When running cross testing and need to use the average benefits percentage test, do you have to pass using the same method as you passed 401a4?

Ex: pass cross testing only by using the annual method imputing permitted disparity, but one rate group is at 50%.  In the ABPT, only the allocation method with permitted disparity is over 70%.  Since I have "a" passing method, am I good, or do I have to make the two line up so the same method is used for both tests?

Thanks.

I need help regarding DB partial plan termination. Below is the situation.

Company A sold company B. All company B unvested employees who had accrued benefits. Do the employees get 100% vested?

2011 -Form 5500 showed 178 active participants.

2012 showed 0 active participants. 

Does this consider Partial plan termination? I thought it was, but my other co-worker told me it was not. I like to find out if is there any exemption that the plan was not considered partial plan termination. Am I missing something? 

Thanks in advance!

Not sure if this has been asked before.  What if an excluded class employee (let's say person categorized as a Seasonal Worker) happens to work 1,000 hours during the plan year.  So, hired January 1, 2022 and has 1,000 hours by December 31, 2022.  Assume plan document has fail safe language so that this employee becomes eligible upon 1,000 hours in plan year.  According to the intent of Quality Assurance Bulletin FY-2006-3 (which I can't find anywhere online), this person would be eligible, but when?

In other words, if the employer makes an employer contribution for 2022 plan year, would this Seasonal employee be eligible?

How long is this person eligible?  Under 403(b) there is a "once in, always in" provision, but I can't find the same for a 401(a) plan.  

If this person continues to be classified as a Seasonal Worker in 2023 and beyond, what happens if this person works under 1,000 hours in any future year?

Thoughts are greatly appreciated!

I am starting a new TPA firm and wondering if anyone is willing to share some essentials to get started. I am not looking to steal anyone’s clients or information but could use some inspiration in creating my documents. 

If anyone is willing to share, I am looking for help on the following: 

1. Engagement letter/agreement
2. Form letters
3. New client checklists 
4. Takeover letters/checklists 
5. Year end census collection 
6. Administration checklist

I have a client which has an employee that has been paying back a plan loan with a remaining term of 48 months. The employee is considering leaving the company. My 3 possibilites are:

1. Assuming that the employees leaves their money in the plan, can they continue to repay their loan even though they are not employed there anymore?

2. Assuming they take all of their money, can they continue to repay their loan even though they are not employed there anymore?

3. Is it true that assuming they terminate from the plan, basically, the outstanding loan will forcibly become a deemed distribution at the end of the first quarter following the quarter when the last repayment was due and no further repayments are allowed after DOT.

Thank you for the help - Rick

Can a pre-paid legal services plan that an employer makes available to employees fit into the DOL safe harbor for voluntary plans and thus not be subject to ERISA assuming all the requirements of the safe harbor are satisfied? 

Controlled group has two companies ("A" and "B"), each with a 401(k) plan.  The plans are currently operating as QSLOBs.  As a result of a purchase agreement, the QSLOB status will cease to exist and they plan on terminating the B plan and merging the accounts into the A plan.  

Would the exclusive benefit rule apply to the forfeitures in the B plan?  If so, does it only apply to forfeitures that occurred immediately prior to the termination of the B plan?

Our Nonqual Plan provides that payment will be made 14 months following termination of employment.  

The idea is that if a participant terminates, he/she still has a couple months after termination to make a subsequent deferral election.  This seems to be compliant, because the 12 month/5 year rule only requires that the subsequent deferral be made 12 months before the payment date, not the date that triggers payment (e.g. the termination date).

Am I reading the rules correctly that this is allowed?

if a plan currently has provisions for non family participants, and has had non family participants in the past, but currently only the owner is participating, however the plan still allows for non family participants, would one file the 5500-SF or the 5500-EZ for 2022? 

Without considering any plan-document change (most of which can wait until 2025 or the later remedial-amendment time):

• For an individual-account retirement plan with a § 401(k) arrangement (with no auto-anything provision, and no need or intent to add any);
• allowing non-Roth and Roth elective deferrals, including age-based catch-up (with non-Roth not restrained for those who had wages more than $145,000 in the preceding year);
• immediate eligibility with no age, service, or other condition beyond employment;
• no matching contribution, and no nonelective contribution;
• distribution permitted on age 59½ or severance from employment;
• no involuntary distribution (except as IRC § 401(a)(9) requires);
• no risk of a coverage, nondiscrimination, or top-heavy failure; and
• with the calendar year as the employer’s tax year, all participants’ tax year, the plan year, and the IRC § 415 limitation year:

Which SECURE 2022 changes must the plan sponsor put in operation starting with 2024?

Which SECURE 2022 changes may the plan sponsor put in operation starting with 2024?

Wife and husband own 100% each of 2 different businesses, unrelated to each other.  The one has about 10 employees and has a 401k plan.  The other is spouse only and started a solo 401k for herself, well under $250K.  Neither performs any work for the other's business.  I do not see in the instructions that this would cause the solo plan to file a 5500EZ.  Would you agree?

Thank you

I have a client who owns 2 businesses.  Each single member businesses (one is an insurance company, the other investments).  He wants to use income from both businesses to enable himself to max out contributions.  I prepared a joinder agreement so both businesses can utilize one plan.  Correct so far?

