Hello! This is my first time posting, so apologies for mistakes. I was wondering if anyone has any knowledge to share on how to properly do the following below. I've been unable to get any clarity from our TPA of the FSA plan, nor from the CPA (perhaps this is a legal compliance issue I'm concerned with and maybe it's beyond their scope). 

We have an existing FSA plan with a plan year of 4/1-3/31, which is the same time line for our health plans' plan year. We merged (acquired) w/ another company earlier this year, and they have a Jan 1-Dec 31 plan year for their health plans, and didn't have an FSA. Our company has decided to restructure the plans so company wide the plan year would be Jan 1-Dec 31 for all offices, with the same plan year and enrollment periods for all health & dental, and FSA. 

Questions I have are: 

1. If we close the FSA plan by Dec 31, this year, do we have to notify staff? If so, how soon? Is there a blackout period? 

2. If we close FSA by Dec 31, some employees have fully utilized their Health Care FSA balances already, so the company would lose the missed premium that the employee would have normally contributed during the Jan Feb Mar payrolls. Is this correct? Can we ask them to contribute those funds they would have normally contributed in Jan/Feb/Mar?

3. To avoid any more of the situation in above #2, are we allowed to ASK employees to only use up to the amount they would have contributed through Dec 31? Or is this unlawful? 

4. For employees who have the Dependent Care FSA, and were anticipating using the full amount, will now be cut short by 3 months. Can they contribute a higher amount? Is this change-over of the plan year possibly considered a QLE/Qualifying Event? 

Any information would be greatly appreciated!

A dental practice was sold in an asset sale.  Original plan is terminated however the seller has outstanding employer contributions to be made including a profit share determined on payroll information up to the sale/termination date.  The new entity is telling the seller that they cannot make any more contributions to the terminated plan since the participants are now all active in the new entity plan.

Can anyone assist with cites that support the notion that outstanding Employer contributions can most certainly be made to the seller's terminated plan?   The client will be asking the new entity for cites as well.

Thanks in advance.

I've got two questions relative to non-governmental 457(b) Plans.  As a TPA firm, we have historically only assisted with plan documents for a few top hat plans, but I find myself needing to get more involved in reviewing assets and generally have more oversight on what is actually transpiring within one or two of the plans.

1)  Two clients have all of the 457(b) assets in brokerage accounts that in the name of plan and FBO the participant.  There are 4 or 5 participants.  This seems to completely negate the requirement that these plans be "unfunded".  There is a rabbi trust, but that does not change the fact that these should not be SDBAs in the participant name, correct?  

2) A participant took a distribution earlier this year after terminating employment.  The timing was in accordance with the document.  The employer understands that they need to have the distribution reported on the 2023 W-2.  That participant took the entire account balance as a cash distribution and had no taxes withheld.  Since payroll taxes apply, I take it this is wrong, but how can we fix?  Do we have the client run the distribution of deferred compensation through payroll to determine how much in taxes is due and ask for the money back from the participant?

It seems like it would be cleaner to never have a distribution paid directly from an account to a participant and have the account balance instead paid to the employer (since it company assets until paid anyway) and then have them run through payroll and issue the distribution in the same manner as a paycheck (aside from applying FICA if already withheld). Is that what you all are doing?  

Thank you!!!

Is there an election change event that would allow the employee who enrolled in VA benefits to drop employer coverage mid-year? 

Our client maintains a DB plan.  A participant was receiving a J&S payment and then died.  The plan sponsor tried reaching out to the (non-spouse) beneficiary for years and never received a response.  Now the beneficiary has died.  Presumably the missed payments are still owed to the beneficiary's estate.  However, is the sponsor required to include an interest adjustment where they made every effort to pay during the beneficiary's lifetime?

One of my clients is of the belief that they can only designate a spouse as the beneficiary of their Cash Balance Plan.  I think I know the answer, but I just wanted to make sure.

Someone can name a non-spouse their beneficiary, correct?  The only caveat being that if they are married, they need to get spousal consent to elect someone else to be their beneficiary.

Thanks in advance!

Letter comes in from IRS. $150K penalty.  My advice has always been:

1) Amend 5500 to check DFVC box

2) Do a DFVC filing and pay the user fee

3) Write the IRS and ask them to abate because you fully complied with DFVC.

Is that what people are still doing?  Firs time I've had to do this with a 150K penalty so I wanted to double check.

The US DOL is auditing one employer that is participating in a PEP. The DOL has requested a copy of the trust agreement for 2022, which provides disbursement information for all participants in all the participating employers in the PEP.

The DOL refuses a consolidated/summary version and wishes to see all approx. 4000 pages.

Is information on distributions to participants not employed by the company being audited private? Should any redaction be made?

Here are the facts of a situation I've not heard of:

As of 12/31/22, individual taxpayer has no IRA accounts. AGI around $1,000,000, which is expected to be the same in 2023.

In Janaury, 2023, individual makes a 2023 non-deductible IRA contribution of $7,500 (over age 50), and immediately converts it to a Roth.

