Company is sold to another larger company which brings all employees onto their set of benefit plans.

Employees are covered by selling company for 2 months after the purchase date so as to finish the year off at 12/31 with the same benefits.

At 1/1 they are under the new company's benefits.

1 employee stays on the old plan for two more months (ie the plan exists until 2/28).

No need to file an additional 5500 since beginning of final year < 100.

So seems logical to file the 12/31 5500 with Code 4R and then mark as Final?

Facts: 

Suppose you have a husband and wife with no kids living in a community property state. Also, suppose he owns 82% of his corporation with no employees and is eligible for his companies' retirement plan. She also owns 82% of her corporation has 3 employees except she is not eligible for her corporation's plan. 

Question: 

A controlled group seems to exist here but would both plans need to be aggregated for testing when she is not eligible for either plan?

Thanks.

Transmeroca sent out a piece indicating tha the IRS now requires W4R every time someone wants to increase their withholding.

Can that be right??  Those forms are notoriously nonsensical.

An accountant posed this scenario to me:

His client established a traditional IRA and made a $7,000 contribution in 2022 and then converted it to a Roth IRA.  In doing year-end projections, the accountant determines that the client does not have any earned income for 2022 and therefore the IRA contribution is an excess contribution.  The current account value is $6,700.

Ordinarily, excess contributions must be withdrawn from the IRA to which made but in this case the original IRA no longer exists.  Seems the only logical thing to do is withdraw the $6,700 from the Roth IRA.  The client is going to get a 1099 for the conversion to Roth.  Since he can't claim the $7,000 as a deductible contribution (which, if it wasn't an excess contribution, would result in a wash for tax purposes) is he now facing taxable income of $7,000?  The 1099 issued for the refund of the excess contribution from the Roth is a non-taxable transaction.  Any thoughts on how this individual avoids picking up $7,000 of taxable income?

Thanks for any input.

The SECURE 2.0 Act of 2022’s provisions for a “pension-linked emergency savings account” include not only Internal Revenue Code provisions but also a new part 8 of subtitle B of title I of the Employee Retirement Income Security Act of 1974.

Am I right in thinking an emergency savings account is a part of an ERISA-governed retirement plan (if it’s not a governmental plan or church plan), and so is governed by ERISA § 206(d)(3), with its QDRO exception from a retirement plan’s anti-alienation provision?

How does a need to pay an alternate payee as a qualified domestic relations order requires affect one’s administration of a retirement plan and its emergency savings account?

Is it the same as, or different from, administering QDROs regarding a plan’s other subaccounts?

If a participant has immediate access to an emergency savings account, would a spouse or other alternate payee get no less access?

Pretty sure I know the answer to this one but just in case ... 401k/PS plan- owner gives his 2 kids (they do not work there ever - they have other full-time jobs) the max 401k and accompanying SHMatch every year.  They are on the payroll so get W2s.   They do not contribute any 401k monies where they actually work, but can they get a profit sharing contribution from both this plan and their actual plan?  No need to comment on the legality of this - been down that road with them.  TYIA! 

I have read that the President intends to sign the Consolidated Appropriations Act, 2023 (which includes SECURE 2.0) into law. Has anyone read when he intends to do so?

Thanks and Happy holidays to all!

I am working on a cross tested 401(k) Plan.  This Plan has a few allocation groups that are defined as ineligible for Plan Purposes in the Plan Document.  In 2022 one of the participants moved from a non-Partner group that was eligible to participate in Profit Sharing to a Partner Group that is ineligible for participating.  This individual is less than a 5% Partner so he is considered non-key.  In addition, he is not an HCE.  He made employee deferrals prior to becoming a Partner.  

Since he is considered ineligible as of 12/31/2022 would this require the return of his deferrals made when he was eligible to Participate?

He is still employed as of 12/31/2022 so does this  require a 3% top heavy minimum and the gateway minimum of 5%?  If yes, would this be on his W-2 wages only or would we also need to include his K-1 wages. 

Thanks for any insight.

Hi

Looking at a possible takeover and have a dilemma I did not deal with before.

Plan's AE assumptions are not great and need to be redone.

Currently, post AE is 5.5% with 2022 Applicable mortality table (yes, hard coded in the document as 2022).

I would like to amend it to a more favorable assumption that would reduce the AB for owner.

I checked the math and based on current assumption, AB is $1,888/month. If I change to more favorable assumption, AB drops to $1,503/month which is huge difference especially for testing purposes. In either case, the 415 limit stays the same.

If I change it now and the pay credit does not change, is this 411d6 violation because the AB drops but not the pay credit?

