Recall back in August the erroneous 8955-SSA penalty letters sent by the IRS.  Both ftwilliam and Relius (perhaps others, too) provided template language for plan sponsors to use in requesting the IRS abate the penalties as their Forms 8955-SSA were timely filed (or didn't file).  My client just forwarded me a notice CP138 for their corporate 1120 tax return that they are due a refund, but their refund has been reduced for the erroneous penalties!  It's as though the IRS completely ignored their own mistake and my client's rebuttal to their mistake.  Has anyone else seen this?  In searching the internet this morning I cannot find anything.  Many thanks in advance for your thoughts.

Which vendor is accomodating the prototype plan document services for municipal defined benefit plans?  

According to the National Employee Services Center (NESC) and the MyFordBenefits website husband's former spouse is listed as 100% Beneficiary and NESC stated as of last communication 8/11/2023 "current spouse is not entitled to any benefit"  I have had numerous interactions with NESC to determine beneficiary of the General Retirement Plan (GRP). My husband has dementia---I have POA approved by Ford---and have acted on his behalf.

Background:

Husband took an Early Retirement effective:   January 1, 2003  "Total monthly pension benefit $4306.19" 

At age 62 +1 month (2010) Pension Benefit After Temporary Benefit Ends was $3,146.04

Husband and former spouse were divorced:   May 11, 2006

Husband and current spouse were married:    July 24, 2010 

In 2013 Ford Motor Company offered a lump sum payment to salaried retirees. Both my husband and his former spouse were offered separate election kits and election kit for husband stated four options:

Option 1:  Lump Sum Payment Option

Option 2:  Single Life Monthly Pension Benefit Payment (only available to single retirees)

Option 3:  65% Joint & Survivor Monthly Pension Benefit Payment (only available to retirees married at least 12 months)

Option 4:  75% Joint & Survivor Monthly Pension Benefit Payment (only available to retirees married at least 12 months)

The Benefit Election Kit stated:  "Our records indicated that you have a Qualified Domestic Relations order (QDRO) on file with the Company as of March 2013. The pension amounts shown in this Election Kit reflect a corresponding reduction for a pension benefit payable to an alternate payee under the terms of the QDRO."  His former spouse has a QDRO to receive survivor benefits when the "participant" (husband) dies.

Husband took Option 3.  Your Monthly Benefit Effective December 1, 2013----Total Monthly Benefit $2,857.28; Benefit to Spouse After Your Death $1,857.23.  My birthdate appears on page 14 of the Election Kit paperwork.

On or about 2018-2019 Ford Motor Company transitioned from Fidelity Service Center for Ford Motor Company to Alight Solutions. The MyFordBenefits website states that "If you submitted beneficiary choices on paper before April 1, 2019, your choices are on file but won't appear on this site unless you enter them again."  There are documents in our files that indicate my husband was in contact with NESC to make sure that I was designated as a beneficiary of the GRP.

My questions:   If the former spouse did indeed take the lump sum payment, would she have had to sign some sort of form to recind the provisions in the QDRO?  In other words, if she did elect to take the lump sum, has she exhausted her right to survivor benefits...in other words, what is the status of the QDRO? Does an amended QDRO need to be filed?

NESC seems unable to help in finding verification of beneficiary. Do I need to hire a QDRO attorney who can contact Ford Motor Company to verify that I am the beneficiary of the 65% Joint & Survivor Monthly Pension Benefit which my husband submitted with the Election Kit in 2013.

Thank you for any assistance regarding these questions.

Are there any resources to find 1099-R's or other proof that a benefit was paid out to a participant?

This client doesn't have his old records.  Plan was terminated years ago before they became our client.

Which vendor is accomodating the prototype plan document services for municipal defined benefit plans?  

Can someone refer me to a document provider that offers a 457(b) document on a plan-by-plan basis (i.e., not a subscription)?  I use ftwilliam for qualified plans but I don't see 457(b) as an offering.

Thanks.

