A physician (of course) has owned  a part of a business in his 401(k) account (yes we've been filing 990-Ts.)  Now the partnership has been sold and he is receiving amounts in 3 installments 2023 (already received), 2024, and 2025.  He says the plan is now closed since all cash has been paid out but there is an A/R for the other 2 payments.  He says the other payments will be made to his Rollover IRA per his broker.  I mentioned 5500s for two more years and likely required plan amendments.  He sold his practice and so he wants the plan to go away naturally.

The other option  could be to file a 1099-R for the entire amount including the 2 receivable payments and so to treat the remaining two payments as receivable to the IRA.  can an IRA hold an A/R or note?  If not would the IRS match the plan 1099-R to the IRA rollover 5498?    The other 2 payments might total $80 to $100K.  And so our 1099-R woudl be very different than the 5498 filed by the recipient IRA.

I know I can advise and he as Trustee and Plan Administrator can provide direction.

Comments? Thanks

Tom

I am working for a multi-state organization that allows for Domestic Partner coverage.  I have one vendor contract that requires individuals to cohabitate for 12 consecutive months in order to qualify as a Domestic Partners.  In writing a company policy pertaining to the qualifications required to be a Domestic Partner, it would make sense use the most stringent set of rules presented in the collective contracts to develop our official policy.  With that said, I'm wondering if this 12 month cohabitation rule might violate any state requirements?  If a state's definition of domestic partnership does not require a 12 month cohabitation period and that state/local jurisdiction requires an employer to provide benefits to domestic partners, this creates a conflict.

Curious to know how others might be handling things from a policy standpoint.

Hi

Veterinary, PLLC, 10 participants, 2 owners (50/50) and their spouses

Controlled group with Corp X, LTD, employees are the spouses only and it does not perform veterinary services nor any other professional services.

Is the DB plan covered by PBGC?

Thanks

If you have a valid beneficiary designation on file, to you segregate those assets to the beneficiary right away?

For example, if Sam passes away and there are two beneficiaries, his son and daughter, do you split the account up for them and wait for then to claim the benefit?  Or do you leave the funds in the deceased participant's account until they come calling?

Is there anything that restricts a participant to take a loan while they are out on a leave of absence?  The loan specifically states that all repayments must be made via payroll deduction, so the thought is that it naturally restricts it.  The Trustees are asking if there is anything more specific, though.

Thanks in advance!

Has anyone else received calls from clients stating their former employees have received SSA Potential Private Retirement Benefit Information Letters when they took full distributions years ago?  In the last week, we've received calls from several and in every case the participants were reported with a code D on a form 8955-SSA at some point in the past. The oldest one was from 1994! 

Anyone aware of any issues at the DOL that might have resulted in this, or aware of something that has been released about this that I might have missed?

Thanks!

I thought I had seen this discussed here previously, but I'm not finding it...

We offer plans the ability to have our participant loan fees (both initial set up and annual maintenance) paid directly from the accounts on the recordkeeping platform, or some plan sponsors offer to pay the fees themselves (usually when there are few loans, or it's a tight-knit group).  And then sometimes this kind of thing happens, where the plan sponsor was paying the fees... and then at some point they decided that was stupid and started having the participants reimburse the employer for those loan fees on an annual basis once they got our invoice (it's itemized enough to show the fees for the loan charges, so it's not hard to figure out who the loan charges are for, especially for a small plan).

Of course, they don't tell us they are doing this until it is mentioned accidentally in a conversation and my distribution team person has her eyes pop out of her head.  She offers to change the plan so that the fees come from the accounts, and is told that, it's OK, this works for us.

So... does it, really?  The loan policy DOES include our loan fee in the amount that is being charged to participants (both at setup and annually), so maybe it does... though it does say that fees are deducted from the accounts from which the loan is taken, which is not correct, so we'd have to modify that.  But it's not on their 404a5 fee disclosure from the recordkeeper - only the recordkeeper's loan fees are shown.  And I don't think they'll let us add our fees there unless we are charging them from the plan accounts.  So my overall gut feeling is that this is danger zone territory.

