Is a enhanced safe harbor match (6%) still exempt from top heavy and ADP and ACP testing?

We have a profit sharing plan that was terminated effective 7/1/22.

Most participants rolled over by 12/31/22, the remaining participants, exclusive of the owners were paid out between 1/1/23-5/12/23.

After the owners rollover, there is an excess of roughly $2,500 sitting in the plan master account at Schwab and the client is asking what to do with it.

Usually the excess is paid to the TPA as an administrative expense, but they are complaining because they had paid my fee 12/22; this is the only plan I have that the excess probably will not be paid as an administrative expense.

To whom would the excess be reallocated, those that were paid after 12/31/22 or all participants of the plan that were paid out.

 

Looking for opinions on what to do with DB RMD when marital status is unknown.  IF you were going to force someone into payment, and did not know if the participant was married or not, would you set up with a life annuity form of payment or a QJSA with spouse date of birth the same as participant's?  What if the normal form of payment in the plan, for an unmarried participant, is a 10-year certain and life?

Hi

Looking at a potential takeover for 2022.

Although 5500EZ was filed for 2021, no valuation was done and no SB signed. Forget the AFTAP for a sec.

Looks like some contribution was made, not sure if satisfies MRC.

As I have never seen this before, what are corrective steps to be taken? If anyone has experience with this and can share it, would appreciate it.

Thank you

I have a plan that apparently has decided to terminate.  It is an owner only plan and he has no comp.  The plan's assets are around 50k.  Plan was created in 2018 and has never had to file a 5500-EZ.  Do I need to file one for the final plan year, even though the assets are still under $250k?  

Hello all, hoping for some advice/clarity on this topic.

A few years ago, my spouse and I started self employed activities. After checking with our CPA we opened two solo 401k plans (one for me and another for my spouse). We did not contribute our self-employed income to our solo 401(k). At that time, we were changing our w2 jobs and we had to move out of our 401k funds. We could put 410k funds in trad IRAs but it would block us from backdoor roth conversions. So we used our solo 401k accounts and put our funds there (my spouse's 401k funds went to her solo 401k and my 410k funds went to my solo 401k). 

We continue self-employment activities and recently opened an LLC (taxed as qualified joint venture) for new project. 

I talked with TPA and they said that all self employed activities and LLC income should go under one solo 401k plan. So now we are starting to think about a way to fix this situation and consolidate our solo 401k plans. 

TPA suggested the following course of action:

1) You will select "restatement on the application," You will use your current plan name. However, you can input your new LLC and EIN. On the application you will choose your desired trust name and we will obtain and EIN for that trust name.

2) We will be giving you a new adoption agreement.

3) Do trustee-trustee transfers from Fidelity solo 401 accounts

4) Close Fidelity solo 401 accounts

I have a concern regarding this new solo 401(k) plan that you described above. It says this plan would be linked to the LLC and its EIN. Does it mean that the solo 401k plan will not be protected by "limited liability" and that anyone who may sue LLC may claim the new solo 401k plan funds as well (assuming there is no "piercing the veil")? What would happen in the event that an LLC is disallowed (closed)? Is it possible to create a "general purpose" LLC plan that would allow my spouse and me to contribute earned income from the LLC as well as from self-employed activities and not depend on the LLC?

I am asking this in a half rhetorical manner.  Client had been a single employer for 5500 filing and filed under 001.  Then employer became a related employer due to an acquisition and joined parent's plan as adopting employer.  Initial 001 Form 5500 had a final filing when the assets merged into the parent's plan.  A few years later and due to ownership change, they are no longer related so the current plan is a MEP and the Client is spinning out their portion of the MEP into a stand alone plan (June 1, 2023).

My experience has been that the effective date of the newly established spin-off plan should be June 1, 2023.  The Client would use 002 since 001 had been previously used.  Since this is a spin-off, there are protected benefits and no distributable events (that is not the issue).

The service provider is insisting that the effective date be 1/1/2018 (effective date of the prior parent's plan).  My concern is that once filed, the EBSA is going to ask about all of the missing prior 5500 filings, which could be avoided with a new effective date and I also believe that the 5500 must be marked as "First Year Filing".

Any experience out there with using a prior effective date and what notices get generated?  I vote for the 2023 effective date and 002 for the plan number.  Thanks!

