Suppose you have an attorney (lets call him Steve) who was a 90% owner in a law firm from 2010 through 2020. The firm dissolves in late 2020 and Steve forms a new law firm as a 50% partner with another attorney on 1/1/2022. They will not have any employees.

Question: If they start a defined benefit plan effective for 2022 could Steve's compensation and service from the prior law firm be counted in the new company defined benefit plan?

Same question except suppose Steve was only a 10% partner in the prior law firm?

Thanks.

Owner of 1-person plan just died, shortly prior to end of year and prior to taking his RMD.

Trustee is unable to be legally appointed prior to eoy.

I'm pretty sure since the plan requires RMD's, that an authorization signature is not required. The recordkeeper is insisting it is.

Additionally, since the RMD is formally taken out after date of death, I'm thinking the 1099-R is still treated as RMD, but perhaps should be marked as Death, even though this is not a Death distribution?

Can a sponsor "convert" their SEP from Form 5305 to a prototype document governed SEP?
 

Doesn't this happen every year - the FIRE system goes down for December?  What are we supposed to be doing for 8955-SSAs due by 12/15?  Just file them ASAP when it comes back up on 1/6/23 and wait to see what happens?

I don't recall ever running into this personally before, which is hard to believe (maybe I've just gotten my 2/28 plans done earlier in the year before?)...

The question is, suppose that A dies and it's not clear whether B or C is entitled to A's 401(k) account. The plan administrator decides to interplead the benefit into Federal court. Assume also (which may not be the case) that the interpleader rules require that the funds be deposited into the court. Finally, assume it takes a couple of years before the court reaches its decision.

Does this mean that a distribution has occurred for 1099-R and withholding purposes when the transfer of funds is made to the court? It seems to me that the only practical answer (although it is also not without complication, especially where RMDs may be involved) is that the court is the plan's agent and that reportable distributions for 1099-R and withholding purposes do not occur until the court cuts a check to B or C, but I cannot find any guidance on this. It certainly would be hard to tell B and C that either of them have income for Federal income tax purposes if neither of them has received any portion of A's account yet, and one of them will probably not ever receive any portion of it.

I'm hoping it turns out that we don't have to pay the funds into court in order to interplead, but that has not yet been ascertained, and so am posting this to see whether any of the BenefitsLink experts have had any hands-on experience with the issue.

I found the following discussion on BenefitsLink from 15 years ago:

Not a lot of analysis in the above post or, apparently, in the following 15 years, and I have not been able to find anything else on the topic.

Does anyone utilize the Schwab Savings Bank asset and also produce their own quarterly statements using the Statements provided in Report Writer?  We currently are trying to add this as an option, but are running into issues as I am not great at Crystal reports.  Just looking for some advice from someone who is doing this.

Thanks!

I believe I'm clear but need reinforcement:

Plan termination, qualified plan loan offsets, some participants over age 55 but under 59 1/2 - the IRS Code for the 1099-R forms would be a 2M, is that correct?

I know those under 55 get a code 1M and those over 59 1/2 get the 7M code.

Edited to add:  I should clarify that these participants are also separated from service as the company has closed.

The following is a prior BenefitsLink exchange that only had two posts:

I completely agree with Roxie99's summation of the issue. A reader could draw from Section 4.07 of Rev. Proc. 2021-30 the negative inference that SCP is not available for a terminated plan. However, it's not really clear from the text that the IRS intended this inference.

I don't see why the IRS would want to foreclose the use of SCP for a terminated plan. For example, suppose that a few months after a plan was terminated the plan sponsor discovers that a few participants were overpaid a few hundred dollars and also that some participants were underpaid a small amount because the employer had not made some contributions it was committed to making. These were inadvertent administrative errors and the employer would like to self-correct in the prescribed fashion for these errors, but the ability to do so is being questioned because the plan has been terminated.

Has anyone had any hands-on experience with this issue with IRS, or possibly heard someone from IRS at a conference expand on this issue either way? Have some practitioners just assumed that IRS did not intend the negative inference and used self-correction for terminated 401(a) and 403(b) plans, without this having been called into question by IRS or anyone else?

Hi

I am no 401k expert so looking for any suggestions on options.

PS plan signed Sept 2022 for 2021. Only PS provisions. Covered owner+employee.

Now in year 2022, wants to add 401k deferral option but the problem is, the employee was fired (embezzlement of company assets) in May with over 500 hours. No other employees.

I know that I have to provide PS allocation to the employee for 2022, if owner decides to make one.

What can I do if the owner wants to defer (will take full year salary next week)? Employee never had a chance for deferrals.

Owner is over 50 and expected 2022 w-2 is 100k and employee's final w-2 is 15k.

QNEC is an option, may be 4%SH additional is an option, what else can be done? 5% limit of deferral to the owner?

Any thoughts are appreciated.

Thank you.

For a § 401(a) plan stated using IRS-preapproved documents, a user’s reliance on the IRS’s letter is not lost merely because the user changed or added some “administrative” provisions the Revenue Procedure sets up some limited tolerance for.

For a § 403(b) plan, the 2013 Revenue Procedure omits a similar tolerance.

