Hi Folks,

Wondering if we can simplify the management of a small plan, owner is subject to RMD under § 1.401(a)(9)-2(b)(3) 5% rule and currently contributing to the plan. Is it allowed to reduce the transfers of cash in such a situation, for example:

1. RMD is $10,000.
2. Contribution is $15,000.
3. Contribute $5,000 and do not remove assets from plan.

It seems economically the same to the plan, and the owner still receives their 1099-R for $10,000 so they are paying appropriate taxes, just not sure if there is any rule that I might be overlooking here?

Thanks for any insight!

I'm hoping for help and clarification on this section of SECURE 2.0. With the automatic enrollment exceptions for small businesses with 10 employees or less, I am curious on how the employee count is defined. Is this looking at the total number of employees who received wages, tips, or other compensation from the employer (what would be reported on Form 941) regardless of whether all employees are still actively employed? Or is there another definition?

As an example,

- If Employer A has 8 employees at the start of the year.

- 4 employees terminate mid-year.

- Employer A then hires on 3 more employees before the end of the year. At the end of the year, they have 7 active employees.

Would this employer be considered to have a total of 11 employees for that tax year and then be subject to the automatic enrollment requirements under SECURE 2.0?

Account Owner of IRA failed to take RMD for 2022 (account owner was incapacitated and under conservatorship).  Account owner subsequently passes away in 2023.  The question is, how does 2022 RMD get addressed?  Are the beneficiaries liable for the 2022 RMD?

Any recommendations for an IRA custodian that will accept Real Estate from a 401(k) Plan?

A summary plan description's ERISA-rights notice includes this:

If you request materials from the Plan and don’t receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan administrator to provide the materials, and pay you up to $nnn a day until you receive the materials, unless the materials were not sent because of reasons beyond our control.

What is the current amount?

Hi! 5330's can now be electronically filed- which is wonderful news! But it looks like it follows regular 1040 tax filing procedures, not the 5500 (since its not going to the DOL). I'd really like to try and move towards electronic filing, but the documents on the IRS webpage are a bit scary. Does anyone know if there are providers out there at will assist retirement recordkeepers with this? We use FT Williams for 5500 purposes and they currently aren't supporting it.

Thanks for any insight you have!

Is is possible for an entity incorporated in Puerto Rico (and/or controlled group of PR corporation) to establish a Code Section 125 cafeteria plan for its employees in the continental US.  The vast majority of employees of the controlled group are located in Puerto Rico and so generally wouldn't be expected to pass the eligibility  or benefits test if a cafeteria plan must count all employees within the group for testing purposes as the PR employees are not generally eligible or able to benefit from the cafeteria plan under current PR law as I understand it.  I'm not sure if there is any sort of SLOB or similar workaround that may be commonly attempted in these situations.  Thanks

I just uploaded an 8955-SSA file to the Fire system. There was an error on the file. Does anyone know how to cancel the filing?

An employer became an adopting / participating employer in a PEP effective 1/1/2022.  They have 10 eligible NHCE's.

In 2023 they established a new single employer 401(k) plan and did a spinoff from the PEP.

For purposes of the plan startup credits, would they qualify under the Secure 2.0 provisions for administrative expenses under both plans (PEP and single employer 401(k) plan) or are they limited in some way in the 401(k) plan?

Does a plan have to require self-certification for Hardship distributions?

If it is discovered under audit or otherwise that the hardship should not have been permitted (because the employee lied) what is the penalty?

Looking for some general information regarding this type of plan. Can anyone please provide some basics about how these plans work and are administered? Thank you!

Does anyone have information on whether a foreign government entity can sponsor a retirement plan (e.g., SEP-IRA or 401(k)) in the U.S.?  I have not found any direct information on this point.

No, really, this one works - it's a one-person plan.

The owner is maxing his Roth deferrals.  He's even going to make his max $20K PS as Roth because he's in a self-directed brokerage account, so we can make that work.  That leaves $20K to be put in as voluntary after tax, which the document allows.  I figure that should be put into a different account since that has a different tax treatment.

And then what is the best way forward?  My thought was that it was better to roll that VAT money to a Roth IRA instead of doing an in-plan Roth conversion; it helps keep the plan under the $250K to avoid the 5500-EZ for a little longer.  Are there any particular benefits or problems one way or the other?

