Interesting question arose from out in the wide world, and I don't know much about ESOP's. Suppose you have an S-corporation, where the document clearly states that all distributions must be in cash. Seems straightforward enough. So if the corporation RETIRES shares (as opposed to repurchasing them) when someone terminates employment, there's still no share distribution to the participant, right? So that no NUA calculation would apply, even if there is a lump sum distribution? Isn't the net effect (to the participant) the same, whether shares are retired or repurchased - i.e. the participant never receives ownership of the shares, so there is no "put" option, and the participant just receives cash, as required under the terms of the document?

Participant had 2021 402(g) excess of 1,000.  At time of distribution there was $20 in earnings.

The IRS says it's taxable in both years.  (I knew that).  But it also says BOTH amounts are reportable on a 1099-R.  I thought just the 2022 amount is reported on a 1099-R (basis and the earnings), but the 2021 overage would be taken care of on the 1040 using the W2.

Here's what the IRS site says:

Under Revenue Procedure 2021-30, Appendix A, section .04, the permitted correction method is to distribute the excess deferral to the employee and to report the amount as taxable both in the year of deferral and in the year distributed. These amounts are reported on Forms 1099-R. In the case of amounts designated as Roth contributions, the excess deferral will already have been reported in income in the year of deferral. However, the amount will be reported as taxable in the year distributed.

Many § 401(a)-(k), § 403(b), and governmental § 457(b) plans distinguish between participant loans with a repayment period no more than five years and those used to acquire the participant’s principal residence.

If a participant’s request for a loan asks for a repayment period more than five years:

Does a plan’s administrator (or a service provider acting for it) accept the participant’s written statement, made under penalties of perjury, that the loan will be used to acquire the participant’s principal residence?

Or, does a plan’s administrator require some evidence independent of the participant’s statement?

If so, what substantiation does an administrator or its service provider require? A mortgage commitment? A purchase agreement? Something else?

If a plan’s procedure requires independent evidence, does this mean a claim must be submitted in paper form? Or does a service provider’s software allow uploading pdf files for the independent evidence?

In your experience, what percentage of plans process a principal-residence loan by relying on the participant’s written statement, seeking no independent evidence?

In March I filed my 2021 solo/individual 401k's 5500-EZ through the EFAST DOL website. 3 weeks later in April I received the CP283 notice with the $150,000 penalty. It turns out I read the form wrong and entered the year 2017 and not 2021. In 2017 I was below the $250k threshold and was not obligated to file the form 5500-EZ. My first year filing was 2020.

After received the CP283 I immediately phoned the IRS and an agent suggested I amend the 2017 5500-EZ with the correct numbers and the penalties would be removed. I did amend immediately but in August received a notice of interest on the original $150k. Just in case there was some error that I was not made aware of, I mailed form 4506 today requesting a copy of my 2017 form 5500-EZ but there was no way to say I want the amended copy.

I've been working with the IRS's Taxpayer Advocate Service (TAS) for a few months now to resolve the mistake. My latest phone call with TAS was that the IRS was still making a determination but we would likely need to go through appeals. I've read online that I need to wait to appeal until after receiving a "statutory notice of deficiency". But everything I read online associates this with 1040's... I plan to work with a firm to represent me in appeals if the IRS determines against me. 

• Should I still mail form 843 like it shows on the IRS page? (https://www.irs.gov/individuals/understanding-your-cp283-notice)The TAS never mentioned this form to me.
• Was the fact that I accidentally, but voluntarily, filed 2017 late still subject me to the late filing penalty, even if I was not obligated to file?
• Does anyone have any other suggestions?

I'm hitting walls at every turn. I don't understand how entering the wrong year can result in owing $150,000. It's easily proven that it was a mistake... the numbers I entered match my statements for 2021 not 2017. Actual people at the IRS have read my letter of the facts and received 401k statements. It's still possible they rule in my favor but my TAS agent didn't sound hopeful. Thank you for any advice.

EDIT January 2023: It is with extreme gratification that I can report back and say the IRS abated the penalty and interest. What a weight off my chest.

