Hi. Just curious if the change to 414(v) (based on Section 109 of SECURE Act 2.0) is mandatory.  In other words, a plan sponsor may choose to permit age 50 catch-up contributions. If permitted, then *must* the plan permit the full increased catch-up limit for ages 60-63, or *may* the plan impose the same catch-up limit for all age 50 catch-up contributions regardless of age?

Survey says...

TIA for your insights.

Hi, 

Good Evening!  looking for help on Puerto Rico plan termination.  This is the first time I'm handling a Puerto Rico Plan that needs to be Terminated.  I would like to under how different this is from a regular plan termination specially when it comes to a 1) forced distribution for the unresponsive participants. 

2) Any special notice that needs to be sent out to the participants? 

3) Can Participants be rolled over to an IRA account? should that be Puerto Rico Individual Retirement Account only? 

4) What are the option available for a participant that has loan? 

5) how does 5500 and Non-discrimination testing work?

Thanks

Good morning everyone!  Is the 408(b)(2) required for a Trustee directed pooled fund?  It doesn't appear that the investment people do it, and the client is asking.  I wanted to confirm if it was required under this scenario or not.

Thanks in advance!

Is it common to amend a plan at year end to add in a profit sharing arrangement?

Or is it okay to have a profit sharing arrangement in the plan that is not used? For instance we have a discretionary profit sharing arrangement for Pro Rata profit sharing on the plan but they do not do a pro rata contributions. If the plan also makes a safe harbor match then would they still not need to do compliance testing? Or does it lose the exclusion from compliance testing with safe harbor because it is an option for them to profit share? 

I've had a one-participant ("solo") 401(k) since 2015. Out of ignorance, I treated the plan like an IRA, and transferred the plan between Vanguard and Fidelity several times. I did not retain complete records for these transfers. My intention was to retain the same plan, but I incorrectly incremented the plan sequence number, and I do not remember whether I adopted a new plan or amended an existing plan in the paperwork for 2 of the transfers.

My plan hasn't had a balance of over $250k until 2022. Last month, I received my 2022 Annual Valuation Statement from Fidelity and completed a 2022 5500-EZ, which is saved (but not submitted) on EFAST2. While filling out the form, I realized that the IRS may take notice of my sequence number of 003 and wonder why I haven't filed a final 5500-EZ for 001 and 002. That led me to Google, where I got spooked by the consequences for mishandling a 401(k).

So, I want to terminate the plan and use a SEP instead. I should have never had a 401(k) in the first place.

I need professional help to

• obtain the correct plan documents from Vanguard and Fidelity—I don't even know the "magic words" to say to the phone reps so they send the needed materials, and
• review them and confirm that I didn't make any mistakes that would preclude terminating the plan.

I've reached out to a couple TPAs, but I get the feeling the assistance I need is too small of a job for them. I suspect this may be because everything might be fine with my plan and there is no remediation work necessary, or because my goal is to get rid of the 401(k) and I will not need ongoing administration.

Can anyone here recommend a firm—even their firm—that could help with an individual's one-off case? Thanks in advance for any leads.

Plan sponsor missed deposits of some 2022 deferrals; they were deposited in early 2023.  We have calculated lost earnings and prepared Form 5330 to report and pay the excise tax on the lost earnings.  We do the plan administration annually.

According to the IRS forum from 3/24/2011 (posted online) they indicate lost earnings have to be calculated for the year in which the deferrals were late, and also for the year in which the lost earnings were deposited.  In fact, it uses a pyramid approach, such that you must deposit the lost earnings for the late deferrals plus the lost earnings for the prior plan year.  It sounds like you have to file two Forms 5330 for one delinquent deposit if the lost earnings were not deposited in the same year as the late deferrals.

How many Forms 5330 can be filed for the same plan in one year?

We have a client that is chronically late in making deposits.  So for 2022 we will report lost earnings on those late deposits of 2022 deferrals in 2023, then we will calculate lost earnings through the date of deposit in 2023, plus lost earnings on the 2022 lost earnings, plus lost earnings on late 2023 deposits.  Do we file a 5330 for the lost 2023 earnings on the 2022 deferrals deposited in 2023, and then another 5330 for lost 2023 earnings on late deposits of 2023 deferrals?

Trying to figure how how this is supposed to work. Any help appreciated.

Hi - We are trying to provide TPA services to a plan that had, until 2019, been serviced by a TPA called CWM Retirement Plan Services, LLC, in Massachusetts. They have not responded to our communications in any form.  I now understand that they were shut down quite suddenly and dramatically. It seems clear the owner is not available to provide any information.

Is anyone aware of how we might be able to obtain records that had been held by CWM Retirement Plan Services?  For example, did another TPA take over their files?  Any help or information will be much appreciated.

Hello, 

My client is undergoing an IRS audit. They filed a Form 5500 that requires and IQPA auditor's report, which was missing since the IRS is auditing the plan for issues in compensation utilized to determine benefits.  My client received a rejection letter from the DOL.  Any ideas on how to respond if the IRS has not completed its audit within the 45 day timeframe?  I'm thinking that they should send the rejection letter to the IRS agent working on the audit and alert them of the ramifications of not correcting the Form 5500 in time.  Thoughts? 

- Rena 

Would they be able to receive $500 tax credit for adding auto enroll in Plan? It is only Owner and spouse in Plan. I know this isn't the spirit of the tax credit but if it is in Plan Document would it be able to be used? If anyone would be hired they'd be auto enrolled.

