A new one for me

Client has an existing fully funded DB plan.

For 2022, I was told that the schedule c income would be 60k.

Suggested a new 401k set up for 2022. Did so and deposited full deferral prior to 12/31/2022.

I just got the net c and it is $600 (thankfully db has no required contribution).

So, now have a 27k deposit as of 12/31/2022 but no income to support it.

What to do?

I understand that an in-plan rollover to a designated Roth account of employer securities is treated as a distribution for the net unrealized appreciation (NUA). What are the implciations of that treatment? 

When complying with the new Roth Catch-Up Contribution provision of SECURE Act 2.0, do plan sponsors need to add Roth as an available option for all participants in the plan? It seems like they should, however we work with a plan sponsor that does not want to make it an available contribution type in the plan.  Is that permissable?

In 2022, a 401(k)/PSP client transferred from a pooled account to individual accounts as Vanguard.  During the first part of the year, they funded deferrals and also made additional deposits to the account which were used to fund the employer safe harbor match at year-end.  The safe harbor match amounts were not calculated based upon a specific time period or earmarked for any specific participant, This is how they had always done it and I see no harm in it.  Those employer deposits throughout the year earned money while in the pooled account.  After the transfer to Vanguard, these funds were placed in a suspense account and continued to have earnings.  The total suspense account, which was comprised of actual money deposited + earnings, was used to fund the annual safe harbor match once it had been calculated based upon full year data.

Is it ok that they use the earnings to fund the required safe harbor match contribution?  I assume they definitely cannot deduct the earnings portion because they did not deposit it, but am now questioning the use of the earnings altogether to fund the contribution.  If we were talking about forfeitures, I know those earnings are used to fund contributions all the time, but is this different?

Thanks!

Accountant filed the 6/30/2021 5500 late to stop the running of penalties. Do you think it can be refiled under DFVC program with outstanding 2022 5500 now since no notice has been received yet? The accountant wants to 

Is it oversimplifying the concept that plan with an elapsed time eligibility provision is not subject to the LTPT rules?  I seem to have picked that up somewhere, and I haven't seen it debunked at any webcast.  Thanks.

Plan has immediate eligibility.  However, Part Time and Seasonal Employees are excluded.  Obviously if the employee in these groups complete 1,000, they were eligible for the plan. There seems to be different opinions if the LTPT rule applies to groups specially excluded from the plan.   

Question, if the plan specially excludes a group (part time and/or seasonal/interns etc.), does the new LTPT rule apply to this group.

Thank You.

I have a client (Company A) that sponsors a 401(k) and a DB plan.  A couple of years ago they acquired another company (Company B) that sponsors a 401(k) plan.  The transition period funder 410(b)(6) has now expired and they may have a testing issue unless they can obtain QSLOB status.

In testing for QSLOB status, both companies meet the 50 employee requirement and the administrative scrutiny requirements under 414(r).  Next up is the Gateway test under 1.414(r)-8 which is causing a potential problem.  I believe that each of the 3 plans has to satisfy 410(b)(5)(B) on an employer-wide basis, and can do so by each having a coverage ratio greater than the unsafe harbor percentage.  While each of the 401(k) plans satisfy this requirement, the DB plan unfortunately does not.

Based on this, does that mean Company A fails to be a QSLOB based on the DB plan's coverage failure?  Or can Company A's 401(k) plan at least be tested on a QSLOB basis since that plan does meet the coverage requirements and the sponsor satisfies all of the other QSLOB requirements.  In that case at least we'd be good for the 401(k) plan and the DB plan could then explore other options (hard freeze or open up to new entrants).

A colleague suggested that Company A as a whole could be tested on an employer-wide basis, not each individual plan.  The argument being that it's the QSLOB itself that needs to be tested, not the plans of the QSLOB.  But that did not sound correct to me.

Any suggestions are welcome.

A participant makes a subsequent deferral election. Before the 12-month period before it will be effective elapses, can she void that subsequent deferral election and make a different subsequent deferral election or is she locked in until the 12 months expire?

I need some assistance determining the Vesting Percentage for a former Employee, please.  This client has revolving door of employees and sometimes makes determining what service qualifies for vesting a little complicated and need some help in making sure I am counting vesting service correctly.

The employee in question has Original Date of Hire was 6/25/2014 and he worked 1,000 hours in 2014.  He termed in January, 2015 and was Re-Hired in November, 2016 so neither of 2015 or 2016 plan years did he work the 1000 hours. He termed on 5/20/2017 having worked his 1,000 required hours for the year 2017.  He was Re-Hired on 9/18/19 but worked less than the hours required during the remainder of 2019.  Now he has termed again on 7/1/2023. I believe he gets vesting service credit for 2014, 2017, 2020, 2021, 2022 and 2023.  Does that sound right?  

This was just released thru BL today.

Issue Snapshot — Deductibility of employer contributions to a 401(k) plan made after the end of the tax year | Internal Revenue Service (irs.gov)

Not a 401k expert.

Example 5 is an interesting one, is it correct though?

SECURE 2.0 section 317 states for plan years after 2022.

What am I missing here?

Thanks

Beginning with 2024, new Internal Revenue Code § 401(k)(16) sets up a new kind of individual-account retirement plan—a starter 401(k) deferral-only arrangement.

