Last summer a participant took a maximum loan equal to 50% of their VAB, to be set up for repayments via payroll deductions twice a month.  No repayments have been made to date.  The outstanding balance of the loan went over 50% of the VAB once the first repayment was missed due to accrued interest, though eventually it went down below 50% due to continued deferrals.  It's a PT if a loan for an amount exceeding 50% is taken and a Form 5330 should be filed for the excess - is it also a PT if the loan's initial amount is OK but the 50% max is breached due to accrued interest from non-payment?  If this is a PT, does a 5330 need to be filed even if the OB went below 50% before the end of the year?  Hopefully not, since the excise tax in this case would be far less than $100.

It seems that section 6.07(3)(d) of Rev. Proc. 2021-30 permits self-correction of loans whose IRS maximum cure period has expired (this occurred on this loan 12/31/21) if the participant pays a lump sum for the missed payments with interest to bring the loan current.  So it appears the loan becoming a deemed distribution won't be an issue if the participant does this, even if it happens in the following year.      

I suspect that the employer neglected to set up the automatic payroll deductions for the repayments, and I remember hearing that the employer may be liable for some of the repayments?  Does anyone have any info on this, or know where I can read about it?        

It's surprising to see that some of the major recordkeepers do not add interest for missed payments onto outstanding loan balances - I thought they were required to do so.  

Question is relating to a defined contribution plan.  Have a client who passed away in 2018, after his required beginning date.  He had a spousal beneficiary who has dutifully been taking RMDs since his passing.  Plan Document states that we established her annuity factor in the year that he died, then we reduce the factor by 1 every year moving forward.

Question that I can't seem to find an answer to is if and/or how the new life expectancy tables will affect her.  On the current tables, her annuity factor at age 60 (when he passed) would be 27.1, but on the old table which the RMDs have been calculated previously, it was 25.2.  Do we just continue subtracting 1 from 25.2 for every year that passed, or can we use the new tables, and subtract 1 from 27.1 for each year that has passed, and calculate based on that?  Basically, am I going to use 21.2 or 23.1 as my factor for 2022 RMD?

Any citations of code would be greatly appreciated, and I looked through Pubs 560 and 575, and can't find an explicit answer.  Haven't checked 1-401(a)(9) yet, as I assumed guidance would be forthcoming.

Plan custodian distributed participant's account upon his termination of employment and withheld required FIT, issued him a 1099.  Participant was a union employee and filed grievance to be re-hired, which he won.  Now he has been rehired and wants to put his money back in the plan, including the FIT withheld.  The only guidance I can find says that the employer has to "repay" the FIT withheld into the participant's account and then apply for a refund from the IRS.  Thoughts?

Sole proprietor with no employees, business started in 2018, plan effective in 2018. This is a takeover plan. Using made up numbers this is what has happened each year from 2018 - 2020: earned income = $100,000 and pension contribution = $99,000. In my mind that means that "plan compensation" is $1,000, which means that since there is no salary history prior to the plan effective date there are going to be a number of problems, not the least being the 415 limit since since 3 year average average comp is $1,000. Am I missing something here wrt plan comp and 415?

Plan is failing ADP test.  One HCE getting a refund had both Roth and Pre-tax deferrals during the year.

What is the protocol for doing the refund?  From which source(s) do you start using amounts?

Is it a plan document issue?  Administrative procedure?  Does the participant have to make the final call?  (Is that even feasible if we are coming up on processing deadlines?)

As usual, your thoughts are appreciated.

For purposes of computing the equivalent accrued benefit at NRA in a cash balance plan, can the benefit decrease at a later point in time due to a decline in the projected interest crediting rate?  Practically it will likely not matter since a participant will opt for the cash balance account value.  There is no early retirement date in this plan for what it is worth. I would think it could decline,but not sure if the IRS has ever opined on this. The 411 regs were written with traditional defined benefit plans in mind so not much guidance there.

Does anyone have the formula for a self employment integrated contribution calculation.  My formula is not working correctly with the check and I am not sure if it’s the way I am checking it that is the issue. 

Quick Question:

Company A - Husband owns
Company B - Wife owns, currently all work done for Company A

The plan is for Company B to start expanding and doing legal services for additional clients.

What is the fallout for setting up separate plans for Company A and Company B?  Can they do it, or do we have an affiliated service group issue?

A small corporation wholly owned by a husband and wife has a solo 401(k) plan that they established in 2020 and includes a 1-year eligibility provision. The plan uses a prototype document from a major financial company designed for individual owners and SE companies. The corporation is about to hire their first employee and knows that the plan needs to change, which would require a new restated document and additional help with plan administration. The financial company, which is also the trustee, states that they only provide these services to clients with 20+ participants as their minimum annual fees starts at $20,000. The corporation’s payroll service, which uses a bundled approach to administer or provide recordkeeping for the smaller companies quoted annual fees less than $2,000. However, claims that they cannot convert the prior plan to a traditional or safe-harbor (SH) 401(k) plan because the current financial institution uses unbundled services. The payroll service which uses Guidelines states that they could not setup a new traditional or SH-401(k) plan until the current solo 401(k) has be terminated for 12 months.

