New plan.

Effective date 1/1 for PS of current year (10/1 for 401(k) and safe harbor)

Owner wants to allow all employees employed as of 7/1 to be immediately eligible as of 1/1.

Does that make sense then that anyone hired between 1/1 and 7/1 would be immediately eligible, albeit on their own date of hire instead of 1/1?

A 125 Plan allows entry date first day of month after meeting eligibility requirements.  The 125 Plan is a calendar year plan.  If the entry date of the participant is Nov 1, can the participant submit for reimbursement a medical expense incurred in March of the same calendar year?

Is an IRA’s sale to a not-yet spouse a prohibited transaction?

Imagine this not-so-hypothetical situation:

Two people who have contemplated marriage decide to wait. Why? One’s IRA owns real property, which the couple intend as their new residence. The IRA holder believes that living in the property while the IRA owns it would result in an improper personal benefit and prohibited transaction. Instead, the IRA sells the property to the holder’s not-yet spouse. (Assume the IRA’s sale is for an amount an appraiser says is fair market value.) The couple delay their marriage, and the IRA holder’s move, until the year after the year in which the IRA sold the property.

BenefitsLink neighbors, have you seen any court decision or agency proceeding that analyzes a situation anything like this as a too-clever evasion or somehow a prohibited transaction?

What tax-law doctrines might the IRS (or a taxpayer) use to reason that the IRA’s sale to a not-yet spouse ought to be treated as if it were a sale to the IRA holder’s spouse?

If a 401(k) plan has no participants and no assets, is a Form 5500 required?

The plan provides for employee deferrals only (no employer matching or other employer contributions) and no employees have enrolled in the plan to date. The plan has never held any assets. Is a Form 5500 required?

TIA!

Best of luck - hopefully it won't be too severe. We're pulling for you!

As I understand it, if an Employer choses to utilize the Top Paid Group (TPG) for it's benefit plans, it must be used on all benefit plans, retirement and non-retirement plans.

So, this would include 401(k) and an HSA, right?  if an employer wants to use TPG for HSA, they have to use it for the 401(k) right?

But what happens if you have conflicting choices?  The HSA says TPG and the 401(k) plan says standard?

Anyone have a decent primer on this they could share? What needs to be in the election by the Plan Sponsor to opt into this method instead of the standard method? Is there a summary of the 24 month average rates? Is that a single rate or are they segmented, that is 3 separate 24 month rates. When you chose a specific look back month for the 24 month average does that same month have to be used for each of the next 4 years you are required to use the alternative method? The standard method is pretty straight forward and verifying rates seems easy on the PBGC site. The alternative method I feel should be somewhat straight forward too but for some reason it's eluding me

This feels like something I should know but I don't do a lot of PBGC plans and most of them are under 25 where it's simply cheaper and easier to pay the small plan cap.

I have a plan that's got for them a significant VRP this year due to the very low PBGC rates and trying to see if the alternative method can reduce that substantially even though I know it means using the alternate method for at least 5 years.

Terminating plan - The termination date is 09/21/2022 and the employee has contributed $27000 ( the 2022 max +Catch up) in deferral contribution.  

* Is the maximum deferral allowed for individuals if the 401K plan only operates for a shortened year, i.e., January 1 through September 21, 2022?

Thank You. 

I have a plan that traditionally gives a 16% ps contribution.  They would like to allow employees to be able to take a portion in cash.  For example: 10% would still be PS, but the other 6% could be cash or deferred.  So, I believe I have a CODA situation.  

That being said, for the 2022 plan year, they would like to start this arrangement.  They would make the PS in March 2023.  Would the CODA portion be a 2022 or 2023 contribution? I am thinking 2023 deferral?  For the amount that is taken as cash, I assume it would be 2023 income.

Question 1: One person CB plan. CB pay credit formula is a percent of compensation using only compensation greater than $150,000. If compensation is less than $150,000 is there a 401(a)(26) failure?

Question 2: Company has three employees, all family / HCE's. All employees have entered the plan, but only one of the participant is receiving an annual cash balance benefit, the others are in a $0 contribution credit group. Is there any way this plan can pass 401(a)(26)?

Have a potential new client that just came to me with a failed ADP Test.  However, the previous TPA did not make any type of correction to the test.  Now we are left trying to figure out how to proceed:

1) Is this correctable via the VCP program?
2) In order to correct the testing, can we refund one participant enough in order to pass the testing?
3) What liabilities, if any, are there to the company?
4) What penalties could the Plan face?

