From what I read the 10% penalty is still due on a hardship withdrawal unless the participant is 59 1/2.  The participant asking for the withdrawal is only 40 and it is a construction expense (he said he over-built) for his prmary residence.  This is from a qualified plan.  Is there any relief from the 10% for this participant?  

I just want some more back-up because he is relentless on the WHY?

If the participant isn't electing to withhold anything now (understanding that withholding isn't mandatory on a hardship), can the amount taken still be grossed up to include an amount to cover taxes to be paid later?  I see discussions here on how to actually figure out how much is an appropriate amount to gross up - we're going with a simple 20% of the amount requested, for better or worse.    But I don't see anything that says that if you're not electing to have the taxes withheld now, that takes away the ability to have the distribution increased for the taxes that will be due, so long as you're still under the amount that you have available under the terms of the plan.  Right?  Thanks.

Just trying to decide how many years worth of old emails to save.

Hi All.  I have searched for my answer, to no 'recent' avail.

I have a small business owner (himself, his wife, and 3 employees) in a 401(k) plan who would like to invest his balance in a Limited Partnership (which holds real estate).  This group is already in segregated accounts, but the owner's investing of almost 100% of his own balance is still way more than 5% of plan assets.

The plan would still need an independent audit, correct??  Obvious answer, I think.

Besides this question, can someone please point me into some reliable source for learning more about question #6 a & b on the 5500SF - ineligible plan assets and the subsequent plan audit requirements?

I greatly appreciate it.

Hi All.  I have searched for my answer, to no 'recent' avail.

I have a small business owner (himself, his wife, and 3 employees) in a 401(k) plan who would like to invest his balance in a Limited Partnership (which holds real estate).  This group is already in segregated accounts, but the owner's investing of almost 100% of his own balance is still way more than 5% of plan assets.

The plan would still need an independent audit, correct??  Obvious answer, I think.

Besides this question, can someone please point me into some reliable source for learning more about question #6 a & b on the 5500SF - ineligible plan assets and the subsequent plan audit requirements?

I greatly appreciate it.

We have direct seller who get a W-2 from us; the majority pf what they do for most is 100% direct sales. They are excluded from H&W & 401k benefit plans.

Must these direct sellers be counted in ACA testing?

thnaks

Alexa

Has anyone had trouble looking up a 5500-EZ filing? We filed electronically and received an acknowledgement number for a 2020 filing.

It is easy to find 5500 and 5500-SF filings on the DOL website but we get nothing when looking for the electronically filed EZs.

2 Year Old plan. First year assets were less than 250K. 2nd year they were over. Hence I'm doing the 1st year filing in the plan's 2nd year. Is my beginning balance $0 or do I use the ending balance from the previous year( that was under $250K)?

2 Year Old plan. First year assets were less than 250K. 2nd year they were over. Hence I'm doing the 1st year filing in the plan's 2nd year. Is my beginning balance $0 or do I use the ending balance from the previous year( that was under $250K)?

BenefitsLink helpfully posted the IRS’s prepublication release of Notice 2023-43 https://www.irs.gov/pub/irs-drop/n-23-43.pdf.

Here are my open questions for BenefitsLink neighbors’ observations:

1.    What does this IRS guidance let us do tomorrow that we couldn’t do before December 29, 2022?

2.    What were you hoping for that the IRS isn’t yet allowing?

3.    If an Eligible Inadvertent Failure is one that may be self-corrected, under what circumstances might one prefer to submit a VCP application?

For a Safe Harbor Plan that contains a Pro Rata Profit sharing element does the ADP ACP and Top Heavy testing only relate to the Pro Rata profit sharing piece or does the entire plan now need to be tested for the ADP ACP and Top Heavy even though some of the contributions were made under safe harbor? 

I have the same question for a New Comparability Plan. Does the entire plan now need to be tested for the ADP APC Top heavy and cross tested even though some of the contributions were made under safe harbor? 

Thank you as always for the insights and knowledgeable responses. A portion of a Plan's assets were discovered as unclaimed funds and returned to the plan sponsor. This was done by a company that specializes in finding unclaimed funds, and this company is charging a fee (commission) for finding these assets. Can plan assets be used to pay this fee? Is this considered a settlor  or a non settlor expense? Thank you.

Multiemployer pension plan.  Participant files an application for benefits.  States he is not married and chooses a non-spousal, 60 sum certain form of payment.  Lists son as his beneficiary.  Participant received payments for about a year and dies.  Just to complicate matters, participant never cashed his payments.   Son began receiving the payments that participant was entitled to before his death, along with the remaining payments for over a year now (and continues to do so).  The Fund has now learned that participant was married at his effective date and at his death.  Spouse now wants her pension benefit.  Not that we are obligated to follow it, but the probate court has awarded her spousal benefits.

No idea if it is applicable, but our plan document does include a statement that if a participant, beneficiary, ect makes a false statement/furnishes fraudulent information relevant to a claim for benefits, then benefits not vested shall be denied, suspended, or discontinued.  But the fact that we are dealing with vested benefits, I'm not sure we could have the participant's actions effect the wife's entitlement to benefits.

