Hi

A sole prop can now set up a 401k plan retro to 2023 and make a deferral, correct?

No employees and must be set up prior to 4/15/24 (no extension allowed)

SECURE 2.0 - effective date was for plan years beginning after 12/29/2022

Am I wrong?

Plan administrator switched in the middle of the QDRO process with my old employer. HR at my old company says new plan administrator wants everything re-done. Do I need re-do QDRO, get court submission / approval done again, and then resubmit to HR? My retirement assets were basically frozen when I submitted it, but HR says it has to be redone: new plan administrator wouldn't process it due to gains losses unknown because it was with old plans administrator,  said qdro needs redone and plan name changed to new plan adminstrator since it was converted.

thank you

Does anyone know when the IRS will have the fill-in version of the 2023 Form 5500-EZ posted to their website? The information I found stated after January 1, 2024. I have been checking the website daily since in previous years they were available within a week after the new year. I can see from the informational version, (attached) that a question was added, which is likely the cause of the delay. However, it would be helpful to know when the fill-in version is expected to be posted.  

2023-ez-instructions.pdf 2023-form-5500-ez.pdf

A small corporation (just a business owner) started a business 5 years ago. Worked very hard all of those years and now the company is profitable enough to sponsor a defined benefit plan. In 2023 his W-2 salary was $300,000. In all previous years of the company he did not take a salary. As it turns out, 2023 was the first year that revenue exceeded expenses. He is currently age 71.

According to the business owner, he has always worked more than 1,000 hours and in years 1-4 he believes he worked more than 3,000 hours per year.

My question is with the 415 limit calculation.

Our understanding is that for 415 purposes, his 415 limit is the lesser of the following:

1. The dollar limit:   $265,000 / 12 months = $22,083.33 X 1 /10 = $2,208.33 but in this case increased to $4,866.13 because of age 76 retirement.

2. Service limit: $330,000 /12 months = $27,500.00 X 10% per year of service. $27,500 X 10% X 5 years of service = $13,750.

So his first year accrued benefit will be limited to $4,866.13.

My question is this: even though he did not draw salary for years 1-4, are we able to count those years in our service part of the calculation (#2 above)?

Thanks!

I received a "Potential Private Retirement Benefit Information" letter from the SSA.  My ex-employer, was bought out and the plan was terminated back in 2010.

I never received a distribution or notification.  I contacted the company listed on form 5500, they administered the plan after the buy out.

They told me they have no idea what happened to any funds not distributed from the plan.  

Do I have any recourse with this matter?

Thanks,

Keith

We have a profit sharing plan (no 401(k)) that has 1 owner and 1 employee. 

The owner's compensation is $330,000.  The employee's compensation is $200,000.  Total compensation is $530,000.  Maximum deductible contribution is $132,500. 

The Plan provisions state the profit sharing contribution is allocated on a pro-rata basis based on compensation.

The owner wants to provide himself and the employee with the maximum annual addition of $66,000 or a total contribution of $132,000 or 24.90566% of payroll.

In order to provide the employee with a total allocation of $66,000, the pro-rata allocation percentage must be 33% of compensation.  However, providing the owner with an allocation of 33% of compensation or $108,900 will violate 415 for the owner.  Can we limit the owner's allocation to $66,000 and still provide the employee with an allocation of $66,000 or 33% of compensation.  I am concerned the IRS would say the terms of the Plan are not being followed because the ending allocation is not pro-rata based on compensation.

The Plan states the following in the 415 limitation section: 

"If the Employer contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed such maximum permissible amount, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the maximum permissible amount."

This language seems to indicate we can reduce the allocation for the owner to $66,000 and still provide the employee with $66,000. 

Thoughts?    

I have not encountered this problem previously. 

An employee elected $3,050 for 2023 FSA.  During 2023, the employer began using direct deposit for payroll.  The result of the direct deposit is that the payroll company processed the 01/01/2024 payroll early, December 29, 2023.  The 01/01/2024 compensation and deductions are now included for all purposes in 2023.  So the participant that elected the $3,050 FSA for 2023 has now deferred $3,200 for 2023.  

It seems to me this is an excess contribution. Does it need to be distributed to the participant as such? 

Thank you. 

Does anyone file IRS form 945 electronically?  If so, what do you use.  We are filing paper again for 2023 since the deadline is approaching.  We e-file our 1099-Rs.

