Hi

Revisiting with a few scenarios:

Scenario 1: 401k with basic match and PS provisions (everyone in their own group)

Participant does not defer thus no match and gets $0 ps allocation, is this participant's salary included in overall deduction limit?

Scenario 2: 401k with NESH 3% and PS provisions (everyone in their own group)

Participant does not defer, gets 3% NESH and gets $0 ps allocation, is this participant's salary included in overall deduction limit?

Scenario 3: For either above scenarios, participant is categorically excluded from PS portion, is the salary excluded for deduction purposes?

Any other scenarios where salary needs to be excluded for deduction (other than being categorically excluded)?

Thanks

If a corporate taxpayer and plan sponsor files for an extension of time to file its tax return, extending the filing deadline from March 15th to September 15th, but then files their tax return on March 13th, should they have funded the profit-sharing contribution deducted on the tax return by March 15th or is the extension to September 15th still recognized? Something in the back of my mind tells me the IRS can invalidate the extension if the return is filed by the original due date.

Plan document has 1000 hours/last day rule for the PS contribution.  In addition, they have an appendix in the plan document that says you must be employed on the "determination" date which is usually in February after the plan year ends.  We have told them this is not possible.  

For 2022, they got mad and decided not to fund for the 2022 plan year.  However, they have now decided to fund a contribution for the 2023 plan year as of February 2023 based on 2022 wages.  We have told them this is creates issues.  They have been told that they will need to true up the calculation at the end of the year based on 2023 wages.   In addition, they will need to forfeit any contribution that went to a terminated participant.  If the terminate participant took a distribution, they would likely need to recovery that money.  

What other problems will the plan face with "prefunding" this contribution? 

Plan sponsor files form 5500-EZ in October.  Plan sponsor thought an extension was filed, but IRS has sent Notice CP-220 assessing a penalty.  Can plan sponsor still use the IRS Penalty Relief Program and pay the $500?  Notice CP 283 has not been received, but the 5500-EZ was actually filed.  

let me start by saying - I think the sponsor should just fix. But since they are asking additional questions I don't know the answer I thought I would see if folks here can point me to threads where this has been discussed. 

Participant submitted a 5% pre-tax deferral election in 2019. It was never implemented. They don't have a balance in the plan. 

Participant is now terminated and is requesting a distribution. The plan does have a safe harbor match provision, and the sponsor has no problem correcting the missed match. 

They are arguing that the participant has some culpability in the missed deferral and for not catching it sooner and the sponsor does not want to make the appropriate QNEC for that part of the failure. 

Any thoughts on a failure to implement that is 4 years old? 

We long used Relius for everything and have since migrated to FTW for 5500 and Compliance though still use the PPD VS doc from Relius (FIS or whatever you want to call them).  We've also subscribed to the Pension Library from Relius but the forms have not been updated in quite some time.  Wondering what alternatives there are to this.  We use it for sample forms to use for distributions, notices etc.  

Thanks for your input.

Just curious - we don't have any plans for "Foster Care Providers" where this would be an issue, so this is simple curiosity on my part. Anyone dealt with this issue on a real plan or plans? Do you specifically question this when gathering annual census data, since it isn't taxable income?

Yes, it is that time of year again – the annual tax lament, to the tune of “Yesterday” by the Beatles. Remember, it is only when the final line is truly sung from the heart that one can appreciate the scope of anguish and angst that the artist is attempting to convey…

Yesterday...

Income tax was due, I had to pay...
All the funds I tried to hide away...
I don't believe, I'll eat 'till May.

Suddenly...

I'm not sure that I am fiscally...
Ready for responsibility...
Oh yesterday, came suddenly.

Why, I

Owed so much, I don't know, I couldn't say
May be
Forms were wrong, how I long, for yesterday.

Yesterday...

Seemed like prison time was on its way...
Now I need a place to hide away...
While keeping IRS at bay.

Why, I

Owed so much, I don't know, I couldn't say
May be
Forms were wrong, how I long, for yesterday.

Yesterday...

Taxes due, I filed come what may...
Losing all deductions that's my way...
Of giving IRS my pay.

mm - mm - mm - mm - mm - mm - mm.

Participant taking RMD's died.

Spouse was taking Participant's RMD's, by subtracting 1 each year from the life expectancy in year of death of Participant. As Spouse there was no 10 year distribution requirement.

Spouse has now died, so grown children will now be receiving the RMD's.

I believe the factor continues to be subtracted by 1 each year, and then fully paid out within 10 years of Spouse's death.

Question is - the factor is pretty small due to older age at death, so, after taking the current year RMD, can the remaining balance be fully rolled over to an IRA to avoid such large RMD's?

For term vested pension plan participants who receive a copy of their benefit statement at or about termination, is there some kind of minimum that the Plan Sponsor is supposed to provide them with benefit statements when asked, like say once per year or 3 years? Is it fair for their prior employer to charge them for multiple requests?

Client wants to retroactively change plan year to calendar year for the 2023 Year.  Previously plan used a 7/1 to 6/30 year, so we would need to amend plan to have a short year of 7/1/2022 to 12/31/2022, making the plan year be the calendar year for 2023.  I am recommending that the plan year be changed for 7/1/2023 to end 12/31/2023 but investment advisor is pushing to do the change retroactive as noted above for 2022.  Any comments will be appreciated.

