Uh oh. Some brothers and sisters just found out, after ten years, that their companies are not a brother-sister controlled group. (No brother-sister aggregation for this test.)

They have always operated their 401(k) plan as if it were "single employer" with everyone getting the same contribution. The 401(k) and (m) tests were also operated on a "single employer" basis, which is the problem because those tests need to be company by company in a multiple employer plan. Maybe if they could find the data, the 401(k) and (m) tests would be passed. The document is set up since the begiinning of time as a single employer plan, also a problem.

Here's the question, and I am sure the answer is No, but it would be great to hear something different. Is there any permissive way that a plan can elect to aggregate as if it were single employer, even if there is no controlled group or affiliated service group but a family relationship among the owners?

A non-owner participant was told that since she was over 72 she had to take an RMD for 2022, slightly over $1,000.

Does this mean she has to continue in the future?

This is a discretionary match that was paid throughout the plan year. The plan document states the match computation period is payroll by payroll. My understanding is that the computation period dictates the mathematical components used to determine each participant’s matching contribution. If the computation period is each pay period, then the formula is applied to deferrals/compensation earned only during that specific payroll period. Therefore, a true-up would only be applicable in a plan where the match computation period is annual (regardless if the match was actually PAID per payroll or annually). So the question is whether the true-up is possible with a per payroll computation period, and also does a true up provision need to be included in the plan document? I'm not sure if the mechanism is simply implied by the choice of computation period, or if it needs to be explicitly stated. 

What makes the situation even more confusing (and concerning), is that the plan document includes a last-day rule as a condition for receiving match contributions. Isn't the plan in operational failure if they fail to forfeit/refund all of the match paid to the employees during the year? 

Additionally, the employer wants to exclude terminated employees from their hypothetical true-up. I don't see how they can exclude them from a true-up (if they can make the true-up), without also acknowledging that they are not entitled to any match accrued during the plan year.

As you can see, a lot of red flags here and a few inconsistencies with the plan document. Any guidance would be appreciated.

The plan administrator checked "establish an account in my name" as opposed to what she stated in MULTIPLE emails to me which was that she was asking ADP to expedite a cash out or me.  So, I thought I was getting a check but the money went into another 401K plan and actually lost money because I thought I was getting a check AND nobody told me the money was in an account.  I called daily/weekly asking for updates.  So now what?  I lost money because of this bungle.

Also, Plan Admin is telling me she is not "allowed" to talk to me on the phone because I'm not the client (my ex husband is the employee).  She says she can email with me but not talk.  Is that accurate?  That seems incorrect.  

Is it permissible for match contributions to be structured in a way so that different groups receive different match?  This is a non-profit and there will not be any HCEs.

The organization would like to give a match 100% match up to 6% of pay for Group A.

For Group B, in year 1 they get 0%; year 2 50% match, and year 3 100% match.  

Is that acceptable?

Thank you

C corp has a Profit Sharing Plan.  The owner is (and has been) the only participant.  I've previously filed 5500SF, but I mistakenly filed Form 5500EZ last year, and didn't realize it until filing 5500SF this year.  Should I file an amended 5500SF for the year I filed the 5500EZ?  

In 2022, a retirement plan’s sponsor asked its recordkeeper to prepare a plan amendment to add, effective January 1, 2023, a business organization the sponsor acquired last summer. Using an IRS-preapproved document’s forms, the recordkeeper sent a restated adoption agreement. In December, the plan sponsor’s chief financial officer signed it. That signature is dated and time-stamped in the recordkeeper’s electronic-signature system.

The trouble? The recordkeeper now says the amendment is ineffective because it lacks a signature on behalf of the adopting employer.

The CFO who signed for the sponsor also is the CFO of the sponsor’s subsidiary and has power to sign for it. I’m guessing there is, or ought to be, no defect.

But I know enough to recognize that I might not know enough about rules or customary processes for using IRS-preapproved documents.

What am I missing?

Hello,

We are trying to figure a possible way out of a top heavy issue and would appreciate any thoughts.

Facts:

• Calendar year 401(k) Plan. Does not allow profit sharing contributions.
• Plan has been safe harbor (safe harbor match) for several years and the employer elected to stop the safe harbor match effective 1/1/2023.
• Safe Harbor Match is an annual match and is calculated and funded after the end of the year. They are getting ready to submit their 2022 required safe harbor match now. 
• The Top Heavy ratio as of 12/31/2022 is 61% calculated on a straight cash basis, i.e. no receivable accrued. This would mean the plan is top heavy for 2023.

We came up with a couple of ideas that we hope might allow the plan to not be considered top heavy for 2023.

1. If we accrue the 2022 safe harbor contribution in our 12/31/2022 balances the top heavy ratio drops to 59%. I looked into this and came across the IRS Q&A from 2002 concerning contribution receivables. Do you think it would be permissible to include the required 2022 safe harbor match in the 12/31/2022 balances for top heavy testing?
2. Establish a new profit sharing plan retroactive for 2022 and make a $15,000 contribution to non-key employees. If we could include that $15,000 in our 12/31/2022 balances for top heavy testing then the plan would not be top heavy for 2023.

Do you think either of these to options would work? I appreciate any thoughts or comments.

Thank you!

