We have a 85 participant pooled profit sharing plan with $17,000 in total assets.  Employer wants to amend the plan to 'charge' the accounts of terminated participants an annual administrative fee the year beginning after the year after termination (Term 2020, fees start 2022 if account not fully paid out.)  Since this is a pooled account would these expenses to the terminated participants accounts become additional earnings to the other participants or forfeitures to be re-allocated to active participants OR something else altogether?

I know the plan can be amended to allow for the expenses to be charged (must also send a notice to each participant regarding the change). Just not sure how to handle the recognition of the expense charges.

Thanks for any input.  Really struggling with this.

Kathy Nichols

I think the answer to my question is that this cannot be done but I just want to be sure!  I have a fairly new NQP plan (started in 2022) that allows both participant (limited to only the CEO) and employer contributions (open to other select employees).  No participant contributions were elected in 2022 but employer contributions were made.  At the time the plan was established, the plan sponsor elected to pay benefits only at separation from service (with the allowed limited acceleration exceptions) with a lump sum payment option as the default.  The plan document did also allow for a 5-year installment option.  The plan sponsor failed to collect payment option elections on the employer contributions made in 2022 thinking that none were necessary so I believe these deferrals have all technically "defaulted" to the lump-sum payment default at separation from service. 

In order to avoid having to get any elections on the employer contributions and to have the plan operate more closely like an older NQP they had in place several years ago, the plan sponsor would now like to only provide for a 5-year installment at separation from service for all contributions - including those made in 2022.  Because no participant contributions were made in 2022, I think this may be an allowable amendment and would not serve to delay anything as no benefit currently exists for this contribution source.  I don't think, however, that this would probably be able to apply to the 2022 employer contributions already made as the change from a lump sum payment to an installment payment would seem to be a delay under the 409A rules.

I am looking to see if anyone has any thoughts on (1) if my beliefs are correct or incorrect; and (2) any possible ideas for structuring this to accommodate the plan sponsor's wishes.

Has anyone had a state unemployment agency ask whether a past employee has taken a distribution? Are we required to disclose? 

PS Plan has owner and one employee. During the plan year,  the employee was paid out.  At year end the only participant is the owner. I recall that since at beg of yr there was an emotes in the plan the 5500 EZ cannot be used. Is there any other opinions? Thank you

Say I have 5 companies that all adopted a plan: A, B, C, D, E, F

The CG's are:

A B & C are one CG

D & E are another

A B & D also

C & E too

F is not part of any CG or ASG, so I have a MEP.

Do I need to do 5 separate tests?

Adult Child #1 - Owns 50% of the company
Adult Child #2 - Owns 50% of the company

Mom & Dad both also work there, but make under $100k each. 

So, based on salary they wouldn't be considered HCE for testing purposes.  I don't believe the attribution goes up, so they wouldn't be considered HCE for testing either, right?  I know that's how it applies for ownership/controlled groups.  I just wanted to confirm it's the same for the testing.

Thanks everyone!

Hi

This is a new one for me and it is for AFTAP gurus out there.

Looking at a possible takeover, one lifer DB plan.

Effective date 1/1/2010. I just found out that AFTAP was never certified for this plan. So, each year a benefit accrual was done and funding was based on this (my understanding is that the target normal cost (TNC) needs to be funded separately each year and not the funding target (FT)). Just by looking at the various valuations provided, looks like the funding may not be an issue, both covering minimum required and maximum permissible deduction so let's leave this part alone for the time being.

It is a BOY valuation.

The plan document states automatic restoration.

After my research, I think the freeze date is 12/31/2014 - end of 5th plan year. Am I correct on this date?

Q1: What I do not seem to find is, how to restore the AB after AFTAP is certified as of 9/30/2022. For simplicity, say the AB is $1,000 per year of participation. So, if frozen as of 12/31/2014, the frozen benefit as of 1/1/2015 and on would be $5,000. This benefit would follow thru 12/31/2021. After AFTAP certification, how would 2022 AB would look like at 1/1/2022 and 12/31/2022.

Q2: Another thing I read (not sure if it will fly), I can hard freeze the plan now i.e. before certifying the AFTAP and have the AB frozen at $5,000 until I amend the formula.

I would appreciate any comments.

Thank you

How do others handle disclosure of fees for distributions and such in the SPD? In great detail, not at all, or with an addendum?

FTW gives us an option to use an addendum but then we still have to go into detail. Can we just say "refer to the fee disclosure document?"

(Of course) I am referring to plans that are on a recordkeeping platform where distribution fees are typically deducted from a participant's account, per participant fees for ongoing services, etc., and they prepare a fee disclosure document. It's such a pain to keep track of the different fees with different recordkeepers, and then our fees might be different by plan, and god forbid anything should change and you have to do an SMM or new SPD. I know it's been discussed before; thanks for any refresher info.

We are part of a CPA firm.  Our department provides TPA services for tax and business clients of the firm as well as for plan sponsors who do not use our firm for non-retirement-plan services.  We use an engagement letter specifically for the TPA services.  It has been several years since our engagement letter has been modified.