This is something that came up in the proposal process and probably would never be designed this way, but it's become a curiosity. Let's say you have a SH match plan, and HCEs are excluded from the SHM. But the plan is TH, and Keys (small company so Keys and HCEs are the same) are not excluded from TH. Every NHCE contributes and gets the max SH match. Keys are getting TH (at least in the proposal system) so it winds up that HCEs are getting 3% nonelective and NHCEs get nothing, but the system is showing keys getting 0% nonelective for testing purposes (I guess because it isn't specifically elected as a PS contribution) so it is passing nondiscrimination testing.

My take on this is that SH match is deemed to satisfy TH, so the keys should not get a TH contribution. That is, I don't think it is an optional position to say that SH match is deemed to satisfy TH; it does, period.

That puts the kibosh on the whole thing, but I still think the TH contributions, if made, should be tested for nondiscrimination (and would fail). Any disagreement on that?

A potential client has a SIMPLE IRA plan for their business.  They are continuing the SIMPLE, covering all employees and making the required contributions, but the owner wants to establish a solok and rollover SIMPLE balance into the solok only to take advantage of other investments not offered in the SIMPLE.  The owner does not intend to ever make contributions to the solok.  The  SIMPLE plan has been in existence for more than 2 years. Would this be allowed?

One of the new items in the SAR model language is the following statement:

“Your plan is a [insert a brief description of the plan based on the plan characteristic codes listed for the plan on the Form 5500, including whether it is a defined contribution or defined benefit plan, and whether the plan is a pooled employer plan, another type of multiple-employer plan or a single-employer plan].”

How are you approaching this?  Does this mean that we need to list out every individual 5500 characteristic code description (or some version of them) as part of this? 

Two clients of ours have received LTR 1072C from the IRS for the plan year ended 12/31/21. These read similarly:

Thank you for your 5500-EZ. Your correct EIN is xx-xxxxxxx. You should use this number when filing Form 5500-series returns or Form 5558.

If you have questions call or write. Keep a copy of this letter.

Cynthia Crowell, Notices/Unpostables Program Manager

**

Does anything need to be done for the year ended 12/31/21?

Does anything need to be done for the year ended 12/31/22, which has already been filed with the same EIN as for 12/31/21?

Thanks for any help.

A key employee began RMDs in 2021.  We have the calculated RMD due 12/31/23.  Before it was taken, the employee passed away.  His spouse is his beneficiary.

Is the spouse required to take the RMD by 12/31/23?  Reading the document below, I interpret this to mean that an RMD is now not due by 12/31/23, but will be due in the year following, or in 2024 (12/31/24).  Does this sound correct?  Plus we would need to calculate a new RMD amount based on the spouse DOB compared to that of the deceased's DOB.  Hoping to get a comment on whether others come to the same conclusion.

Thank you

Death On or After Date Distributions Begin.

                                                 (i)            Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant's designated Beneficiary...

When I make a withdrawal from a 401K they add the federal tax for the tax % I fall into.

The thing I am having a problem understanding is,

If they are making me  pay federal taxes on my withdrawal and adding the taxes to my total withdrawal which becomes taxable income. Then at tax time I am taxed at my total income with includes the taxes they withheld and added to my total withdrawal . How is that not double taxing me for the amount they added to my 401K withdrawal for taxes? seems I am sending the Federal Gov. the taxed for the income % rate of the total withdrawal and then IRS looks at total and I am taxed again???

 I realize they are withholding and sending that to the IRS but it is still being added to my total imncome which is used to determine my taxable income for the year...

Looked around and did not see a similar thread on this issue but apologies if addressed elsewhere and I missed.

Looking for some qucik help on this one.  Employer has self-insured health plan.  One participant depends on prescription drug to stay alive.  The drug is covered under the formulary and normally no issue; however, the drug is in short supply currently and the one network pharmacy for the plan cannot provide on a reliable basis.  The drug can, with some effort, be found elsewhere, including at retail, but is out of network.  Network provider (ASO insurance company) has suggested coverage be extended at member's current benefit level to cover purchases at any pharmacy that has drug available for temporary period while supply is so restricted.   Provider wants employer / plan sponsor to sign an exception form agreeing to cover all costs and also to hold provider harmless, etc.  Employer is eager to help and ok with exception generally and picking up the additional drug costs.  (The added costs have not been great thus far.  They will also clear with their stop loss provider.)

