We have a plan that we took over as part of a business acquisition some years ago; it is profit sharing only with pooled/trustee directed investment accounts. They went from SF reporting to full 5500 with Schedule H and an audit in the year we took over. They have 4 different investment accounts, 3 are with mutual funds and ETFs with 15 to 20 positions, and 1 with 100+ individual securities (fortunately not a lot of trading in that account). We never really charged enough for the more detailed trust accounting required to prepare the Schedule H, but then in 2022 they moved money (not just cash but fund transfers in kind) and it became a full blown nightmare. We're charging them extra, and are bumping the fees going forward, and getting static.

I explained the nuances (if you can call it that) of plan trust accounting, and it didn't really sink in. Then I made the (big) mistake of saying "well why don't you ask your investment people if they can provide reports specific to plan trust accounting" and now I'm spending more time explaining to them what we need (gains and losses from the beginning of the year) and basically having to prove that what they can provide doesn't work. Setting aside the business decision-making issues, if you are still with me...

...how common would you say it is to have a 100+ life plan that is not on a platform? Any anecdotal comments like "we have a bunch of these" or "we wouldn't touch this with a 10 foot pole" are appreciated. This is mostly to satisfy my curiosity. We run a small shop and don't know how others approach things. I know if we had 100 plans like this we wouldn't make any money.

Corp A sponsors Plan A. Corporation B, while partially owned by Corp. A, is not part of a Controlled Group/Affiliated Service Group. Corp. B is a participating employer in Corp A's plan, so it is a Multiple Employer Plan.

Corp B. is buying out the ownership that Corp A currently has in Corp B, and is withdrawing from the Corp A plan. Suppose Corp B does NOT want to maintain a plan. Is there any alternative to Corp A invoking the involuntary spinoff provisions (establishing a new plan in Corp B's name, which Corp B can then terminate)? I'm confused as to the alternatives in terms of the accounts of the Corp B employees who have been participating. They haven't terminated employment with Corp B. I feel like I'm missing something obvious.

Hi

Someone I work with where I provided a combo plan proposal forwarded the following they received from the 401k recordkeeper (no name will be mentioned).

Background, brand new plan, effective 1/1/2023, signed 3/31/2023 with the following:

401k deferral and NESH (3%), eligibility - age 21 and 6 months service with entry 1st day of the month after completion of 6 months - no hour requirement

PS, eligibility - age 21 and 1 year service (1000 hours service required) with entry 1st day of month after completion of 12 months

Additionally, as special provision, all employed on or before 1/1/2023 enter the plan without regards to the above eligibility

This is what they received from the recordkeeper as forwarded by the client:

"I received the feedback below from Compliance: This is a Safe Harbor plan, so we cannot make this plan more restrictive by adding 1000 hours service requirement for PS in the middle of the plan year.* Please let us know if you want to make these changes effective 1/1/2024"

What am I missing here?

Thanks

Early in 2022 person requested in-service distribution.  Distribution was processed before we as TPA even received 2021 Compensation, and person's compensation for pre-2021 was not even close to HCE Threshhold Amount.  Data for 2021 was received shortly after processing distribution and turns out person's 2021 compensation is over the Threshhold, making this person HCE for 2022.  ADP Testing for 2022 results in the need to payout Excess Contribution.  Problem is that the in-service basically zeroed out the person's deferral account, so there is nothing left under the Plan to payout the Excess.  Monies for the in-service were rolled into an IRA.  We notified the IRA of the Excess in February 2023, but the IRA did not get back to us until now.  They gave us a form to pay out the Excess as an Excess Contribution, but now they say they can't do that for some undeclared reason.  The IRA wants to pay money back to the Plan which would then pay out the Excess now.  Of course, the IRA was subject a investment loss, so the amount won't even cover the Excess.  A bigger concern is that the Excess was around $5K, so if paid back to the trust and then paid out now, there will be an excise penalty tax of around $500.  The question is what is the best way to deal with this Excess Contribution?

I am looking at a takeover CB Plan.   The Plan Doc provides for 2.0% ICR for HCEs and 5.0% ICR for NHCEs.

I vaguely recall that idea was floating around 5 or 6 years ago but was informally criticized by IRS on account of creating different BRFs and thus failing that test.   Does anyone have any recent information on such design and any source of additional background info to research in more depth?

There is a small 401(k) Plan for a company where several employees provided false SSN in order to collect paychecks, etc. The company did not verify and as some time had passed, the employees that provided false SSN were able to get into the Plan. The company made contributions on their behalf. The Plan itself deems "non-resident aliens" are ineligible from entering the Plan. It was found out that said employees were in fact not of legal status to be in the United States.

(Still receiving further details.)

Would the employees just receive their contributions to the Plan, their contributions with the employer's contribution, and what would they be entitled to? I am seeing some cases where employees that fraudulently self-identified because of immigration/legal status had to go through Civil Claims. 

I am a participant in a 409 A Plan and the plan administrator, Principal, sent me my first annual distribution last year, 2022, when I turned age 65. This year, 2023, they realized they they made a mistake and my first distribution was not to be until my age 66. I didn't know they had made a mistake until they called me and told me, and asked me to send the money back.

Then they sent me a registered letter saying my 2022 distribution was premature and and I therefore owe the 20% penalty plus interest on the penalty, but they would pay those costs for me. What nice people, huh?

It doesn't seem right to me. Shouldn't they fix their mistake? All I can find in my research is the possibility they could have filed a corrected 1099R.

Even if they're paying my penalty and interest, I I still don't like it.

Had a Plan with 350 participants but only 101 with balances. Under the new Form 5500 audit rules, is one required? I know that it is clear that any Plan that hasn't met the 120 limit won't need one but wasn't sure if one had already been having the annual audit if it could discontinue. 

I am sure this will be a hot topic to discuss in the future.

Plan DOT 12/31/2022

Restatement period started 4/1/2023

Possible asset distribution 6/1/2023.

Do I need to restate?

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.