Background:
A potential client adopted a one-participant 401(k) plan (AKA Solo 401(k) plan) in 2015. The plan assets were over $250K by the end of 2020 and the brokerage account services provider didn't file Form 5500-EZ.

Question:
1)    Can this plan use the Penalty Relief Program for Form 5500-EZ Late Filers to fix the error?

       https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers

2)    Are there any additional things I need to take into consideration?

I have a combo plan - 401k PSP and CB plan - and the documents were signed in February 2022 for the plan year effective 1/1/2021 (calendar year plan).  

Does SECURE allow for us to "skip" 2021 filing since it was signed in 2022?

Recovering from Ian here...Thanks!

We have a new client for 2022 that has a profit sharing plan. There have been no contributions to the plan since 2017 (there will be no future contributions) and in the adoption agreement we prepared for them effective 1/1/2022 we indicated that the plan was frozen on 1/1/2022. Their previous TPA never amended their adoption agreement to show it as frozen. We aren't terminating the plan because there are several investments (real estate, private equity) that are not liquid and for some reason the owner doesn't want to find an IRA custodian to deal with it. 

When the plan was established in 2013 there were two 50/50 partners and no employees.  They filed Form 5500-EZ's from 2013 through 2017. They hired an employee mid-2017 who became eligible for the plan on 7/1/2018 but has never received a contribution so has no account balance. They have filed Form 5500 (Schedule I) from 2018 - 2021.

Partner A bought-out Partner B mid-2021 and Partner B's profit sharing plan account balance was rolled-over to an IRA on 12/31/2021.  Now we have a single-member LLC as a plan sponsor for 2022 with one account balance and one employee who does not have an account balance and never will.

Can we file Form 5500-EZ for 2022 forward or are we stuck with Form 5500? I am questioning whether or not the employee needs to be considered a participant because while the plan was not amended to be frozen, it has been frozen for all intents and purposes since 12/31/2017 which was before she became eligible.

In case anyone not aware--all parts of Florida are extended until 2/15/23.

Asked by someone as i never heard of this before.

Can they file the 5500-EZ before certifying schedule SB?

Thanks

Client is a high end restaurant where employees are paid a minimal wage, with income primarily from tips.  (They get very good tips.)  While these tips are actually reported on on Form W-2, they are not paid through the firm.  Instead, the employees declare tip values to the employer, who then includes in records for taxes and such.  When taxes, health premiums, etc... are applied, many of these employees actually owe the firm money and must pay back the firm these costs with a check they provide to the employer.  My first question is are these employees required to be covered?  Looking purely from an IRC 410(b) Ratio Percentage, the answer would be yes.  (They are a big chunk of the workforce.)  Another concern is that these employees have no monies paid under the payroll system that could be deferred, outside of a personal check the person writes and gives to the firm to pay back any deferral processed through the payroll system.  From a "paycheck perspective", these employees have zero income (no check) but do show W-2 Wages from the tips they declare to the employer.  So how can such a person make a deferral?  My guess is that they make the election against the "W-2 Wage Amount"  (base pay plus declared tips) which the firm contributes, which they employee must then repay to the firm with a personal check.  In summary, my 2 questions are how do you handle coverage and deferrals of these types of employees?

So, we all know the SAR is typically due 2 months after the 5500 deadline.

But is that 2 months from the "real" deadline of 7/31, or is it 2 months from the 8/1 date that came about from 7/31 being a Sunday?

And hey, 10/1 is a Saturday so now can we go up to the following Monday 10/3?

💣  (blow your mind!)

These blasted things. The DOL has stated:

Section 105(a)(2)(B)(iii) of ERISA provides that participant-directed individual account plans that furnish quarterly benefit statements under ERISA § 105(a)(1)(A)(i) must include the lifetime income illustrations on only one pension benefit statement in any 12-month period.

