Hello All-

Our firm is considering changing methods from Accrual to Cash Basis for 5500 and year-end valuation reporting.  Is there anyone out there with experience who can provide any tips on how best to do this?  I have worked on a cash basis previously, but would like to explore any pitfalls of making the switch from accrual to cash. Trying to make the transition go as smoothly as possible. Any advice is greatly appreciated! 

Thank you!

Hello,

We have a participant in a fully insured plan that is past NRA and would like to take a partial distribution. They have 4 annuity contracts in the plan and want to distribute 2 of them to an outside account and continue to pay premiums on the other 2.  I realize we have to amend the formula to make this work, and there are only owners in the plan, so that part should be ok.  I'm wondering if this partial distribution would be allowed?  I had been told in the past that in-service distributions aren't allowed from fully insured plans.  But, this participant is past NRA, so this could be considered a partial distribution of the retirement benefit.

Thoughts?

Thanks,

Austin

For 401(k) plans that decide to allow Roth employer contributions, how, if at all, will the deduction rules change for those contributions? I'm thinking that traditional employers will still get a deduction, but what self-employed plan sponsors? Will it depend on the way the self-employed business is structured?

Thanks for any thoughts.

Suppose you have two non-governmental tax exempt employers, each of whom sponsors a 403(b) plan with, for all practical purposes, identical provisions. Both are calendar year plans. Are there any particular problems with permissively aggregating them for coverage and ACP testing, if one fails, but permissive aggregation would allow them to pass? I'm not seeing any, but perhaps I'm missing something.

It occurs to me that the original post left out the fact that they are a controlled group - a rather important piece of information!

Gracias.

Received a referral on a cash balance as well as a 401(k) plan. Cash balance no eligible employees (presumably), 401(k) remains to be seen.

My first question to him is the 401(k) "handled" by a payroll company as I refuse to takeover any such plan.

Secondly, ADP has no knowledge of the cash balance plan.

Third, the cash balance is on a 10/1-9/30 plan year; the 401(k) is calendar.

Regardless of different plan years, granted they need to be aggregated for deduction purposes; don't the plan need to be tested together for 401(a)(4) ?

Seems like a loss leader.

We use FT Williams for administration and  it's getting me so confused! Or maybe I'm just getting too old for this s$%t! 

This cross-tested plan has passed the rate group test but not the average benefit test. It also passed the ratio percentage test. Does it still have to pass the average benefits test as well? Are deferrals included in the average benefits test?

Someone have mercy on me!

A CPA reached out to me today to tell me that he was amending 2020 and 2021 tax filings for the Employee Retention Credit (under CARES, I think), and how would that affect the employer contributions for those years?

Basically, certain business are getting to amend COVID-era (like it was so long ago) tax returns to claim a tax credit for retaining their employees if they met certain criteria (I don't care what the criteria are since I know my business didn't qualify for it).  This increases the net income for the year - sometimes significantly - and therefore for a sole prop or partnership entity, this affects the net compensation.  Has anyone else been hearing about this?  How are you handling it (ideally with the minimal amount of disruption)?

I'm concerned that if we include it in 2022 (or 2023) based on the deposit date, then it will reduce the amount that can be contributed for the current year (or next year).  And, since the CPA is amending the 2020/2021 tax return, it would be nice (though not required) if things lined up.

Any thoughts are appreciated.  Thanks.

Section 603 ELECTIVE DEFERRALS GENERALLY LIMITED TO REGULAR CONTRIBUTION LIMIT

This is the section that refers to Roth catch ups for those making $145k. This section states the following:

(b) CONFORMING AMENDMENTS.—  (1) Section 402(g)(1) is amended by striking subparagraph (C).

Question: isn't that the subsection that allows catch up beyond the 402(g) limit regardless of compensation? If that section is stricken, what remaining section allows catch up beyond the 402(g) limit? I am curious if this has the unintended consequence of eliminating all catch ups - is that what this does? (If it does, I am sure it will be fixed so this isn't a fire drill question)

Thanks

Client got a letter from DOL about late deposits.  The old version made it clear that no response was required.  This has a little more of the "respond or else we're coming for you" interpreation.  Has anyone else gotten this letter?  This is the first one we have received.  If this is the new version of the old approach it would be tempting to use the same solution (not respond).  Curious to know if this is just a new template to get a higher response rate or they are really coming after clients who do not respond.

I am in a very preliminary discussion with a new plan. Just discovered that they have an employment contract with one HCE employee that states that the HCE will receive X% compensation annually to be contributed to his 401k. The amount is going into his gross pay and then to the plan as employee deferrals. It is not going in as employer contributions. I'm not comfortable but haven't quite worked out how big of an issue, if any, this is. 