If you use an engagement letter for TPA services, would you be willing to share a sample?

Thank you!

We had a participant in our pension plan elect a lump sum.  However, he died prior to the benefit commencement date.

Do we still pay out the benefit in the same lump sum amount elected (to the surviving spouse), or should it be recalculated as a death benefit (which would result in a lower amount to the surviving spouse)?

Thank you!

I am looking for a well-written guide to in-plan Roth conversions, assuming there is such a thing available. All comments/suggestions appreciated.

New plan last year.  Getting a feel for the business.  

2 employees have recently terminated.  The office manager said that sometimes these guys quit but come back later.  Plan is a SH match. Payout is immediate.  I can make sure they are whole with regards to the SH match so their payout is complete and final.  But what if they come back?  

There would be no forfeiture because it's a SH plan and everything is 100% vested
They could put their money back if it is within 60 days (right?)
If they come back before a year has passed there is no break in service so they would be back in.  

Am I good with regards to my understanding? 

Thanks

Participant is requesting a hardship distribution for purchase of an RV that will be used as participant's principal residence.  Plan document allows for hardship distributions for safe harbor purposes.  I see no issue with allowing the hardship distribution.  Recordkeeper is asserting that the IRS requires that a principal residence be a "fixed" dwelling and that they have unequivocally indicated that a motorhome is not considered a principal residence.  The recordkeeper offers no documentation just their assertion.

Has the IRS indicated that an RV cannot serve as a principal residence? 

Thank you for any guidance.         

My apologies if someone else has already brought this up on one of the boards. If so, please redirect me there. 

Have other people encountered this recently? What are your thoughts?

This past week several of our clients have received e-mails from a large bundled provider attempting to drum up business. (we are a traditional TPA) The e-mail states in part "Your TPA is filing your 5500 wrong" and then goes on to explain that Lines 10e and 8f MUST match, and that they are opening themselves up to audit and penalties from the DOL. The e-mails have screenshots of the two lines from their most recent filed Form 5500-SF. 

I was outraged when I saw the e-mails. I'm just wondering if my outrage is a bit displaced, or perhaps a disproportionate response, because like many folks we are really really focused on getting everything done by 10/17 and things that I would typically be able to shrug off are getting under my skin. Clearly this has bothered me enough to make a post. 

Thoughts?

A cash balance plan excludes all HCEs except the owner.  The plan defines the contribution credit for Group 2 (all participants other than the owner) as .5% accrual to cover meaningful benefits.  All NHCEs are participating but the 40% coverage requirement of (a)(26) isn't satisfied for 2021.  The only way this can be cured is by making one HCE a participant retroactive to 2021.  Can this be done by an 11(g) amendment naming one HCE a participant, or will that be deemed discriminatory since effectively the amendment is granting an accrual just to one HCE?  Must this go through VCP? 

Thanks.

Retirement Plan set up for the first time today effective 2021.  Therefore no extension was filed.  I have checked the box indicating that the plan was adopted retroactively under SECURE Act. Should I indicate in the "Special Extension" box "SECURE Act Section 201"?

Seems like the most practical approach.  Perhaps the IRS has even already issued something about this?

I need to file two 5500-ez via the IRS relief program dating back 7 & 8  years when my solo/individual 401k exceeded $250k (I was ignorant of the requirement to do this). The $500 penalty per submission is a bargain compared to the alternative.

What I don't understand is why the Department of Labor DFVC program doesn't also cover solo 401k's 5500-ez submissions  - won't the paper submission of the delinquent 5500-ez via the IRS relief program almost certainly trigger an insanely high penalty dating back 7/8 years from the Department of Labor as well?

Taking on a new client where the forms have been filed as a Form 5500-SF.  However, it's a one-person plan and really should have been filed as a Form 5500-EZ from inception.  Is there any issues with just making the switch for the 2021 Plan Year or should we continue to file it as an SF?

Just want to make sure we don't create any issues for the client.

Read this case from the U.S. District Court in Georgia dealing with the naming of a beneficiary of a pension plan. -

https://scholar.google.com/scholar_case?case=7964216609854086279&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:17102308171145443235:AAGBfm2dXJvPo0nUQKlDLqIPUBXxyXMitw&html=&pos=0&folt=kw

Who is responsible for the chaos described?  The Participant who had no idea what he was doing?  The Plan Administrator who obviously was not paying attention to the actions of the Participant and his violation of Plan requirements?  The Sponsor who adopted Plan rules that clearly were not understood by the Plan Participant?   

Lots of lessons here.  I suspect the case will be appealed.    

Hi, 

Plan is terminating due to asset sale and the sale will happen December 1st 2022.  Regular pay roll end on Nov 30th however they will be retention bonus post acquisition .  The terminating employer will happen they EIN and will be a participating employer. 

I feel this might be a controlled group or lead to a controlled group - Is it possible? 

Can they make the bonus payment post the plan termination? The plan will terminate in December and they are likely to start the process in Feb 2023. 

Can the seller be a participating employer? 

Thanks