Probably a very basic question for most of you, but I am pretty new to the industry.  I know the 2022 SIMPLE IRA contribution limit is $14,000 (or $17,000 with catch up if over age 50).  Does that contribution limit apply only to the amount the employee contributes, or does that limit also include the employer matching amount?

Thanks!

The Plan document currently provides that forfeitures may be allocated to Nonelective Contributions and to pay Plan Expenses.  The Employer would like to amend the Plan to allow forfeitures to be allocated to, in addition to Nonelective Contributions and Plan Expenses, also to: (1) Additional Matching Contributions, (2) Applied to Reduce Nonelective Contributions and (2) Applied to Reduce Matching Contributions.

My initial thoughts are this amendment should be effective the beginning of the next plan year to avoid a potential Anti-Cutback violation?  Any other issues I may be missing?

If the plan has elected the safe harbor rules for hardship distributions can the plan sponsor rely on employee certifications with respect to the amount to satisfy the financial hardship and the employees need for the hardship distribution? I want to make sure we are okay to just have them sign a certification statement without having to also request documentation proving the hardship. 

I'm working on a plan with year end asset on 12/31/2021 $125,000 at John Hancock & plan made profit sharing contribution amount of $30,000.

Do I need to consider bond amount on $155,000 (with PS receivables) of 10% or only count on $125,000 (John Hancock)? 

Thanks!

I contributed the maximum 401K limit amount of $20,500 from Jan 2022 to June 2022. Today, Aug 23, my 401K shows a QNEC contribution of $100. 

1) Will I have exceeded the 401K limit by $100.00 now due to QNEC contribution? Does QNEC count towards the $20,500 basic 401K limit?

2) I turned 50 years old this year in March. Will the QNEC contribution count towards catch-up contribution even though I have not asked my company to deduct my paycheck for catch-up contribution? Should I start deducting for catch-up contribution (with limit of $6400+$100QNEC = $6500)?

3) Does the QNEC contribution show up in my W-2 as "Elective Deferrals" with a total of ($20,500+$100 = $20,600 + $6,400 =) $27,000 as one entry on W-2 or separate entries for Basic 401K limit of $20,500, separate entry for QNEC, and another separate entry for catch-up contribution?

4) Do I need to fill out any special IRS forms when doing taxes for QNEC especially if it counts towards the basic 401k limit of $20,500 which I would have now exceeded by $100? 

Thank You!

I'm retired and looking into purchasing real estate with some of my funds from my 457 account.  I'm trying to figure out the federal tax rate If I make a withdrawal.  Does it count as income that will it be added to our annual income between my retirement and my wife's salary?  If that is the case it will probably bump us into a higher tax bracket.  Or is there  straight federal tax rate when you make the withdrawal?   I live in California so I know they will want their share as well.  I plan on talking with my CPA, but I thought this forum would be a good starting point and get advice from others on here.  Thanks!

Under a nonqualified 409A plan, must elective deferrals be 100% vested at all times - and only nonelective contributions may be subject to a vesting schedule? Or may elective deferrals also be made subject to a substantial risk of forfeiture? Some citation or authority one way or another would be much appreicated. 

Somebody terminated a one-participant 401(k) early this year (and distributed all assets), and is filing the final 5500. The CPA is asking what the final plan assets should be for line 6(a).

Plan assets are zero, but I guess the confusion comes from the fact that the current IRS 5500 is for 2021 (the 2022 version isn't out yet). The 7-month deadline is approaching, so there's not a lot of time to wait.

Would they just use the 2021 form and indicate at the top that the plan terminated in 2022? Presumably they:

• Check the box for a short plan year
• Enter 1/1/2022 and the termination date as the plan year?

The plan was a calendar-year plan, but again, the plan terminated early in 2022.

Thanks for any pointers on this!

Plan defines normal retirement as "the later of 59 1/2 or 5 years of plan participation".  100% vesting occurs at that point per the Plan.  Plan defines a "year of service" as "1000 hours during the plan year" for vesting.  Plan does not separately define a year of participation. 