Part of the hold harmless agreement, however, has Plan acknowledge that making benefit exceptions for the group health plan could violate provisions of state and federal law, including ERISA, the Code, HIPAA, COBRA, etc. and result in significant penalties and adverse tax consequences, etc.    Here the member at issue is not a highly compensated individual and the exception being made is tied just to the lack of consistent supply for the drug with the plan's pharmacy network.  The drug is covered under the plan and so not an exception in and of itself.  The Plan / Employer is just trying to find a way to provide a critical drug that it has otherwise promised to provide. 

Plan wants to know if there really are material discrimination concerns or other significant penalties or adverse tax consequences here that could arise.  That seems unlikely but welcome others' thoughts and experiences.

Can the various EPCRS corrections for elective deferral errors be applied separately to different participants?  A 401(k) plan sponsor recently discovered that although the definition of compensation for all purposes was total W-2 wages, operationally they were not applying the participants' deferral elections to bonus payments.  The employer non-elective contributions were based on total wages.  This has been going on for many years.  Incidentally, none of the participants has ever raised a question about the lack of deferral from their bonus.

The general correction is to make a QNEC in the amount of 50% of the missed deferral opportunity plus earnings.  The EPCRS safe harbor correction reduces that QNEC to 25% if corrected within 3 years from the date of the failure (the period for correction of significant errors).  Can the plan sponsor correct by providing a 25% QNEC for participants who have been participating for less than 3 years (since the failure as to them is less than 3 years) while providing a 50% QNEC for all longer-term participants? 

My client has a non-safe harbor 401k plan.  They want to terminate it and start a SIMPLE IRA.  I know SECURE 2.0 allows a SIMPLE to be terminated mid year and start a 401k plan, but is the reverse true?  Can a non-safe harbor plan be terminated mid year and start a SIMPLE mid year?  

Is a 60 day notice of termination required?  I have a Q&A from TAG saying that an advance notice of plan termination is not required (even if the plan is a safe harbor 401k plan.)  Is that true?  I know TAG isn't official legal advice but they're a pretty decent source of information.

What say all you interesting people - in light of the new SECURE 2.0 rules for mid-year replacement of a SIMPLE IRA program with an appropriate 401(k) w/ safe harbor - is 60 days notice to participants required? 

Typically employers would have to notify folks by Nov 1 that the SIMPLE would not be continuing for the upcoming year. Since we are past Nov 1, do folks think notice now is sufficient? Assuming that effective Jan 1 there is an allowed replacement (401(k) SH as provided in SECURE 2.0), is notice now enough? 30 days? Something else? Seems like there is interest in having no SIMPLE in 2024, for a cleaner break, if that is possible. 

If there is another thread already discussing this, please point me in that direction. 

Thanks! 

Retail business A is comprised of multiple locations with a total of approx. 75 participants, owners include 2 families and operates a 401k plan, Family 1 owns 51% of the business.

Retail business B is comprised of multiple locations with a total of approx. 40 participants, owners include children of Family 1 (with ownership of 51%) and operates a 401k plan.

Retail business C opened in 2008, and is comprised of one location with a total of approx. 5 participants, 25.5% ownership to Family 1, all other owners are unrelated with smaller shares.

Retail business D opened in 2015 and is comprised of one location with a total of approx. 10 participants, 51% ownership to Family 1.

Participation agreements were created in 2019 using business A as Signatory Employer. Prior to this, they operated their own plan documents.

Each plan was tested separately and a 5500-SF was filed for each division, using their separate business plan names and TINs 2019 to present.

What issues are present in this situation?

