In reliance on advice of prior counsel, a client engaged in what has turned out to be multiple prohibited transactions, with a 4975(a) tax due of around $200,000.  Client has corrected the prohibited transactions, so no second-tier tax is involved.

          First Question: Does the IRS have any discretion to not assess the full 4975(a) tax? 

I know the IRS has discretion not to assess a second-tier tax, and discretion not to assess penalties for failing to file 5330s under IRC 6651(a). I know the client can apply for an individual exemption with the DOL, and that the DOL has the discretion to reduce penalties under ERISA Section 502(l)(3) for reasonable cause.

          Second question: Is there any IRS discretion or other statutory or regulatory basis to reduce the 4975(a) tax?  What are the client's options if the $200,000 tax would be an extreme hardship on the taxpayer by using up essentially all of their savings and other assets?

Thanks for any help. Feel free to email separately if you prefer: jkirtner@hershnerhunter.com

A fiscal year filer's report was due 10/31.  Our office submits on the client's behalf and the client signed and returned the form timely, the actual submission took place after 10/31.  No penalty notices have been received.  Is it possible to submit it again using DFVCP?

The following is a link to the SEC Clawback Regulations as published in tomorrow's (11/28/22) Federal Register (which take up a mere 67 pages in the typical Federal Register three-column print).

https://www.govinfo.gov/content/pkg/FR-2022-11-28/pdf/2022-23757.pdf

just wondering - do Plan Sponsor's generally sign the Safe Harbor Notice, or do they just get sent out as applicable?

Plan Sponsor/Administrator files 2018 5500-SF one year late (not under DFVC).

Ignores IRS penalty letters and IRS has now assessed a $70K penalty.

No DOL penalty assessment yet.

Can we file an amended 2018 5500 under DFVC and get IRS penalty abated or is it too late?

Many thanks.

one of our clients asked what it would look like if they stopped doing 3%NE SH-if there would be refunds/ how much. Is the simplest solution setting up a new plan and uploading the census and running the tests? I know what I'd do in Datair, but that's not an option right now. 

I have a company that has 2 divisons, but they are operated as seperate companies. it is 100% a controlled group, Each of the companies has a 401(k) set up, but one company is an all-union shop, so no participants can be in the plan. recently, a new, non-union member joined the company, so he would be the only participant. is the best course of action to set up a division at the custodian to keep them seperate? does the new employee need to be kept separate from the original 401(k) plan?

We have a plan that missed providing deferral opportunities for quite a few employees over the years.  They are going to go back and make good on calculating and depositing what is required for these individuals.  However, several individuals have left the company years ago and they may not be able to locate them on their own.  Any recommendations on a public or private services that can be used to search for lost participants?  

Thank you

Hope you all have a wonderful Holiday break. Watch out for crazy drivers! There were already a lot of people in a heckuva hurry this morning...

Never encountered this - one person plan and the owner died.  Spouse survives him, though she was never in the plan.  Does she sign the plan termination paperwork?

Getting word that a plan I've been chasing is going to come with us.  Sounds like they haven't yet gotten their safe harbor or EACA or QDIA notices from their current TPA or RK yet for 1/1/23.  It's a SHNEC, so we can pass on that if we have to, fine.  I'm getting information rapidly, but what if we just can't get enough to produce the EACA or QDIA notices by 12/1/22?  I don't see any kind of remedy, like "hand it out as soon as possible" anywhere.  What kind of pickle are they in?  Thanks.

Client has pension in TIAA, rolling $50,000 to Roth IRA and paying tax on that.

He is also required to take an RMD, which is about $15,000.

Can the $50,000 coming out of TIAA and going into the Roth cover his RMD requirement?  

It seems like that would be a 'no' but I am not an expert on this.

Thanks.

When I was doing some random browsing, I saw something on this that made be do some additional browsing. There are MANY websites out there that say you are a HCE if you had more than $150,000 compensation in 2022. 

Now, while true, it seems to me that this is very misleading, as some of the charts, etc. would lead someone to believe that the THRESHOLD is $150,000, rather than $135,000, so that if you had, say, $145,000 in compensation in 2022, you would not be a HCE in 2023.

Are others seeing this, or getting questions due to this type of information out there?

Hi

My very first age 72 RMD.

Turned 72 in September 2022, when is my first RMD due from the DB plan?

Is the AB based on 12/31/2021 AB if starting 4/1/2023?

If participant wants 2022 RMD and withdraws in December 2022, can he receive annual lump sum by 12/31/2022?

Thank you

We have been attempting to terminate a Plan for about a year that is with Ascensus. We have a handful of terminated employees and a deceased participant. The deceased participant's spouse does not want the funds and refuses to sign paperwork (they were estranged for many years). We would like to force them out to an IRA and finally close this Plan. However Ascensus refuses to let this happen. They say that Plan cannot terminate until beneficiary signs forms. No one else can be forced out as they want checks to be cut at same time. I have countered that they are excercising  control over Plan Assets and acting as a fiduciary but they claim that in the termination paperwork they require you to sign, the Plan Sponsor requests no one gets paid out unless they sign a form. I don't know how many years Ascensus expects them to continue the Plan for this beneficiary. Does anyone have this experience or ideas?

Hi

One life/owner only CB plan. 3 years old. Business is sold, needs to terminate by 12/31/2022

Plan document states any excess to be reverted to the corporation (there will be no DC plan as QRP- qualified replacement plan).

The participant is nowhere near the 415 limit and the excess, if can be provided to the participant, will be eliminated.

Can the plan be amended so that the excess can be provided to the plan participant rather than being reverted to the corporation? I am aware of the 5 year rule but always wondered it was only for switching from participant to the company. 

Thank you

Hi

Cash balance plan with 10 groups, some groups cover individuals (like founding member) and some groups cover multiple participants (like support staff).

Benefits are to be frozen.

Can 10 different 204(h) notices be provided for each group separately?

Thank you

Does anyone have access to the Relius/Sungard amendment for a Money Purchase Volume Submitter plan?  Looking for one for a takeover client.

Are there any special rules in terms of hardship distributions and the impact of a hurricane?  The participant is looking to use the money to fix her car, due to damage from a hurricane.  However, by the letter of the law, this wouldn't qualify as a hardship.  Before we just rejected the request, I wanted to be sure there wasn't a special exception out there.

Plan participant’s account is hacked by an outside fraudster. Participant sues plan sponsor for negligence. The two parties end up settling before trial. Can the plan sponsor deposit the settlement amount into the participant’s plan account? I seem to remember some IRS guidance saying it’s allowed if it is the result of a dispute that would have resulted in fiduciary breach. Does anyone have a cite?