So let's look at a participant directed quarterly valuation plan. Suppose the 12/31/2022 valuation is completed, and the valuation and lifetime income illustration is sent on February 15, 2023. Then the 12/31/2023 valuation and lifetime income illustration is sent on March 31, 2024. This is more than 12 months later. What's your interpretation on this? Is it out of compliance? 

Hi -- we have a company that terminated its pre-approved 401(k) plan very recently. The plan timely adopted the Cycle 3 restatement, but did not adopt the interim amendments prior to the termination. The resolutions do reserve the authority of officers to execute any amendments necessary to effectuate the termination, and the assets have not been distributed yet.

Section 7 of Rev. Proc. 2016-37 provides that:

Notwithstanding Sections 5 and 6 of this revenue procedure, the termination of a plan ends the plan's remedial amendment period and, thus, generally will shorten the remedial amendment period for the plan. Accordingly, any retroactive remedial plan amendments or other required plan amendments for a terminating plan (that is, plan amendments required to be adopted to reflect qualification requirements that apply as of the date of termination) must be adopted in connection with the plan termination regardless of whether such requirements are included on a Required Amendments List.

It doesn't say that the amendments absolutely have to be adopted prior to the termination, just in connection with it. So I am wondering if we can make a reasonable argument that the interim amendments can still be adopted in connection with the termination if they go ahead and adopt them now? The resolutions adopting the amendments would of course reference the provisions from the prior resolutions and the Rev. Proc. Or do you all think we should not risk that and just do VCP? There are some timing pressures that make VCP not desirable.

Thanks for your thoughts!!

I understand that for Davis Bacon prevailing wage contributions, they must be deposited quarterly, as opposed to the 401(k) contribution deadlines.

I don't think it's included but has anyone ever reported that on the delinquent contribution line of the 5500?

I have to figure out what kind of penalties there are for this.

I've recently come across a new type of order purporting to be a QDRO.  Colloquially termed "marital" or "post-nuptial" QDROs, these are court orders that transfer property rights to a current spouse but no divorce or legal separation is anticipated; the sole purposes of the court action is to get the court's sign-off on the order.  They're entered pursuant to state domestic relations law (for example, some states that permit them have laws governing post-nuptial agreements, similar to prenup laws). Since these are court-signed orders awarding marital property rights to a spouse pursuant to domestic relations law, they technically satisfy 206(d) and would seem to require approval by a plan. Of course, they appear contrary to the spirit and intent of the law. 

These orders are gaining traction and several law firms are promoting them as a means to get a distribution when a participant is not otherwise eligible under plan terms. There's negligible case law on them. I reached out to the DOL and was told it's not yet an issue on their radar, nor have they opined on it.  All of this is reminiscent of the sham divorce issue about a decade ago, where the court told the administrator to take an order at face value and not dig into the motivations. 

Have any of you come across this yet? Thoughts?

Business owner is shutting down his practice, moving states, and opening a brand new practice.

Although it's the same line of work, for practical purposes he is planning to create a new S-Corp in the new state and shut down the old one.

There are and will not be no other employees.

Any reason he cannot just keep the same 401(k) plan and rename it under the new Corp?

Professional Services Group with shared ownership of company by the professionals.

Each professional has their own Inc/LLC and their own plan.

All plans mirror each other and are cross-tested together.

Some of the professional are exiting the Company at say 9/30, though their individual companies will continue.

The PS contribution requires last day worked and they will be making PS contributions as separated companies.  It is assumed then that their PS contributions will not be included at year end testing.

Somehow I know I'm not thinking of everything clearly. Two questions:

• I believe they are treated in the testing as terminated at 9/30, so 401(k) contributions made prior to 9/30 are included in testing.
• One of the Partners leaving is over 65, so is eligible for a PS contribution as a Retiree, but the contribution will be made long after 9/30. Not sure if this is included in the testing?

Can a multiemployer health & welfare fund (which, by definition is not an "employer" or an "employee organization") take advantage of the DOL voluntary plan safe harbor contained in DOL Reg. §2510.3-1(j) to avoid application of ERISA (assuming it otherwise satisfies the safe harbor requirements)?

