Question:  For the Covid distributions that did not get paid back, do they count as an in-service distribution that needs to be added back/included in top heavy balances?

Personal question: I turn age 65 in November, 2023, and am currently deferring amounts to an HSA account to cover the HDHP deductible. I know I have to cease HSA contributions when I turn 65, but the question is when do I have to stop? I currently plan to retire in January, 2024, and keep my health coverage through my employer through the end of 2023, starting Medicare Part B on 1/1/24. I've heard conflicting theories as to when deferrals have to cease, so I'd thought I'd ask the question here.

Thanks for any replies.

I’m terminating a cash balance plan with a PYE 7/31 and am trying to get all benefits paid out prior to that date so that the 5500 for that PY will be the final 5500. The plan document is from FT William which has a Secure Act amendment for terminating DC plans but has advised that it won’t have one for terminating CB plans for several months. Any ideas? Thanks.

We prepared a 2021 Form 5330 for a client who had late deposits.  For several reasons, we did not prepare it until December 2022 but we calculated the interest/excise tax through 12/31/2022.  They will also need a 2022 Form 5330, which I believe we could have included the 2021 info on that for only one filing, but we elected to do two separate filings.  

The client remitted the form (along with excise tax payment) fairly quickly; the IRS apparently received these on Jan 9, 2023.  I know this because they actually sent our client a letter assessing penalties.  Granted, the amount is quite small (< $10) but I have never heard of a late 5330 letter being sent by the IRS. 

Has anyone else heard of their clients receiving a late 5330 letter, ever?  I know the IRS is beefing up their staff and perhaps now have employees eager to take action on things like this.

Also, could the client have avoided a penalty if we had done a combined reporting on one 2022 Form 5330? 

Thanks!

A client claims that some ESOPs freeze the share value on termination of employment for the terminating participant. That participant's share value/account balance would not change in the future, regardless of how long the participant waits to receive distribution. There would also be no interest credit or any other adjustment to the account balance at termination. The purported rationale is that a terminated participant should neither share in the upside of future stock increases nor bear the potential risk of share price decline in the future.  I can find nothing on this. Seems dubious to me. Has anyone heard of this? 

LLC taxes as an S Corp.   Taxes have been filed by March 15th.  I do not know yet if the extension has been filed or not.  Is there a creative approach to install the Plan retro to 1/1/2022?

A plan came to our attention that has been making the same discretionary matching contributions for the past three years at least. The first formula is 100% of the first 3%, but they also pay 100% of the first 6% if a participant is employed longer than 10 years. I've never seen this before. I thought the maximum service requirement for an employer allocation is 1000 hours. Would they need to pass ACP testing on each formula separately? 

Hi

Looking into a proposal, all plans are calendar.

DC Plan already exists. Provisions are 401k+NESH+PS

Entry is first day of the month following completion 1 YOS

Compensation is defined as from DOP

CB plan will have 1 year wait, dual entry and full compensation

For all purposes, all top heavy.

DC plan top heavy provision states last day rule. PS states last day rule+1000 hours

EE data for DC plan:

• DOH 3/15/2021
• DOP 4/1/2022
• DOT 5/1/2022
• 2022 w-2 $12,000
• Salary from 4/1/2022 to 5/1/2022 - $3,000

From above, never eligible to enter CB plan so top heavy is only 3% and under DC plan only

Gateway is 7.5% (3% NESH+4.5% PS)

For gateway, $3,000 salary is used and thus $225.

Top heavy is based on full salary i.e. $12,000*3% = $360 however, plan has last day rule.

What amount is supposed to be allocated?

Thank you

Need some clarity here.  Dealing with a typical A-org ASG for a professional service organization.  The partners of an accounting firm (LLP) are each individual PCs.  The PCs receive K-1 share of profits, and then pay W-2 salary to the owner of the PC.  The individual PCs have each adopted the 401(k) plan maintained by the LLP.

Suppose Jane Smith PC owns 4% of LLP, and Jane Smith owns 100% of Jane Smith PC.  Through 318 attribution, Jane Smith is deemed to own 4% of LLP, but she also owns 100% of Jane Smith PC which is a participating employer in the 401(k) plan.  Is Jane Smith a 5% owner for purposes of determining HCE status?  The plan uses top paid group and she falls below the top 20% in salary.

We have a difference of opinion here.  Is there any authoritative guidance on the correct analysis?

Thanks.

          I have a client composed of husband and wife doctors and 4 employees. The assets in their defined benefit plan as of 1/1/22 were about $5,260,000. Due to investment losses, the 12/31/22 balance dropped to about $4,500,000. In 2021, there was a surplus in the plan of about $235,000. In order to bring the surplus down, no contribution was made into the plan for Plan Year 2021. Given that the plan is going to be terminated early in 2025, we were hoping that this would lower the surplus. Due to the large investment losses in 2022, not only did the surplus disappear, but, a minimum contribution of almost $100,000 was generated. At this point, the medical practice is not generating very much income and coming up with the $100,000 for the contribution is a problem. To avoid having a potentially large contribution in 2023, the plan is being frozen before anyone accrues a benefit for 2023.   My question is, what are their alternatives for getting the money to make the required contribution of almost $100,000?

Potential alternatives:

1. Have the doctors personally lend the money to the PA and then have the PA make the contribution. What are the tax consequences if the PA can't pay the loan to them back? Are     there other tax concerns to be aware of?

2. Amend the plan to allow for in-service distributions. This would seem like there could be double taxation. Again, what other tax concerns could crop up?

