I have a client who is terminating their Cash Balance Plan and wants to make their 2022 contributions based on the short plan year, so they can get the money paid out before the end of the year.

Have the '22 segment rates been released as of yet?  If not, is it OK to use the '21 rates?

Thanks!

Hi,

I recall seeing that an the contribution to the DC Plan that will serve to offset the DB Plan benefits (DB is floor offset plan) should be a minimum of 5% of comp. Therefore, to use 3% of comp as the DC Plan is not advisable. 1. Is this correct? 2. Or is this only so that the DB Offset plan is a safe harbor, so technically 3% can be used, however, the db plan will now be a NON safe harbor offset plan? Thank you very much for any insights from all the Pros out there.

The plan sponsor calculates and deposits the employer contribution per pay period.  For this particular participant, they calculated it incorrectly and deposited $30 too much for the 2021 calendar plan year.  Unfortunately, the plan has immediate distributions; by the time we got to do the reconciliation, the participant had terminated and taken a distribution.

Sure, the plan could try and get the money back because it was an excess distribution... but that would be returning money to the plan that didn't belong there in the first place.  Similarly, if the participant balks at returning it, we'd normally instruct the plan sponsor to deposit $30+earnings to the forf account... but, again, that's $30 that shouldn't have been there at all.

Is there any justification for letting this go?  I need a justification because it's an audited plan, so I have to be able to back this up to the audit team.

Thanks.

Any thoughts on what to do if a plan participant who should be receiving RMDs does not apply for benefits in a defined benefit plan, even after numerous reminders?  The application would include an election of a specific form of benefits and providing bank account information for the deposits.

I'm assuming that one should then start providing benefits in the form of a joint and survivor annuity, or a life annuity if the person is not married, using paper checks.  (It's actually a governmental plan, so a joint and survivor annuity does not have to be the default form, but that would at least satisfy the RMD requirements.)  But if the person later wants to select a lump sum form, can they be permitted to do so if the plan otherwise does not permit a change of elections after beginning to receive benefits?  Alternatively, can they be forbidden from making the election (because obviously there is the potential for adverse selection if participants can elect a lump sum after starting a J&S)?

Also, what happens if checks are sent but never cashed?  There are procedures for dealing with missing participants, but I have not located any for dealing with participants whose whereabouts are known but who simply ignore checks.

In recent months, some BenefitsLink discussions have remarked on ERISA § 105’s command for lifetime-income illustrations. These discussions assume recordkeepers provide a service to generate the illustrations. Some discussions observe that an illustration is not routinely furnished for a self-directed brokerage account. I guess those mentions refer to a situation in which there is a securities broker-dealer’s account AND there is not an arrangement that results in a computer feed of the SDBA’s balance (not the details) to the recordkeeper’s system.

BenefitsLink neighbors, how much does this happen?

How many ERISA-governed plans have this situation?

I work for a small TPA/consultancy (under 20 employees) who have outsourced their entire IT function to a third party. We are in the process of trying to upgrade some of our IT systems and are interested in what other options are out there especially with regard to remote work situations. For those of you that have also outsourced your IT support would you be willing to share what group you work with, whether or not you would recommend them, and do they facilitate remote work environments? Bonus points if they are in the San Francisco area. 
 

I have a plan.  It's top heavy.  All eligible employees receive at least an 18% contribution.  When I run the tests I am failing TH.  How can I be failing a TH test?

Eligibility is 500 hours.  2 employees work less (much less).  To pass 410b I had to override and let 1 of them in.  

What more needs to be known?

I have no confirmation yet, but here's what has been communicated to me. I've asked for additional details.

Employee is out on disability. Has not terminated employment. Employer pays disability premiums, disability payments are made to the employer, who in turn pays them to the disabled employee. This would normally be considered compensation for plan purposes, as the plan uses W-2 and does not exclude disability payments. So far, so good.

What I'm being told is that the insurance company is issuing the W-2. Do (some) insurance companies perhaps do this as a "service" and issue a W-2 in the name of the employer, using the employer's id #? Anyone have experience with such a situation?

I am terminating a profit sharing due to the sale of the company.    This is not a 401k plan and they do not wish to apply to IRS for DL.  I was taught to give a 15 day notice to plan participants but can't find the citation.  Can someone please provide me with some guidance in this matter?

Participant elected to have Roth deferrals taken.

Company deducted funds pre-tax.  (However, the proceeds were "correctly" placed in the Roth source at the record keeper.)

Crossed tax years.

What might the fix be here?

Plan is SH Basic Match with 1 year wait and semi-annual entry.  Wants to amend to immediate eligibility but exclude seasonal employees who have not met the eligibility requirements.  Is that permitted to be done mid-year? 

I'm taking over a client where there are two life insurance policies owned as Plan assets.  Here is the issue, the premiums were paid outside of Plan assets.  Normally we would use those payments as part of the contributions for the year, but the issue is that the premiums are actually in excess of the allowed contribution (plus the client also made an additional contribution in '22 for the '21 plan year).

Would there be an issue in having the fund reimburse the owners who made the premium payments from outside the Plan?  That way the premiums were paid by the Plan and the additional contribution could be made?

I just wanted to make sure that this wouldn't create additional issues.

Thanks in advance!

