A participant has excess deferrals of $2000. There were losses during the year. My recollection, which might be wrong, is that the excess is taxed in the year of the contribution (2022) and the gains are taxed in the year distributed (2023) but how does this work with losses, or am I mistaken?

I have never dealt with this before.   Also, not sure if I should have posted this in "Distribution" or in "Estate Planning".

Here is the situation.  A NHCE participant has passed, never returned a Beneficiary Designation form.   The CB is < $1,000.  What paperwork the client should have in place in additional to a "normal" distribution package?  What should be the process to disburse the funds? I am thinking:

1) Some kind of documentation regarding the estate trust

2) Documentation regarding who the trust administrator is

3) Money should be payable directly to estate with the estate administrator being signatory after the paperwork is on file

4) Anything else I need to thinking about?  You do not know what you do not know

Client told me all assets were distributed by 6/30/2022.

Filed an extension on 1/31/2023 till 4/17/2023

Now found out that still 0.02 is in the account and they will close it this week.

When is the final 5500 due?

Matching contributions fail coverage due to allocation conditions.  Plan has failsafe language.  it is FTW document.  Can you bring in participants who did not defer and give them no match because they did not defer?  Seem right based on plan language but seems wrong to bring in employees for coverage without giving them a contribution.  Thanks.

I have a plan that was a start up plan in 2023. They just notified us through their annual compliance questionnaire that the owner had a soloK that he rolled into the start up plan that was set up with a different name and EIN. Upon further questioning as to why he did not tell us about this prior plan he stated because it was for his other company before he had employees. He did not make any contributions to it in 2023 - he only made contributions in the new start up plan along with his employees.  He only mentioned it because his provider for his soloK told him that he had a problem because of the successor plan rule.  What is the best way to correct this situation?

Plan has three allocation groups, with pro-rata allocations within each:

Owners (2 participants)

Other HCE (3 participants)

Staff (6 participants)

Passes testing at gateway (4.25)

Right now HCE group gets 5% of pay.  They want to give ONE of those HCE 8%.

Can they do an 11(g) amendment giving the HCE 8% and 2 NHCE also 8%?

Has anyone been contacted in regard to FIS declining the project to create change the SGN link from TD Ameritrade to Schwab.  We were notified last week.  Our contact at Schwab informed us and wanted to know how we were going to proceed with this block of business. 

What are others doing about this issue?  

If a profit sharing or 401(k) is a REA safe harbor, and therefore does not require spousal consent, is consent nevertheless required if the distribution is greater than $5,000

Hi

Sole proprietor, farm owner. CPA is asking if can use schedule for Pension purposes. 

Never heard of it but someone may have experience with farm owners.

Thanks 

We were recently hired to takeover as TPA for a plan. It is a mess. The previous TPA was sold in 2021 and the Plan was left to fend for itself. In the time since, the Plan Sponsor has retired most of the previous owners. The remaining owners and associates are all pretty new to the Plan. Outside of knowing where they funds are currently being held, they have little information on their Plan. 

Through some digging they were able to locate a plan document. It is a PPA document. None of the Trustees listed on this PPA document are with the company currently.  Our office is working to get them a new document, but I am unsure about the exact process we need to take to keep everything in good standing as we correct everything that has happened over the last 2 years. 

Can we take their PPA document and restate it on our provider's Post PPA Document? What should we use as the effective date? Who should be listed as Trustees? They also changed the Plan Sponsor and Plan name in 2023. Does this change need to be made as an amendment after we have restated the Plan?

Any assistance/guidance is greatly appreciated.

This question might go out of style with the change in counting participants to determine whether a plan is required to have an audit.

Normally, the answer is yes, you can split a plan into two and avoid the audit, assuming all of the good things that go into maintaining separate plans. The question that was brought to my attention is whether a sponsor, finding out today that their particpant count went over 120 on 1/1/22, do the split retroactively to 1/1/22. I don't think you can, but I raise this to make certain that I'm correct on that. Thanks for any replies.

