A State might have an income tax law that does not follow the US Internal Revenue Code.

Is anyone aware of a State’s tax law that would treat as not an income-free rollover a transaction or an amount treated as rolled over for Federal income tax purposes?

I realize that the answer to this question is "in the plan document", but I've read it and still am unsure how to proceed.  Any basic guidance on this is appreciated.

A 1 life plan has life insurance in it as well as other investments.  The owner is getting close to retiring.  He would like to terminate the plan but maintain the policy outside of the plan.  In this case, is it common for him to pay the cash surrender value of the policy into the plan and then have the policy moved out of the plan and retitled as a personal life insurance policy, which would avoid any taxation on the policy at the time of the transfer?  Is there any other way for him to continue the policy outside the plan, not pay the CSV into the plan and not be taxed on the CSV at the time of transfer?

If he just took ownership of the policy and did not pay the CSV to the plan, he would be taxed on the CSV of the policy at the time of transfer, is that correct?

FWIW, its the insurance guy who sold him the policy that is asking this questions :)!!!

Thank you

Before 2009 you not use a 5500-EZ for a controlled group.  Apparently, this has changed and you can use 5500-EZ if the plan qualifies as a one life plan.  Basically, we have a situation with a plan that covers only the owner and has less than $250K, but is adopted by a controlled group with the same owner.  One form is a proprietorship and the other is an LLC.  Just want to confirm that even though there is a controlled group the 500-EZ can be used.  Also, want to confirm that no filing is needed since the trust is under $250K.

Hi

CB/DC combo, cehcking something resuklted by sofftware.

DC has 401k deferral+NESH+PS

401k+SH eligibility age 21 and no service i.e. immediate entry (this was amended to be effective in 2022 and on - prior was 1 year wait)

PS portion eligibility age 21, 1 year service after 1000 hour service with dual entry

PS allocation 1000+ hours and last day

CB eligibility age 21 and 1 year service after 1000 hours and dual entry

Overall gateway is 7.5% ow which 3% comes from NESH

Q1: EE hired on 8/15/2021 and active as of 12/31/2022 - works 40/week - does this employee get a PS allocation under gateway requirement?

Q2: same as Q1 except EE terminated 10/31/2022 - does this employee get a PS allocation under gateway requirement?

Q3: same as Q1 except EE was hired on 7/5/2021 and active as of 12/31/2022 - does this employee get a PS allocation under gateway requirement?

Thanks

Financial advisor asked if this client he has can sponsor a SEP IRA with one of his businesses and a 401(k) with the other?  There are no employees.  

We filed From 5558 for a plan sponsor using the EIN it had been using in past years.   The sponsor elected S corp status for 2022 and wrongly assumed the EIN would not change.  the plan sponsor said the EIN (old one) on the 5500 now to sign is wrong.  But if we use the new one - it wil not link with the 5558.  I was thinking of filing under the old EIN.  That will not raise any red flags.  At this point any late filing penalty is small - 10 days which we can eat but I'd rather not go there.  It is an EZ by the way.

Any suggestions?

All subs participate in the same 401(k) plan, which includes catch ups.

In Sub 1, all catch-up eligible participants have their contribution limits automatically increased at the beginning of the Plan Year.

In Sub 2, all catch-up eligible participants are given notice that they need to actively elect catch-up.  They are given a notice at the beginning of the year and a follow-up mid-year.

Accordingly, if someone in Sub 2 elects to defer 6% of comp, and that equals $30,000, they will be cut off at $22,500 unless they have actively elected catch-up.  That same employee in Sub 1 would have the full $30,000 contributed, without ever having elected catch-up.

We plan to make all catch-up administration consistent for future Plan Years, but what about this Plan Year?

Is this a problem?

If we change administration this year, does that create a problem where we otherwise wouldn't have one?

If this is a problem, what is the solution?

Has anyone ever encountered the situation where an unused forfeiture account reverts to the employer on plan termination? Got asked this question today and in all the years I've been a TPA, I've never seen it. Thanks for any replies.

With the various new optional and required changes taking effect January 1, 2024, how are other TPA firms preparing for this?

More specifically, are you reaching out to every client and telling them about the changes coming and discussing with them each individually about amending their plans to accommodate the changes (Roth catch up contribs, LTPT employees, etc)?

Trying to develop a plan for our firm and would GREATLY appreciate others sharing what their firm's strategy is on this.

Thank you so much!

I just want to make sure I haven't missed any updated guidance on the following specific items only. Thanks.

1. Only contribution REQUIREMENT is to allow the eligible LTPT to defer.

2. IF the employer chooses to contribute match, PS, SH, (mix and match), to those who are SOLELY eligible due to LTPT rules, these people may still be excluded from coverage, ADP/ACP, and 401(a)(4) nondiscrimination testing.