Participant was hired in 2017 at age 66.  Termed as of 02/05/2021 (but had no hours or comp in 2021).  Participant had 4 years over 1000 hours (2017, 2018, 2019 and 2020).  Employer match has 2/20 vesting.  Participant is 60% vested in the match upon termination on 02/05/2021) because he had not yet reached his NRD.  So far so good.   

Participant is rehired as of 05/17/2022 working approx 16 hours per week.  Reenters plan on rehire per plan provisions.  Participant needs another 2 years of participation to reach normal retirement under the plan definition.  If he ends up working over 1000 hours he will become 100% vested by the vesting anyway however since he is only scheduled for 16/wk he probably won't make 1000 hours. 

Where I'm getting hung up is trying to figure out if this participant will fully vest upon attainment of the plan's normal retirement definition regardless of his hours worked in the next two years?   

Client is a small company with a 401k plan.  Current employees are owners and one of owners children.  Last non-related employee terminated in 2018.  There is a small forfeiture of $1,500 in the plan.  No participant has had any income after 2018.

There are no unpaid fees, and no income to base an allocation on.

Allocating forfeiture based on account balance has been mentioned, but I don't see how that would work since forfeiture allocations are annual additions, and 100% of the participants income is $0...

Any ideas other than revising 2018 to allocate the forfeiture?

Thanks!

Here is a new one for me.

Sent docs for 2021 plan year 5/31/2022 and they executed on 6/3/2022.

I now get a confirmation that they made the deposit on 5/23/2022.

So, what is wrong with this picture, if anything?

Am I being paranoid that they opened an account without a plan document and also without an executed plan document?

Thanks for comments.

Client has requested an amendment to reduce the maximum allowable loan amount to 50% of vested balance, but not to exceed $25,000.  Client also wants to reduce loan repayment period to 3 years.  Can these elections be made and the loan still satisfy 72(p)?

Any guidance you can provide would be greatly appreciated.

Under our QDRO procedures, under a child support Order, the Participant is responsible for taxes owed on the QDRO distribution.  Normally, we give the Participant the option of either (1) paying the tax amount out of pocket or, (2) increasing the distribution in an amount needed to cover the taxes.  For example, if the QDRO award the AP $100, we can either distribute the $100 to the AP and have the participant pay $10 (10%) out of pocket, or we increase the distribution to $110 so that $100 can go to the AP and $10 can cover the taxes.

We recently received a child support Order that awards the AP 100% of the participant's account.  Clearly, we can't increase the distribution to cover the taxes.  Do we just send the Participant a demand for payment to cover the taxes?  What happens if the Participant refuses to pay?

An auditor friend of mine was reviewing an audit report for an ERISA 403(b) plan. The assets are held by VOYA and Equitable, and are listed on the audited financial statements as Pooled Separate Accounts. His question was that he was of the belief that 403(b) plans cannot invest in PSA's; the investments must be in mutual funds or annuity contracts. Researching this over the weekend led me to believe him.

In reviewing the Equitable report, it appears that each participant has their own unique "contract number". Therefore his and my question is whether the investments with Equitable are appropriate for a 403(b) plan.

Thanks for any replies.

I posted this in the "401(k)" forum, but I think it is relevant here, too.

A participant made an elective deferral election of 25% of his bonus.  The bonus was $4,000, so $1,000 was deferred under the 401(k).

However, the bonus was subject to the participant remaining employed with our company for at least one year.  The participant has chosen to leave the company after 6 months, and is required to pay back $2,000 of the bonus.

How does this affect the $1,000 deferred under the 401(k)?  Since half the bonus was forfeited, does that mean we have to remove half the deferral that was based on the bonus before forfeiture?  In other words, do we kick $500 out of the plan?

*Please note:  The numbers are made up, so to the extent some de minimis rule applies to the figures above, it is probably not applicable in this situation.

Some other facts:

• The Bonus was paid this year and is being clawed back this year.
• The Bonus is going to be paid back directly by the employee (we aren't reducing any compensation payments). 
• On the participant's 2022 tax statement, it will be reported that she earned a $2,000 bonus (not the full $4,000, half of which was clawed back).