Thank you

Accountant mistakenly gave 5% owner of LLP us date of birth which turns out to be incorrect, 11/11/49, but accountant gave 11/11/50.

No previous distributions based on his being age 72 in 2022, this would have been the 1st RMD. With the corrected date of birth, don't we need to go back to the old 70 1/2 and recalculate 2019, 20 and 21?

in 2020 I started then terminated a solo 401k, then somehow now I ended up with another plan in 2022 and I'm completely overwhelmed
I try to read the instructions but my head just starts spinning and I'm panicked over the possibility of making any mistakes. at least I filed 5500ez 7 months after the first plan was empties.

I just want to give everything to a pro to check everything over (from both 2020 and 2022), correct any mistakes, and reassure me both plans are terminated properly, I want nothing to do with them anymore before I start crying.

Where can I hire a pro to take this on? I don't think my usual tax accountant can really do this.

Awersome article from Groom Law.  But in a sea of bad news, this almost makes it worthwhile...  I haven;t seen yet if they fixed the issue where a top-heavy safe harbor match plan can avail themselves of immediate eligiblity and a 1 year wait to avoid blowing their top-heavy exemption. That would for sure be a disappointing exclusion but regardless this is pretty awesome for a lot of plans.

https://www.groom.com/resources/secure-2-0-hitches-a-ride-just-in-the-st-nick-of-time/

Hi

Looking at a CB document for someone. The formulation is written in a way I have never seen.

For accrual/pay credit, no service requirement i.e. 0 hours. Crediting period is "Each Plan Year".

For the formula within a group, they wrote "$2,000 however for any terminated participant during the year, they will receive 1/12th of the pay credit for each month they worked 1 hour".

How is this possible? Aren't the member of this group entitled to full pay credit since no service requirement?

What am I not seeing/confusing here?

Thank you.

Hi

All below are on a calendar basis. I have never seen this before. Hope there are some out there who have experience/knowledge on this.

Company X left PEO on 10/1/2022.

They want to set up a new combo plan for 2022 which will be 401k/PS plus CB.

How are the PEO contributions and salaries applied? How is testing done, just from 10/1/2022 (salaries and contributions)?

Are they supposed to be short plan years?

Anything else i need to be aware of?

Thank you in advance.

Wishing you all happy holidays and great, prosperous New Year.

The best think tank ever.

Some practitioners have suggested there might be practical difficulties about the SECURE 2.0 Act of 2022’s catch-up elective deferrals for ages 60, 61, 62, and 63.

Just curious, what are the practical difficulties?

I have a client who is paid 40k in W-2 wages from their sole proprietorship
We are going to defer the max amount of 20,500 to his 401k and do 25% profit sharing. This gets us to 30,500 in the 401k account. We were going to do an additional 9500 of after tax to get to 40k in his 401k this year but we wanted to see if there are other options around compensation. 
He earns additional pass through income from this s-corp. 
Is there anyway to consider this pass through income as eligible compensation for the plan purposes so that we can defer additional amounts (this could be in after tax) to the 61k limit rather then 40k? How would we have to structure the s-corp and plan to allow for this, or is that even possible?

Client got this email and wanted to know if it was legit.  Have others seen this?  You get an email from some account with hyperlinks and obvioulsy people are concerned it is a phishing campaign (ALL links were deleted before I pasted this in).  Curious to know if anyone else has heard of these going out.  This will ruin 2023 for us unfortunately. IT was awful the first time.  The 2nd time should be no different.

The email is as follows:

EBSA is modernizing the EFAST2 website authentication process. The existing EFAST2-issued User ID and password log-in process is being phased out and will be replaced by the unified single sign-on solution for U.S. government websites. enables users to securely log in to many government agencies’ services with a single username and password.

Beginning Jan. 1, 2023, all new EFAST2 website accounts will be created using the process. Existing filers may use their EFAST2-issued User ID and password to log in to the EFAST2 website until Sept. 1, 2023. This eight-month grace period provides a gradual transition for filers. However, existing filers may change to a account as early as Jan. 1, 2023.

Logging into the EFAST2 website is required to obtain new electronic signature credentials for the Form 5500 Series. It is also required to file the Form PR or to use IFILE, the government’s Form 5500 Series filing application. Logging into the EFAST2 website is generally not necessary for existing Form 5500 Series filers using

Thank you,

The U.S. Department of Labor

For a plan effective 1/1/22, under SECURE, does the document need to be signed by 12/31 or would the tax deadline suffice?

I have a client with a solo 401k who contributed the max deferrals for 2022 but would like to make after tax contributions to get to the 61k limit. Their compensation this year was 40k so can they contribute more then 100% of their compensation to their 401k in after tax dollars?