We have a situation in which a company is acquiring a new subsidiary in a stock transaction.  The acquiring company has a 401(k) plan. The acquired company had a 401(k) plan before the transaction, but it was terminated immediately before the transaction to avoid the rule that you can't terminate a 401(k) plan if the employer maintains another 401(k) plan.

Acquiring company would like to provide that an individual's election regarding deferrals in the acquired company's plan would carry over to the acquiring company's plan.  (Obviously, employees can change their elections at any time, but that would at least be the starting point.) That seems to me like a perfectly reasonable thing to do, so that you don't have to get new elections from all the employees at once (and risk having some of them offended that they have to make new elections when in their mind they already made elections).  But everything I can see refers to employees making elections under a plan--not employees making elections under one plan and having them carry over to a different plan.

Has anyone experienced this situation?  And has the IRS ever approved or disapproved of it that you know of?

Strange one here:  SAFE HARBOR Match Plan

Plan excludes a number of items from their definition of compensation for deferral purposes (including several types of special bonuses).  For the SH match, they exclude the same things as deferral, but have an additional "bonus" exclusion.    414s testing would be required for both the deferral and the SH match definitions of compensation.  My understanding is that the  plan must pass 414s testing.   The plan does not pass 414s for deferral, but does for the  SH match.   In a Non-SH plan, I would run the ADP testing on total compensation and be done.   What are my options for a SH plan?  If the SH match compensation failed, I would amend the plan and recalculate the match. 

Thoughts?

A $1,000,000 contribution was made to a db plan on 7/1/2022. Are there any problems assigning a portion of this contribution to the 2021 plan year, i.e. $700,000 will be shown on the 2021 Schedule SB, and the remaining $300,000 will be shown on the 2022 Schedule SB? 

I am a trustee of my company’s ESOP and historically we have always issued distributions from the plan in the form of a check. However every year or two we will have a check get lost either in the mail, by the participant, or by an investment brokerage.  When this happens we will put a stop payment on the check and renew the stop payment one or two times while efforts are made to locate the check, but eventually if the check isn’t found we end up closing the checking account which is a hassle. 

We would like to move to an electronic form of payment so we don’t have this problem, but ACH payments won’t work because there’s no way to indicate who’s account it should go to when you route it to an investment brokerage’s bank (there’s no memo field as with electronic wires). Electronic wires are expensive because there are fees at both ends of every transaction.  And the daily check writing limit is prohibitive for using our bank’s Bill Pay system.

What method of payment do other ESOP companies use?  Is there a good way to make distributions electronically?

Thanks!

Hi all

MD office, less than 10 employees

Owner also owns 2 pizza restaurants with a few employees.

If a DB plan is set up just for the MD office, is it covered by PBGC?

If a DB plan is set up with the pizza restaurants as additional employers but the MD office being the plan sponsor, is this DB plan covered by PBGC?

Thank you

I have never dismissed a client  - I am lost as to how to commit this to writing.  I took over a DB plan I never should have, I should have known from my conversations with, and then an in-person meeting, this guy was totally clueless as to what plans he had - but always expected someone else to do the job.

I'm sure a few TPAs have fired clients - any "sample" wording?  The only thing I can think of would be totally unprofessional unprofessional, but ha been a total waste of my time.

TX.

 A participant meets all the requirements for a hardship withdrawal and the plan allows hardship withdrawals in the amount of the participants elective deferral account. However, there is an outstanding loan on the participants account and the hardship withdrawal will wipe out the amount in the account securing half of the loan. The plan does not have a provision prohibiting hardship withdrawals given outstanding loans but my conclusion  is to deny the hardship withdrawal given loan security issues unless the participant can prove the loan is secured by other than plan assets. Any comments. 

Wishing you all a safe, happy, relaxing and enjoyable Labor Day holiday weekend, however you choose to celebrate! 

So this is a new situation for me.  We have a client who terminated a long-time employee in '22 for embezzling money from the company.  Technically the participant is eligible for a contribution in '21.

My understanding is that, regardless of the reason for termination the participant is still required to make a contribution for them.  I just wanted to confirm that's accurate?

Also, is there anything that the employer can do in terms of withholding the Profit Sharing account to recoup the money that was stolen?  I know that's more of a legal question, but I wasn't sure if anyone knew.

Thanks everyone!

2 questions, unrelated to each other, but related to use of Automatic Extension:

1. I understand the plan year has to match employer's tax year.  How about just the plan year end? ie a short plan year was declared from 7/1-12/31 and the ER's tax year is 12/31.
2. Plan sponsor insists they never use Form 5558 but always rely on their own Automatic Extension of their business tax returns. Do other TPA's have plans that rely on this?  We have always taken the approach to file 5558 no matter what, if it needs to be extended.