I appreciate any help!

Group:

In reviewing a client's ESOP Plan docs adopted 2013 the employer excludes leased employees from participating. However, then I read the payroll and employee census and see a leasing company was the employer of record and issued W2's in the leasing Co name. 

At the time of adoption there were approximately 22 employees including 2 HCE. 

IRS has begun to audit the plan and we have already received IDR's asking about the leased employees. 

My research thus far is as follows:

Under TEFRA 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) Public Law 97-248 to curb certain abuses, the 1982 TEFRA act promulgated a law that leased employees are not subject to the same pension rules if the leased employee is covered by a plan maintained by the leasing organization that allows for immediate participation, full and immediate vesting, and employer contributions of at least 7.5 percent of the employee's salary.

In other words, Leased employee are subject to employer/plan sponsor pension rules if lease Co doesn't allow immediate participation , full and immediate vesting and employer contributions at least 7.5% employees salaries. 

Then under TRA of 1986 public law 99-514 seemed to modify the 1982 law by adding the following:

Additionally, IRC§414(n)(5)(A) states that the safe harbor provisions do not apply if leased employees constitute more than 20 percent of the recipient's nonhighly compensated workforce.

Q: To prevent the plan from being disqualified is there any argument that the leased employees are under control and direction of plan sponsor and the leasing company doesn't provide a money pension plan with immediate vesting and participation? (I may be getting the rules confused)

The '86 law seemed to remove the safe harbor and no other work around to prevent disqualification. 

Q: Would the result change if instead of leasing company there was a PEO? 

Any cases or other treatise to review for my research would be greatly appreciated. 

Thank you 

Hi

A corporation wants to start a new 401k/SH plan (basic match) for 2022.

The only non-owner employee was fired early in the year as was stealing money from the company and worked over 500 hours during the year.

If the owner sets up a 401k/SH plan today for 2022 and makes no profit sharing contribution i.e. deferral plus safe harbor match, I see no issue, correct?

How about, adding profit sharing? As the employee would need to get an allocation for 2022 to pass 410b, would the employee need to be vested at all?

Thanks

A recent BenefitsLink discussion points out a potential difficulty when a retirement plan’s named fiduciary is the plan sponsor’s sole proprietor and her death leaves doubt about who has power to administer the plan. (The inquirer described an investment custodian’s unwillingness to accept, absent a court order, instructions from a person many would treat as the sole proprietor’s successor.) https://benefitslink.com/boards/index.php?/topic/69560-orphan-plan-how-to-appoint-a-new-trustee/#comment-324850

Imagine another business similarly controlled and managed by its only owner. It is organized as a corporation or limited-liability company, but no one beyond the sole shareholder or sole member had been named as a director or officer, or as a manager.

Is a difficulty about who has authority to administer the retirement plan avoided if the employer/administrator is a corporation or a limited-liability company?

Does State law—whether about a corporation or company, or for decedents’ estates—provide enough authority for someone to manage the corporation or company, and its retirement plan?

What are your experiences about whether investment custodians and recordkeepers will accept instructions from someone who shows some reasonable explanation about the source of her authority?

What evidence or information is enough to persuade a custodian or recordkeeper to take instructions?

We have a 401k plan that has excluded certain employees when they should not have and as a result, quite a few never were given the opportunity to contribute to the plan.  The plan sponsor wants to go through EPCRS, make the participants/plan whole.  But how far back do they go on this?  The plan was effective back in the 1990s and as far as we know has always excluded a certain group of employees (when they shouldn't have).  Do we have to go all the way back?  Do we go back 3,4,5,or 6 years, go through EPCRS and wait for the IRS to determine if we need to go back further?

Thank you

I have a question one of the client is considering to terminate they 401k plan and they are a safe harbor non-elective setup. Is it possible to terminate the plan as of 12/31/22? If so, how does the Safe Harbor Non-elective contribution work since it can’t be calculated till after the plan year?