3. For top heavy purposes, their account balances will be included in the determination if the plan is top heavy or not, but they are not required to receive a top heavy contribution.

4. No gateway required, even if employer chooses to give them profit sharing.

Example: 12/31/2022 payroll is deposited to the plan on 1/3/2023. The deposit includes deferrals, employer contribution, and loan repayments. We enter the deferrals and employer contributions under 1 (b) Receivables lines 1 & 2 on the schedule H and we usually enter the loan payments under (c) "other" receivable. We then lower the overall loan balance under C General Investment (8) Participant Loans by the receivable loan payment. However, I'm not sure if this is correct. Just curious on how everyone else handles receivable loan payments on the schedule H?

Thanks!

Looking at a plan, and it doesn't seem right to me.

The plan charges a fee to terminated participants who leave funds in the plan. $100 per ppt per year. The recordkeeper also pays revenue sharing to the TPA.

The Revenue sharing now equals or exceeds the TPA fees, and the $100 per ppt per year charge is being put in a "forfeiture" account, and the client is being told to offset required match contribution by the balance in the forfeiture.

As Archie Bunker once said, "I smell something stinko in the city of Denmark." This fee doesn't seem to qualify as a "forfeiture" as that term is defined.

So, what can be done with these amounts? Maybe I'm being unnecessarily conservative in my viewpoint. What do other folks do?

A Form 5500 Schedule H or I question asks: “Was this plan covered by a fidelity bond?” The form has boxes for Yes or No, and a line to state an amount.

How does one answer this question if a fiduciary obtained the insurance before the administrator signed the Form 5500 but after the reported-on plan year ended? (Assume the fiduciary does not buy retroactive coverage.)

Does the past-tense “was” refer to any time in the past?

Or does “was” in context suggest the question refers, somehow, to the reported-on plan year?

How does one answer the question if the fiduciary obtained the insurance during the reported-on plan year (so the plan was uninsured for some portion of the year)?

Am I right in guessing the usual software restrains a user from answering both Yes and No?

For the line that calls for a coverage amount, does one report the amount that applied as at the beginning of, or the end of, the reported-on year? Or is it the highest coverage amount on any day in the plan year?

Plan has 3-month wait for deferrals and 12-month for safe harbor match plus semi-annual entry-dates.  I realize the <1 year deferrals would need to be ADP tested but that is not an issue since can use the statutory exclusion, plus there are never any HCEs in that group.  No other employer contribution is made - no regular match nor profit sharing. 

This plan is not top heavy thankfully but I thought I read something that if this plan were top heavy, the funding-safe-harbor-only top heavy exemption would not apply to those not eligible for the safe harbor match.  Does that sound right?  

Thanks in advance for your comments.

I have clients seeking to simplify the administration of the SECURE 2.0 Roth requirement for catch-up contributions made by participants earning more than $145,000. One potential way to do this is to require all participants (regardless of compensation) to make catch-up contributions on a Roth basis, but it's not clear to me whether that would be permissible. 

May plan sponsors require all catch-up contributions to be made on a Roth basis? More generally, how have you advised clients who are concerned about the complexity of administering the new Roth catch-up requirement, but who don't want to eliminate catch-up contributions from their plans?

An employer with less than 100 employees who earned at least $5,000 in 2021 adopts a MEP in 2021.

On 6/1/2022 they spin out of the MEP and adopt their own 401(k) plan, covering essentially the same employees.

Would I be correct that company's participation in the MEP would disqualify it from the start-up tax credits for any year (2022 or after)?

Would I also be correct that assuming the company continues to employee less than 100 employees, they would still be able to qualify for the "Employer Contributions" credit beginning with the 2023 plan year?

Thank you.

The Plan document says the following:

Eligibility. Rollovers may be accepted from all Participants who are Employees as well as the following
(select all that apply; leave blank if not applicable):
a. [X] Any Eligible Employee, even prior to meeting eligibility conditions to be a Participant

Does this leave any discretion for the Plan Sponsor to not allow rollovers from employees who have not met the plan's eligibility requirement?  Or must they allow the rollover?

Thank you all as always  for the insights. A DB Plan where the owner and his wife are participants is terminating. The owner passed away and his Beneficiary is his wife.  Therefore, the wife is entitled to two IRA rollovers (one since she is a participant in the db plan she therefore has a DB benefit, and one rollover as beneficiary of her husband's benefit). The rollovers to the IRA are approximately 1.7 and 2.3 million respectively. ...Is there any reason to rollover each benefit separately, or can one amount of 4 million be rolled from the DB to her IRA? Thank you.

Typically, if the plan allows, deferrals and Roth plus earnings are available for hardship distribution.  

We have someone asking if they can do a Roth conversion of profit sharing for example.  I don't think that then qualifies as a "safe harbor" hardship source - does it?  I realize they could amend the plan for in-service on profit sharing at 60 months or 2 years aged deposit.