Client applies for a residential loan August 1, 2023. Paperwork supporting the purchase is not provided until today. The settlement date was August 7, 2023. Would you allow this to be a residential loan? Clearly the funds are not being used to acquire the home since the purchase has already settled. 

We have a plan with immediate eligibility for elective deferrals and delayed eligibility for the safe harbor match (I believe the standard 12-month with entry date).

I know the ADP test is required for the <1 year group and the exclusion rule can be used, so the ADP test is not an issue.  Someone in this group mentioned in the past though that top-heavy could be an issue.  So when only safe harbor match is funded, no profit sharing, this plan is not deemed to meet top heavy rules because of the differing eligibility?  And not only that, all participants would be eligible for the top heavy contribution if the plan were top heavy.  Fortunately it is not but climbing and getting into the danger zone - approaching 50%.

We always applied top heavy 3% to plans with different eligibility when profit sharing was funded.  90% of our plans are top heavy and have same eligibility for all sources.  But this plan with only delayed safe harbor is a unique plan for us.

Thank you for your comments.

Administer a DB Plan for a small law firm with 5 participants. Non-PBGC.

Plan terminated 9/15/2022 and all benefits were paid by 10/15/2022. There remains about $5,000 which they will use to pay our fees for the termination and administration. 

The 100% shareholder took a $70,000 haircut to his benefits when distributions were paid.

The 100% shareholder now wants to fund $65,000 from the company for 2022 only to himself in the terminated defined benefit plan and then take a distribution of the $65,000. This to make up for the haircut he took.

Does anyone think there would be a problem with this?

Thanks.

If the plan is not covered by PBGC, is it required to file with PBGC for a Standard Plan Termination? 

A one participant plan covering owner and the spouse. Should 5500 SF be filed after divorce, if the none owner spouse stays as participants?

I'm working with a partnership that is split 95%/5%.  I'm being told that the 5% partner isn't really an employee - they perform no services for the entity.  I think that I'm able to exclude them from any plan consideration, yes?

Does your answer change if I add the detail that the two are married to each other?

Thanks...

I've tried and failed to find out if an entity with no plan currently can adopt the Plan mid-year. Parent bought the stock recently, and are within the transition window but they want to add them mid-year,  2016-16 references amendments, but I think that's different then adding participating employers (i.e., adding a Participant Employer is not an amendment and so doing so is not covered by 2016-16).

My own personal conclusion is as long as they are on by 10/1 it should be ok because they would be able to set up their own SH 401k plan in that scenario but I can't find anything at all on point.

Any insight on how a 529 and 127 plan would coordinate with each other?  Code 529 talks about coordination with ESA and American Opportunity and Lifetime Learning credits, but nothing re: 127 plans. 

If this topic already exists, will happily take links (could not find in a few searches)... 

Employee enters the plan on the 1st of the month; payroll is typically run on the 1st of the month, but when it falls on a weekend or holiday, is paid the business day immediately preceding said weekend/holiday. Is the employee eligible to defer from that payroll?

My interpretation is no, since the actual pay date is before their entry date, but open to other interpretations / guidance here!

Example:

• Sally enters Company ABC 401(k) Plan on Sunday, October 1, 2023
• Company ABC follows a monthly pay schedule, with payment on the 1st of each month
• Pay date typically scheduled for October 1, 2023 is instead paid on Friday, September 29th due to the normally scheduled pay date falling on a weekend
• Is Sally eligible for deferral on the September 29th adjusted pay date, or must she wait for her first monthly payroll actually paid on/after October 1st (in this case Wednesday, November 1, 2023)?

A company wants to set up a 457(f) Plan.  They are aware of the taxation upon vesting rule, but they don't want to make a full distribution upon vesting.  Instead, they want to distribute a percentage to cover taxation, but leave the rest in the plan until a specified payment date.

I don't see this as a problem, but what issues am I missing?

• The company is a nonprofit, so how are 990 tax returns handled for contributions/distributions.
• The money in the Plan will continue to accrue earnings after it is vested but before it is distributed -- is there a tax issue here, or are the investment earnings not realized until final distribution?
• Does the tax distribution (the amount distributed at vesting to cover taxes) have to be a set amount (specified in the plan ahead of time) or can it just be the amount necessary to cover taxes, which is calculated at the time of distribution?

Thank you in advance!