I have a document that excludes non-key HCE's. My problem is what happens to participants who enter as an NHCE, and then become an HCE is a future year? The document says that if you go from eligible to ineligible that you immediately cease to participate in the plan. What does that mean? Just that you no longer get a benefit? How do I code this person now? Active? Excluded? They still have a benefit due to them, vested or not. I've been trying to research it, but not having much luck. Most other threads that mention going from eligible to ineligible are based on hours and devolves into another discussion entirely.

Any help appreciated!

Thanks!

There are three entities and out of which two of them wishes to continue with the retirement program and hence they decided to spin off their portion into a new plan however the client never got it to our attention or spoke about spinoff.  We went ahead with the termination of the 401k plan and now we are in a situation the term needs to be on HOLD since participants have not received spin off notification letter, looks like some have even taken a distribution any idea from the regulatory stand point how this can be rectified and handle the spin off first. 

Thank you. 

What are the ramifications, if efiled without the SB and then amend a couple of days later to include the SB? Thank you!

Hi.

The situation is that an 85+ year old client has a terminal disease and has a life expectancy of several weeks to maybe a few months.

This person has no spouse and has named his four adult children as beneficiaries of about $300k each. 

I've read everything I can find on the new Secure Act rules, and it seems the best planning the beneficiaries can do is inherited IRAs and withdraw the money over a 10-year period.

But I'm not even sure that's correct.

Can the beneficiaries implement inherited IRAs to receive their distribution from the deceased's pension plan 

If so, is the period during which they must withdraw the money 10 years? And if so, must withdrawals be level or can they wait 9 and 1/2 years and take all the money at once? Or decide each year how much they want as long as they take it all out in 10 years?

Is there a tax deferral strategy that's better, if deferring taxes is their goal? 

Thank you. 

Hi, hope all of you are going great.

I’ve a question regarding required minimum distribution (RMD) and the scenario as follows:

Plan Year: 12/31/2022

Participant’s age as of 12/31/2023 turned to 72

Does he/she need to take RMD in 2022 Plan Year? Or he/she will be eligible to take RMD in 2023 Plan Year (turns on his 73th)

Appreciate your insights.

A husband and wife are both self-employed and 50% owner of each other's companies.  Wife's company has (1) W-2 employee.  Husband's company is hiring (1) W-2 employee.  They want to start a Simple IRA under wife's company, they will both participant including the employee under wife's company.  Can employee (2) under husband's company also join the Simple?  Or would each company need to set up their own Simple IRA?

Thanks!

Client currently owns an LLC that sponsors a SIMPLE IRA for herself and one other W-2 employee.  Same client wants to start a C-Corp and new 401k Plan.  I understand that this creates a Controlled Group.  But is this even allowed?  What needs to happen with the SIMPLE IRA if so?

Our office orders free tax forms from the IRS every year. For 2022, half of the forms 1096 we received from the IRS in our forms order have 2021 in the upper right corner instead of 2022. Is it okay to use the 2021 forms 1096 for the transmittal of the forms 1099-R?

A client over age 50 is self-employed. He has net Sch C income of $20,000 for 2022. No other earnings. No partners. No employees. He wants to contribute $18,587 of either pre-tax deferrals or Roth into his 401(k) plan "and" $6,500 into his Roth IRA. I think it is okay. Any issues with this?

Situation - Company has a safe harbor match 401k plan.  The owner is self-employed, Schedule C.  He has several employees who will defer on a payroll by payroll basis, and he would like to fund safe harbor match is contributed each pay period, and not provide a true up, as that's how his other employer, where he is just a W2 employee, operates.  We won't be "paid" via payroll on the business in question, his income would be determined via his schedule C after the year in over.  Once he knows his income figure (after year-end), he would like to contribute to the plan based on his Schedule C, self employed income, and deposit his deferrals and the appropriate match after year-end.  Is there a way to structure this?  If the determination period is "End of Plan Year", then he'd certainly be able to participate as he wants, but would also be required to provide everyone with a true-up.  If the doc's determination period is "Each Pay Period" that does not allow for true ups, but would that negate his ability to participate since he's technically not participating on a payroll by payroll basis?  Would he technically be providing himself a true-up but not everyone else?  Thoughts?

An individual-account (defined-contribution) plan has no nonelective contribution and no matching contribution, only a participant’s elective deferrals. The plan allows participants a choice between non-Roth and Roth deferrals.

After qualified military service, a reemployed participant invokes her right to make her contribution regarding the time she was away on military service.

The participant’s wages are not enough to support her current-year deferrals and extra reductions for prior years’ deferrals. Fortunately, the reemployed person has savings. For the prior years’ deferrals, she sends her personal check to the plan’s recordkeeper/trustee.

The participant asks that her make-up contribution be credited to her plan account’s Roth subaccount.

Is there any reason the plan would not do this?

Hi

Here is another new one for me.

Back in 2020, CPA asked me to run a proposal for a DB plan. Did projections for 2020 and 2021, big numbers, provided consulting and also all the mandatory deadlines. Never heard again from the CPA and the prospective client.

Last week I got a note from the CPA saying the client did not make any money in 2022, is $0 contribution ok? 

I went "huh???"

Apparently, plan sponsor (one lifer) made deposits into an account (do not even know what kind as there is no plan document) for 2020 and 2021. So

• No document
• No valuation
• No signed SB
• No 5500 for 2020 and 2021 (EZ - easy fix)

Other than getting an ERISA attorney involved, has anyone dealt with a situation like this and if yes, what steps were taken?

Yucks