A Dr. has a plan.  He is a sole member entity.  He took a position with a larger medical practice starting Jan 1, 2023.  He fully funded his plan for 2022.  There is no reason we need to keep the plan open past 12/31/2022, right?  The 2022 contribution money is in and now want's to roll everything out and into an IRA to close the plan before the year end so he doesn't have a 2023 administration.  No problem right?  

- Roll everything out into the IRA
- Generate a 1099-R for the rollover
- File a final form 5500-EZ for 2022

Thanks

(There is so much good info to learn when you start clicking on posts in all message board areas! I find myself getting into topics that I did not intend to and before you know it you have forgotten why you are here)

Someone suggested this might be a way to help a failing plan fail less badly, and it's something I never would have thought of... is that because it's too out there, or because I'm too conservative?

6/30 plan year 401k plan, non-safe harbor is failing ADP test.  It failed 6/30/21, too, but by recharacterizing $1,200 of the sole HCE's deferrals, a refund was avoided.  For 6/30/22, the same sole HCE doubled his deferrals so is failing much worse.  He deferred $28,100 for the plan year (not exceeding any calendar year limits), so even when subtracting the catchup, he still needs a refund of $6,700.

The thought was that there's $6,500 - $1,200 = $5,300 of catchup that was unused from the previous calendar year - can that be used in this plan year somehow as well?  Either to reduce the starting deferrals that are used to calculate the ADP test ($28,100 - $6,500 = $21,600 currently), or to partially offset the amount that is slated to be refunded ($6,700 currently)?

Thanks.

As an open-architecture recordkeeper, we routinely prepare combined Sarbanes-Oxley/404a-5 notices and manage the fund change process for the advisors when plan wide fund changes are requested.  We have not traditionally charged a fee to do this.  Lately, advisors have been asking us how much we charge.  Is this something you guys are seeing as a line item fee and if possible, can you share a range of how much a fee are you seeing?

Hello -  need some help!

plan has year of service 1000 hours and entry dates of 1/1 & 7/1

I have an employee hired 6/2017 and terminated 7/2017.  Only worked 12 hours

She has rehired 2/2022 - worked over 1000 hours in the 2022. 

Plan does not have rule of parity or one year hold and elig switches to plan year.

Does she enter the plan 1/1/2023?

Thanks!

Here is the situation.   The prospect (S corp, just husband and wife) has started 401(k) Plan in 2021 using the free plan doc from Fidelity(?). Year-to-date no contributions/deferrals have been made so the account is sitting pretty with a zero balance.  Obviously, that Plan Doc does not allow for any "fancy" stuff like Voluntary After-Tax ("VAT") contributions.   Now the prospect would like to do the VAT contribution and do In-Plan conversion to Roth (for 2021 - what else is new - why not wait until New Year's Eve?).   So, I am trying to think through viable options (given we are already in December):

1) Take the Plan and restate it on our plan document system, have the additional brokerage account opened (to accept VAT and conversion to Roth in the Plan) and help the prospect to get it done.   I am concerned that Fidelity might not accommodate the existing account without them sponsoring the Plan doc.  And it might take some extra time to sort it through which will diminish the opportunity to meet the objective by December 31

2) Leave the Fidelity Plan alone (and not fund it at all) and start a new 401(K) Plan for 2021 using our platform.  That would leave an "empty" plan for some time and then later on I would terminate it.  The shortcomings are having an extra Plan lingering around, cost of termination, extra 5500, etc.   The whole nonsense but squared....

3) Terminate Fidelity plan and start another one.    Obviously this triggers the "replacement" plan issue.  But the Fidelity Plan is empty and it should have never existed in a first place?

All thoughts with pros and cons are appreciated.  I apologize in advance if this does not make much sense because I am not a "401(k) guy" but unfortunately an actuary.   Thank you.

We have a brand new plan starting up in 2023.  We have been including the CARES Act amendment with every new plan document we've drafted but now we are wondering if there is any reason to actually adopt the amendment for new 2023 plans.  I can't find anything indicating that we should.  Anyone else have input or support otherwise?

Hello All - I have a US based company that may be hiring a Canadian employee.  The client tells me that the employee will be paid on a W-2 form and therefore would otherwise be eligible for the client's 401k.  Is it possible for the plan to have "Canadian based employees" as an excluded category for eligibility?  I wasn't sure if that category would be considered discriminatory in any way or if there is a better way to accomplish what the client wants.  This particular client plan will easily pass coverage. 

Thanks in advance. 

In the context of terminating and liquidating a deferred compensation plan, does anyone have advice or a good rule of thumb for valuing the liquidation payments to participants in non-account balance plans where the ultimate benefit (had the plan continued) would be uncertain?

For example, a 45-year-old participant who must work until age 60 to vest, at which point she would receive fixed installment payments for, say, five years?

Would you discount the liquidation value not only for time, but also likelihood of reaching vesting?

Appreciate any insights.