I really struggle with Affiliated Service Groups. A client asked me about the following scenario: Hospital wants to engage physician practice ("PP"). Hospital offers to hire all of PP's employees. Doctor will be the sole person that will remain behind in his entity. Hospital will then engage Doc as Independent Contractor, where he will provide all of the same services, using his former staff (now employed by the Hospital). Hospital will handle all of the back office functions for doctor (billing, insurance, etc.). The question was whether Doc, in his own entity by himself, can maintain his own retirement plan that provides very rich benefits; and not get lumped into testing that plan with the Hospital retirement plan. It seems to me that this is exactly why the ASG rules were created and that this seems like an A Org situation. But again, I am terrible at ASGs. 

Any thoughts?

Has anyone had any information as to the degree the IRS budget increase under the Inflation Reduction Act will flow down to TE/GE division and possibly impact plan audit activity?  I read Chuck Rettig's letter about not focusing on small taxpayers but do we know anything about allocation of these funds and the degree to which it will impact plan enforcement?  Any comments and surmises welcome.

A client established a profit sharing plan during 2021 (drafted and signed before 12/31/21) with every intention of making a first year contribution.  The client also has a 401(k) plan that's been in existence for years, but they wanted the profit sharing plan to be a stand-alone program.  It's intended to operate as a trustee-directed investment fund as opposed to the participant-directed 401(k) plan.  Due to certain cash flow issues, they now decide to skip the contribution for 2021.  There are well over 200 eligible participants. 

We (the TPA) plan on preparing Form 5500 reporting the accurate participant count and zero assets.  The auditor says they've never had this problem before, and don't know how to proceed.  Other than auditing the employee eligibility, they're stumped on what to do regarding the lack of assets and how to report.  By the way, the client is aware that an audit is needed for this second plan (with whatever cost is involved).  We suggested that if they don't plan on making a profit sharing contribution for the next few years that they terminate the plan and then re-establish to avoid these additional annual auditing fees.  They declined.

Has anyone faced this situation who can offer some guidance?

Thanks.

Hi, 

One of the plan that is terminating the term date is 08/31/2022 and participants have already max out for the entire year (20,000) since the term date is 08/31/2022 and the part's have contributed for the entire year will this be excess contribution from the participants end? 

Thanks

I have an auditor friend who  has brought up the following issue:

Plan subject to audit terminated and all assets were distributed during the month of June, 2022. The auditor inferred to the plan sponsor that they could defer the attachment of the 12/31/21 audit, and include it with the 6/30/22 short year filing (audit will be prepared for the short year), utilizing the answering of Schedule H, Line 3d(2), indicating that the plan "has elected to defer attaching the IQPA's opinion for the first of 2 consecutive plan years, one of which is a short plan year of 7 months or fewer".

The sponsor tried to submit the 2021 Form 5500 without the audit, and the software vendor would not accept the return, citing the lack of the auditor's report being attached to the return.

In all my years I have always applied the language of Line 3d(2) of Schedule H to an initial plan year of less than 7 months. In the scenario above, we would insure that the 12/31/21 5500 filing had the audit report attached, and then again for the final short plan year.

Has anyone seen the scenario above, where the auditor tried to attach both audits to the final short year filing?

Thanks for any replies.

I'm participating in a NQDC that specifies that the distribution starts the January following an Elected Age + Separation of Service.

I'm allowed a one time change and I changed my plan by five years (original elected age + 5 years).  The change was made 13 months prior to the earliest payment date (the January following the original specified age) - Change became final in Nov the year prior to the original elected age.

Nine months after the change my employer statement was showing the new age + separation from service (status pending - I assume because it can't take effect for 12 months).  Several months later the plan got transferred to a major investment firm and their statement was showing new age + "separation+5 years".  I filed a claim stating that it should be new age + separation of service but they declined the claim and pointed to 409A.

Note that my plan states that if I attempt to change the payment election the same year as the elected age (that would be less than 12 months from earliest payment date) they will change the separation of service to separation+5 years.  In this case I made my change the prior year (Nov).

I have read countless web site that discuss "Changes in Time and Form of Distribution" but I can't find anything that talks about adding five years to my separation date.  This seems like a slam dunk but then we're dealing with the IRS tax code.  Does anyone have any insight on when separation would/should be changed to "separation + 5 years" so I can determine if I should appeal the claim?

Can a non-citizen/non-green card holder living and working in the US (for example, on a visa) contribute to an HSA if he or she has qualifying HDHP coverage in connection with his or her US employment and no disqualifying coverage?

The Code and related IRS guidance state that eligible "individuals" can contribute without any caveat that they be citizens so it appears that non-citizens can do so but I have come across some sort-of-authoritative sources that say the opposite.

Any thoughts are appreciated.

Sorry for some very basic questions, but it seems to me that under the 409A regs the concept of "performance-based compensation"  is only invoked if there were a possibility of that compensation being deferred. In other words:

1. If there is no opportunity to defer, an employer could pay a bonus for performance over the preceding 12 months based on criteria established right before the bonus is paid without running into 409A, correct?

2. If there is no opportunity to defer, an employer can establish performance criteria for a bonus that would be paid with respect to a 12 month period that has already started without running into 409A, correct?  (E.g., in August 2022, the employer establishes performance criteria for the period July 1, 2022 through June 30, 2023, and any resulting bonus would be paid shortly after June 30, 2023.)

Thanks!