Should a business owner keep fiduciary insurance policy (because of a QRP while business was active) for a few years after closing or selling their business? This could include ERISA bond coverage, employment practices liability, and a fiduciary and crime policy. Any related thoughts....

401(k) Plan was adopted 1/1/20.

There have been no deposits through 6/30/22.

How long can a plan continue to be a plan without any actual plan activity?

The following may or may not be hypothetical.

HE and SHE are considering becoming Husband and Wife.  Second marriage for both.  Both have adult children from first marriage.  Both age 70.  Both have investments that fall into the common categories:

a)   individual investments, such as stocks, bonds, mutual funds, none of which are part of an IRA or qualified plan.

b)   small cash accounts (checking, savings, CDs).

c)   retirement accounts, including all of the following: traditional IRA, Roth IRA, 403b plan (governmental), and 401a plan (ERISA-covered).  All retirement accounts are individual accounts, not defined benefit.  None of these accounts have reached Required Minimum Distribution.  All accounts existed long before HE and SHE met each other and have no potential beneficiaries other than children.  There are no real or potential QDROs.  All current accounts have named children as beneficiary(ies).

d)   There may be other property with small (but non-zero) value such as vehicle, artwork, real estate, antiques.

Both parties want the following to happen:

• Current retirement accounts will not be commingled.
• Upon the first to die, the retirement accounts and investments of the deceased will remain in existence and the income (and/or RMD) will be payable to (for the benefit of) the survivor.  The principal of the retirement accounts and investments would NOT be available to the surviving spouse unless the spouse's investments become exhausted.  Non-investment property (i.e., items that do not produce income) of the first-to-die (such as a car) might remain with the surviving spouse or go to the surviving children of the deceased (to be determined).
• Upon the death of the second, the ownership of all remaining investments (in all categories above) will pass to the children of the original owner.  For example, if HE dies first, at the time SHE dies, all of HIS investments and IRAs and accounts will become owned by HIS children, and all of HER investments and accounts will become owned by HER children.

What method(s) can be used to accomplish this?

Would the marriage automatically alter any beneficiary designations in effect for any of the above investments or accounts?

Does it require both pre-nuptial and ante-nuptial agreements to document the intent and actions?

What have I forgotten?

Some background:

1. Client currently has a safe harbor match plan (Plan 001) that was restated for Cycle 3 effective January 1, 2022. Document was executed December 2021. I am not aware that this plan has been frozen any time in 2022.
2. Client has decided to add a Cash Balance Plan for 2021 but determined that the profit sharing formula in the current 401(k) Plan for 2021 would not work.
3. Initially, the client requested a new profit sharing only plan (Plan 002) effective for 2021.
4. They have now come back and ask that we add deferrals to Plan 002 effective October 1, 2022 and add safe harbor nonelective at the same time.

My observations:

1. I agree that the client can establish a profit sharing only plan effective January 1, 2021 so long as the document is executed by the due date of the client's extended corporate tax return.
2. Client is an S-corporation, so document would need to be signed by 9/15/22.
3. I know that it is allowable to add safe harbor to a current PS only plan so long as you allow for 3 months of deferrals. So, under normal circumstances, deferrals and safe harbor could be added no later than October 1st and would need to be executed by 10/1/2022, which is not an issue since the document for Plan 002 will need to be signed by 9/15.
4. My concern is the existence of Plan 001 and that the same employees would be covered under both plans in the same plan year.

Can a client sponsor both a safe harbor match plan (Plan 001) and a safer harbor nonelective plan (Plan 002) in the same plan year?  Any guidance and support you can provide would be greatly appreciated. Thanks.

I am curious if anyone has run into a similar situation as a colleague of mine.

Plan assets are well below the $250,000 filing requirement, but Form 5500-EZ has always been filed.  For the 2020 plan year, a filing was made after the extended due date.  The IRS has assessed an extremely large penalty.  When my colleague spoke with the IRS, he was told that since the form was filed (even though it was not required), the penalty applies.  The IRS representative did offer the option to write a letter asking for the penalty to be waived but gave no guarantee of relief.