If he makes a 10% contribution to the plan from Company A does it stand to reason he must make a 10% contribution from Company B?

Let's say he does, do these contributions need to be in separate accounts? or at least accounted for separately?

Thanks

Top Heavy SH 401k plan with basic match and cross tested PS (everyone in their own group)

• 2 HCE/Key 3 NHCEs (only 2/3 NHCEs have met PS eligibility of 1YOS+A21)
• Eligibility for 401k/SH is 3 months, all EEs have met this eligibility.

Plan Sponsor wants to provide PS to just one participant, a NHCE.

The way I'm looking at this is that PS to the NHCE means the plan no longer consists solely of deferral and SH, so TH minimums would apply if the plan is TH.  The 401k and SH for the HCE/Key is around 20% of compensation.  One NHCE received a SH match of roughly 1.9%  I think that NHCE needs a TH minimum to get to 3% of comp.  

I'm getting some pushback because the Key's only received an allocation of 401(k) and SH, and the only participant with a non elective contribution was a non-key.

I cannot find a reference to TH exemption when there is an allocation other than 401k/SH, but the allocation is only to non-Key EEs...  

Does anyone agree that TH minimum is not required because the key did not share in the PS allocation, and can you provide a citation or reference to this point?  I'm also open to arguments for TH minimum of course

A potential client approached us to establish a 6/30 year end 401(a) plan.  They are a governmental entity, so it will be a governmental plan.  It is September 13, 2023, and the client is expecting to establish the plan effective 7/1/2022, because they've already deposited a contribution for the 6/30/2023 plan year end to a Trust.  Can we prepare a plan document with a retroactive effective date at this time?  If not, what should the client do with the money that has already been deposited to a Trust?  I'm attempting to gather additional information from the client (i.e. documentation for the Trust; any documentation regarding the plan provisions).  Any guidance is appreciated.

A doctor called requesting a loan, without saying how much.  I sent a blank application.  I mentioned in the email to complete, return, we would review, get Trustee authorization and direct Merrill to issue a check (the doctor has a plan brokerage account.)  This doctor is one of many doctors and only those on the Executive Committee serve as trustee and he is not one.  He completed the application and just gave it to Merrill who issued a check for $20,000 which is $16,000 over his borrowing limit due to the 12-month lookback rule. 

I emailed him today and the Practice Administrator saying he must pay back the excess right away.  If he refuses to pay, the plan provides for hardship distribution and he could self-certify hardship eligibility.  In-service distributions are not available at his age. But if he will not complete the hardship form, then we have an uncorrected prohibited transaction.  I'm guessing just issuing a 1099 as taxable for 2023 will not solve this problem.   I thought about the group withholding $16,000 from an upcoming bonus but I doubt that is legal to withhold from pay without consent.

The doctor seems very reasonable from past dealings so my hope is he will quickly pay it back but I question his ability despite a high income as he borrowed $50,000 not long ago and I suspect something is going on like a divorce.  This just happened within the last 2 weeks.  So maybe not yet spent.

Comments are appreciated as always.

If an employee terminates and comes back 5 months later they really haven't "terminated" in the eyes of the plan, they simply have a lapse in service.  It's not until they have been gone for 1  complete year when they can be considered "terminated" and in essence would have to start all over if they were re-hired.    Correct?

And the break in service rule is an IRS rule? Not an individual plan rule?

Hi

I am sure this is the first time it is happening

New client (husband & wife only) set up a DB plan for 2022 and literally signed the documents yesterday. No need to file 5500 forms but do I need to file PBGC for 2022? Yes, they are covered by PBGC.

I was told that they had SEP all this time. Yesterday, before preparing the documents, found out that they have a solo 401k plan and not a SEP. Caught it in time to set the plan # properly for the db plan.

Deduction is not an issue.

Solo 401k plan has 800k in assets and never filed 5500 forms - this plan is with a reputable brokerage house.

Did a bit of math and figured out that they exceeded 250k 7, may be 8 years ago and no one told them that they had filing obligations, quelle surprise!

Other than filing with DVFC, anything else I should be aware of? Do not care about the documents etc as I am not taking over the plan, just helping with the 5500 forms?

Thanks

S corporation, owned by Father and Son, each owns 50%. No employees.  Which 5500 should be filed?  EZ or SF?  I am getting lost in the EZ instructions language:

"2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner);"

We have tax client (not a TPA client) who we just discovered had plan assets exceeding $250,000 as of 12/31/2022 for the first time and it is an owner-only plan.  This is a Sch C client who has his 1040 extended and so taxes are due Oct 15.   We didn't know about this in July so we did not file an extension (nor were we engaged on the plan.)

We've never filed 5500s under the extended tax return rule.  I'm reading that as long as the plan year and tax year are the same and as long as the 5500 is filed by the tax return due date including extension, it is not late.  I want to be 100% on this since I don't want to risk missing the $500 penalty opportunity and risk a much larger late filing penalty which will then be blamed on us.

Thank you

I have a plan that inadvertently did not offer 401k enrollment to eligible employees (non-auto enroll).  However, there were no contributions by any HCEs or NHCEs for any of the plan years involved or any matching contributions. What would be the basis for the missed deferral opportunity?  Should it be assumed that it is 3%?