Thank you

The end of December marked the end (at least for now) of my 41+ years in this business, starting as a part time DC system programmer (before I knew what a "forfeiture" was) and ending as an Enrolled Actuary with all the ASPPA exams completed as well.   I have also been a Benefitslink Board participant for more than 23 years.   Here, as well as through the exams, is where I learned my stuff.   I am grateful for the learning, teaching and helping opportunities (and more than a little fun) created by Dave and Lois Baker through this awesome system.   Their efforts aren't appreciated enough.  Thanks also to the countless Board participants that have educated and helped me over the years; and I hope I've been able able to help others as well.   I still plan to linger now and then but goodbye and Happy New Year for now!

Thanks again Dave and Lois.

Does anyone have a generic special tax notice that they have been using that doesn;t reference any recordkeeper names?  Something special designed for TPA's for example?  I know Relius Documents spits one out but I think they customize it quite a bit based on plan document elections and we want one for all plans.

The IRS one has two separate notices, one for Roth and one for Pre-tax and that's, well, not workable.

Can a DB plan be amended to permit in-service lump sum distributions and also cease future accruals for any person who elects to take a lump sum?

I've got a plan (only deferrals and SHNEC money) where the employer is undergoing an asset sale on 1/31/24.  We were all set to terminate the plan on that date pursuant to the business transaction (so they can keep the SH for 2024).  Today they asked if, since it's an asset sale and therefore they will 'retain the company' after 1/31, they can pay out bonuses after 1/31 through payroll (since they'll suddenly have a lot of cash and they are very nice to want to share it with some of their former employees) and how would it affect any plan calculations.  It's not clear yet if they prefer it to be counted or not, but first I want to make sure I've got all the pros and cons right.

I think that as long as the 'payroll date' is in 2024, it will get brought in as plan compensation under the post-severance comp rules (which are included for plan compensation).  The employees are considered terminated on 1/31/24.

Also, since they are retaining their entity (they are an LLC taxed as a partnership), they can effectively say it is open until 12/31/24 and therefore the plan also goes along with that.  I'm fine with terminating the plan effective 12/31/24 - it might even give the partners some additional income if they collect money during 2024.  But if they want to terminate the plan, say, 6/30/24, do they lose the benefit of the safe harbor since at that point, the plan termination is no longer connected to the business transaction? I suppose they could give a 30-day notice at that point - there are no active employees to get it, so they could just stick it in their files.

I'm sure I'm overcomplicating this...

Good afternoon, I hope all is well with everyone.  I know Secure 2.0 had initially said that Hardship Distribution could be self-certified.  Was that pushed back, though?  I just want to make sure, as we had a client that had adopted that strategy, but I think we may need to backtrack.  I just want to be sure.

Thanks in advance!

We are working on a 403(b) plan termination with TIAA CREF.  Although TIAA CREF has certified that the plan is terminated, we have plan summaries with assets after the termination date, which, according to TIAA CREF, is attributable to individual contracts.  These plan summaries still have the plan sponsor's name on the reports.  At what point can we say that we have sufficient documentation to say that the plan is terminated and all plan assets have been distributed?

Confused here, IRS notices 2023-66, -72, -76, and 2024-04 showed 2024 ARPA Segment rates as 4.75%, 4.87%, and 5.59%.

Now IR Notice 2024-21 has 2024 ARPA Segment rates as 4.75%, 4.96% (instead of 4.87%), and 5.59%.

Note that they show the January 2024 segment rates as 4.37%, 4.96%, and 4.95%.

Did just leave a voice message with the IRS to figure out if they have a typo on 2024-21.

Holding off on doing 2024 valuations for now.

May a governmental defined contribution plan exclude from vesting service time in which the employee was ineligible to participate in the plan?

More specifically, an employee is in a category of employees excluded from the plan, works for a year or two, then is transferred to an eligible class. May the plan count only the employee's service for vesting purposes from the date he or she became eligible to participate?

Thanks in advance. 

It is my understanding if a specified employee's deferred compensation is subject to a 6 month delay, income tax is due at the end of the 6 months when the deferred compensation is paid. Is this correct? I have an employee saying otherwise.

Hi

Preparing my first 5500 for 2023. I heard some mixed comments about completing the new compliance questions.

I am answering them but wanted to check what others think out there.

No multiple employer plans.

Thanks

The 1099-R instructions aren't clear to me for my situation below. for this don't seem clear to me.  Maybe it's simpler than I think it should be. 

We have a client with some employees rolling small DB distributions a Roth IRA.  Code H does not apply since the instructions say that is for Roth source to Roth IRA.  I'm wondering if that is just a G code with boxes 1 and 2 completed with the rollover amount.  am I missing something?

Thank you in advance!

Tom