ERISA Sec. 3(37) defines a multiemployer plan as "a plan—(i)to which more than one employer is required to contribute, (ii)which is maintained pursuant to one or more collective bargaining agreements between one or more employee organizations and more than one employer, and (iii)which satisfies such other requirements as the Secretary may prescribe by regulation."  

There does not seem to be a definition of what it means to be "maintained pursuant to 1 or more CBAs" in the specific context of Sec. 3(37).  

ERISA Sec. 3(40) excludes from the definition of a MEWA "any...plan or other arrangement which is established or maintained—(i) under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements...."  

The regulations under Section 3(40) do define what it means to be "established or maintained under or pursuant to one or more agreements which the Secretary finds to be a [CBA]."  In part, this test requires that 85% of the plan's participants be covered by the CBA or CBA-adjacent.  29 CFR 2510.3-40(b).

The Section 3(40) regs state multiple times that the definition therein of what it means to be established or maintained under or pursuant to one or more CBAs applies ONLY in the context of Section 3(40).  E.g., "Nothing in or pursuant to this section shall constitute a finding for any purpose other than the exception for plans established or maintained under or pursuant to one or more collective bargaining agreements under section 3(40) of ERISA."  29 CFR 2510.3-40(a).  

My question is:  Does the definition of what it means to be "established or maintained under or pursuant to one or more collective bargaining agreements" under the Section 3(40) regs apply to Section 3(37) for multiemployer plans?  If not, is there a different definition for Section 3(37)?  

Thank you for any insight.  

It’s been decades since I last advised anything about a plan that uses a safe harbor for coverage and nondiscrimination.

Am I right in remembering that a subaccount attributable to safe-harbor matching or nonelective contributions must be withdrawal-restricted as if it were a subaccount attributable to § 401(k) elective deferrals?

Hello,

Does anyone know whether the contributing employers of a multiemployer welfare plan are still responsible for an ESRP if they are unable to provide benefits to their full-time ees and dependents?  Would the fund/contributing employers still be required to provide coverage or face penalties?  I took a look at IRM 5.9.4.1 which discusses bankruptcy and insolvency and ERSP assessments, but only when a 226-J letter has been issues either pre- or post-petition in bankruptcy.  Does anyone know of any other regulations or guidance exists that discusses this topic?  My initial thought is that generally an employer, including a multiemployer, is not required to offer coverage.  However, if the multiemployer is an ALE and does not offer coverage to its full-time employees and their dependents, then the employer will be subject to an ESRP.  According to the IRM, the ESRP excise tax can be included as either a pre- or post-petition, depending on when the ESRP assessment is made. However, the IRM does not discuss whether a multiemployer's insolvency absolves the employers from offering the requisite coverage to its FTEs.  Thanks in advance.

SH 401(k) - 3% NEC SH, for medical practice.  Plan is terminating due to sudden health issues for doctor.  He wants to term the plan before the end of 2022.  Next-to-last payroll is 12/14/2022, last payroll would be 12/28/2022 which will include severance.  Practice does not want to pay 3% NEC on severance, so wants to term before that last payroll, probably 12/16/2022.  MD has comp in excess of $305K already.  Will term date affect his plan comp?  

I received a QDRO where the Participant is a US citizen but the AP is not.  Since the AP doesn't have a SSN, he would like to provide his ITIN instead.  Are there any issues with using an ITIN or with the AP not being a US citizen?  

It should be noted that the AP is actively seeking citizenship, although that is no guarantee, of course.

I can't think of any issues, but I just thought the community here could help me brainstorm if there is something I'm not considering.

Thank you!

I have some general knowledge on this - I know property can't be contributed to a DB plan - but can't seem to figure out where to research more deeply. A sole proprietor is asking if he can contribute CDs by transferring them. I think the answer is no but need to be pointed in the right direction. There are certainly issues having to do with potential gains and losses at the point of transfer, but might CDs be considered "cash"?

just wanted confirm my understanding that if a plan does not provide meaningful benefits to enough eligible employees for the plan year, but then adopts an amendment after the year end but before 10/15, that this does not impact the valuation for the year preceding the amendment. For example, 10 eligible ees and only 3 have meaningful benefits for year X.  In year X+1, a timely amendment is adopted to correct the (a)(26) error for year X. There is no change to the valuation for year X and the 5500 for year X, yes?

