Now that new pre-approved 403(b) documents have been submitted to the IRS for new Cycle (or maybe Sickle?) does anyone have contacts at the IRS as to how the discretionary matches might work? With the Cycle 3 401(k), they allowed the "flexible discretionary match" provision due to the late decision that previously "normal" flexibility shouldn't be allowed, but word on the street was that they would NOT permit this approach on the 403(b) plans.

I don't know about the rest of you, but some of our non-profits have some of the most ridiculously complicated flexible match scenarios, which likely won't be allowed. Anyone have IRS contacts/feedback, at this early stage, as to what parameters might be imposed on match formula provisions? Never too early to start preparing them that they might have to think about other possibilities...

Thanks.

Group

I'm looking for a comprehensive checklist to review an ESOP plan for compliance. Anyone have a checklist they're willing to share and/or a resource that does a pretty good job. Anyone using artificial intelligence/chatgpt /othet apps to review ESOP plans and compliance? 

I have an old checklist and just want to see if there's something I'm missing or should change. 

Thoughts and comments and resources are much appreciated. 

Hi

Did a proposal for 2022 for a one lifer. They said to go ahead, asked for w-2 and when I got it, there were 2 listed.

CPA said the other was part-timer and terminated in 2022. Insisted on DOH and DOT.

Surprise surprise, DOH early 2021 with DOT late 2022. I asked for hours and of course, full-time employee.

Can set up the plan with 3 year cliff and/or 2/20 with no prior service before 1/1/2022 aka effective date of the plan. Not sure how the partial termination would play here as employee is not replaced. What do you think on this?

The question here: Is it ok to set up the plan now with 2 year wait (100% vesting is not an issue as it is only the owner)?

This is unchartered territory for me and not sure about discrimination issues.

Thanks

This one is new to me, so I wanted to check.  We have a potential new client, who plans to employee their 10-year old son (I'm not really sure of the specifics, to be honest).  So the question is:

1) Can someone legitimately have a 10-year old on their payroll?
2) If they are allowed to be on payroll, could they then allow them to participate in the 401(k) Plan?

The whole thing seems a little odd to me, but they are asking questions so I wanted to try and get the correct answers.

Thanks!

I'm looking at a 5500 Schedule I that was prepared for an ESOP. Diversification elections were made, whereby assets were transferred to the employer's 401(k) plan. The Schedule I, Line 5b, does NOT show these transfers. It seems to me, reading the instructions (excerpt below) that this should have been reported on Line 5b? They were included on the distribution line on the 5500 itself.

I don't know how critical this is, in real life terms. If it was reported incorrectly, at least it was "reported" - if the DOL audited the report, maybe just an "oops - reported on wrong line" and do amended 5500 form(s)? I have no idea how far back this goes... 

Line 5b. Enter information concerning assets and/or liabilities transferred from this plan to another plan(s) (including spinoffs) during the plan year. A transfer of assets or liabilities occurs when there is a reduction of assets or liabilities with respect to one plan and the receipt of these assets or the assumption of these liabilities by another plan. Enter the name, plan sponsor EIN, and PN for the transferee plan(s) involved on lines 5(b)1, (2), and (3). Do not use a social security number in lieu of an EIN or include an attachment that contains visible social security numbers. The Schedule I and its attachments are open to public inspection, and the contents are public information and are subject to publication on the Internet. Because of privacy concerns, the inclusion of a social security number or any portion thereof on this Schedule I or the inclusion of a visible social security number or any portion thereof on an attachment may result in the rejection of the filing. Note. A distribution of all or part of an individual participant’s account balance that is reportable on IRS Form 1099-R should not be included on line 5b. Do not submit IRS Form 1099-R with the Form 5500.

I am looking for some guidance on the following scenario please.

1. In January 2023 an HSA account holder intended to contribute x amount toward the 2022 tax year. Howeever, in error, he contributed the funds toward the 2023 tax year. In February 2023 all funds are transferred to a new HSA trustee in a trustee-to-trustee transfer. In March the account holder realizes the error and requests to have the January contribution recoded as a 2022 contribution. What obligation does the new trustee have to make this correction? How will this correction affect the trustee's 5498-SA filing?

Is anyone aware of a list of approved VCP corrections? A co-worker recalled seeing a list (over ten years ago...) complied by someone which laid out a bunch of approved correction methods. 

I have not been able to find such a list, and I'm not sure how someone would even have access to this info to create such a thing. 

Thanks! 

How is a buyer to treat cobra continuation coverage under the following circumstance:  Seller has former employees who have elected mini-COBRA coverage pre acquisition.  Seller will terminate the benefit plans so Buyer will have the obligation to provide COBRA to all M&A qualified beneficiaries which would include those individuals currently receiving mini-COBRA.  Does Buyer continue to provide coverage for the mini-COBRA period (12 months) even if Buyer is a large employer and not eligible for mini-COBRA or does the COBRA continuation period increase for those already receiving mini-COBRA because Buyer is subject to the federal COBRA regulations?

If you're aware of any  guidance, PLRs, cases, please share.  

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!