I have a small business 401k and PSP which has language which allows a one-time irrevocable election not to participate. An older ex owner executed this election after disclosure of the plan, but before it became effective. I assume they did this because the money would be subject to RMDs soon, and they didn’t want to have to manage another account. They received no compensation or other consideration for electing not to participate?

Is this valid? I am worried that they may claim they should have been covered, especially on the profit sharing side after some time has gone by. 
 

Is the proper way to confirm this by requesting a private letter ruling?

Hi. A physical therapy practice offers all employees (doesn't matter full-time, part-time, HCE, NCHE) and their families a workplace perk. They have a policy where employees and families receive a discount on any physical therapy services they need. The employee provide insurance information and insurance is then billed. The employee is responsible for paying all cost share amounts. After that, the employee pays no more than $75 per visit. 

My questions are:

1. Is this structure permissible?

2. Does this policy create an ERISA-covered plan that would require a plan document, 5500, etc.?

Thanks.

A CPA came to us with this situation.

A woman suffered a stroke a year or so ago.  She needed cash to buy some type of long term care or medical policy. Not sure exactly what it was, but it doesn't matter for this question.

In late December 2022 she took a $450,000 cash distribution - $90,000 was W/H.

A couple of days later, but still in 2022, she unexpectedly died.

The money is no longer needed and the husband would rather it not be taxed.

Normally she would have 60 days to roll it over if she came up with the withholding.  Husband said he could afford the $90k, but the wife is deceased, so I don't think there is a way to do that.

If it was in the plan, he could roll it to a spousal IRA, but I don't think that can happen without having the distribution reversed first.

The check for the $360,000 has not been cashed.  Husband has it in his possession.

I doubt the plan can reverse it.

Can the plan limit the damage by voiding the $360k check and making the distribution $90k - 100% withheld?

Any other options, or are they stuck?

We use Fidelity as our 401(K) Administrator that allows those age 50 or older to elect pre-tax/Roth and catch-up. The problem is that many of our employees are electing catch up when they will not be maxing out on their pre-tax/Roth IRS limit. We only match on pre-tax and Roth.

This leaves us with the issue that what should be regular pre-tax or Roth is being captured as catch up in the payroll contribution side of things. We do not true up at year end or termination to ensure the match is correct so this is one issue.

However, I believe this can be corrected with some rule built in to only deduct regular pre-tax and/or Roth until capped out and then catch up deductions would begin. But I am not having much luck selling this.

Could anyone share how this is done in your system to avoid this type of issue? We use Workday payroll.

Thank you!

I have a client that utilizes individual brokerage accounts for their participants' investments. The Plan requests beneficiary elections from all participants, as does the Custodian. The participant files a beneficiary election with the Custodian, but NOT the Plan. If the participant dies, does the beneficiary election on file with the Custodian stand or would you default to the plan document provisions?

Suppose a plan that is participant directed merely adds another mutual fund as available. Doesn't change any of the alternatives already available. Is there a 30 day advance notice requirement before the new mutual fund can be available? 

Its January, 2023 and we realized that there was a minor mistake on the 2018 5500-S/F filing.  The client would like to file an amended 5500-S/F.  EFAST will only allow back to 2020. Can we still file an amended return for 2018 on a 2020 form, or is there no way to file an amended return at this late date?

Thank you

I've been looking at the various options for administration and document software or subscription service.  It seems the only options are:

ASC

ftWilliam

Datair

FIS Relius

Are there any others?  

Thank you, 

Listening to a presentation today on SECURE 2.0 and I left with the impression that this is literally impossible to implement.  Anyone else?

Between Roth as catch-ups, match as Roth, mandatory auto enrollment (with Auto Increase to boot), 37 new distribution options that you can only take once every 3 years.

Sure I'm exaggerating but only a little.  I just can't see implementing this stuff with a small service business that has 25 employees.

I am have been tasked with setting up a NQDC plan for a few key executives at our small company and it has my head spinning a bit.

Basically the owners of the company want to set aside an annual discretionary amount for a few key employees.  The contribution would be tied to employee and company performance.  The amount is intended to be a SERP (no employee deferrals)  and become available after the employee retires. Most of the target employees are 10-15 years away from retirement.

We are looking at the standard clauses providing for acceleration in the event of death, disability, change in control.  Also provision regarding non payment for termination for cause or going to work for a competitor.

I will admit I am getting somewhat confused  regarding the difference between vesting and triggering event.  I have talked with a couple of folks who state that it is normal for employees to vest over a 5-10 year period.  For example can 50 year old employee have a 5 year vesting schedule at 20% per year but the plan specify that payment is not made until they reach normal retirment age?

My lack of clarity of over the vesting / triggering question leads me down the path of the what is the correct reporting and payment regarding payroll / FICA.   I have some done some research and want to make sure we handle any issues regarding the special timing rule for FICA correctly.

What the owners have in mind is to make these annual discretionary contributions, perhaps tie a return rate on the contributions to the S&P500, and pay the employee out either in a lump sum or in 3 years after retirement.  The funds would be available at the later of age 65 or a separation from service (some employees may work until 67).

What I think I know so far:

- This would be a defined contribution SERP plan.

- It would be a non account balance plan.

- Distributions from the plan should be reported on a W2 and are subject to income tax when paid

- If FICA is not paid according to the special timing rule, then FICA would would also be owed at the time of distribution under the general timing rule.  FICA would be paid by both the employee and employer.