I'm of the understanding that they wouldn't qualify for any of the other tax credits since there are no HCEs.

Hi

CB & DC plan combo, DC has 3% NESH 3%

Controlled group, 2 schedule c, both entities adopted the plans.

Employees, some paid from both and some separately from each entity.

Sch X had 500k net c

Sch Y had 200k losses

There are mandatory CB, SH & PS contributions attributable to both entities.

Q1, for all purposes,need to combine the income, correct?

Q2, should each entity fund its own portion of contributions?

Q3, as to deduction, cannot exceed combined sch s, correct?

Anything else I didn’t think of?

Thanks

We have a plan that excludes HCEs from the 3% non-elective safe harbor.  Several HCEs are non-key employees.  There is no employer contribution other than the 3% safe harbor.  The question is - do the non-key HCEs have to receive a 3% profit sharing contribution since the plan is top heavy?  The plan passes coverage on the safe harbor since the only ones excluded are a couple HCEs.

Thank you,

Tom

Obviously there are so many things that go into making a plan top heavy, including how much each participant contributes, who participates in the plan, and which participants contribute more ect. But is there a threshold that is common practice in the industry to say if you have x% or more HCE's than NHCE's then you should use the Top Paid Group?

The more I read these rules the more convinced I am that the only possible option is to avoid these rules altogether by designing eligiblity rules to avoid exlcuding LTPT Employees. So for example the most simplified approach here will be to change the 1,000 hours in 12 months eligiblity to 500 hours (at least for 401(k)).  There are other options, but I am concluding that what is not an option is for a client to try and administer these LTPT rules in the context of a plan with 1,000 hours and 12 months "normal" eligibility.

Can I get an Amen?

DC Plan, only participant was owner, spouse pre-deceased, no children, no beneficiary designation.

There is a will directing how the Estate is to be distributed.

Do the plan assets get paid to the estate, and then distributed accordingly?

Can any relatives (or even non-related beneficiaries) roll to IRA's? Any other tax advantaged methods of distribution available?

Thank you in advance for your help with this!

Several times recently, distributions have been requested where the receiving retirement plan or IRA has requested a "qualification letter" from the sending plan. 
Sometimes the receiving plan is appeased with a copy of the IRS opinion letter, other times there is pushback. There is one right now where Fidelity is insisting the Opinion Letter is not what they want (the sending plan is not audit sized, so there is no audit statement, and while the assets are held with a custodian that does recordkeeping, not all plans pay extra for a certified trust statement either). 

What do they mean when they say they want a qualification letter? The receiving plan provider can't seem to articulate it, and it is holding up distributions. I don't think the sponsor (who is the named Plan Administrator) minds writing a letter saying they believe the plan to be qualified. They would be happy to. But is that what they want? At one point a receiving plan was saying the letter had to cover the qualification of the plan for this year (they didn't like the date on the opinion letter I guess, among other things). 

Anyone have a good resource or article or something that can help me understand? 

The increased catch-up limit is the greater of $10,000 or 150% of the regular limit.  The regular limit in 2023 is $7,500 and 150% of even that limit is $11,250.  Yet I cannot find a single article that references this contradiction.  I realize the $10,000 is indexed for inflation but so is the catch-up limit.  The 150% is so far ahead I can't see the $10,000 (even indexed for inflation) will ever be relevant.

The lack of commentary on this is so glaring I am starting to wonder if I'm the one missing something?

Is there a cut off on how much can be contributed before it is not longer exempt from testing for safe harbor non-elective?

I know for safe harbor match anything above 6% will then need to be tested for ADP ACP and Top Heavy so I was not sure if the same rules applied for Safe Harbor Non Elective 

Plan has QACA Match, so changing to SH Match effective 7/1 would be an amendment that increases everyone's match for the whole year.  Do we think this is possible?  The primary objective is to eliminate the auto enrollment.

During open enrollment, an (childless) employee elects HDHP coverage and therefore (implicitly) to receive the employer's HSA "seed" contribution.  Unfortunately, the employee also intended to enroll in the general purpose health FSA but instead enrolled in the dependent care FSA.  The employer's systems obviously would not catch this error.

Well into the year (the employer's cafeteria plan does not currently provide for a time limit of providing notification) and after the employer HSA "seed" contribution was made, the employee notices the mistake and notifies the employer.  Pursuant to IRS guidance, the employer corrects the mistake and converts all of the year's prior and subsequent FSA amounts to the health FSA.

The change would certainly make all HSA contributions, including the "seed" amounts, excess contributions.  The employee can avoid the tax penalty if he or she takes a timely curative distribution.  If the employee does so, the effect would be that he or she would get addition compensation from the employer but only as a result of the employee's mistake.

Under these circumstances, can the employer ask the HSA custodian to return the "seed" contribution to it? 

Under the HSA regulations, there are only limited circumstances when this can be done, most notably when the employer was never HSA-eligible.  Here, the conversion means that in effect the employee was "never" HSA-eligible but it was solely as a result of a change made mid-year.

Any thoughts are appreciated.

Company A:  Plan uses prior year testing method.  

Company A acquires company B on 9-1-21. 

Company B uses current year testing method

Effective 12-1-22, Company/Plan B merges into Company/Plan A.  We are testing Plan A for full year and including Plan B only from 12/1-12/31.  

Both populations are approximately the same.  What average do I use for the prior year testing adp/acp average?  Do I need to do a weighted average?  (Ideally, they should have waited to merge until 1/1/23. Or tested together for entire plan year).

Thoughts?