3. What if the contribution is not made by 9/15? Aside from paying the 10% penalty, is there any advantage to this?

        I would appreciate any advice on this.

Apologize in advance for the rudimentary questions, have already tried searching previous threads for my answers. 

In my limited understanding when doing new comp, my goal is to maximize the HCE's total contributions. The remaining gateway to eligible NHCE is the lesser of 5% of comp or 1/3 of the highest allocation percentage of an HCE.

Upon 401(a)(b) failure, is it in my best interest to allocate more to the elder NHCE's? If so is there a general formula to achieve the correct amount?  In my experience the 401(a)(b) seems really finicky and feels almost arbitrary at times. Once again I'm sorry if this isn't the correct place to ask, my previous resources weren't helpful for me.

I'm sure this is easy but want to confirm anyway -

5500-SF filer - pooled fund plan - termed 10/31/2022.  Participants were notified and paid out/rolled over in late December.  Plan has a very small balance at the end of 2022 due to residual earnings that will be disbursed to participants in early 2023. 

As far as Part VII; question 13 -  13a is "yes" and "0.00" reverted - I assume that for 13b "Were all the plan assets distributed..."  the answer is "no" because the final residual payouts have not yet been completed?  It strikes me that answering "no" might create issues although I can't for sure say why I think that.  Reading to much into it I suppose - i.e. you termed the plan but didn't pay out yet?  why is that?  

Of course that question will be marked "yes" on the final 2023 filing.

Suppose a Section 125 plan provides only FSA and DCAP. They also have a "cash in lieu" option where anyone eligible for the company group health insurance can either have a certain amount contributed to the 125 plan to be used for benefits, or they can elect to receive it in cash, taxable in their normal paychecks.

The COBRA provisions, if applicable, are "administered" by a third party. Is it allowable for the employer to attach to the SPD a written COBRA explanation provided by the third party? Or must it be in the SPD as part of a self-contained single document?

I don't, EVER, have anything whatsoever to do with COBRA, so I essentially know nothing about how COBRA information must be presented.

Employer is a retirement plan client of ours, so I'm trying to assist them somewhat with questions, but this is out of my bailiwick. I don't think the the third party "administrator" is apparently being very helpful, or necessarily even doing documents - not like a typical TPA in the retirement plan world. Their 125 document provider from way back is long gone.

Thanks for any thoughts.

P.S. - while we are at it, same question for a governmental plan (state municipality). Although not subject to ERISA, still subject to COBRA, so other than the "SPD" not really being an ERISA SPD, but rather a "Summary of Plan Provisions" or whatever you want to call it, COBRA information still required. But maybe more flexibility on how it is communicated?

Can a plan impose a service condition that is longer than 12 months for receive safe harbor matching contributions?  

Hi

Another new one for me.

PBGC covered plan, terminated 12/31/2022

500 is not yet done/filed with PBGC.

Sponsor changed their mind, wants to continue.

Can a simple notice to the participants stating "we decided not to terminate the plan" would be sufficient?

I will amend the plan later to unfreeze the benefits.

When terminated all became 100% vested (plan was only 3 years old and all would have been only 40% vested if not terminated). I cannot find any written document of making everyone 40% again with the reversal of termination. Anyone knows if possible?

Thank you

Hello all,

This is a first for me. The plan terminated and assets have been liquidated from record keeper. The plan failed ADP/ACP testing with two participants requiring employer match funds to be returned to the plan. My understanding is once the two participants transfer the employer match funds back into the forfeiture account (via rollover from participant's IRA), those funds will get evenly distributed amongst participants who had balances as of the date of the plan termination. Is this correct?

Alternatively, what would happen if the plan decides to do nothing? What penalties will incur? The employer funds only total $900 and if distributed amongst participants, the participants would receive very low amounts. 

Any insight would be helpful!

Last year, someone was generous enough to post the 12/31/2021  actuarial equivalents for a J/S and an individual life annuity for an account balance at age 67.  I was wondering if anyone would do the same for 12/31/2022?

The central issue is whether or not a family member can be excluded entirely from the plan (0 deferral, 0 SH 0 PS)?

An ESOP has a standard distribution policy, 5-year wait, payment thereafter in 5 equal installments (no acceleration below $5K, no segregation of stock accounts, fees fully paid by the Sponsor).  Last year the installments were incorrectly counted and participants who should have received their 4th installment (i.e. 50% of the available balance), their payment was calculated based upon a 3rd installment and received only 33% of the available balance.  While this may be an operational failure for not following the terms of the document, is there a correction to be made?  If future company stock gains are neutral or positive, I don't see that the participants were disadvantaged in any way that would produce a basis for a correction. 

What about a participant who was due their 5th installment(100%) but only received 50% of their available balance and now will need an additional distribution?  Are they harmed vs a comparison to the broader stock indexes? 

How should future installment amounts be calculated, does the missed amount all get made-up in the next payment, or are they calculated normally based on the remaining periods?

We may or may not take over the administration of this small defined benefit pension plan.

I know this is somewhat common but do not know the solution. What happens when a company adopts and funds a non-model SEP on December 1, 2022 for the 2022 year and adopts a qualified Defined Benefit Pension Plan on January 15, 2023 effective for the 2022 year?

Does this work like if a SIMPLE IRA were adopted in the same year as a qualified plan. I think in that case there is an exclusive plan rule where the SIMPLE would be invalidated and distributed under VCP.

A non-model SEP and qualified plan cannot be maintained at the same time. Is the SEP or the qualified pension plan invalidated?

Thanks.