I am sure this has been asked many times but I do not see anything similar to my challenge. 
Unfortunately, terminated employee was paid and had 401k withheld. Employee is returning the entire paycheck but due to system processes, our team was advised that we cannot choose which deductions to return - the whole check will be voided to look like it didn’t happen. 
Enter having to correct with our record keeper - we have advised the compliance way to correct - send over to record keeper for self correction, they will calculate the earrings, and issue 1099-R to offset W-2. If we do not have our record keeper complete there could be an employee loss to make whole or if there are gains, we still have ineligible funds in the Plan. 
I was basically told to just figure it out make it work. My make itwork way would be to follow our record keepers advice but getting pushback on the business because of their system limitations.

how would you go about correcting? How would we be able to calculate earnings or losses on a contribution that has been in the Plan for months?

thank you. 

We have separate 401(k) plans for non-union and union employees.  How are employees who unionized but with a balance in the non-union plan counted on line 6?  Are they active because they are active employees or are they separated because they are now in a different plan?

Thanks in advance.

We are trying to determine whether a large plan made several late deposits for approximately 50 participants during 2022 totaling around $25k .  They were deposited between 5 and 50 days after the payroll date, although most were in the lower range.  The one deposit that was 50 days overdue, as well as some of the others, were late because the plan was switching recordkeepers at the time and that was a very convoluted mess that dragged on for a couple of months. 

The trustee usually makes the deposits within a few days of payroll, and I'm aware of the 'asap' guideline for deposits; in addition to the recordkeeper change, the trustee also had seemingly valid reasons for why the other deps were late.  Since all of the deps were made by the 15th business day following the payroll date, would it be reasonable to deem the deposits as being made in a timely manner given the circumstances?     

If not, all but one late deposit would've had positive earnings (a small amount), while all the others would've suffered losses if they were immediately invested.  I imagine this could be remedied via self correction and a 5330 would still need to be filed to report the late amounts (as well as report that late deps occurred on the 5500) even though the net earnings calculated would be negative and there wouldn't be any excise tax due. 

Also complicating things is the fact that the 5558 that was filed did not request an extension for the 5330.  It has been a long time since I've had a situation like this, so any help would be greatly appreciated - hopefully there's some relief.  Thanks in advance!    

A small law firm operates as an LLC and is taxed as a sole proprietor.  The law firm sponsors a 401(k) profit sharing plan.  The sole member of the LLC makes 401(k) deferrals.  Which bank account should the LLC member use to pay his 401(k) deferrals into the Plan, personal account or the LLC's bank account?  Does it matter?

See particularly (c)(iii) of the link. This is idle curiosity only. Does the extension to deposit retirement plan contributions extend to minimum funding deadlines for a DB or MP plan? Please don't spend any time on this on my account, as there's no live case situation.

https://www.law.cornell.edu/cfr/text/26/301.7508A-1

If a plan was created in December of 2022 but no assets were in the plan until 2023 are there any filing requirements with the IRS for the year of 2022? 

Hello! We have a client that started their plan in 2022 and failed ADP and TH testing due to their owner maxing out their contribution. Their TH Funding was going to be almost $30k and they demanded a reversal of all the owner's contributions in 2022 which were processed recently after many conversations on why this was a bad idea and having them approve a hold harmless letter. Several questions about this:

1 - Does the reversal change the TH test? The balance as of 12/31/22 hasn't changed, and I know first-year plans can use accrual, but I have only ever used that when adding employer contributions to the total. Was not sure how this should/could be handled since I have never had a client actually go through with a request like this.

2 - Similarly, the Form 5500 will reflect the amounts that were in there on 12/31/22 since this is done on a cash basis. So do their quarterly statements. Should any of this be updated or should it all be left as-is? It's just a glaring issue in an audit and I am fine with that as the client signed off understanding they need to own everything that comes with the request.

3 - The reversal that was processed was for exactly $20,500 and all earnings/dividends remained in the plan. Thoughts on how this should be handled? Their letter of direction stated the exact amount versus making it all look like it never happened but, again, such an obvious issue if looked into.

Thanks!

Employer sponsors a 5304 SIMPLE, wants to change it to a 5305-SIMPLE.  There are six employees who are participating in the SIMPLE plan and all want to move to the new investment platform as a group.  (By moving as a group they will get a discount on fees, etc.)  Does the employer have to wait until January 1, 2024 to make the change?  And would he just restate on the 5305-SIMPLE?

We've run into multiple situations where it is discovered companies are not taking employee deferrals from bonuses and commissions, despite there being no exclusions specified in the adoption agreement. What is the typical correction? Would analysis need to be done for every plan year going back to when the AA was restated? Or since inception? 

This seems to be a recurring issue for plans that are being audited for the first time (first year over 120 ppts).