My client has a SEP IRA that received contributions for 2021. However, the client wants to set up a DB Plan by year end 2021. Does setting up a DB Plan automatically invalidate the SEP IRA resulting in "excess contributions" for the SEP per 408(d)(4), and thus a tax free distribution to participants if made before tax return is filed in 2022?

If an individual mistakenly makes a contribution to an IRA and wants to cancel the contribution can this be done by withdrawing the contribution by the due date of the individual's tax return without including in income and without penalty? I know IRC Section 408(d)(4) addresses and provides favorable tax treatment to withdrawals of excess contributions to IRA's (in excess of 219 limits) prior to the tax return filing date, but I'm not aware of any tax rules that provide favorable tax treatment to individuals who want to nullify and withdraw a mistaken IRA contribution that is not an excess contribution.  Any opinions on this? 

How do other plans typically handle the requirement that distributions begin no later than the 60th day after the end of the plan year in which the participant attains 65, has 10 years in the plan or terminates service if the 12/31 valuation is not completed by the 60th day?

Do you pay a portion of the benefit and then true it up when the valuation is complete?

Thanks!

Person terminated in 2021 and his required distribution date is 4/1/2022. The form of benefit taken is a lump sum. The amounts not eligible for a rollover should be calculated for 2 years, 2021 and 2022. Generally to calculate the amount of RMD that is not eligible for rollover under the account method, you would divide the lump sum amount by the distribution period taken from the Uniform Life Table. The two distribution periods will correspond to the age of a participant as of 12/31/2021 and as of 12/31/2022. Effective 1/1/2022 the IRS amended the Uniform Life Table with longer distribution periods, and therefore smaller RMD amounts.

So question is: Will you use both distribution periods from the amended table, or will you use the distribution period from the old table when calculating RMD amount associated with 2021, and the distribution period from the new table when calculating RMD amount associated with 2022?

An insurance agency says that its employees are statutory employees, but pays them W-2 income instead of 1099 income.  Their W-2s consist entirely of commissions and they all work from home.  They work as they wish - essentially as independent contractors - but are paid a W-2 income.  Is the agency able to exclude them from their 401(k) plan?  It seems that most statutory employees who get paid 1099 income may not be considered eligible employees, but I couldn't find information that discusses how eligibility is handled when their income is reported on a W-2.  Has anyone come across a situation like this?  

Sometimes a question comes up that I should know the answer to and my mind is staring at me blankly.

Is the Special Tax Notice required to be provided to a participant requesting an in service distribution? I think the answer is an unequivocal yes.

good luck. simply print out the song list on the second page and enter the number of the song in the corresponding yellow box. It will tell you whether you made a good guess or not.

Scrooge told me to wish you a Bah Humbug as well.

christmas_puzzles__130_to_solve.xls

A company was sold through an asset sale.  The retirement plan was not addressed in the agreement.  All employees started with the new owner on 12/1.  We received a rollover check for a participant with a balance in the old employer's plan.  The new owner has not set up a plan and I do not see anything being set-up for 90 days.  Do you think I am okay processing the rollover check into the old plan?  The rollover was initiated prior to 12/1, however, technically the old plan now has no active employees, so I am questioning if a former employee can make a rollover into the plan.  

A unique situation for the participant, who was not aware the company was in the process of selling.  I would like to process the rollover, but what I like and what is correct may be different in this circumstance.  

Thank you.

ASPPA is giving me the runaround.   Iasked them this questions twice and no one has returned my e-mail.

My co-worker took the practice test for the QKA1 exam.  How can he see the question-by-question results?  All he can see is the overall score.

Employer hates loans and wants to stop offering them.  Does he need to wait until all outstanding loans have been paid off, or are those loans fine retaining the loan policy in place at the time of the promissory note?

Hi

100% owner Joe marries Jane who has 2 adult children from prior marriage (ignore the 1 year rule)

Joe refers to them as his step-daughters.

Jane and the 2 daughters work for Joe's company.

Jane is an HCE by attribution.

How about step-daughters?

In one case assume they are adopted and in another they are non-adopted.

Any other scenarios?

Thank you

We had a participant who meant to defer his compensation until 2022, but he accidentally entered 2099.  This was clearly a mistake, as he will be well over 150 years old in 2099.  I know there is no real way to accelerate payments once the schedule is set (outside those listed in the regs, which we've already ruled out or otherwise explored), but are there any exceptions where the election was clearly, on its face, a mistake?

We have a client that wants to provide a Safe Harbor Match plan for their employees.  They also want to exclude the HCE's from the Safe Harbor Match, which the is allowable.  However, they would like to give the HCE's a less generous Non Safe Harbor match.  At first glance, It looks like this would be okay because they're giving a better benefit to the nonHighly's.  However, someone in the office believes that this would kick in the ACP test.  Are there any other issues?

Participant, former employee, died this year.  She was taking RMDs.

Can the 2021 RMD check be made payable to the estate?

Does anyone have some insight on how we could remedy excess 402(g) deferral after the employee has separated service and transferred their account to an IRA?  I'm wondering if the IRA can be used to return the assets or if it would have to come from the original 401(k)?

Trading on margin in qualified retirement accounts is considered debt-financed income and therefore leads to UBTI (unrelated business income tax) / UBIT.

Many other forms of leverage (futures, short sales, gains from lapse or termination of short options, repurchase agreements, notional principal contracts) are either explicitly exempt in the code from generating UBTI, or don't generate UBTI by virtue of entailing no borrowing of money in the traditional sense.

What about using the proceeds from options sales (for example options box spreads) on a rolling basis to buy additional equities, will it generate UBTI? Is it debt-financed income, as the short options create an obligation (albeit the size of the future obligation depends on the performance of the underlying); or not, as (by the same argument that applies to futures) it does not entail borrowing money in the traditional sense?

I've been driving myself crazy on this. Question came up as to whether an in-plan Roth conversion/rollover could satisfy the RMD requirements. I know it can't, but I'm having a devil of a time finding "proof" - and I'm sure it is staring me in the face! I recalled that there was guidance a long time ago where it said that for 401(a) purposes, an in-plan rollover was not a "distribution." So I looked back at IRS Notice 2010-84, etc., etc., and while I found SOME of what I was looking for, I couldn't find anything that confirmed this head-on -  (or possibly my eyes scanned over it). Anyone recall the citation for this? There's ample IRS verbiage out there that addresses this in an IRA context, but seems to be a dearth of similar IRS publications answering this same question for designated Roth accounts.

Shoulda stayed in bed this morning...

if a plan has a large number of employees and for sending out the annual sar and disclosure notices, would it be possible to upload these documents to the companies ADP port hole site where all employees have access and mail out a letter to each person and let them know these documents are out on the ADP port hole for their retrieval if they would like to print or review?

We are looking at taking on a new client for 2022.  They have an existing 401k plan; non-safe harbor.

In reviewing the adoption agreement and plan document, the current TPA drafted an amendment in 2021 that provided a waiver of eligibility for one specific NHCE participant.   

The reason being is that participant was allowed into the plan before they were eligible (not eligible until 1/1/2022) and made salary deferrals to the plan in 2021.

I've never heard of this approach of a waiver for a single NHCE employee; thoughts?