I don't see any rules about the timing of the Roth conversion.  I'd think that depositing the VAT on Day One and, say, converting it to Roth inside the plan is just a thinly veiled excess Roth plan contribution, but I guess the regs don't see it that way.  Obviously, the goal is to minimize gains in the VAT so there is no taxable income to report (maybe leaving it in cash will take care of that).  I suppose there's still a 1099-R to report the base amount... another reason in favor or rolling to an outside Roth IRA!

Thanks!

I'm working on a new client that has a group of participants who are eligible for the 401(k)/Profit Sharing, but are excluded from the Cash Balance Plan.  Are these participants required to get the 7.5% to pass the gateway?  Or can they be given a lower amount into the Profit Sharing?

Basically, I wanted to confirm that the people who get 7.5% are those who are eligible to participate in both the Profit Sharing and Cash Balance Plan?  If someone is only eligible for the Profit Sharing, can they just get the minimum gateway to pass the New Comp testing?

Their contribution, as well as the Safe Harbor Match, does get included into the 6% max going into the Profit Sharing, correct?  (I'm pushing to move this to the 3% Safe Harbor, as it will obviously help), but I wanted to confirm I was correct.

OK, I researched for a long time before posting this question.  We have a client that has company stock (NYSE traded) as an investment option in their 401(k) plan.  The plan also allows participants to invest all money types, including Roth contributions, in the stock fund.  Further, the plan gives participants the option to either reinvest dividends or pass them through.  The question is if a participant invests their Roth money source in company stock and elects pass through of dividends, are the dividends taxable or tax exempt?  Thanks!

Non safe-harbor 401(k) plan (integrated discretionary PS plan design) has become top heavy.

The key employees defer > 3% 401k. (great NHCE participation so they never fail and thus no safe harbor provision)

If I recall correctly, even if they do not make a nonelective PS contribution, they still need to contribute the 3% top heavy for non-key (as indicated in adoption agreement) just because of the key ee 401k contribs?

We administer a 401(k) Plan with a safe harbor match.

Turns out the employer allowed an employee who was not eligible, to make salary deferral contributions.

Generally, this can be self corrected by having the plan execute a corrective amendment that would allow the ineligible participant to have funded salary deferral contributions. Since the plan does have a safe harbor match, must a safe harbor match be provided to this ineligible employee?

Thanks.

401l(h) accounts can add up to 25% tax deductible contributions to a pension plan.  Are 401 (h) accounts which provide incidental post retirement medical benefits appropriate for small Cash Balance and Defined Benefit plans, where all the participants take lump sum distributions or rollovers on retirement or termination.  Suppose an employer has 3 owners and 10 non-key employees.   If one of the non-key employees retires and distributes or rolls over their full lump sum pension amount, are they still eligible thereafter to benefit from post retirement medical expenses, or must they be receiving a monthly pension from the plan to be eligible for post retirement medical expenses.   Similarly, suppose an employee terminates prior to retirement and takes a full distribution at termination, and later reaches the plan's retirement age while the plan is still inexistence.   Are they then eligible for post retirement medical benefits.   If a key employee is past the plan's retirement age, but still an active participant, can they start to received post retirement medical benefits.  

What actuarial requirements are needed for a pension plan with a 401 (h) account.  Is anyone actively administrating plans with 401 (h) accounts for many of their clients.    

Two cannibals are eating a clown.  One says to the other: "Does this taste funny to you?"

I've had related questions in the recent past and so thank you for past comments.  But I'd like to make sure I put the whole picture out here.  

Corporation is 100% owned by an ESOP.  Corporation sponsors a 401(k) plan.  There are 5 corporate officers.  These 5 plus an additional 10 constitute the ESOP Board of Directors.  All 15 Board members are 401(k) plan participants, not all have balances.  The 401(k) plan is a deferral-only plan with about 250 participants.

So the question is who is a key employee?   Only 2 of the corporate officers have wages of $200,000.  None of the other Board members has wages of $200,000.  No one is a >1% or >5% owner of the corporation since it is 100% owned by the ESOP participants.  I see past comments that plan balances in an ESOP are not treated as owned by the individual but by the trust.  Even if I treat all ESOP Board members as key employees, the plan is far below 60% but obviously I have to get this right. 

And as for the ADP, we are just looking at compensation for 2021 in the 2022 HCE determination process.  There have not been individual owners for about 5 years.

Thank you for comments - they are greatly appreciated as top heavy is critical and can be very ugly - 3% for all non-key.  Tom