I have come up with a question that I’m not sure I know the answer to:  A social service agency we just inherited sponsors a 401(a) Thrift Plan. The only contributions allowed to the plan are discretionary employer “Profit Sharing” contributions; no employee contributions are permitted. The Plan has been filing the Form 5500 series, and, since it has greater than 100 participants, has been audited by an independent accounting firm; however, the last audit performed for the plan was for PYE 6-30-2019. For 6-30-2020, the prior accounting firm attached the company financial statement to the 5500 filing, and for 6-30-2021, the accountant’s opinion section was left completely blank.

I have not personally dealt with a 401(a) plan for a long time, and I seem to remember that 401(a) plans are not subject to ERISA, and therefore, not subject to Form 5500 filing requirements. Therefore, should this thrift plan even be filing a 5500? The though of having to go and do a 6-30-20, 6-30-21 and 6-30-22 audit is making our assurance department head very sickly…..

I can't seem to find an answer to this question. 

Is electing the source of an in-service distribution a protected benefit? Potentially an optional form of benefit? Or maybe not protected as an "administrative procedure for distributing benefits"? I'm not asking about removing in-service distributions entirely. This is a scenario were currently participants are able to elect which account (e.g. pre-tax, after-tax, rollovers) the distribution comes from. Would it be impermissible to eliminate this election and instead institute a policy whereby any in-service distribution is taken from all accounts on a pro-rata basis?  

Did I miss any IRA guidance on exactly how beneficiaries must take distributions over 10 years? They initially said, or at least everyone thought, that any time was ok - all in the tenth year if that is what was desired. Then last year they said no, it had to be taken each year, but 2021 and 2022 were ok if RMDs weren't taken. But they didn't say if 2021 and 2022 had to be taken in 2023, or if it would be ok to do it ratably over the remaining years - seems kind of important to be left hanging this long.

Husband/wife (only) CB plan.  Terminated last March.

Plan was sufficiently funded, and the plan document allowed for a pro-rata increase to plan benefits up to the 415 limits.  (Neither was reached, even.)  IRA rollovers processed a year ago for MORE than the actual accrued benefits under the formula.

Problem is - there was a $200K residual balance stuck in a gated hedge fund.  It still exists a year later because they can't seem to liquidate it. 

So the "get all assets out in 12 months" has now been broken.  Technically the employees (not old enough for an in-service) both got more than they were required to.  

At this point I'm just wondering who's seen this kind of fact pattern before and what became of it.  I wouldn't think the original rollovers would draw IRS scrutiny, but would finally moving any further excess to IRAs at this point, even with re-papering the participants, be problematic?  Could the IRS deem any amounts at this point just a reversion to the sponsor?  (Hiding behind the idea that the participants are technically fully "paid enough" at this point.)

I wish I knew the limitations on changing the named investor on that hedge fund - whether or not it could be "transferred" between plans or to an IRA directly, since it's apparently not liquid enough to sell.  (I enjoyed 4-5 years of hell a decade ago due to a gated hedge fund in a DC plan.)

Hola,

I am working with a small 401k that is terminating due to a buyout. The existing 401k plan has a stable value fund, which is now triggering a Market Value Adjustment. I have reached out to the fund requesting information on a put option, but since the plan is terminating, I am not sure that even if the put is allowed.

Date of termination hasn't yet been established - but the assets generally must be distributed within a year of the date. I'm concerned that the put option (if available) might be more than 12 months.

Any guidance would be appreciated!

Thinking with my typing fingers here....  

CB plan expected to terminate with an asset sale pending.  With PBGC timeline, probably early 2024 we get everyone (about 35-40 folks) paid out.

IF there are any excess assets (and we're thinking at worst case, 50-100K), was thinking about a QRP transfer to their profit sharing plan.

1)  Gotta cover 95% of active employees.   If everyone's terminating employment with the seller, then do I need to cover 95% of zero employees?  There are 3 partners selling, so they could certainly still be potentially "active" in their hollowed-out shell.

Is that an appropriate interpretation?  95% of either just the 3 former owners, or 95% of just totally zero active participants? 

Anyway, the extra 50-100K would be allocated completely for the final 2023 profit sharing plan year, since although I only gotta worry about the DB shutting down, there will still be allocations due (it's a DB/DC combo) for the PS plan.  Eliminates the need to come up with a higher PS amount for its short year.  And could use it all up for 2023, since I wouldn't expect there to be six more years to release it from suspense.

Thanks...

--bri

A single member plan (Solo) wants to roll out the balance of her plan into an IRA.  She is not closing down her business, but she is ceasing her contributions to the plan.  She would like to keep the plan around in case she decides to make a contribution at a future date.  

I know that a plan that does not receive a contribution for 3-5 years means that everyone is 100% vested.  Not an issue here with this plan being a single member plan.  But can she do this?   Empty the plan out and keep it around with a small balance, $1,000 or so?  

Thanks

In the plan accounting, are qnec and qmacs considered the same as profit sharing? So for instance if for non elective contributions we say you must be employed on the last day of the year to qualify for a non elective contribution would that also apply to qnec and qmacs? So in essence are qnec and qmacs also considered non elective contributions and follow all the same rules in the plan doc as a non elective contribution? 

Any prohibition against Employer reimbursing Employee the 20% excise tax when using the program?