Generally we use 5% when setting the interest rate for Cash Balance Plans, but we have a prospective client that is looking to have it at 4%.

The question is, is there an acceptable rate to use as per the IRS? 

I tried to do a search, but couldn't find an answer.

Thanks!

This is a vanilla PSP plan.  Here is what I have:

• June 30 FYE
• Integrated
• 1,000 hours and last day requirement
• 4 participants

One participant is throwing a wrench:

• Hired 1/1/2020
• 1st year of service 1/1/20 ~ 12/31/2020, worked 1,000 hours
• Enters the plan on the next entry date (semi annual) - 1/1/2021
• Received a 6/30/2021 contribution based on his 1/2 year salary

Here is my problem:

• He terminated 2/17/2022
• For 6/30/2022 year end he has 1,000 hours but was not employed on the last day of the plan year

He is the reason for the 410b failure.  He does not meet the continuing eligibility requirement rule.  Why do I need to include him?

Thinking about working with Nationwide as a TPA for 401(k) plans.

Does anybody have comments on pros and cons of working with them versus other platforms. 

Is it a big deal to switch between cash and accrued basis?

New 1-person plan deposited $500 as a starter contribution after the end of the plan year.

As part of a controlled group, she would normally file a 5500.

We'd like to wait until the current plan year contribution is filed before starting to file, and then file as accrued, so the 2nd plan year contribution would show the contribution for both the first and second plan years.

I understand a new safe harbor 401(k) plan can be signed prior to 10/1 and effective 10/1.

However, does the notice for the new plan need to have been delivered to eligible employees by 9/1 (ie 30 days previously)?

Hi

PS plan, top heavy for 2021. Both key and non-key receive top heavy minimum. Plan also has 5% gateway requirement for non-HCEs.

Beginning of 2021, Joe owned 100% of the company

July 1 2021, Joe sold 20% to an employee, Mary.

As of 12/31/2021, ownership is 80/20.

When did Mary become a key employee?

What contribution does Mary need to get for 2021?

Thank you

DB plan sponsor is an insurance company, currently in receivership under its state insurance department.  This status has not altered the plan's requirement to do annual valuations, file 5500, etc.; the actuary prior to receivership is still in place.  The prospects for rehabilitation (and/or coming out of receivership) are virtually nil.  While there is no formal statement yet from the state DOI, it appears likely the DOI will seek to have the PBGC take over the plan.  (The plan actuary has not been part of discussion, if any, between the DOI and the PBGC.)  Most recent AFTAP is around 100%, but a termination ratio is estimated around 70-75%.  The plan has been frozen for several years.

The plan has an unlimited LS option.  The current question is whether any PBGC regs and/or practices would require the plan to suspend (ie, before any formal action by the PBGC) the use of the LS option for anyone currently reaching a benefit commencement date (retirement or otherwise)?   My review found nothing on point; checked all the Blue Books, did not see anything in the regs (although that might be easy to miss).  Any relevant experience?  Ideas/suggestions?

Is there any way to force out small balances of active employees who have never contributed to the Plan?  We have a plan where a number of employees have balances <$1,000 resulting from a one-time profit sharing contribution. The employer would like to cover recordkeeping expenses for participants with less than $1000 as a perk to newer employees who are just starting to save in the plan, but want to exclude those with just profit sharing money. The recordkeeper is unable to do this systematically. Is there any creative way the employer can get these small balances out of the plan if these participants are still active employees? 

We have a large client that funds safe harbor non-elective and profit sharing quarterly. So we make YTD calculations in Relius with pre-determined PS contribution rates for a couple classes and have the net cost determined by reducing for prior quarterly allocations.  Getting it then into Ascensus format is a feat for 250 participants.  Data entry routine I suppose could possibly work or just hand key, or cut and paste.  It will be trued-up for the last quarter after the end of the year since the HCE PS rate is estimated on the low side during the year for discrimination testing purposes.

As an alternative we will attempt to have the client code employees in Paycor for SH % and PS% for those eligible and have a file created by Paycor that can be uploaded to Ascensus automatically each pay period.  Sounds idealistic and likely to take an act of God for the plan sponsor and Paycor to get done. The plan sponsor wants to automate the contribution process and wants contributions to go in dollar cost averaging each pay period. (Did I say it is a large group of doctors?)

Anyone doing anything remotely like this?  

Thanks for any comments