Or, does the fact that this is handled "outside the plan" make this a moot point?  That feels wrong just typing that, but I think that's their rationale.

As I dabble as a benefit plan auditor in my spare time, the following issue came up yesterday; any thoughts would be appreciated:

We have a benefit plan out in New Jersey where the manager on the plan reached out to Nationwide for an asset certification so that an ERISA Section 103(a)(3)(C) audit could be completed for 2022; they have always received a certification from Nationwide in the past, but one was not included in the package they received this year. They received a response from Nationwide that “after consultation with our auditors, we are no longer issuing certifications on assets held with Nationwide”. I have a Nationwide client that I have already received the certification letter from for 2022. Has anybody heard anything about Nationwide not certifying their reports anymore? All of a sudden there could be folks out there that need a non-ERISA Section 103(a)(3)(C) audit…..

We have a sole prop client who contributed $20,500 into the plan throughout 2022.  At the end of 2022, she was advised to elect S Corp status for 2022.  I was told by her CPA firm that she will have no Sch C as the entire 2022 year is being reported under a tax filing for the S corp.  (The conversion to S was solely to reduce her Sch C Medicare comp from $1,000,000+ to $200,000 in wages.)

There was no 401(k) deferral deduction on her W-2.  It seems to me we have no choice but to count her deferral in testing for 2022 - the money is in the plan.  But since she has no Sch C I'm not sure she can take a tax deduction on her 1040.  But that is not my problem I suppose.  I wonder it the IRS would take the position the deferrals are all excess because she did not have deferrals on her W-2 and had no sole prop compensation to support the deferrals.

Comments? Thanks.

Tom 

Notice 2023-43 Question 2 states: 

Hi

Drawing a blank here.

Fiscal plan, plan year 7/1/2022 to 6/30/2023

Owner and spouse only

Limitation year is plan year=fiscal year

415c limit is based on 2023

They take salary once a year and as of 6/30/2023.

The 401k deferral portion, is it based on 2022 or 2023 limits?

Do not worry about the multiple deferrals within plan year as all deferrals are always done as of 6/30.

Thanks

I am getting a little mixed up when I try to think this through so could use some help

I have a client who is currently contributing for their field employees $4 per hour into the 401k  plan.  This is tested under 401(a)(4) testing by the recordkeeper.  it is not Prevailing Wage, just profit sharing.

The client wants to change the arrangement so that employees will have the option of either continuing to receive a $4 per hour contribution into the plan OR getting a $3 per hour pay raise.

What are the implications of this?  Since employees will have a choice, has the employer effectively given a pay raise to all of them of either $4 per hour or $3 per hour, depending on what they elect?  I would think that previously the employer was taking a tax deduction for the employer contribution, but under this new arrangement employees who elect to receive the $4 per hour contributed to the plan are really just contributing their own pay, so this is no longer an employer deduction?  And the employer will now need to pay applicable payroll taxes, etc on these raises?  

Also this seems really confusing in the case of an  employee who is currently already contributing to the 401k plan as a % of their pay, and now they elect to continue to receive the $4 per hour into the plan.  Doesn't that conflict with their deferral election?  

thanks!

Hi,

There is an existing DB Plan with the only participant being the owner. The Corp then hires an employee and wants to join a PEO. How dies this effect the existing DB Plan? Is the new employee really an employee of the Corp? Thank you. 

Good afternoon,

CPA here auditing a plan and hoping to run by an error encountered in the first-ever audit of a 401(k) plan. Facts are as follows:

• From inception 1/1/2019 through 12/31/20, the effective plan document had a 1 year service requirement with monthly entry and an autoenrollment feature. During this period, the plan operated as if the eligibility was immediate upon hire. 
• Effective 1/1/21, the plan was restated to change the eligibility/entry date provisions to immediate and removed the autoenrollment feature.