For relief from top-heavy treatment and from actual-deferral-percentage nondiscrimination constraints, the price is providing no contribution beyond elective deferrals, and limiting them to $6,000 (or $7,000 for those 50 and older).

Under which conditions would an employer prefer a starter 401(k) over sending payroll deductions to Individual Retirement Accounts?

Is it about saying, in recruiting workers, that the employer has a “401(k) plan”?

Under which circumstances would it be rational for an employer to pay (instead of letting participants bear) all or some of a starter 401(k)’s plan-administration expenses?

I understand that not all plans allow for in-service distributions.  And I understand that you must die, become disabled, be terminated or reach retirement age.  But all that aside, can a participant request and can a plan make an in-service distribution to an active participant that isn't considered a hardship in-service distribution?  Of course the payout would be taxed and coded early.   Is this possible?

Here's a odd one for this afternoon - We are TPA on a plan that requires the independent audit report for the 5500 due to size.  The plan is with a large recognized national 401k vendor.  The auditors are currently doing a review of selected participant distributions.  They were unable to match the amounts forfeited on two individuals based on the vesting so of course came to me for explanation.  I also could not match the amounts that were paid out/forfeited so I checked both my system and the participant hard copy distribution form.  Both of those reflect the proper vested percentage for each participant.  I then went to the vendor for explanation as to how the vested percentage was computed.  In both cases the participants had taken a Coronavirus withdrawal back in 2020 and the vendor is telling me that affected the final payment and subsequently the forfeitures for each participant.  That would indicate to me that a portion of the Coronavirus distribution was made from non-vested funds.  We're not talking about a lot of money here because this particular client limited the CVD to $3,450 per participant.  Both participants had deferral accounts and for one of them the vendor didn't even take 100% of the deferral account before taking from the Employer sources.  It's pretty confusing to me anyway.

Ultimately I guess my question is - I was unaware that it was even allowed at the time to take non-vested funds as part of the CVD distributions.  Does anyone know if this was a thing?

Thanks in advance!

With the new 2023 forms, this number will be required. The IRS has informally indicated that this will be available as part of the 5500 data sets. So, anyone can look up the opinion letter serial number for a given TPA, and essentially obtain your client list for 5500 filings under each pre-approved plan you sponsor.

Is the ARA raising any hell on this? Seems pretty serious to me! 

Hi. Client is terminating a 401k Plan. There is a sizable amount in the forfeiture account. Even after paying expenses, there will be a balance left over. The document says that forfeitures are allocated first to restore previously forfeited amounts to participant accounts. Thereafter, remaining forfeitures are used to:

• offset Plan expenses
• reduce future matching contributions
• reduce future nonelective contributions

Since we are terminating, and thus there will not be any future contributions, how should we allocate the remaining forfeiture balance? Pro-rata to participants according to??

Thanks.

Looking for a citation for the following:

For a new entrant into the plan who receives the safe harbor contribution for only part of the year, i.e. while a participant, the top heavy contribution should be for the entire year and thus, such a participant would require an additional top heavy contribution.

Participant entered in July, but received a safe harbor from date of participation.

We're having a difference of opinion in my office regarding whether the eventual grant of a meaningful benefit (via an 11(g) amendment after the year ends) is an appropriate actuarial assumption for purposes of running the beginning of year valuation.

For example, when doing the 1/1/23 valuation for a cash balance plan the actuary is aware that less than 40% of participants will be accruing a meaningful benefit.  The actuary determines that 8 additional participants, who would not otherwise accrue any benefit during 2023 (due to a current classification exclusion), will need to accrue a meaningful benefit and includes them in the valuation on the basis that that reflects his best estimate of plan liabilities.  Others believe that the meaningful benefit accrual for those participants should not be reflected as of 1/1/23 since there is no current amendment granting the accrual.  It's possible that when the amendment is adopted the meaningful benefits may be granted to different participants.  As an aside, the increased contribution for the additional normal cost (which is about 10% of the overall normal cost) would still be within the plan's maximum deductible limit even without these benefits.

What do you think?  Opinions and/or specific citations would be appreciated.

Thanks.

Suffering from Friday brain cramp.

John Doe owns 100% of corporation A, Sponsors Plan (X) - calendar year plan. During 2021 calendar year, John sells ASSETS of corporation A to Edward Doe. Edward has corporation B  - keeps the same corporate name, but now under new employer id# (he's 100% owner) and assumes the assets and liabilities of plan X and sponsors the plan. The former owner John Doe continues as a non-owner employee in corporation B.

For 2022, John would appear to be a Key employee, since for part of the PLAN year containing the determination date (2021), he owned 100% of the corporation sponsoring the plan, which was subsequently taken over by corporation B. Have I got that right? Then in 2023, he's a former key, and his balance is excluded from the top heavy test. Have I got that right?

Thjis is probably one of those things where I'll come in on Monday, look at it and say, "Duh, the answer is simple" but I'm chasing my tail at the moment.

Thanks!

I'm supposed to be able to dump into Excel or whatever format a listing of all plan provisions.  It's under "Data Export".  Anyone know how to do that?  I cannot get it to work.  I'm waiting for Relius to provide some direction but figured I would ask y'all!

FYI I am trying to very efficiently figure out which clients dont have Roth or who are affected by LTPT rules.