This makes little sense to me.  (I know, what else would you expect from the IRS.)  What do the rest of you think?

Does anyone have a sample 204(h) notice?  I have a Cash Balance Plan terminating, so it is required to be sent 15 days prior to termination correct?

Thanks in advance!

I have been doing this a LONG time, but I think I may have missed an important class somewhere along the way.

1)  If a plan offers self-direction, the participants are getting monthly statements from the brokerage firm (ie, Merrill Lynch) or online platform (ie, Empower).  These statements should satisfy the quarterly requirement.   I do not prepare quarterly statements because my clients do not wish to pay me to do so. 

2) If a plan does not offer an annuity form of payment, what purpose do these silly things serve?  

Thanks.

I haven't seen any official guidance on the following situation, and I wondered if there was something that I missed?

Suppose a plan excludes "truck drivers" for all purposes. They are excluded even if they have satisfied the plan's 1 YOS/1,000 hour requirement. Plan passes coverage with flying colors.

Now skip ahead to 2024 (*or possibly 2023 if SECURE 2.0 further complicates things). Must the LTPT truck drivers be allowed to defer?

It seems like the grossest type of stupidity if they must be covered, while excluding people in the same employment classification who satisfy a 1 YOS/1,000 hour requirement.

If there hasn't been any official guidance I've missed, anyone have a pipeline with some IRS folks for "unofficial" conversations that they might have had?

Due to an error by the recordkeeper, the vested benefits paid to many terminated participants were understated and balances that should have been vested were forfeited.  This occurred for several years and we are now filing a VCP application to correct.  The participants' accounts will be reopened and the restoration of the vested benefits will come from the plan's forfeiture account.  The missed earnings will be calculated based on the plan's rate of return for the intervening years.  The recordkeeper has acknowledged responsibility and will pay for the missed earnings amount.  

Can the recordkeeper just fund the missed earnings directly (i.e., deposit the amount into the participants' accounts)?  Alternatively, should the earnings also be restored from the forfeiture account and the recordkeeper then reimburse the plan sponsor outside the plan?  

Any downsides to the two approaches?

Thanks for all input and/or past experiences.

We have a Profit Sharing Plan that was sponsored by a sole proprietor.  The business he owns has employees who are participants in the Plan.  The Sole Proprietor passed away.  His will left his assets to a revocable trust.

Does the revocable trust become the plan sponsor?  Can a revocable trust be a plan sponsor?

Has anyone had an issue like this?

Hi, 

One of the participant is trying to rollover his 401k Plan into his SIMPLE however there was no funding for 2 years (into his SIMPLE).  if the there was no funding for 2 years is it true the part will not be able to rollover the funds to his SIMPLE? 

Thanks 

We have an employee who just got approved for LTD after 6 months. He has been working part-time (about 20 hours/week) after his STD expired 6 months ago

He has decided to continue to work part-time. Our benefits eligibility is 20 hours/week 

He currently has a health FSA. Our policy has been to terminate all benefits with exception of continuing medical and employer paid basic life at 1x pay and offering COBRA for dental & vision one someone gets approved for LTD. This is the first LTD who has returned to work 

Can we terminate his health FSA or other benefits since still actively employed and benefits eligible?

Is LTD status a "change in status" event? if so what benefits can be changed?

Our fully insured carrier has a Return to Work Incentive of up to 12 months as long as monthly earnings from job+ LTD benefit not more than 100% of predisability pay

For him to get full LTD he will need to reduce his hours to no more than 16 hours/week which makes him ineligible for benefits

To make things more interesting we are no longer going to terminate anyone on an LTD status so not sure yet how that affects the equation:)

Thanks in advance for any help

Lexy

With the mandate for the new version of the W-4P being just 5 months away, we've encountered a unique issue and I'd like to see what other pension systems are doing.