On the one hand, they are just giving the HCE funds that he can choose to put into or not put into the plan. But since they clearly labeled it as "pension funds" (they have a 401(k) not a pension) it concerns me as a possibly discriminatory issue. 

I would welcome any input. 

A customer engaged us to prepare a non-SH 401(k) plan document for them in mid-2022 with elective deferrals to begin in the 4th quarter of the year. We prepared the document and they signed it.  We've received word from the advisor that they've never collected or contributed a cent into the plan, and whether or not they ever gave their employees copies of the SPD or had an enrollment meeting is unknown at this time. 

I was wondering what the board feels is appropriate with regarding to formally terminating the plan. I've heard the argument that if the plan is never funded it never really starts, but I don't know if I can get behind that. In my mind, the execution of the plan document creates an obligation on the part of the plan administrator to operate the plan according to its terms, and there's an operational failure resulting in a missed deferral opportunity as a result. I haven't been in the industry that long, so I'm not sure what the commonly accepted practice would be in this situation. Any thoughts?

Plan sponsor failed to timely remit deferrals following multiple payrolls.  We are proceeding with a VFCP filing with the DOL.   Question is whether there is also an "operational failure" under EPCRS.  Plan document only requires deferrals to be deposited into the plan "as soon as administratively feasible."  I have not found any basis to consider this an operational failure since the plan document does not require the deferrals to be deposited by a certain date.  We are trying to avoid an EPCRS VCP filing (we are outside the self-correction window for significant operational failures).  Any thoughts (or real world experience) would be appreciated!

Hi

I have an interesting question/dilemma.

I was provided a plan amendment by another person. The amendment was sent to the client by DocuSign.

It has 2 pages, a resolution and an amendment.

Both pages were signed but only resolution was dated. Amendment's date is left blank.

As they were both sent by DocuSign to be executed, there is proof that all were executed on the same date. There is the summary too.

In your opinion, would the amendment be considered as signed on the same date as the resolution? Or, it will need to be re-executed and dated tomorrow?

If this was not DocuSign related, I would not accept it but because there is no evidence as to when signed.

I am curious on the legality.

Thank you

I received a call today from a client.  They maintain a DB Plan with mandatory employee contributions of 3% of salary.  It appears that HR missed this on a small number of employees and has realized it now.  This has been going on for 3 years on one employee and about a year on a few more.  The total number of employees impacted is less than % of the total population. 
 

Does anyone have thoughts on an appropriate correction?  This isn’t a missed voluntary deferral situation where we have set guidance on the correction.  Does the employer have to make the missed contributions?  Can they work with the employee to “catch up” the amounts that were missed?

Thanks for any thoughts!

Prior to SECURE 2.0 there was the 3-year credit of 50% of plan admin costs up to $5,000 for small employers.  I understand now that credit rate is 100%.  PLUS there is now a new credit of 100% or an employer contribution up to $1000 per employee (phased down after year 2.)

So a small employer starting a new plan gets both credits?  That seems to be what I am reading.  Is it really that good?  

Good afternoon!  We took over a Cash Balance Plan and for '21 it appears they were using these interest rate s (they used the corridors under BBA):

However, I see that this table hasn't been updated for Plan Years Beginning in 2022.  Does anyone know when these will be updated, or what can be used instead?

Thanks in advance!

Hi, 

There was a balance of $300 in the forfeiture account and the sponsor was unable to terminate the plan because of the balance in the plan level l account.  The sponsor decided to re-allocate the balance in the forfeiture to one participant as a match contribution.  There was no employee for 2022, they funded a match in 2022 but there is no deferrals which has lead to a operational defect  since they can not fund it match. 

Since the plan is completely terminated what options the client has to have this corrected/fixed. 

 Thanks

Has anyone recently filed Form 5310 for a frozen defined benefit plan after formal action has been taken to terminate the plan but prior to the termination date?  We have previously done so, but didn't know if there had been any recent concerns or questions raised by the IRS with this approach.

ERISA § 502(c)(2)’s civil penalty for a failure to file an annual report is $2,586 per day.

88 Fed. Reg. 2210, 2219 (Jan. 13, 2023).

If a plan’s administrator is off by one year and three weeks, that’s about $1 million.

To keep this simple, I will use  two HCEs and two NHCEs that are being tested for nondiscrimination. All 4 employees are non-excludable. 

Can one HCE & one NHCE receive an allocation, and the other HCE and NHCE receive $0.00?

410(b) test would be 100%

Each employee is in their own group, and the plan does not have the SHNEC to trigger the minimum gateway.

Thank you!