a)(6) of the Code provides that a contribution for a taxable year made by a taxpayer reporting on the accrual basis shall be deemed to be made within such taxable year if paid within the time prescribed for filing its return plus any extension of time in which to file. Therefore, a contribution paid within an extended filing period is deemed to have been made during the taxable year. Thus, a contribution made during such extended period, as provided for under section 6081(b) of the Code, is deemed to have been made during the taxable year regardless of when the return is filed."

Guess the question is does the filing of the 2022 corp return trump the automatic extension granted for CA thru 10/16/23?

Thanks for any input.

Plan is owner and spouse only.  They have 100% of assets (obviously). Is the plan top heavy?  I know this question sounds dumb, but I thought maybe top heavy was an ERISA requirement to which they are EXEMPT, but I don't see owner-only plans listed as a plan type not subject to top heavy.   I also considered that there would be no non-key employee balances giving us a denominator in our top heavy ratio of 0, making the plan not top heavy.  But I can't find what I thought would be an easy answer!

Here is why I ask - the plan was NOT written to exclude keys from the top heavy minimum and both the owner and spouse deferred the max, but they were not wanting to do an ER contribution.  Do they have to put in a top heavy contribution for themselves?

Thanks!

Hi, 

Should the Cycle 3 restatement be amendments to include the Plan Termination date?  is it a must or does a 5500 hold good. 

I have a plan terminating that had about $20k in the Forfeiture Account.  They used some of it to pay plan expenses, but even after that there's about $12k left in there.

So who does that money get split up between?  Is it:

1. Anyone still actively employed at the time of termination (I believe it was just the owner)
2. Any person who had a balance at the time of termination

Hoping someone could assist. I help oversee a 401(k) Split Plan. There is several complexities to the Plan which is why is makes me harder to administer.  Trying to determine which book is best to purchase. The options I believe I have is the ERISA Outline Book  or the 401(k) Answer Book by Empower. Both are super expensive so weighing options. 
thank you for your thoughts. 

So, here's 1.401(k)-1(d)(4) from the Cornell Law website folks

The fact pattern a co-worker gave me was interesting

DB/DC combo, plan needs to make DC allocations for 2022.

Plan sponsor's assets were sold/employees terminated in 2022.  DC plan has been already terminated, though, and everyone's paid out, maybe except for one straggler.

There's concern their big former DC separate recordkeeper would balk about opening the plan back up after termination/payouts.

Anyway, the "interesting part" concerns whether or not the sponsor can just start up a separate DC plan, retroactive to 2022, to receive these allocations for the testing.  This regulation seems to preclude distribution upon the termination of a plan when the sponsor's going to set up another plan within 12 months.  The thing is, in this case, all the employees' distributions are contingent upon their termination of employment with the Seller.  And the owner has a distributable event upon age 59½.  So none of these distributions seem to have the plan termination as the distributable event - does that mean a successor DC plan is going to be okay after all?

--bri

Company A merges with Company B.  Company A and Company B have 401(k) plans.  Company B terminates their 401(k) plan.  There are 5 employees total in company B, 2 of the 5 employees transfer into Company A's 401(k) plan but 3 of the employees take a cash distribution.  There is also a parent company, and they want to be conservative and file VCP for the failure.  How would you present this for correction under VCP?  Any thoughts would be appreciated!

Hello, 

We have been working to make corrections on missed deferrals from 2018 through 2022; this includes on the employee and employer side. Is there a general rule or guideline to make these corrections? We've been receiving information in pieces and it seems that every time we have it complete, something else comes up and we need to start over. 

We were instructed to look at each paycheck and determine the missed deferrals but it seems there's so many other contingencies, that we feel it would be easier to calculate on an overall basis. 

Has anyone had experience with this situation or can provide any better help?

Thanks!

This new client came to me and needs to update their ERISA bond coverage.   The plan had $800K in 2022... probably less now due to the investment performance.  I've attached a copy of the screenshot he sent to me.   What do people recommend?  Just a stand alone bond or a bond + Fiduciary Liability?   or maybe a bond + Fiduciary Liability + Cyber liability.   As you can see each option that he was given includes all 3 options.

Thanks

Bond Coverage Options - Copy.pdf

The Plan Sponsor made payment of back wages in 2022 pursuant to Department of Labor Wage and Hour Division investigation.  The Wages were reported on W2 form for 2022.  None of the employees elected to have deferrals taken from these back wages and no employer contribution was made to the plan for 2022.   In the 2021 Plan Year the Employer did make a matching contribution as well as a QNEC to correct the failed ADP test.  I understand that the Regulations discuss the back pay as it relates to 415.  Related to this back pay, my questions are as follows.  :

1.  Is the Plan required to rerun the 2021 ADP/ACP test to include the additional wages?

2. Is the Plan required to recalculate the Match for 2021 to include the additional wages?

3.  Is the Plan required to recalculate the QNEC allocation?

Thank you.