The owner of an established construction company XYZ has a 401k plan with 75 employees, purchased car dealership A in 2019. In 2020 they purchased dealerships B & C. All were asset purchases, employees were considered new hires, eligible on first day of employment.

Dealership A started their 401k plan as a participating employer of XYZ plan as did B & C when they were purchased.

Assets of all of the plans were held with one recordkeeper, using separate divisions for XYZ, A, B & C.

Each plan was tested separately and a 5500-SF was filed for each division, using their separate business plan names and TINs 2019 to present.

Due to attribution rules, owner owns more than 50% of each business, making it a controlled group.

What issues are present in this situation?

Hello all - 

Wondering if you have an opinion on whether the $250 or less de minimis rule applicable to excess amounts also applies to excess allocations?  As you know, an excess allocation is a subset of an excess amount.

Pg 21/140 of Rev. Proc. 2021-30:

• Excess amount:  "A Qualification Failure due to a contribution, allocation, or similar credit that is made on behalf of a participant or beneficiary to a plan in excess of the maximum amount permitted to be contributed, allocated, or credited on behalf of the participant or beneficiary under the terms of the plan or that exceeds a limitation on contributions or allocations provided in the Code or regulations.  Excess Amounts include:  (i) an elective deferral or after-tax employee contribution that is in excess of the maximum contribution under the plan; (ii) an elective deferral or after-tax employee contribution made in excess of the limitation under § 415; (iii) an elective deferral in excess of the limitation of § 402(g); (iv) an excess contribution or excess aggregate contribution under § 401(k) or (m); (v) an elective deferral or aftertax employee contribution that is made with respect to compensation in excess of the limitation of § 401(a)(17); and (vi) any other employer contribution that exceeds a limitation under § 401(m) (but only with respect to the forfeiture of nonvested matching contributions that are excess aggregate contributions), 411(a)(3)(G), or 415, or that is made with respect to compensation in excess of the limitation under § 401(a)(17)."
• Excess allocation:  "The term “Excess Allocation” means an Excess Amount for which the Code or regulations do not provide any corrective mechanism.  Excess Allocations include Excess Amounts as defined in section 5.01(3)(a)(i), (ii), (v), and (vi) (except with respect to § 401(m) or 411(a)(3)(G) violations).  Excess Allocations must be corrected in accordance with section 6.06(2)."

Pg 34/140 of Rev.  Proc. 2021-30:

• "(e) Small Excess Amounts.  Generally, if the total amount of an Excess Amount with respect to the benefit of a participant or beneficiary is $250 or less, the Plan Sponsor is not required to distribute or forfeit such Excess Amount.  However, if the Excess Amount exceeds a statutory limit, the participant or beneficiary must be notified that the Excess Amount, including any investment gains, is not eligible for favorable tax treatment accorded to distributions from the plan (and, specifically, is not eligible for tax-free rollover).  See section 6.06(1) for such notice requirements. 

There are differing opinions on whether the $250 de minimis rule applies to an excess amount that is also an excess allocation.  An example, employee elects to defer 5%, but the plan sponsor withholds 7% in error. The 2% would be considered an excess allocation.  Could the plan sponsor elect to use the $250 de minimis rule here?  According to the ERISApedia.com webinar presenters, the answer is no. I even challenged this statement during the webinar and the presenter said the $250 de minimis rule doesn't apply.  

I cannot find anything on the web except one article from Newfront that says the de minimis rule doesn't apply to excess allocations.  And, the Rev. Proc. doesn't really make it clear enough to be certain.

Any feedback is greatly appreciated!  Thanks.

Participant was hired in 2018 and was participating in 401k plan. He terminated in 2020, and then was rehired 2 years later in 2022. Since his rehire, he has been working on an as-needed basis. He receives a W-2 and is on payroll when working (not a 1099 employee). He took a full distribution from his account, even though he technically will still work on an as needed basis. Would he have been inelgiible to take his distribution? He wasn't working when he took it and he is not 59 1/2, so it couldn't be considered an ISW. Just curious if technically they could consider him terminated, and then rehired when he works?