Would it be permitted to make a Minimum Top Heavy Contribution in a non-top heavy plan?

Plan A - PS Plan with no keys

Plan B - PS Plan with keys

Plan C - CB Plan that includes some from Plan A and some from Plan B (including the key employees)

Plan A requires B/C to pass nondiscrimination. Plan B/C does not require Plan A to pass nondiscrimination. Based on this, we would say that B/C forms a required aggregation group but does not need to include A.

Plan B/C is Top Heavy. However, the plan sponsor would like to make the minimum Top Heavy contributions for B/C in the two PS plans - this would include making contributions to A for those who are participating in A and C.

Thanks in advance for your thoughts!

Hello everyone,

Does the 10% excise tax apply to the post March 15th refund of a discretionary match that was calculated and deposited as a lump-sum after the end of the plan year? Thank you all. As always, I appreciate your assitance.

it's been a while since I've had to deal with a 1099 for a 402g failure.

If done by 4/15, does the participant get 2 1099's?  One with code P for the excess and one with code 8 for the earnings?

Afterward, it's just one for code 8 for the earnings, right?

Pooled 401k plan, client deposited the match true up as instructed in Feb 2021 (Jan YE) then forgets he's done that when reporting is finished in November and deposits the full true up again.  I think this could be considered a mistake in fact and returned to the client or held to utilize for the following plan year.  Thoughts?  He's also deposited more than he needs for the 1/31/22 PY deposits though room for PS and I'm thinking he can take out the $11475.67 that was the duplicate 1/31/21 match true up but has to allocate $8300 additional deposited during the year as PS.  Agree?

Is there a standard procedure for exiting PBGC coverage (i.e., a pension plan was covered, but is no longer covered) aside from simply stopping premiums? More specifically, a takeover of a private entity plan sponsor by a governmental entity. 

S-corp. sponsors a DB plan and sole-prop (spouse) is an adopting employer of the DB plan. Both make over the compensation limit.

If the sole-prop (spouse) is the only entity making/deducting contributions into the DB plan (above the minimum funding requirement), can the S-corp. make the maximum ps contribution ($58k) into a DC plan and not trigger the deduction limit under 404(a)(7)?

Employee elected health coverage during open enrollment, coverage effective 9-1-21.  Employer just discovered premiums were not being withheld from employee's paycheck.  Can the employer begin deducting the cost of the elected coverage now plus an amount to make up the missed deductions?  Since it was the employer's fault, they want to know whether they can just "eat" the amount of the past-due premiums and begin deducting premiums going forward?  Do they need to issue a corrected W-2 for 2021?

I haven't worked on a 403(b) plan in about 20 years. This 403(b) plan failed its ACP test. Do the match refunds go back to the plan as forfeitures or do they get refunded to the participants?

Plan has 450 employees that are only paid when called to a job site. During 2021 these employees were not paid w-2 wages (no job site work).

The plan has 90 day  service requirement

1. The recordkeeper is assuming these employees are all non excludable for 410(b) testing.

2. Recordkeeper stated "employees with zero compensation are included in the number of non-excludable employees but are not benefiting.  They are considered as not benefiting because they had no compensation and thus did not have the opportunity to defer into the plan or receive contributions."
3. As a result of including this group in the 410(b) test, the coverage test fails.

If an employee has no wages, why are they included in the coverage test?

Assuming they have to be included in the coverage test, how would you correct the failed coverage test?  There is no compensation  to calculate a  QNEC or match

Not sure how to proceed.

Thought was to show them as terminated as of 12/31/2020. Then if they are called to a job site in 2022, treat them as a "rehire".

Thanks

Looking for experiences with HRA substantiation audits.  Specifically, have plans that suspend HRA debit cards where participants fail to send requested substantiation, send 1099s for unsubstantiated claims, and after 1099s issued “turn on” HRA debit cards and let participants use again.  Does this violate substantiation rules by creating systematic failure?

One of my clients inadvertently moved money from the suspense account to the Employer operating account instead of re-allocating to participants in 2021.  Are they now subject to the excise tax or can this be self-corrected by moving the funds back to the Employee profit sharing accounts?  If they must pay the excise tax, what is the percentage of the tax?

