Does anyone know whether the price an employee pays for the grant of an option can count toward the price of the exercise of the option for 409A-exemption purposes?

In other words, say employer's stock is worth $10 per share on the date it grants an option to an employee. The employee pays $9 per share for the grant of the option itself, and the price of exercise is $1 per share. A few years later, employer stock is worth $20 per share. The employee pays $1 per share to exercise the option. 

Under the 409A definition of "exercise price" it seems that only the $1 is considered ("...the consideration in cash or property that, pursuant to the terms of the option, is the price at which the stock subject to the option is purchased...").

Under 83, both the $9 paid for the grant and the $1 paid for the exercise would be part of the "amount paid" for tax-calculation purposes.

But would this blow the 409A option exemption?

I have a client that is US citizens and lives in the US. He work in the Cayman Island a few weeks a year and picks up the income on his Sch. C of his 1040. Can this income be used towards retirement contributions. I believe it is subject to self employment taxes.

Good Morning,

Hoping you all can help with a question....

I have a plan with safe harbor match and discretionary match.  1000 hour and last day requirement on the disc match.

When running the 410b test, FTW test both the sh match and the disc match contributions as one component in the 410b test.   Since they are actually two different money types do they need to be tested separately? 

appreciate your help!

So we have a client that missed a 401k deposit for 1/5/2021.  The total missed deferrals was $330.

The lost earnings was $11.14.

The 15% penalty is $1.68.

The question i have does the IRS have a deminimis rule for self-corrections like this or do they need to file 5330 and pay the $1.68 penalty.

Just looking for some clarification/thoughts on how best to handle.

A TPA told an employer that charges for flavorings added to Rx medicines (usually for kids) are not reimbursable under an FSA. Has there been any IRS guidance on this issue? I can't find any. TIA. 

Was unable to find an answer to this on the forums or in a google search.

Plan

Plan matches 100% of employee deferrals up to safe harbor match of 3%.

Situation

Employee is accelerating deferrals which lines up to the concern that the employee will be jumping ship and has been slacking. The deferrals are not (likely) sustainable (20% of salary??) so the goal appears to be to max out the employer match. 

ADP contributes 3% of our match to the employee's 401k. 

Query

Will we have to true-up the employee's match if they quit in March/April/May but have contributed their full 3% already? (e.g. employee makes $150k. We have contributed $1.1k by March based upon ADP's approach. Employee has contributed the full $4,500 by March. Do we have to true-up our contribution to match theirs even if they were only a member of the plan for 25% of the year?

I have a single member plan which is funded solely by ROTH money.  His CPA told him he didn't need to take an RMD because it was ROTH money.  In the case of an IRA an RMD is not required as long as the owner is alive, so that is good advice for his IRA accounts.  But I have read that when it comes to a qualified plan it doesn't matter if it is ROTH money or pre-tax money... an RMD must be taken.

Right so far?

That said, how would a ROTH RMD be taxed?  It wouldn't?

Thanks

This type of plan does not need to cover 401(a) (26). If running a 12/31/21 valuation and the lookback is month  prior to plan year beginning (ie month prior to 1/1/21 is 12/31/20) for 417 e rates. Since the factor in determining if the plan is underfunded is "Plan does not have sufficient assets to pay all benefits".

In Realty, the benefits would not be paid out until at least 1/1/2022. Therefore, can the 12/31/21 417(e) rates (month prior to 1/1/22) be used to determine if the plans benefits (PVAB) exceed the the assets? Thank you for any insight son this.

A and B are a CG (100% owned by one individual), they want to establish a plan, all employees of both entities will be covered.

A employs its staff thru a staffing company C.   C is 50% owned by the owner of A and B (other 50% unrelated ownership), so it is not part of the A&B CG.

C has absolutely no other functions.  It pays A's staff and gets reimbursed by A, that's it.  The employees are hired, fired, directed, controlled. report to, and in all respects managed by A.

It seems to me that under RPs 2002-21 and 2003-86 that these C employees are common law employees of A only.  In fact, if C sponsored a plan and wanted to cover them, it could not do so on its own.  It would have to set up a multiple employer plan with A adopting to comply with the RPs.  

Question 1 - Do you agree so far?

Now there is another company, D, that is a CG with C (80% ownership overlap by 2 owners).  D has employees and its own 401(k) plan.

It seems to me that since the "employees" paid thru C on behalf of A should be considered common law employees of A only, that A and B can proceed with their plan without regard to D.  It also seems that D can maintain its 4k plan without regard to C, as C has no common-law employees.

Question 2 - Do you agree with this?

Any other thoughts?   For the record none of these are service orgs.

Thanks. 

Entity A has a Nonqualified Deferred Compensation ("NQDC") Plan.  For one particularly highly paid employee ("Employee A"), Entity A is worried about having Employee A's NQDC liability on their books.  Entity B has ties to Entity A, but is not in the same controlled group (you could call the entities affiliated).  Can Entity A transfer Employee A's NQDC liability to Entity B, while also transferring the portion of the Rabbi Trust that holds assets needed to cover Employee A's NQDC interest to Entity B?

One concern I have is that Entity A's creditors may not like the fact that Entity A is giving up assets (the Rabbi Trust holdings) at the same time they are getting rid of an unsecured general creditor.  From a secured creditor's viewpoint, this isn't exactly positive.

I welcome any thoughts, comments, answers.  Thanks in advance!

Have a multiple employer plan where one of the employers inadvertently contributed for an ineligible participant.  This was discovered in an audit, so the money had been invested and there was investment income.