Participant indicates spouse is primary beneficiary and the contingent beneficiary is his nephew.

participant then gets divorced so spouse is no longer primary beneficiary.  Does the nephew now become the primary beneficiary until he (the participant) remarries?

The bene form says the spouse is primary and if not living at the time of participants death, the the named contingent benes will get the benefit.

But the ex-spouse is still living...

Does the whole thing get blown up due to divorce, and new paperwork would need to be filled out or the plan's hierarchy will take over?

I have a plan that is well into Top-heavy territory now, and because of the family/HCEs that will not be changing. They have a match now, but if they change to a SHM, this should fix the top-heavy issue, I believe. 

My questions are:

because they're now 29 days to pye, they cannot amend and fix the issue for 21-22, correct? I don't think they're interested in a non-elective SH plan 

They have a non-elective profit sharing source now, if they use SHM to avoid adp/acp and top-heavy, will they need to not contribute to that source again to remain exempt?

Thanks for your help.

Amendment just came in. The adopting resolution language says it was "duly adopted" on August 25th. However, it was SIGNED on August 31. Is it still valid, or do those dates need to match? Does it depend on state law? 

P.S. I'm talking about the corporate resolution. The amendment itself, while being signed on August 31, isn't effective until November 1, so no worries there.

A BenefitsLink discussion yesterday remarked on a service provider’s request for a nonelectronic signature, despite an IRS procedure that permits an electronic signature.

There is no one comprehensive rule that answers questions about the acts or circumstances that require a manual, rather than an electronic, signature.

For some of us, it’s not easy to recall which acts (of those that call for a plan sponsor’s or plan administrator’s signature) permit an electronic, or require a “manual”, signature. So, let’s crowdsource our list.

The focus is on what the three U.S. government agencies—the Treasury department’s Internal Revenue Service (IRS), the Labor department’s Employee Benefits Security Administration (EBSA), and the Pension Benefit Guaranty Corporation (PBGC)—say is permitted or required. If you quickly remember it, next to each description put the abbreviation for the agency that stated a rule or guidance.

I’ll start by putting one entry in each category.

Manual signature required

A plan’s administrator authorizing its service provider to submit the administrator’s Form 5500 report — EBSA — source ???

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. . . .

Electronic signature permitted

A user’s signature to adopt an IRS-preapproved plan document — IRS — Rev. Proc. 2017–41 § 5.10, 2017-29 I.R.B. 92, 99 (July 17, 2017), https://www.irs.gov/pub/irs-irbs/irb17-29.pdf

. . . .

. . . .

. . . .

We invite your BenefitsLink neighbors’ praise if you help us complete this list.

Has anyone seen language from FIS Relius?  (Yes, I posted on that board as well.)  Or any other source?  I believe FTWilliam has a SECURE Amendment for its NQ plans but have not seen it; am also wondering if there is other amendment language available out there.  The amendment is due to be adopted by year end.  

Has anyone received from FIS Relius a SECURE amendment for required minimum distributions for use with their 457(b) plan document?  The amendment is due to be adopted by 12/31/2022.  Thanks.

Hello all,

Have a sole proprietor with a profit sharing plan, would like to terminate and roll funds to an IRA. In looking through paperwork it appears there may have been 2 Plan ID's used.....checked both and do not see record of any 5500 filings. Plan was established in 2005 and, until recently, had more than $250K in assets each year. Only activity are yearly RMD's. Looking for advice on how to proceed.....

Thank you!

Brian

We have a potential new client where:

Grandma owns 47%
Mom owns 47%
Third party owns the remaining 16%

If they were to hire one of the grandkids, technically they wouldn't be considered an HCE based on attribution correct?

My understanding was that ownership transfer from grandkid to grandparent, but not the other way.  And since mom only owns 47% there isn't an issue.

I just wanted to confirm I was correct.  Thanks!

For anyone who watched it (good webcast if you didn't) - at one point my attention got diverted for a couple of minutes by an e-mail popping up. When I dragged my attention back to the webcast, I THOUGHT I heard them say that for a tax-exempt 457(b), a SECURE amendment was due by 12/31/2022. Did they say that?

I recall seeing some debate on this in the distant past, but I don't recall any consensus. Say an employer does a corporate resolution to make a discretionary match, or PS, then doesn't make it. Are they now legally required to make it? If not, shouldn't be a plan qualification issue, just revising valuation(s). (And let's assume there's no employment contract that dictates an employer contribution.)

Many employers never end up doing a resolution. If they never did the resolution, then I presume the "failure" to make the contribution isn't a problem anyway?

There may be a potential bankruptcy looming...