This client is putting in their discretionary match on a payroll basis. They are putting in 10% of the participant's deferral amount. So if a person is putting in a flat $100 amount, they are getting a $10 match. If a person is putting in 20% of pay and it comes to $2500 then they are getting a $250 match. 

I always thought the match had to be based on percentage of compensation not deferral amount. Am I wrong or am I just confused?

The owner of  the LLC sold his practice May, 2022,  (plans were terminated, all participants paid, final 5500SF filed,

The former owner is now receiving 1099 income from the new owners .

Can the former owner start a new profit sharing plan in 2022 using

his 1099 income for contribution.

Group:

Potential client has had a DB plan for approximately 20 years. 

The adoption agreement states the following under Unit Benefit Formula 

 "(1) Uniform formula.   10 % of Average Compensation multiplied by Years of Credited Service.

(i) Years of Credited Service above 25 will not be taken into account.

 (this box checked) (ii) Years of Credited Service above 10 will not be taken into account. "

Does this mean on an annual basis any eligible employees are not entitled to a contribution past year 10?

Or Is this merely part of the actuarial equation the TPA uses for annual valuation purposes? 

Client was informed that a non-owner employee/100% vested participant is due $315k if terminated plan as of 12/31/22.

I'm told there is approx $2.mm in various stocks/bonds/some annuities at this time. 

Only two participants. Owner (age 72) and one rank and file employee (age 47) who's worked there for 20 years 

He's just trying to get a handle on whether or not the TPA is accurate is the $315k amount. As he doesn't believe that's the true amount and that any distribution should be lower than. 

Thoughts and comments appreciated. Or other guidance and resources are appreciated. 

I note I may not have provided all facts and am awaiting on information. 

Thank you 

What is the purpose of Normal Retirement Age in the plan document? There is a section that specifies in service distributions can begin at 59.5 but then there is another section specifying that normal retirement age is 65. What benefits must start at 65? This does not mean that they have to start taking RMD's at age 65 correct?  

100% of the ira was converted to roth, and taxes were paid. Now, a partial distribution is happening, but the 5-year clock has not been satisfied, making it a non-qual distribution. I think jsut the earnings are taxable, but, can he specify return of capital and not touch earnings, making it a tax-and penalty-free distribution?

We have received 3 letters from plan sponsors in the past week that Form 5500 EZ plans filed their forms late with huge penalties.  All three forms were filed on time.  Has anyone else had plan sponsors receive these letters?  We've asked ASPPA and we haven't received a response yet and our plan sponsors are obviously concerned.  We tried to call the IRS and got a message that due to high volume to call back tomorrow.   Any advice on how to find out if these were sent out in error to EZ plans? Thank you!

Fee Example: a TPA quotes $15k to $20K for TPA work for a plan year for a new client, not knowing what the records will look like.  The plan sponsor signs an engagement letter agreeing to the fee range.  Time tracked to complete the year ends up being $12,000.  Is it ethical for the TPA to bill $15,000?  Can a client demand to see time entries?   I think we all know recording exact time doesn't happen.  Many small things go un-logged into time/billing.  This would be a case where the TPA fee is paid by the plan sponsor not from plan assets. 

I just heard from the partners of a plan sponsor that they could barely fund the 3% for 2022 and want to eliminate the 3% safe harbor for 2022.  It is not a "maybe" safe harbor.  Most of our SH plans have the 3% hard-coded in because it is easier to deal with as opposed to an amendment each year.  they are probably stuck for 2022 which is fine.  they then will ask me if they have to fund for themselves - 2 partners in a partnership.  My answer has always been for this situation yes so as to follow the plan document but if they want to take that chance and simply have insufficient funds, they must at least fund for the non-HCEs.  

Any way to get out of the safe harbor for 2022 at this late date?

Tom

An IRR is a rollover within a retirement plan to a designated Roth account in the same plan. 

Question is do we code the 1099 code "G" and then use the taxable box to create the tax liability to the participant converting OR do we use code "2" (I have read this is IRA to Roth coding only).

Thank you for any input.

An employee stopped working for a company for a certain period of time, kept on payroll, but did not officially terminate from the company. Would you consider his termination date the day he/she stopped working for them or the date they are no longer on payroll? I'm thinking the latter, but would like to know your thoughts on this.

Plan sponsor has an employee who wants to be excluded from the plan due to religious reasons.  Eligible employees receive the 3% SH and a small PS.  It is not workable to exclude him by job definition or class, location, etc.  Very strange and I will tell the sponsor he must participate.  Maybe use the beneficiary designation to assuage his objection to the plan whatever that might be.

https://www.sidley.com/en/insights/newsupdates/2022/11/us-dol-proposes-self-correction-of-delinquent-contributions-and-loan-payments

Can someone pleas call the DOL and explain to them what "self-correction" means?

1. The sponsor would submit an electronic notice form on the EBSA website, after which the self-corrector would automatically receive an emailed acknowledgment. The sponsor must complete a retention record checklist, including signing a penalty of perjury statement, preparing or collecting certain documents, and providing the checklist and required documentation to the plan administrator.