My question is: Can the plan sponsor correct the error related to the 2019 and 2020 plan years through the SCP under Revenue Procedure 2021-30 by retroactively amending the plan's service and entry date requirements to immediate to conform to how the plan operated during 2019 and 2020? 

Based on my reading if the Rev Proc, I would think the answer is yes as the amendment resulted in "an increase of a benefit, right, or feature", but am wondering if I am missing something?

Thank you!

I apologize in advance if the question is not formulated clear enough.  I am trying to establish the framework to analyze the coordination of multiple employers, so the high level summary and IRC sites/links will be appreciated as well as reference to educational materials not in violation of proprietary information policies.

Let's assume we have one person who works for an organization sponsoring 403(b) plan making in excess of $330,000 (just to avoid the math) as a W-2 employee. The person is under of 50. The same person also owns a single member LLC taxed as a sole-proprietorship that sponsors a "solo 401(k)" plan.  Let's assume there is no CB/DB plan in a picture for time being.

Scenario 1 - The organization is a non-profit hospital.  Then the 403(b) plan is deemed to be controlled by that individual.  The individual also has his own medical practice (no common law employees). Therefore, the maximum benefit will be $22,500 in 403(b) deferral and $43,500 in PS allocation in solo401(k).  Both 403(b) and solo 401(k) are integrated for purposes of 415.  Do you agree?

Scenario 2 - everything is the same as above but the business is NOT a medical practice.  Let's say it is a medical technician type of activity.  Does the answer change?

Scenario 3 - the organization is NOT a non-profit hospital but rather the educational institution (University of State for example).  Does the answer change?

I am looking to understand the general framework when the non-profit 403(b) MUST be aggregated with the individual 401(k) and what are the exception to that exception of "separate employers" rule.  I think there are some exceptions to exception and that is where it gets very muddy for me.  Help and education are appreciated as always.

Medical practice with SH 401(k) lists two groups of HCEs - one for the doctor and another for non-physician HCEs (doctor's wife).  A third group is for all other continuing employees and a fourth group for terminated employees.

Doctor's adult daughter now working for the practice and became eligible for the plan in 2022.  Is it possible amend the plan retroactively to put the daughter in a separate group from the doctor's wife?  Giving the daughter the same percentage allocation as the wife is killing my non-discrim test.

Thanks for any help!

For the Roth catchup provision for off calendar plans,  is the $145,000 look back comp based on plan year or calendar year? Also since this is starting in tax year 2024, does this provision start earlier for off calendars.   For example, a 4/1/2023-3/31/2024, would the Roth requirement start with contributions made in calendar year 2024?  

I have a dental practice (PA, in the State of New Jersey) that sponsors three profit sharing plans, each with individual accounts. One for each dentist (Dentist #1 profit sharing plan; Dentist #2 profit sharing plan).  The third plan is Plan #3 is for the employees of the PA.

Keeping in mind, the plans are all sponsored by XYZ, DDS, PA.

One of the dentists (Dentist #1) had decided to invest a portion of his account in a limited partnership and I've been on his case to see the original paperwork to determine if the registration was done correctly. 

I have a copy of the K-1, apparently the account is registered under the name of the Sponsor, but there is nothing n the paperwork that mentions this as an investment of "Dentist #1 Profit Sharing Plan".

They way this account is registered, this is NOT a plan investment, the Entity should be "Dentist #1 Profit Sharing Plan and I think must be re-registered correctly.

OMG some clients just don't get it.    This guy is generous.  He wants to match everyone's deferral dollar for dollar.  But I don't think it will work.  

He only earns $67,000.  He deferred $27,000 so he wants a match for himself equal to that $27,000.  That doesn't work... does it?  I've got so many numbers bouncing around in my head.  What is the max that he can get?  Flat out 25% of 67,000 or $16,750?  Total deposit for him would be $43,750?  Is there any way to get him what he wants?

Thansk

The investment adviser of one of the 401k's that we manager would like to use his solo 401k retirement funds to invest in a startup. If he has no existing connections with the start up and no other investments in it is this an allowed transaction with their 401k funds or would this be considered prohibited?