My goal is to find a service provider that will convert or restate this plan and provide annual recordkeeping/administrative services for a 3-participant plan for a reasonable fee.

Any takers?

Hi

Doing a 110% liability test for a CB plan.

As far as I know, one can use any reasonable method as long as it is approved by the sponsor and stay with the decision forever.

The methods I am aware of are, 415 lump sum assumptions, 417e assumptions or 430 assumptions. Assume AFTAP is not an issue.

Usually 430 assumptions would yield lowest amounts but in my case nothing is working so looking for another way to lower the liabilities and see if they can pay the HCE who is now terminated and under disability. I would like to get this done before an accrual for 2022 happens which will make things even worse.

Any other methodologies that I am not thinking of? 

I know the bond/annuity etc options but trying to avoid.

Thank you

Participant terminated, entitled to payout, check was requested from the annuity carrier.  Plan Sponsor receives the 1099-R  showing Plan Sponsor as the recipient, with the gross amount the participant is entitled to, and an amount withheld. The broker must have established the annuity in the company name and not the name of the Plan. I would think the annuity carrier paid the IRS the withholding but under their EIN.

Annuity carrier sends Plan Sponsor a net check, sponsor deposits into their corporate account and pays the participant, cross referencing the whole transaction.

Now participant is calling client complaining she ever received a 1099R, and client  comes to us to prepare.

I believe that since withholding already paid, I would show the net distribution as the  gross and the net amount taxable with $0 withheld?

So I'm struggling with this - distribution from a Defined Benefit plan - participant wants to roll into a Roth account in a Governmental 457(b) Plan. 

I'm thinking it must be rolled into the 457(b) plan as non-Roth, then converted as an on-plan Roth rollover. But that seems stupid - can it just be rolled directly to the Roth account in the 457(b) (and of course reported as taxable)?

Column b of the Form 6088 asks that you indicate if each participant listed is an HCE. For this purpose, is a former HCE considered an HCE?

Thanks for any responses!

What happens when the plan's method of crediting hours of service is the elapsed time method?

is a Year of Service merely when someone works for 12 months straight (or credited due to spanning rules)?

How does that translate to calculating Otherwise Excludable?

I have a participant in q 403(b) plan who was hired 7/3/18 and worked 350, 650, 675, 720 hours in '18, '19, '20 and '21.

Is the OEX rule purely 1,000 hours in a year, or can it be based on elapsed time and depends on the plan's definition?

can this person be OEX or no?

Client bonused himself $28,000 to max out his deferral

He reported on his W2 $28K in box 12 and coded it D
I told him he exceeded the 402g limit 

He withheld taxes from the $28K and deposited $25,858 into the plan.

He wants to say that the extra $2K is a voluntary contribution.  He can do this (doesn't exceed 415 limit) but it needs to be in Box 14... correct?
And technically he needs to actually deposit $28,000... correct?

In the end he needs to amend the W2 and make whole the $28K in the plan... correct?

A plan sponsor provided a hire date that was actually months before the employee was actually hired.  As a result the employee was included in the profit sharing contribution calculation.  A contribution was made on the employee's behalf.  This is a straight PS plan, not a 401(k).  Do we have to honor the contribution, or actually, do we have to take it away ?

Thanks

Plan only does deferrals and safe harbor match.  One employee met the one year wait, but not enough hours; sponsor let her in anyway.  Found out the following year, so did a corrective retro-amendment to let in the NHCE for deferral & SH match early.  Does this take away the top heavy exemption?

Hi

Combo plan, CB+DC.

An HCE was employed in 2020 as a w-2. Excluded from CB but included in the DC.

Now I am informed that he terminated as an employee on 1/2/2021 and became 1099 employee for 2021. He had $0 W-2 for 2021 however they make 26k deferral plus non elective SH on his behalf for 2021.

How is he treated for all coverage and non-discrimination testing? How is his deferral/SH to be corrected?

Thank you for your comments.

if a plan has assets with VOYA or a vendor like this, is there a requirement to attach/create a Schedule or do you just report fees/commissions on 5500-SF

For Universal Eligibility, is regularly scheduled for 20 hours per week determined week by week, or is it an annualized test?

In other words, if a 40 hour per week temp is hired for a one month engagement (less than 1,000 hours expectation) can they be excluded as being regularly scheduled for less than 20 hours per week, even though they will be 40 hours per week for one month?

The 1,000 hour test in the 2007 regulations, the LRM definition, and Notice 2018-95 all state that the 20 hour test is really based on expectations for a full year, rather than a week by week schedule. This makes sense in a way. What if you hired a 40 hour per week employee for just a one week assignment ? 

Still, I see many different "interpretations" of UniVersal Availability on websites, and they all dance around (or are unaware) of this issue.

I get around it for most clients by making 403(b) available for all, but this interesting issue came up.