I have a few plans where the forfeiture account has increased, either from zero, or from some amount to a higher amount. Do these assets get counted as employee assets? I don't know what was done in past years for these, but I wanted to make sure they are in the correct place.

I have a prospect that is a part of a PEP.  He wants to exit out of it and operate his own 401(k).  I have never done this but from what I'm reading it's not a simple task.  Anyone have insight as to if it can be done and if so, how?  Thanks

The sponsor of a retirement plan that yet has no provision for an involuntary distribution desires to provide an involuntary distribution if a participant is severed from employment and her balance is no more than $1,000.

The sponsor prefers to limit the plan’s involuntary distribution to the amount specified in Internal Revenue Code § 401(a)(31)(B)(i)(I) because the sponsor/administrator is unwilling to provide for a default-rollover IRA, which would be required if an involuntary distribution is more than $1,000 and the participant/distributee furnishes no different instruction.

The plan’s provision would look to whether a participant’s whole account, including her rollover-contributions subaccount, is no more than $1,000.

The plan’s governing document uses no IRS-preapproved document. The sponsor would amend the document to state its desired provision (except to the extent a provision would tax-disqualify the plan).

Assume all amounts are 100% nonforfeitable.

The plan provides participant-directed investment, with a broad range of investment alternatives. Account balances are recomputed every New York Stock Exchange day.

For simplicity (and to not resume a June 2020 BenefitsLink discussion), assume the plan incurs no fee for processing a distribution, and a participant’s account incurs no charge that could result in a distribution amount less than the participant’s before-charge account balance.

What happens if, between the time the plan’s administrator sends a § 402(f) notice and the form for instructing a direct rollover and the time the administrator would process an involuntary distribution, the participant’s changes from less than $1,000 to more than $1,000? Must the administrator cancel the distribution?

What happens if, on the day the involuntary distribution would be processed, the participant’s account balance changes from $999 (based on the preceding day’s funds’ shares’ prices) to $1,001 (based on the funds’ shares’ prices on which shares would be redeemed)?

Must the administrator cancel the distribution? How does a recordkeeper do that? If looking to the preceding day’s balance is good enough and the distribution is not canceled, what does the recordkeeper with the breakage between $1,000 and the funds’ shares’ redemption value?

How do plans’ administrators and, perhaps more important, recordkeepers deal with this in the practical real world?

I have a plan that was a controlled group/ASG in the same plan.  

This year (2021) four other companies joined the plan that aren't part of the CG/ASG, and no other business ties, so we have an open MEP.

As I understand it, in an open MEP, each plan has it's own 5500, and in a closed MEP, they only file one.

So, in this case, can I treat that CG as one closed MEP and file a single 5500 for those plans, and stand alone 5500's for the four new ones?

Or do I have to file 14 seperate ones?

We have a client who provides health through a community plan.  Employers pay into it, there is insurance and a trust with assets.  Each participating employer has had to file their own 5500 under their EIN.  The health plan has provided information for Schedules A and I in the past.

I requested the information for 2021 and was told by our client - the health plan is filing the 5500 on behalf of the plan and participating employers no longer need to file a 5500.  I have to think our client will need to file a 5500 marked "Final" as the IRS/DOL will be looking for one since there was a 2020 filing and since we filed an extension 2021.  I am attempting to clarify this with the health plan people but still waiting for a response.  If they don't provide any direction, we will prepare a 5500 for our client to sign and file.  The 5500 program doesn't like a welfare benefit plan with no Sch A or I but I suppose  I can ignore that validation warning.   Better to get one filed and possibly amend later if needed.  We only file a handful of welfare benefit plans and have never had to file a final. 

Just checking myself - ERISA 403(b) plan allows "ad hoc" distributions - i.e. partial withdrawals for terminated participants. Is it allowable to eliminate this option for current accrued benefits? (Plan provides for lump sum distribution.) Note that this is not an "in service" distribution question.