So what happens to that income?  I believe the Fund can return just the contributions and keep that interest to use towards Plan expenses (self-directed accounts, so we know exactly what interest was earned).

Is that accurate?  Thanks everyone!

A 401(k) participant COVID'ed her loan but did not start repaying until September, 2021 and terminated employment 12/31/2021.

She has not received a 1099R as of yet; for the deemed distribution -  accountant has asked us to prepare.

We have the outstanding balance as of 12/31/21, but how would you take into account the payments only made in the 4th quarter?

Hi

Having a discussion with someone and need outside expert opinion. I never came across with a situation like this.

Sub-S corp XYZ is owned by Joe 100%. No salaries taken.

LLC partnership is owner 100% by XYZ.

LLC has Joe and Mary (husband/wife) as w-2 employees. 

LLC is setting up a DB plan

LLC has income and will cover the deductible contribution and transfer the balance of the profits to XYZ. This is the way the structure was explained to me.

Q1: Is the LLC DB covered by PBGC? Not a professional entity so technically not an exempt category of business.

Q2: Is the above structure kosher? I am assuming the deduction is fine with the LLC

Anything else I am not thinking of?

Thank you

Parts of New York have the Hurricane Ida-FEMA extension through February 15, 2022.  

We have correctly marked under Special Extension - "New York-Hurricane Ida-FEMA-4615-DR" and so far, only one client has received an email from DOL advising that Form 5500-SF for 2020 has not been received, although it has been.

We have the DOL acceptance of the filing, answered the email and attached a copy of Form 5500-SF.

Anyone else receive a similar DOL email or letter?

A couple signs a prenup foregoing all claims to each others qualified plan benefits. But IRC Reg. Section 1.401(a)(20) is clear that prenups or other agreements entered into before marriage do not satisfy spousal consent requirements and case law supports this. However, the prenup I am examining states that after marriage, each spouse agrees to waive spousal consent pursuant to the QJSA rules. Thus, it would seem to me that the plan participant could go to state court and based on the contractual provisions of the prenup get a judgement requiring the spouse to waive spousal benefits. However, my view is that ERISA would preempt the state law contractual decision because it impacts plan benefits and plan rights and thus, the state court order would be deemed preempted by ERISA. Further, the state court order is clearly not a QDRO and would not have to be followed by the plan. Any thoughts on this?

Hi all. I have a client who merged two 401(k) plans starting 1/1/22. Plan A (the surviving plan) provides for an ER match of 100% up to 5% of a participant's compensation. Prior to the merger, Plan B's plan document called for a discretionary matching contribution at the end of plan year. Turns out, for 2021, Plan B was administered using a 2% match every payroll. Of course, the Plan B's plan documents were not amended accordingly. Plan B participants were notified of the change in ER match (which was administered in a non-discriminatory fashion and was more generous than what the plan document provided for). Are corrective measures needed here?

Specifically, my questions are as follows: 1) Are we permitted to retroactively amend Plan B following completion of the merger (which was effective 1/1/22)? If so, do we have to resurrect Plan B to amend since it merged with Plan A effective 1/1/22? Or, can we simply amend surviving Plan A to reflect the fact that the prior Plan B was administered during 2021 using a 2% match? Is that even necessary, given the fact that participants received an increased benefit in a nondiscriminatory manner?

Any help is welcome. Thank you.

Entity A is an LLC (taxed as a partnership) owned 99% by John Smith, and maintains a SEP.  Entity X is a partnership.  One of the partners (with a 10% partnership interest) is a single member LLC (Entity B) owned 100% by John Smith.

The SEP must cover all related/controlled employers.   Since Entity B is a disregarded entity (as a single member LLC), is John Smith deemed the 10% partner of Entity X and there is no control?  Or since John Smith owns 100% of Entity B and 99% of Entity A, is this a controlled group?

John has SE earnings from Entity A, but a loss from Entity B.  If the entities are controlled (and therefore both must be covered by the SEP) I would net the earnings from both for purposes of determining any SEP contribution and 415 limits.  If the entities are not controlled, and since only Entity A adopted the SEP, I would only use SE earnings from Entity A for determining the contribution.

Which is the correct analysis?

Thanks to all for your input.

Hi

Sponsor has an existing PS plan. Now wants to add a DB plan for 2021. DB plan, by design will state that the PS plan will provide top heavy. However,

PS plan has no provisions on how the "top heavy duplications when a DB plan is maintained" checked. In general, depending on the document type, I would put in a very detailed language explaining how the top heavy will be satisfied under the PS plan.

For 2021, DB plan is on the hook for top heavy? There is no way to retroactively amend the PS plan for 2021, correct? I just cannot think of a way out of this.

Any thoughts?

Thank you

The No Surprises Act requires that health plans "post on a public website of the plan or issuer" their No Surprises Act notices.  In the employer-sponsored plan context, does that mean that an employer can satisfy this requirement by posting the notice on its internal intranet or similar site that employees can access?

Many of the commentators that I have read said that is acceptable and that makes some sense because I don't think that a participant would ordinarily think to go to the employer's general website for health plan information.  But what about non-employee participants, such as those participating in the plan through COBRA?  Would an employer who does so be complying with its notice obligation with respect to those employees?

We want to find a great M&A advisor for the TPA industry. The ideal profile is this advisor is well known in the TPA industry and has done many deals. 

Please let me know if anyone comes to mind. 

Thanks,

John