Company sponsors two plans, one for union EEs and one for non-Union EEs.

Do I combine them for Top Heavy, or do them separately?  Or, do I have the option to test them together or separate?

We have a long standing client who sponsors a soloK plan.  His wife just established her business and he would like add her company to his plan as a Participating Employer PE.    This may or may not be a Control Group.  This will need to be determined.

Aside from that issue, is a plan still a soloK plan if there are PEs?  Would your answer be the same if this is a GG, or if adding the PE makes this a MEP.

Thanks for your guidance.

I had a solo 401(k) plan held at one institution and then transferred it to a new institution, specifying it as a restatement. Unfortunately, I realize now that I incorrectly incremented the sequence number, rather than using the same one. I've contacted the new institution to ask them to correct the sequence number, but I was wondering if there was anything more I need to do? (I have not yet heard back from the institution know if they'll push back on updating it in their own records.)

Note that no 5500 has ever been filed for this plan, as the assets are below the threshold.

I'm referring back to this prior thread which indicated that using a new sequence number technically creates a new plan. Unfortunately, I didn't read it beforehand.

Mary is the 100% shareholder of an S corporation she uses to provide her personal services to her clients. The corporation has no employee or other worker beyond Mary.  Mary is a young 63.

Mary intends to sell her client list to a buyer. The buyer will do an assets purchase. Mary keeps her corporation.

The clients choose whether to get services from the buyer. Clients are free to leave any time, without cause, and without significant notice. Because of this, the deal terms obligate Mary to remain available and devote reasonable time and effort to help the buyer keep Mary’s former clients. This obligation continues for 2022-2026.

After the deal closes, Mary is considering doing no work except the light touches needed to meet her hand-holding obligation.

Unless her tax lawyer (not me) tells her there is a better way, Mary anticipates receiving the buyer’s payments in Mary’s corporation.

Each year, the corporation would receive enough money to pay Mary wages, perhaps up to the IRC § 401(a)(17) limit, and pay pension funding and retirement contributions as generous as the actuary and third-party administrator I refer-in design and advise as proper.

In setting compensation for an S corporation’s shareholder-employee, usually the worry is that the IRS might challenge the compensation as unreasonably below the value of that worker’s services.  But does the IRS ever challenge a salary as too high?

Could the IRS argue that $305,000 is too big a paycheck for someone whose only work is a few calls to calm down a jittery former client and persuade them to stay with the buyer?

Or are there reasons why my question imagines more difficulty or risk than there really is?

And what other issues should I be thinking about?

Came across one of the more strange cases I've ever heard of. Seems an elder widower died 3 years ago naming his son as 50% beneficiary of his TIRA. His inherited portion is small at under $5,000. Seems son and father were not talking and son said he'd take nothing from his father, including the IRA. So the IRA is sitting at the custodian, who has notified son but son has ignored them and said he'd burn any check he's sent for the IRA balance (his sister transferred her part out shortly after death). No RMDs have been taken. What will eventually happen to the son's portion of the IRA? Will it...

• Be transferred to a taxable account in the son's name by the custodian and a 1099-R sent to the son for the year?
• Eventually undergo the escheatment process and be transferred to the state with a 1099-R going to the son?
• Escheatment and no 1099-R, it just goes away?
• Eventually the IRS will require son pay 50% underwithdrawal penalties?

What section of the code is the Federal Thrift Savings Plan under?  Are there any published correction procedures that apply?   I am working with errors made by the VA relating to eligibility and the correction of an ineligible participant (an entire group of them actually).

Hi,

Thank you all for your insight as always. I'm involved with a few things at once and have gone blank on this topic. Participant age 67 retires and requests a lump sum (DB Plan). The retirement and request was as of 1/1/22. If the lump sum is actually payed on March 14,  2022 do you calculate the lump sum as of 1/1/22 and give interest to 3/14/22? Thank you.

Sorry for all of the questions lately!  Here's the rough situation:

Total Normal Cost (which is the minimum contribution) - $120,000
Maximum Deductible Contribution - $25,000 (due to positive asset performance)

So, does this mean that they can't deduct the entire contribution or can they still take just the required minimum contribution and nothing more?

Thanks in advance!