Hi. We had both a 403b and 401k plans. We decided to freeze our 401k plan (no contributions) a few years ago and use the 403b as our sole DC plan. The question is what does this plan freeze do to our vesting (3 year cliff)? I had thought we could just continue with applying our vesting schedule. But I read that the IRS may view a 401k freeze as a "complete discontinuation of contributions" and require full vesting of all participants. I couldn't find anything official, but did find the language below on an IRS website. I also found this: https://www.irs.gov/retirement-plans/no-contributions-to-your-profit-sharing-401-k-plan-for-a-while-complete-discontinuance-of-contributions-and-what-you-need-to-know

Does anyone have experience with this? Any thoughts?

Thanks.

 

We haven’t made many contributions to our profit-sharing plan. How will this impact our plan termination?

Although employers are not required to contribute every year to a profit-sharing plan, contributions must be recurring and substantial. If the amount is not significant enough to show an intention to continue the plan, the IRS will treat the contributions as discontinued.

A plan is treated as terminated for vesting purposes if the employer completely discontinues contributions. The employees affected by the discontinuance must become 100% vested. Generally, you must vest all affected employees no later than the end of the taxable year following the taxable year in which you made your last substantial contribution (IRC Section 411(d)(3)).

The IRS presumes that an employer has completely discontinued contributions when the employer fails to make substantial contributions for at least 3 years in a 5-year period. If this happens, the burden shifts to the employer to show that a complete discontinuance has not occurred (Announcement 94-101).

This IRS article has me a bit confused on what filing is required:

https://www.irs.gov/retirement-plans/financial-advisors-are-assets-in-your-clients-one-participant-plans-more-than-250000

Quote

$250,000 combined plan assets - Many plan sponsors didn’t know the $250,000 in plan assets is a combined total for all their one-participant plans. Sponsors must file a Form 5500-EZ for each of their one-participant plans when the total assets at the end of the plan year for all one-participant plans they maintain is greater than $250,000. Some plan sponsors incorrectly thought the $250,000 filing requirement was per plan, per participant or per investment.

 

Let's say a person has two solo 401k plans setup:

1) Sole proprietorship - solo 401k balance of $1,500,000

2) S-Corp - solo 401k balance of $125k.

Both companies have separate EINs and 401k accounts. Since the individual is the sole participant in both plans would they be required to report the smaller account balance on Form 5500-EZ since in aggregate they are over $250k or is it not required since these are two different sponsors and the 2nd account is under the $250k threshold?

If required, would it be wise to file and request late filer relief and pay the fee?

Many practitioners recognize the wave of lawsuits asserting a retirement plan’s fiduciary’s breach in allowing unreasonable expenses began with the Schlicter firm’s first few in 2006.

An insurance business’s infographic BenefitsLink helpfully points to shows an average of 83 fiduciary-breach lawsuits a year for 2019-2022. https://www.sompo-intl.com/wp-content/uploads/Fiduciary-lines-Excessive-Fee-Litigation-0323.pdf And it shows 625 lawsuits for 2010-2022.

For 2009-2021, the Labor department’s EFAST database shows an average of 833,722.4 Form 5500 reports a year. https://www.efast.dol.gov/5500search/) Year by year, some plans enter that count, some plans exit that count, and many plans continue over many years (and decades). Further, not all plans are pension or retirement plans, and of those not all are individual-account (defined-contribution) plans. (I confess I didn’t even try to sort the database.)

But extrapolating from these numbers and filling-in or assuming other facts, what’s our guesstimate of the percentage of individual-account retirement plans’ fiduciaries not sued?

Is it 99%?

Hoping for some help.

Client had a late deposit for the 12/23/2022 pay date.  The total deferral was $1,400

It was discovered, deposited and the lost earning were calculated and deposited into the plan in Feb 2023.

 

Since the payroll was 12/23/2022 , is it considered late for 2022?   Do we need to put on the 2022 5500 and complete the 5330 for 2022?

Could this be corrected with self-correction and no need to report?

Your help is appreciated.

 

Normally, when we assign a signature to a 5500 filing, the signer receives an email from the DOL about signing the return.    We found out today that a few clients have not received these emails to sign their 5500.    These were all returns over the past month.      Anyone else having this issue?  