In September, 2023, individaul rolls over a prior retirement plan balance into a Traditional IRA.

Question: Would the entire Roth conversion of $7,500 be considered non-taxable, or would the individual have to consider the rollover traditional IRA to determine if a portion of the conversion, for earnings, is taxable.

Thanks for any replies.

Where does it say that a participant must pay off a defaulted loan before they can take a new one?

What if it was offset after a distributable event?

(Plan allows only one loan at a time)

The tax-qualification condition for some nongovernmental and nonchurch § 401(k) or § 403(b) elective-deferral arrangements to include an automatic-contribution arrangement if the elective-deferral arrangement was not established before December 29, 2022 begins with a plan year that begins on or after January 1, 2025.

Perhaps in the last few months of 2024 the Internal Revenue Service might announce a nonenforcement delay of Internal Revenue Code § 414A?

If PredictIt [https://www.predictit.org/] were to offer a yes-or-no future on whether the IRS announces a nonenforcement by December 31, 2024, how much would you pay for each $1.00 yes future?

I've seen no formal guidance on this question. Grandfathering for the SECURE 2.0 auto-enrollment for plans established prior to 12/29/2022.

If a plan with a plan year of 11/1/2022 to 10/31/2023 is signed prior to the end of the plan year, (i.e. prior 10 10/31/2023) is it considered "established" for purposes of the grandfathering, or must the document have been SIGNED prior to 12/29/2022?

Any formal guidance that I've missed? Otherwise, I've seen differing opinions...

Hi

Sorry if was asked before.

DB/DC plan combo, covering 2 owners only (no PBGC). Each has 100k of salary

DC plan has 401k and PS provisions only - no SH match

Owner Joe has deferral and PS

Owner Mary has only deferral and no PS

What salaries are included to determine the maximum 6% PS deduction?

Assume DB contribution is 500k so will never satisfy 31% rule.

Thanks

401k Safe Harbor Plan is effective 1/1/22.

Plan deposits 2022 Safe Harbor in 2023.

Plan pays fee for 2022 in 2023.

Understanding that the 2022 contribution applies to 2022 taxes, I think the fee paid in 2023 applies to the 2023 taxes, but wasn't sure.

I'm even more confused about which year the Contribution credit for the safe harbor would apply to - 2022 or 2023 taxes?

We're a bit confused on how the 5500 filings work for a retroactive plan.

Background: We created a Defined Benefit Plan for 2021 by the clients corp due date in 2022. We're now working on the 5500 Tax Forms for the plan for 2021 and 2022. Please note we use Relius Gov't Forms.

Question 1: Our understanding is we will need to do two separate forms using the 2022 5500 SF. One for 2021 and check off the retroactive option on the SF. However do we enter 1/1/2021-12/31/2021 as the plan year for this form? (this is what we do when we're using a prior year form to complete a final tax form so it makes sense).

Question 2: the instructions are a bit confusing because they state that the prior year SB (2021) must be attached as an external attachment as well as the 2022 SB. Does this mean we should only complete one tax form and carry forward to the ending balance as of 12/31/2022. In other words do one tax form for 2022 mark off the retroactive box attach the 2021 SB as an external attachment and the 2022 SB. However, the 5500 SF would have a zero beginning balance and include all contributions for both years and ending balance as of 12/31/2022 (hope that maks sense :)) if this is correct, please ignore question one!

Our plan eligibility computation period is anniversary/plan year.

Assumptions:

• Calendar plan year
• Normal entry is 1000/12: Monthly entry
• Over age 21

For LTPT entry with 500-999 hours / 12 months over 2 or 3 consecutive years.

When will the plan entry date not be January 1 of the following year that the employee met the requirements?

Company has always been under 100 participants but has been filing 5500s for its H&W plan. Now saying that its broker filed those in error and doesn't have a wrap plan in place. Should they correct the 5500s even though they didn't have to file in the first place?

Client deposits deferrals/loan payments on their payroll date. This means deferrals are funded in one day

Plan will migrate to Empower ( formally Prudential) on 10/20

First payroll to be sent to Empower is 10/27

Issue - once the file is received, Empower will have a call with the client about the process to review and approve the file. This call will not take place until the file is received. Furthermore scheduling this call is first come first serve, so there is no idea when the first deposit can be funded.

Client is concerned the deposit will be 3 - 10 days later than the normal deposit date.

Client stated their auditors will flag the deposits as late

Question - Is there anything in the IRS/DOL guidance that grants a grace period for unusual circumstances?

Our client is a former auditor and she feels the deposits will be deemed late.

any thoughts?

I have a terminated 401(k) that I am trying to remove all of the participants monies from before the end of this year. Several of the participants can't be located and/or won't return the distribution paperwork to the plan sponsor. It's my impression that the plan sponsor can establish individual IRA's for each of these individual's so that their monies can be removed from the plan trust and we can terminate the trust before the end of this year. Question: does anyone know of a financial institution that would establish individual IRA's without the participants signature?

Thanks