Can you make is so that employees that were terminated in the year will not receive a QNEC or a QMAC for that year? 

I have became aware of recent bulletins from the insurance regulators in several states that appear to require health insurers to cover treatment (and testing) related to monkeypox without cost-sharing during the public health emergency (PHE) declared by the federal government for monkeypox.  I am not aware that the federal PHE declaration for monkeypox requires insurers to cover testing and treatment for monkeypox, so this appears to be an action initiated by state regulators.  Unfortunately, some of these bulletins provide no exception for HSA-qualified plans so I'm concerned that both bulletins are problematic for HSA account owners with state-regulated HDHPs.  Has anyone else come across these situations?

CA All Plan Letter 22-019 - Health Plan Coverage of Monkeypox Testing, Vaccinations, and Therapeutics.pdf NM Bulletin 2022-17 Monkeypox PHE.pdf

Anyone else tried playing around with the ChatGPT AI system by asking employee benefits questions?  Not perfect, but you can definitely see where this is heading.

https: //chat.openai.com/

I have a few clients who provide an unfunded death benefit for their retired employees.  It is a relatively small amount ($2,000-3,000), but not small enough to qualify for the remembrance fund exception under ERISA.

I am curious how other handle the 5500 filings for these benefits.  These are larger employers, so there's a high participant count. Do you typically see these programs having their own filing, or wrapped with other welfare benefits?  Does the large participant count create issues? (Since it is difficult to track the number of retirees at any given time and enrollment is not required to be covered.)

Couple of questions on this, as we aren't a PPP.

We are TPA on a plan sponsored by a corporation, (a controlled group with one other corporation which signed on as a participating employer) where a financial advisor convinced them to move all the funds to a PEP. Fine. This happened a couple of months ago. (Calendar year plan.)

We have been asked to complete the plan administration for the 2022 plan year. Is it ok for the PPP to farm out the administration to a TPA like us? In addition, any thoughts as to why we might not WANT to do this admin, or is it just carry on as usual - We've never been involved with a PEP/PPP yet.  All thoughts appreciated!

95% of our our plan clients use record keeping platforms fortunately.  But there are those with brokerage accounts.  We normally charge $125 for a distribution (we provide election form and tax notice, letter to plan sponsor to request the funds from the custodian, we write the distribution checks or issue ACH, withhold taxes and pay through EFTPS and do the 1099-R.  We charge more for EFTPS, each 1099-R and 945 if needed.  Very time intensive obviously.  We are struggling with residual balances that come in once someone's account has been closed.   We provide the fee disclosure each year as participants pay the $125.  We had a policy of reducing our fee so as to be no more than 10% of the distribution - didn't want any DOL attention.  So I'm ready to write off balances less than our fee.  I guess those funds would go into an unallocated suspense account.  Curious what others do.

Hi,

similar to question below. Small headcount plan where only HCE's actually made DCAP contributions. Company does employ NHCE's. Not worried about 25% concentration test. Would this plan fail 55% Average Benefits Test just because zero of its NHCE's make contributions? I would also appreciate a source if anyone has one.

Calendar year 401(k) plan provides for a 3% safe harbor nonelective.  Employer wants to change to safe harbor match for 1/1/2023.  Discussions started weeks ago, but employer got side tracked with personnel changes, including board members who were supposed to be making this decision.  They still want to make the change, but now that we are passed the safe harbor notice period what is the risk if they proceed with amending the plan and giving out the notice of the safe harbor match say, next week.

The RK supposedly already sent the 3% notice, although that has not been confirmed.  

Forgive the very basic question, but is it permissible for an employer to pay, on a tax-free basis, all or a portion of one employee's fully insured group health premiums outside of the employer's cafeteria plan? Assume the one person is highly compensated. 

No nondiscrimination rules would be directly applicable because the group health plan is fully insured. Would the cafeteria plan nondiscrimination rules cover this type of payment?

In other words, does the existence of the cafeteria plan (and the other non-HCEs' requirement to pay a larger premium under the cafeteria plan) eliminate the ability for the employer to make tax-free premium payments under section 106?