Employee wants to voluntarily drop group health coverage mid plan year (remain an active employee) and enroll in Medicare. The employer allows for this as a Life Event for dropping coverage, but I don't believe this a COBRA event as it is a voluntary drop of coverage and not an actual COBRA event. This in turn will affect the employee's spouse/dependents. Because the CMS website is very generic in this response and my reference materials don't mention voluntary drop, I'm having difficulty in providing information that will satisfy the employee, client, etc. I did reference an old post on here regarding voluntary drop of coverage, but I need more. Any clarification or assistance is appreciated.

EE who was under eligible age (21) was given a PS allocation last year (by small plan owner who thought they understood the plan).

This has just been discovered upon annual TPA review.

They have already filed their taxes and do not want to 'take money away' from that ee.

Must it be an 11g amendment, or possible to change eligibility age from 21 to 20 retroactively for prior plan year? 

 

 

I've got what used to be a paired MP-PS plan where we merged the MP into the PS 20 years ago back when that was all the rage.  Of course, that MP money is still tracked separately for purposes of making participants who have that money get the proper spousal consent for a distribution.

Now I've got a participant who is saying that when she Legally Separated from her spouse, as part of the separation agreement he waived all rights to her plan benefits.  There is no other plan paperwork to his effect - I presume he is on the beneficiary form as her beneficiary (which predates the separation agreement).  This is a new one to me.  Is this legit?  I feel pretty confident that she is still considered married for plan purposes, but can the spouse waive his rights that way?

Thanks.

The 401k/PS plan has 1 year of service eligibility.  Two NHCEs were allowed to defer before meeting the requirement.  The plan is going to be amended to allow them to make deferrals but they will not be eligible for PS contributions.  Are they required to receive the 5% minimum gateway (Plan is cross tested)?  

Thanks

I thought that there was a program for fixing 457(f) and 409A plan errors but I can't seem to find anything with the IRS. We have an erroneous deferral in our non qualified deferred comp plan. A participant reached their vesting date and should have been paid out their balance in 2021. I am looking for guidance on how to correct.

Thanks.

I've learned that one of my clients has a couple of employees that live and work in Japan. One of them has become a Japanese citizen. I have no info as to whether this person has dual citizenship.

I'm trying to figure out whether these employees should be covered under the 401k plan, which uses fairly standard language in its document (see below). I believe a nonresident citizen should be covered, though I'm not sure. Is it determined by whether the person receives US-based income? And what about the nonresident former citizen? Seems like that person should not be covered.

If anyone has some experience in this area, please shed some light.

Thanks, Greg

 

"Employee": A person who is currently or hereafter employed by the Employer, or by any other employer aggregated under Code sections 414(b), (c), (m), (n), or (o) and the regulations thereunder, including a Leased Employee subject to Code section 414(n) and a self-employed owner of an unincorporated employer, but, unless otherwise provided in the Adoption Agreement, excluding (a) an Employee who is a nonresident alien (within the meaning of Code section 7701(b)(1)(B) deriving no earned income (within the meaning of Code section 911(d)(2)) from the Employer that constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)); and (b) employees who are included in the unit of Employees covered by a collective bargaining agreement between the Employer and employee representatives, provided benefits were the subject of good faith bargaining and 2% or less of the employees of the Employer who are covered pursuant to that agreement are "professional employees" as defined in Treasury Regulations section 1.410(b)-9. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.

The owner of two entities in an affiliated service group earns W-2 income in one entity, and K-1 in the other.  His W-2 income is lower than his K-1 income.

When I aggregate the entities for 401(a)(4) / Gateway testing, the system (Datair) is disregarding the K-1 income for purposes of testing.  This impacts the Gateway minimum for starters.  It's the difference between a 5% Gateway and a 4.something% Gateway.  

The message I get is this:  Compensation for 401(a)(4) Discrimination/Gateway Testing differs for sub plans for owners of a sole proprietorship or partnership.  Smallest nonzero compensation will be used for testing in the Master Plan.

Is this a rule, or is this a shortcoming with Datair?

I tried looking for answers on this and haven’t found one that gives the plan sponsor view of what it is like to change recordkeepers. We are knee deep in converting our plan and the hurdles keep coming to us. We seems to take one step forward but then 15 steps backward each day. 
 

Any advise or previous experience in converting? This is a massive change in a very condensed timeframe and very small team.