How should withholding be reported on a Roth conversion if under 59 1/2? We have 2 opinions.

1. If a conversion occurs for someone under 59.5 and there is withholding then report on 2 1099-Rs. One showing the distribution as code 2 and another saying the withholding was distributed to the client as code 1.

2. The conversion both the cash and withholding would fall under the exception to excise tax withholding so both legs should be reported under a distribution code 2. 

Which is right?

Is anyone else getting push back from any record keeper regarding e-signed plan documents? Nationwide is telling us that they have to wet signatures and are not accepting our e-signed versions. I know that other RKs send their documents out using e-signing so this has to just be Nationwide. Thanks for any feedback

Seeing as how 401(a)(31) is a statutory provision, does a Plan need a separate document provision electing to be able to use an automatic rollover, or is it available to any Plan the claims qualification under 401(a)?  The DC LRM from 10/2017 includes a required provisional statement about automatic rollovers, that references the mandatory distribution section, but no adoption agreement provisions are noted as needing to be included.  Also, the mandatory distribution section the LRM notes that should be included, is not addressed anywhere in the LRM.

Hi,

Yesterday, two separate DB Plan ez CALENDAR filers for 2020, that were extended due to IDA to Jan 3rd and then further extended to  Feb 15th received late filer penalty notices of $16, 500 and $17,000 respectively. They both filed in mid December 2021, well before the Jan 3rd extended due date. In addition, on top of each form it was written in Bold..."New York- Hurricane IDA - FEMA IDR 4615." Has anyone else heard about this? Thank you. 

We offer top hat medical plan.  Can we set up ICHRA?

Sole Prop established a Solo 401k a few years ago.  All was well as he had no employees

In February of last year (2021) a FT employee was hired  Unfortunately, the Plan had both immediate eligibility & vesting  for PS contributions.

May 2021 - owner amended the Plan to a SH 401k and added a vesting scheduled for PS contributions - an effective date of 1/1/2021

The sole FT employee has since severed employment 

Question?

How is vesting calculated? 

Is the former employee 100% vested (since there was no vesting scheduled when he became eligible) or does he follow the schedule (since the amendment was effective 1/1/21) prior to his DOH?  

All help is appreciated. 

Thank you

Would appreciate a quick sanity check here:

Mother owns 70% of Corp A. Mother has an adult daughter, who is married to son-in-law. Son-in-law owns the other 30% of Corp A. Son-in-law also owns 100% of Corp B. (Assume no other attribution aside from family, no excluded interests, no ASG, no management group, not a community property state.) 

Under 1563, I believe that mother will not be deemed to own any stock in Corp B. Daughter would be deemed to own all 100% of son-in-law's stock in Corp B, but because daughter is an adult, and mother does not own >50% of Corp B, mother is not deemed to own daughter's (attributed) stock in Corp B. Also, the prohibition on double-attribution among family members would cut off deemed ownership of those shares with daughter (i.e., once they are attributed from son-in-law to daughter by spousal attribution, they cannot be attributed again to mother, even if mother did own >50% of Corp B). 

Likewise, as an adult, daughter would not be deemed to own mother's shares in Corp A because daughter does not own >50% of Corp A's shares. 

Because mother owns >50% of Corp A, she would be deemed to own any shares in Corp A owned by daughter directly (zero); however, the double-attribution rule would prevent attribution from son-in-law to wife to mother, so mother would not be deemed to own son-in-law's 30% in Corp A.

I think I'm left with:

Corp A: 70% mother; 30% son-in-law; same 30% daughter through spousal attribution

Corp B: 100% son-in-law; same 100% daughter through spousal attribution; 0% mother

This leaves only 30% common ownership, which clearly avoids a controlled group unless I am missing something.    

Client has 2 locations with separate plans to avoid being a large plan filer. One participant has moved from one location to another. Should her account balance be moved to the new location as well?  If so, would this be treated as a regular rollover distribution where the employee has to complete distribution paperwork and a 1099R is generated? Or can it just automatically be moved? The amount in question is over 100K. 

Thank you!

Hi,  

When a employer decides to discontinue in the pooled employer plan (PEP) and allows distribution, will the participants needs to be 100% vested? can someone share the IRS/DOL rule on vesting for PEP ( plan termination) 

Thanks

Plan participant first wife dies.   He  names daughter as beneficiary of his 401k plan, and also as beneficiary of the 401k plan in his family trust.  He remarries and dies several years thereafter without naming his new wife as beneficiary of his 401k plan.    The daughter is claiming the benefit.   The new wife disagrees.    Who is right.     

I am looking at setting up two plans for a controlled group. The entity structure is as folllows:

Company A is owned 100% by husband and Company A owns 100% of Company A1 and 70% of Company A2 (the other 30% are unrelated owners) Company A1 and A2 are restaurants and Company A is a management company. 
 

Company B is owned 100% by wife (married to husband above and husband and wife participate in all businesses) and Company B owns 100% of Company B1 and 100% of Company B2, Company B1 and B2 are restaurants and Company B is a management company. 
 

If we did one plan to cover all entities it would have enough participants to require an audit. What we are looking to do is have two plans (both plans would be designed the exact same) and Plan 1 would cover Company A and Company A1 and A2. Plan 2 would cover Company B and Company B1 and B2. By having two plans each plan would have less than 100 participants and neither one would need an audit. 
 

I have the following questions:

1. the affiliated service group rules don’t apply here since these entities are mainly restaurants, right?