Is that correct? Is that still current?

Is it so that a user must do no change beyond what the adoption-agreement form allows?

I have a plan that is starting a Basic Safe Harbor Match effective 1/1. Their Custodian will not be ready to accept contributions until 2/1. If we make the plan effective 1/1, but deferrals not allowed until 2/1, will they need to do ADP/ACP testing for this first year?

Deferrals and match for three payrolls posted to the participants account ( all deposits made timely).  The employer discovered the employee was actually terminated an not eligible for the compensation paid.  The employee returned to compensation to the client. However, he took his distribution from the plan before the incorrect match and deferral could be returned from the account.

Is the correction to request the participant return the overpayment? Vendor will need to modify the 1099R to reflect the overpayment

If the participant does not return the funds, can the deferral and match be excluded from the ADP/ACP Test ( NHCE)? Based on this updated compensation, his match will exceed the match formula.

We are pretty sure the participant will return the funds, but need to figure out plan B in case he does not step forward and correct the error.

We're taking over a client's plan starting next year and looking over their 2022 information, and it looks like they added a Safe Harbor match mid way through the year. It does appear that the date they added the Safe Harbor is the same date as the effective date for deferrals. Even though the plan has a 1/1/22 start date. I always thought mid year Safe Harbor wasn't acceptable, but I'm wondering if this structure makes it ok?

Plan has dual eligibility. Few Employees with PW does not qualify for receiving PS contribution(Did not satisfy eligibility requirement for PS) hence the gateway fails How this needs to be handled?

Note: PW not enough for 5%.

My client is a dentist and he wants to reduce vesting hours for a year of vesting credit retroactively to make a couple part time hygienists happier.   He will be selling the practice soon and he wants to keep them around until then.  Once he sells, he will then make everyone 100% (even terms).

When I went to restate the plan to reduce vesting hours from 1000 to 500, I didn't have the option to put in a retroactive effective date.  Do you think it is ok to drop hours for vesting and bump up the % for the part timers?  This hasn't affected anyone who has been previously paid out in the last 6 years that I am aware of.

Hi, 

I have been with a large employer for several years that has had an employer-funded pension plan. 

The employer announced that at the end of this year (2022) it is going to stop adding contributions to that plan "because other companies don't do that anymore". 

I do not fully understand the possible impacts / implications for me personally.  This makes me nervous.  I cannot withdraw or roll over my pension proceeds without leaving the company, but it also seems me that the pension can only start to dissipate over time once further contributions are "frozen". 

My immediate problem is I do not even know what specific questions to ask, or what to monitor in deciding whether I should "take the money and run" or stay with the company.  From my point of view, anyway, the current sum involved is not insignificant - around $250K. 

In lieu of 401(k) contributions, over the years I have looked to the pension as a resource for future retirement.  I have a 401(k), but there is not much in it.  

Any thoughts / ideas / suggestions?

Thanks!

W.R. Smith

Question regarding the termination of a Cash Balance Plan.  Obviously, like most plans, the assets are down in '22 so now that they are looking to terminate the Plan they are roughly $20k short of the balances earned to date.  That said, the only participants are the owner and his wife.

Is it necessary for them to make a contribution in order to bring the balance up to the earned balances?  Or can they simply distribute the money that's in the plan?

Thanks everyone!

A defined benefit plan purchased an annuity from Prudential for one of its participants. The plan is terminating and the participant is willing to either take a distribution or purchase the annuity from the plan. The annuity has a Highest Daily Lifetime 6 Plus Rider, which Prudential is saying will terminate if the annuity is transferred to the annuitant. this rider provides the major value of the annuity. Examining the rider, there is nothing to indicate that a transfer to the annuitant is not allowed.

I have little experience analyzing these annuities, but it does not make sense that an annuity sold to a qualified plan would have provisions negating its provisions if the ownership of the annuity is changed from the Plan to the annuitant. This is what we expect would happen either upon termination of employment or termination of the Plan.

Prudential is being opaque. They keep saying the transfer will not be allowed to maintain the rider, but will not offer language in the rider (or elsewhere) that supports this assertion. Can anyone offer insight and guidance here?

I believe I know the answer here, but I am just looking for something definitive that supports my position.

A client had approximately $60K worth of Bitcoin in their Roth IRA that was stolen through a hack on one of the crypto exchanges. They believe they are going to receive a settlement check (unsure of the amount) from a lawsuit. Client wants 100% of the proceeds to go back into their Roth IRA. 

I believe this would be permissible and would not be considered a contribution for the year. I can't find anything definitive to support/oppose that position though. 

Thoughts? Agree/Disagree?

My web browser (Safari on my non-work laptop) tells me "The password for your 'benefitslink.com' account has appeared in a data leak, putting your account at high risk of compromise."

I'm not super worried because

A) I don't use the password for anywhere else

B) I've used the same password since 2000 with no issues

C) You'd have to put forth at least some effort in digging to figure out who I am from my profile

D) Who would want to come on here and pretend to be me anyway?  Being me is not a profitable endeavor.

But anyway, seeing the message today for the first time was a bit surprising.