What I am confused about and seeking guidance

- The difference between vesting and triggering 

- When would the FICA tax be due? Does the special timing rule apply?

- If the special timing rule applies, how is the amount determined?

- What am I not thinking about that I should be?

I have a client who is starting to grow through acquisitions.  Client sponsors a SH 401k. They have purchased a Company (Stock purchase not Asset). New firm has a SIMPLE. I know there are transition rules that allow this arrangement to continue through the end of 2023.  They are about to complete another acquisition (or more) as Asset purchases. The target has a 401k and they want to allow that new staff to join when acquired.  I believe the SIMPLE has to continue and that staff should not be eligible/contribute to 401k

If they amend the current Plan to recognize the new group(s), don't they lose the 410b6c exclusion that allowed the first acquisition to complete the SIMPLE for 2023? Can we amend to only allow the asset purchases to enter the Plan early? Any guidance is appreciated!

I'm trying to search this topic on-line and not finding much.  Don't deposits coming in from a Real Estate LLC investment count as contributions in a 401(k) plan?  If not, how would they be identified as?

Can anyone comment on how long the IRS has been taking to issue plan termination favorable determination letters following submission of a 5310 in the past few years? Are ESOPs taking longer? 

TIA!

Which SECURE 2022 changes are in effect now?

Assume a § 401(a) plan with a § 401(k) arrangement for elective deferrals (non-Roth and Roth), but no matching or nonelective contribution.

Assume the plan has no automatic-contribution arrangement, and no auto-escalation provision.

Assume the plan’s year began January 1, 2023.

Assume the plan’s sponsor will amend and restate the documents within the remedial-amendment period.

Which SECURE 2022 changes now are mandated as a tax-qualification condition?

Which SECURE 2022 changes are permitted?

Let’s use our BenefitsLink community to see that we have a thorough list.

Remember, even if there’s a long delay about plan documents, we operate the plans now.

Without providing too much detail as this is an ongoing review, what options would a plan administrator have if it were found that  loan from 2020 should have been distributed  as a covid hardship withdrawal? Plan does not allow for multiple loans at one time however a participant was somehow able to take about two loans less than 10 days apart. 

somehow the participant had two active loans that went delinquent as not enough money was coming out of paycheck to cover both. 

the first was a loan and the second should have been a covid hardship as it had to be done over the phone. Our participant tried fixing the issue and has since learned the second “loan” would be considered a hardship withdrawal and will need to amend their taxes. 

If we find this was a systems error on the plan side and it was not done correctly, would this hold up that the record keeper did not follow our plan and we should ask  to recoup some of the fees and penalties for this participant?

thank you 

I had this question posed to me the other day. For the new tax credits for 2023, can we start a new plan even though we already have a 401(k) plan. Freeze the existing plan and merge into the new plan but yet take advantage of the new credits including the $1,000 credit for matching. This is a small 6 person plan.

When considering spinoffs and plan mergers, what would be considered the date of establishment for the plan that is spun off or for plans that merge.  Would it be the establishment date of the original plan?  Would these plans be considered new for purposes of the new auto enrollment requirement?

Hi

Looking at a possible takeover. This is a question on what is used for offset calculations. I have not done of these in 20+ years.

DB is 50% of pay offset by 26.25% of TWB, fractional

DC has 401k+PS+NESH (mandatory 3%)

What is used for offset?

Thank you

How are folks interpreting this section?

I recognize it is optional, but because its effective now, there seems to me a lot of questions about it. 

Let's start with a basic 401(k) plan, that has a basic safe harbor match provision. 

There are two options coming up - 

1. The employer would make a blanket decision to have the safe harbor contributions as Roth. Can this be a yearly election? What if it's just the annual discretionary employer contribution (profit sharing) does it have to be in the plan document that the employer contributions for year 20XX will be designated Roth Contributions? 
2. Each individual participant would elect if they wanted the SH contribution made as Roth or not. 

For item 2- I'm not seeing anything in section 604 where the the participants get to elect one way or the other. Plus plans can already accomplish pretty much the same thing if they allow for in-plan Roth conversions. 

I think #1 is how I am interpreting 604, which will be useful for plans that have an auto-enroll feature where the default enrollment is a Roth deferral, so any match will also be Roth. 

I can see the plan issuing 1099-R at year end for the amounts of the Roth contributions that weren't Roth deferrals. 

What say all of you? 

Here’s the situation (with some facts adjusted slightly to protect my client’s and others’ privacy):

About four weeks after a 78-year-old participant’s death, the plan’s administrator receives a document the sender presents as the participant’s beneficiary designation. It is dated a few days before the participant’s death.

Nothing about the form is witnessed, by a notary or anyone else. But the employer has no record that its former employee ever had a spouse (or any child or other dependent), and the obituary mentions no spouse or former spouse and no child.

The employer/administrator worries that the ostensible beneficiary-designation form might not be the participant’s act.

Here’s the difficulty: Because the participant retired 16 years ago, the employer discarded records that might have showed its former employee’s handwriting. The retiree’s request, a few years ago, for automated minimum-distribution payments was processed through the plan’s website. The recordkeeper too has nothing that shows the participant’s handwriting.

No one now working for the employer knows anything about the retiree beyond what’s in a computer system record from when she retired. (The employer has tens of thousands of employees, and many retirees.)

What information would you want to form a discretionary finding about whether the form submitted as the participant’s beneficiary designation likely is the participant’s act?

What information might suggest to you that the ostensible beneficiary designation is not genuine?