Sole-prop situation with the CB Plan.  The minimum for 2022 is 160K, the client has made only 150K contribution in 2022 for 2022 Plan Year.  CPA went ahead and has already filed the tax return for 2022 without consulting with anyone.  Per my conversation with the advisor, the "missing" 10K has been deposited today.

My understanding that reliance on revenue ruling 76-28 - https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev.-rul.-76-28/dcb4  still secures the deduction of that 10,000 for 2022 tax year as long as the tax return is refiled.

1) Anything I might be missing here?

2) Reliance on 76-28 requires a designation in writing by Sponsor to Plan Administrator of that contribution as being made for 2022.  Does anyone has a sample of such language they would be willing to share?

3) Tax return will have to be amended - I do not believe it needs to be amended by 4/15 and can be really amended at any point.   Thoughts? 

Can a company with over 100 employees sponsor a SEP? 

Matching contributions fail coverage due to allocation conditions. 

1.  To correct, we have to provide QNEC to some NHCEs at the ACP rate.  Can these QNECs be used in the ADP tests?  Can they be used in the ACP test  I believe the answer is yes to both

2.  Or do we run the ADP/ACP tests first, then make QNEC to correct ACP failure which will correct the match coverage failure?

I think # 1 is the correct methodology, but looking for other opinions.  Thanks.

Here’s another statute-reading exercise for BenefitsLink mavens.

Internal Revenue Code § 414(v)(7)(A) restricts to Roth treatment a § 414(v)(1) catch-up deferral for “an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000[.]”

If a retirement plan’s participant who otherwise would have had wages more than $145,000 had no wages (but as a partner had net earnings from self-employment more than $145,000), may she choose non-Roth catch-up deferrals?

As many of you run into, we sometimes have on-going plans with former employee participants that cannot be located.

I believe the rule is as follows:

1. For on-going plans - after a diligent search, the plan can distribute a former employee's vested benefit to a default IRA Custodian, but only if it is $5,000 or less.

2. For Terminated plans - (non pbgc plans) after a diligent search, the plan can distribute a participant's benefit to a default IRA custodian no matter how large the participant's benefit is.

Anyone disagree with this?

Thanks.

We have a 401(k) Plan that has safe harbor match.    The employer acquired a second company in October 2022 and this company has a 401(k) Plan that does not have any safe harbor contribution.    I'm not sure how to test the 2 plans.     Can we test them separately or are they required to be aggregated?   

With a heading “Mandatory Distribution Rules Not to Apply Before Death”, Internal Revenue Code § 402A(d)(5), as SECURE 2022 adds it for tax years that begin on or after January 1, 2024 (with a transition for 2023 measures to be paid in 2024), provides:

Notwithstanding sections 403(b)(10) and 457(d)(2), the following provisions shall not apply to any designated Roth account:

(A) — Section 401(a)(9)(A).

(B) — The incidental death benefit requirements of section 401(a).

Am I reading correctly that only Roth 403(b) and Roth 457(b) participants are excused from minimum distribution before death?

Or is there another provision I didn’t read thoroughly enough to find?

I'm having trouble getting my head around the rules in EPCRS about when a sponsor doesn't have to make a corrective distribution of small benefits.

EPCRS Section 6.02(5)(b) says: Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions. Corrective contributions are required to be made with respect to a current or former participant, without regard to the amount of the corrective contributions.

My questions are:

• What may be considered a "corrective distribution"? Like are corrective distributions limited to 415 excess, 402(g) excess, and ADP/ACP refunds?
• When it says "This section 6.02(5)(b) does not apply to corrective contributions.", does that mean corrective contributions for former participants with no balance still have to made if the amount is < $75 or the actual cost of making a distribution, even if the TPA's cost for making a distribution will wipe out the benefit?
  • Can corrective contributions for former participants with no balance be forfeited if they are less than $75 or the cost of making the distribution?
• Essentially, how liberally can this section be used to avoid having to fund small corrections to terminated participants with no balance?