2. Wouldn’t Plan 1 technically be a multiple employer plan because of the 70% ownership of company A2? (Doesn’t rise to 80%)

3. If Plan 1 is a multiple employer plan (which I think it is) can Plan 1 be permissively aggregated with Plan 2 for testing purposes (coverage and nondiscrimination)? Technically wouldn’t you just be aggregating Company A and A1 in Plan 1 with Company B, B1 and B2 in Plan 2 and company A2 would be tested separately? 

4. Are there any risks to structuring two plans instead of having just one to avoid an audit? 

I am looking at setting up two plans for a controlled group. The entity structure is as folllows:

Company A is owned 100% by husband and Company A owns 100% of Company A1 and 70% of Company A2 (the other 30% are unrelated owners) Company A1 and A2 are restaurants and Company A is a management company. 
 

Company B is owned 100% by wife (married to husband above and husband and wife participate in all businesses) and Company B owns 100% of Company B1 and 100% of Company B2, Company B1 and B2 are restaurants and Company A is a management company. 
 

If we did one plan to cover all entities it would have enough participants to require an audit. What we are looking to do is have two plans (both plans would be designed the exact same) and Plan 1 would cover Company A and Company A1 and A2. Plan 2 would cover Company B and Company B1 and B2. By have two plans each plan would have less than 100 participants and neither one would need an audit. 
 

I have the following questions:

1. the affiliated service group rules don’t apply here since these entities are mainly restaurants, right?

2. Wouldn’t Plan 1 technically be a multiple employer plan because of the 70% ownership of company A2? (Doesn’t rise to 80%)

3. If Plan 1 is a multiple employer plan (which I think it is) can Plan 1 be aggregated with Plan 2 for testing purposes (coverage and nondiscrimination)? Technically wouldn’t you just be aggregating Company A and A1 in Plan 1 with Company B, B1 and B2 in Plan 2 and company A2 would be tested separately? 

4. Are there any risks to structuring two plans instead of having just one to avoid an audit? 

Husband owns a business that is predominantly non-service (warehouse, sales, capital intensive inventory) but does provide some related service such as installation of products.  The business has over 200 employees.  Wife has been on payroll but will be terminated in 2022.  Wife owns a service business with no employees.  Husband’s business enters into a contract with wife’s business starting in 2023 which generates the majority of wife’s business income.  (This, of course, is subject to the accountant determining that there is a legitimate business reason to pay such amount to wife’s business.)  Wife intends to set up a pension plan for her business starting in 2023 with her as the only participant.

Effective 2023 wife will not be an employee or involved in management of husband’s business, and husband will not be an employee or involved in management of wife’s business; therefore I believe there is no controlled group.

I don't think there's an affiliated service group -- husband's business cannot be the FSO as it doesn't seem to be a service organization; and if wife's business is the FSO I don't see how husband's business could be an A org or B org.

Any contrary opinions?

Thanks.

We have come across an interesting situation and I'm hoping for some insight here. A client who had a plan formed (i.e. plan document executed) in 2019 has not actively used the plan (i.e. zero contributions made) yet and has been generally non-responsive to our notices regarding the Cycle 3 restatement, etc. They have now recently resurfaced and want to start actively using the plan. This is a new business (formed in 2019) with no new employees (yet).

It is my understanding that the Cycle 3 restatement (under SCP) and SECURE Act amendment will need to be completed. However, my uncertainty is surrounding the CARES Act amendment.

Since there were no funds in the plan, and no other eligible employees (other than the owner), there was no option to allow for coronavirus-related distributions or loans and there were no options for RMDs. Would the CARES Act amendment still be required?

Client has a calendar year QACA plan with QACA statutory minimum schedule.  They would like to change to schedule of QACA provisions to 6% auto-enroll with  no escalation and would like to do it effective 10/1/22.  Is this allowed mid year?  And to whom do the new provisions apply?  In other word, if employee A was auto-enrolled under prior schedule at 3%  and is now at 5% deferral rate, does he need to be increased to 6% effective with amendment change or can he stay on the old schedule and just auto-increase at next increase date?

Thanks in advance for your reply.

We have several 403b plans and none have a named trustee.  The document software that we use does not even permit a trustee designation.  Yet, we are being asked for a trustee by a new recordkeeper that the plan is transitioning to.  Any thoughts?

Thank you

Hi, 

Plan terminated due to asset sale and the termination date was 06/30/2022.  the client failed the 415 testing because the testing was done for the period 01/01/2022-06/30/2022, since the plan failed testing they want to change the termination date to 09/30/2022.  as per the client if they had the termination date been set at September 30, 2022, the prorated annual limit of $61,000 would have been $45,750 and the 415 Total Excess column on the far right of this calculation would have been $0 for everyone.

The termination process has already been started and notification has been sent to participants and participants have already started requesting for distribution.  Can they change the term date now?  what will be the repercussion? 

Thank you.

Does anyone know what's involved in getting a plan to become a dual-qualified plan so a person who lives in Puerto Rico could be eligible?  Are there forms/fees involved in completing the process?

It's something I've never done and I have a client that's looking to hire a Puerto Rican citizen and wants them to be able to participate.

Thanks in advance!

We have a defined benefit plan with 21 retirees and no active participants. The employer wants to purchase annuities for the retirees now however we feel they should go through the PBGC plan termination process first. Can they purchase the annuities now, pay out the retirees and then file with the PBGC with 0 participants and $0 assets? The employer has not initiated any formal plan termination process.

Participant takes 50k loan from two plans sponsored by unrelated employers.  Subsequently, the unrelated employers become a controlled group, and now the participant has loans that exceed 50k from the new controlled group.  Is there a violation and how to fix it?  My initial thought is there is no violation, but want to get other opinions.  Thanks.