In light of the automatic enrollment requirement for new plans (beginning with the 2025 plan year), does SHMAC make sense for a new plan anymore? Since automatic enrollment is required either way, seems like QACA is always better than SHMAC (unless the employer want to give the higher match and immediate vesting).

Is there some other factor that I'm forgetting that would favor SHMAC?

executive exceeded 415(c) and company refunded the $10,000 of excess after-tax contributions through payroll rather than through the plan.

months later, company convinced plan recordkeeper to remove $10,000 from participant's account and send it to the company.

issues abound! there's still a 415(c) issue because the earnings were never distributed from teh participant's account. A 1099-R was never issued (since the amount distributed out of participant's account went to company). Moreover, there's a prohibited transaction here given the transfer of assets from the plan to the company.

Welcome other thoughts, but I think the company should unwind as best as possible by returning funds to the plan (with earnings/interest), moving it to the participant's account, distributing it to the participant as a 415(c) excess, reporting it on 1099-R for current year, and then recouping that amount from the participant outside of the plan (since participant would otherwise have a windfall).

My main concern is with the fiduciary violation. Would this qualify as a below-market interest loan from the plan to the company, such that it could be corrected via VFCP? 

We have a 403(b) Plan that restated its document in 2018. The restated document has a discretionary match while the 403(b) Plan has been operating with a 3% Safe Harbor Non-Elective for 8+ years. This restated document is not at all how the plan was being operating at that time, nor how it is currently being operated. The Plan has been failing to follow the plan provisions for an extended period of time, but they would like to continue with the 3% SHNEC. They do not want a discretionary match.

What is the process to correct this error? 

The IRS is at it again...

Have received two penalty notices from clients today regarding the 12/31/2022 filing of the Form 8955-SSA through FIRE. Penalty is for $660, with the reason that the Form 8955-SSA was not filed timely. Have confirmations from FIRE that the returns were filed in February and June of 2023.

Get ready to start responding to yet another IRS mess-up.....    

Calendar year plan - Plan requires Year of Services defined as 12-month period in which at least 1000 hours is worked with entry on following 1/1 or 7/1.  Eligibility determination year switches to plan year after first anniversary year if not eligible

Original Date of Hire 10/21/2020

Date of Termination 8/25/2020 (>1000 worked from DOH to DOT))

So not eligible for 2020

Date of Rehire 11/1/2021 250 hours worked in 2021

Date of Termination 4/25/2022

I wonder if this person should have been made eligible on date or rehire although she never worked a consecutive 12-month period.  I believe FIS told me at one time it was just a passage of time in cases like this and doesn't have to be 12 months of continued employment.

I know - tell clients not to re-hire!

Employee participated in two plans during 2022 and went over the 402(g) limit by $1,000.

Can we just remove the funds from the plan and the ER issue a corrected W2?

Before all of the "Nooooooo" answers, consider this:

The ER is already reissuing a new W2 b/c of another, unrelated problem.

Can/should they "correct" the deferral and remove the funds from the plan?  If so, does it get placed int he suspense account or can it be sent back to ER as Mistake of Fact?

If a plan currently allows catch up contributions but does not allow roth contributions, does it HAVE TO BE amended BY 12/31/23 to either remove catchup or add roth. 

Participant contributed in two plans in 2022 and went over the deferral limit in the aggregate.

I know there is no distribution after 4/15, the money just stays there and he's taxed twice on the gross excess.

However, he lives in California and there is a federal extension for taxes due to the wild fires.  Does that 4/15 date for CA residents get moved?

Hello Everyone!

I just need to clarify the rule for Option 1 for Otherwise Excludable Employees:

The rule: The earlier of the first day of the next plan year after attaining age 21 and completing one year of service or 6 months after satisfying such requirements.

The question:

Let's say we are working on a 2023 profit share, and an employee was hired on 07/02/2022.

The earlier of:

 1^st day of the next plan year after completing one year of service: one year of service = 07/01/2023, next plan year = 01/01/2024

 Or

 6 months after satisfying such requirements: 07/01/2023 + 6 months = 01/01/2024 (or is it 12/31/2023?)

 Question: Is 6 months after 07/01/2023 actually 12/31/2023 or is it 01/01/2024?

Thank you in advance!

We have had clients inform us they received penalty letters from the IRS for their 2022 Form 8955-SSA.  The Form was filed by our office timely and accurately.  We received notification from ftwilliam.com today the IRS goofed.  Below is the text from the ftwilliam.com email:
 

Dear ftwilliam.com Customer:

We recently contacted the IRS due to several customers receiving erroneous penalty notices for filing late or incomplete Form 8955-SSA for the 2022 tax period. If users receive this letter, and the batch was filed timely, IRS representatives have advised that the Plan Sponsor request an abatement of penalties.

If the batch filing shows ‘Completed’ with a timestamp prior to the deadline within the ftwilliam.com software, the IRS FIRE records indicate the filings were completed timely and processed accordingly. Plans Sponsors are advised to contact the IRS at the number on the CP283C notice (877.829.5500) or fax a signed letter for request of abatement as well as the IRS notice to ATTN: Employee Plan Account at 877.792.2864.