Any suggestions on how to handle this situation?  Just spitballing here, but it seems like we need to stop the son's payment ASAP.  With SECURE Act 2.0, its likely gonna prove difficult to seek an overpayment from son, unless we have on record some fraudulent statement made by him, which I doubt.  Once the wife applies, we should adjust the form of payment to a spousal pension, and give her the payments participant was entitled to prior to his death, and spousal payments until her death.  I don't like the thought of having to pay out some benefit periods twice, but I'm not sure there is any way around it.  We probably should also set the record straight with the probate court about federal preemption.  

Any and all guidance is appreciated.  

I work for a bank that is trustee of a 401k plan.  One of the participants passed away in 2019 with no beneficiary form.  He has $590 in his account.

He was not married.  He has 6 children.  In the state where he lived, 18 is the age of majority.  4 of his children are older than 18.  The other two are 15 and 17 years old.

Each bene is due around $95.  For the 2 children who are not 18, must those checks be paid to a guardian?  I think those 2 kids might be living with a grandmother.  If the payment has to be made to the guardian, do I need to request something to substantiate who is legal guardian for the two minor children?  Thank you! 

Hi. Just curious if the change to 414(v) (based on Section 109 of SECURE Act 2.0) is mandatory.  In other words, a plan sponsor may choose to permit age 50 catch-up contributions. If permitted, then *must* the plan permit the full increased catch-up limit for ages 60-63, or *may* the plan impose the same catch-up limit for all age 50 catch-up contributions regardless of age?

Survey says...

TIA for your insights.

Hi, 

Good Evening!  looking for help on Puerto Rico plan termination.  This is the first time I'm handling a Puerto Rico Plan that needs to be Terminated.  I would like to under how different this is from a regular plan termination specially when it comes to a 1) forced distribution for the unresponsive participants. 

2) Any special notice that needs to be sent out to the participants? 

3) Can Participants be rolled over to an IRA account? should that be Puerto Rico Individual Retirement Account only? 

4) What are the option available for a participant that has loan? 

5) how does 5500 and Non-discrimination testing work?

Thanks

Good morning everyone!  Is the 408(b)(2) required for a Trustee directed pooled fund?  It doesn't appear that the investment people do it, and the client is asking.  I wanted to confirm if it was required under this scenario or not.

Thanks in advance!

Is it common to amend a plan at year end to add in a profit sharing arrangement?

Or is it okay to have a profit sharing arrangement in the plan that is not used? For instance we have a discretionary profit sharing arrangement for Pro Rata profit sharing on the plan but they do not do a pro rata contributions. If the plan also makes a safe harbor match then would they still not need to do compliance testing? Or does it lose the exclusion from compliance testing with safe harbor because it is an option for them to profit share? 

I've had a one-participant ("solo") 401(k) since 2015. Out of ignorance, I treated the plan like an IRA, and transferred the plan between Vanguard and Fidelity several times. I did not retain complete records for these transfers. My intention was to retain the same plan, but I incorrectly incremented the plan sequence number, and I do not remember whether I adopted a new plan or amended an existing plan in the paperwork for 2 of the transfers.

My plan hasn't had a balance of over $250k until 2022. Last month, I received my 2022 Annual Valuation Statement from Fidelity and completed a 2022 5500-EZ, which is saved (but not submitted) on EFAST2. While filling out the form, I realized that the IRS may take notice of my sequence number of 003 and wonder why I haven't filed a final 5500-EZ for 001 and 002. That led me to Google, where I got spooked by the consequences for mishandling a 401(k).

So, I want to terminate the plan and use a SEP instead. I should have never had a 401(k) in the first place.

I need professional help to

• obtain the correct plan documents from Vanguard and Fidelity—I don't even know the "magic words" to say to the phone reps so they send the needed materials, and
• review them and confirm that I didn't make any mistakes that would preclude terminating the plan.

I've reached out to a couple TPAs, but I get the feeling the assistance I need is too small of a job for them. I suspect this may be because everything might be fine with my plan and there is no remediation work necessary, or because my goal is to get rid of the 401(k) and I will not need ongoing administration.

Can anyone here recommend a firm—even their firm—that could help with an individual's one-off case? Thanks in advance for any leads.

Plan sponsor missed deposits of some 2022 deferrals; they were deposited in early 2023.  We have calculated lost earnings and prepared Form 5330 to report and pay the excise tax on the lost earnings.  We do the plan administration annually.

According to the IRS forum from 3/24/2011 (posted online) they indicate lost earnings have to be calculated for the year in which the deferrals were late, and also for the year in which the lost earnings were deposited.  In fact, it uses a pyramid approach, such that you must deposit the lost earnings for the late deferrals plus the lost earnings for the prior plan year.  It sounds like you have to file two Forms 5330 for one delinquent deposit if the lost earnings were not deposited in the same year as the late deferrals.

How many Forms 5330 can be filed for the same plan in one year?

We have a client that is chronically late in making deposits.  So for 2022 we will report lost earnings on those late deposits of 2022 deferrals in 2023, then we will calculate lost earnings through the date of deposit in 2023, plus lost earnings on the 2022 lost earnings, plus lost earnings on late 2023 deposits.  Do we file a 5330 for the lost 2023 earnings on the 2022 deferrals deposited in 2023, and then another 5330 for lost 2023 earnings on late deposits of 2023 deferrals?

Trying to figure how how this is supposed to work. Any help appreciated.