We currently send out the old format form (Single or Married with number of allowances), but in December when we implement the new format form we'll literally have thousands of old format forms out to members. The IRS has given the computational bridge to enter an old format into the new format, so we can handle that during 2022 and into 2023. But I can't find any guidance for a "grace period" of accepting old forms. I know we'll get old forms signed in 2023 during the transition - I'd sure hate to send forms back to them and default them to the new "single with no adjustments" because they don't have a current form.

But my question to you: How long will you accept an old format form next year? (the ones in member's hands while they deliberate the start date of their pension)

Any other issues you've encountered with the new form mandate?

Hi,

A DB Plan was adopted for 2014. The only participants for 2014 were the owner and 1 employee.  The other 15 employees worked each year less than 1000 hours and were not eligible. In early 2015 this eligible employee terminated and was  0% vested, since did not have 2 years with at least 1000 hrs ( only 2014). 

Question: 1. Would this be a partial plan termination? 

2. If yes, would this one terminated employee become 100 vested?

3. Why should the owner be "penalized" and be forced to make this employee 100% vested just because there were only 2 participant's in the plan (and 1 terminated)?...... The plan is still in existence in 2022, 7 years later, (with the owner still the only participant) and there are no plans to terminate the plan, and calling this a partial termination is quite harsh.

4. What is the ramification if the terminated employee was removed from the plan (since at termination was 0% vested) instead of being kept in the plan and becoming 100%vested?

Thank you very much for any insights.

If a client opts to terminate their Cash Balance Plan prior to the end of '22, due to selling the business, is their a contribution obligation for '22?  Just want to confirm so the client knows what to expect prior to termination.

Thanks in advance!

Curious as to opinions on this - suppose you have pooled plan, annual valuation only, and the client (on extension) doesn't get you data until the last minute. (Naturally, no one else has any such clients...)

I guess you just have to send them late. Only other alternative is to send them out with duplicate of 12/31/2020 statements, with some sort of disclaimer, but I don't much like that option. 

Other alternatives/thoughts? This is preying on my mind, with a lot of folks on extension this year...

Thanks.

I know they don't really exist, however, I have a client that has a "solo 401k)" with Schwab.  He has hired an employee and that employee is now eligible.  Schwab will not allow us to open an account for the employee under the current plan.  They say we can open a company retirement account (CRA) for that money.  When I asked how to transfer the "solo 401k" account over to the CRA I was given a distribution form, well there is no distributable event and they confirmed it would generate a 1099, etc.  Has anyone else run into this situation?  Have any ideas how to solve it?  

We restated the plan on our plan document and I guess we can just keep his "solo 401k" account and combine it with the CRA account for 5500 purposes, just seems like there should be an easier way.

Good afternoon to all,

I have been asked to post the following question, and I do not have any further details concerning the reason for the question.

"Is the definition of plan compensation for a partner (in a partnership) anything other than box 14a on the K-1 if the income comes from real estate income? "

Thank you in advance for any information you can share in this regard.

A single member plan that invests through Merrill Lynch made every effort to liquidate before 12/31/2021 so that the plan can be terminated.   The process started in August of 2021 and everything was rolled into IRAs.   For some reason 14 shares of an investment kept being returned to the account.  $1,900 dollars.  It left and came back and left and came back.  The advisor is saying its a ML back office problem.  He has a documented paper trail.  

I am of the mind to say the plan is terminated as of 12/31/2021.  If an issue arises later then deal with it then.  

Sound good?  Anyone ever have this problem?  

A client is telling me that the form 5500EZ does not need to be filed this year because their assets have dipped below $250,000 (as of 12/31/2021).  Makes me nervous to not file.  Do people skip a year if the plan's assets don't exceed $250,000?  Or is it recommended/you recommend to the client to keep filing?  OR by chance, is an EZ plan required to keep filing once a form was filed (even if assets are less than $250,000 now)?