We have included a sample fax coversheet letter to provide Plan Sponsors to send the IRS at the following Link: Request for Penalty Abatement Under Reasonable Cause

Please note the letter needs to be signed (including the signer’s title), and dated by the Plan Sponsor before faxing to the IRS.

Thank you for using ftwilliam.com, a product suite of Wolters Kluwer Legal & Regulatory U.S. If you have any questions or concerns, please feel free to contact us at 800.596.0714 or via email at support@ftwilliam.com.
 

Hi. I always struggle with issues related to controlled groups. A hospital wants to start a joint venture with another group. The hospital will own 51% of the JV. Does that level of ownership allow the hospital provide benefits (retirement, health, etc.) to the employees of the JV?

Thanks.

2024 increases to $7k. Suppose plan currently uses 1K. Can the plan operationally go ahead and use the 7K for 2024, or must it amend to 5k, which then increases to 7k? The latter seems absurd, but an interesting question...

Need some help.

Plan has 1 year of service, 1000 hours and dual entry.  FTW Document -  Rule of Parity & 1 year hold out is not elected

i have an employee hired 8/2020 termed 3/2021.  Worked over 1000 hours

Rehired 8/2022

Since she worked over 1000, would she enter on rehire date?

Appreciate your help.   Thanks!

Participant died in 2022 prior to his required beginning date.  Surviving spouse is sole beneficiary and current employee and would like to roll over his balance into her account in the same plan.  Assuming the plan allows this, any concerns?  Would she have 10 years to fully distribute the amount attributable to the deceased participant or would it be consolidated with her balance and subject to her own RMD requirements?

Employer contributes a specified dollar amount each year to an HRA on behalf of each participant, which money can be used for deductibles and co-pays under its high-deductible health plan.  As a group health plan, the HRA is subject to COBRA, but the premium is not entirely clear.  I understand that there are a couple methodologies for determining the premium for COBRA purposes (e.g., actuarial method and past-cost method), but is there an argument that the premium is the employer contribution itself on top of which an administration charge up to 2% could be added?  It does not seem that former employees should be eligible for continued employer contributions to the HRA; that should be limited to current eligible employees.  

Professional office with a 401k safe harbor cross tested plan is being sold to larger company, with sale date set for 9/1.

All employees will become part of purchasing company with immediate participation in new owner's 401k plan.

Both plans are calendar plans. The plan itself is not part of the sale and is intended to be terminated, rather than merged.

Both plans also have 1000 hours and last day worked requirements.

So there will be no employer ps contribution in seller's plan since no 12/31 eligibility, though they will be making their 3% safe harbor.

The new company (I have not seen their plan doc) has informed their intent to provide a ps contribution based on 9/1-12/31 compensation, honoring hours worked all year, but not pay.

How is this usually resolved that there seems to be no PS contribution for 1/1-8/31? I note that this info has been provided to my company, we have not been involved in any discussions until now.

Group:

Over the years I've seen Plan Sponsors (for ESOP's) setting up

sinking funds to pay for future participant benefits.

Where do I find the citation/authority for types of assets

a plan sponsor can use to fund the repurchase obligation? Is there a specific DOL citation? Treas regulation?

I was thinking about this awhile back at a conference for civil/criminal tax matters and one speaker

referenced that there's no guidance even on investing in Crypto.  Other than a DOL letter/notice (?)

with a stern warning that retirement plan investments in 'crypto' may be a breach of fiduciary duties.  I don't have the date

readily available.  I may be conflating the two items as this didn't per se relate to ESOP's.  But,

could a ESOP trustee invest in crypto as their asset for the repurchase obligation?  Seems the IRS/DOL

leaves this in a grey area on purpose.

Thoughts and comments appreciated. 

An individual works full-time as a private school administrator. She receives 20% of her income from her employer and the other 80% from a separate grant organization. Each pay period she receives two checks, one from her employer and the other from the grant organization.

Both sources of income are considered taxable income.

She is eligible to participate in the employer's 403(b).

QUESTION: Can then money from the grant organization be considered compensation for calculating her contributions as well as for purposes of determining includible compensation (415c limit)?

I assume further guidance is required, but The Secure Act text states that the lookback 145k compensation for determining the HPEs  is from the employer sponsoring the plan.  

So if a worksite onboards with a PEO and the PEO sponsors a MEP, and the worksite adopts the MEP, then could we make a case that the lookback compensation is based on the compensation under the PEO only?

Otherwise, the operational processes of onboarding a PEO, collecting  prior-year  FICA wages, and possibly year-to-date compensation plus deferrals (if HPE) will be a bigger administrative lift given that employers join PEOs continuously throughout the year.

Consideration:  Worksite now receives W2 from PEO EIN.

Does anyone know what the IRS user fee is for requesting a change in funding method that does not get automatic approval? It is classified as a letter ruling request but the fee schedule does not specifically show changes in funding methods and actuarial assumptions. I see changes in accounting method at $11,500 and then all other requests at $38,000 - big difference. The IRS does not make this easy!