I was approached for consulting on the following - never saw this before:

Sponsor has a PS plan.

Sponsor intended to merge (or terminate the existing plan and join - not clear) with another group of plans and add 401k feature.

Sponsor, without taking any formal action, provides distributions to all participants, mostly active employees. All happened in May of 2021

Sponsor decides not to join the other group and continue with his PS plan and also amend for 2022 by adding 401k feature.

What can be done here to correct all?

Thank you

This Dr. is taking down his shingle. He was born 1/6/1951.  I've been reading and here is what I found....

The beginning date is determined as follows (from the IRS site):

• April 1 of the year following the later of the year you turn 72 (70 ½ if you reach 70 ½ before January 1, 2020) or the year you retire (if allowed by your plan). If you are a 5% owner, you must start RMDs by April 1 of the year following the year you turn 72 (70 ½ if you reach 70 ½ before January 1, 2020).

So...

first, he was not 70-1/2 before 1/1/20 so he shouldn't need to take an RMD until he is 72 but he is a 5% owner... and he is retiring.  Can he just roll his money into an IRA or does he need to take an RMD first?

Thanks

A Plan Sponsor sponsors both a DC and CB plan and as of 1/1/2021 the CB Plan is PBGC-covered. As of 1/1/2021 there are two participants, the business owner and one other participant. The other participant is paid out during 2021 and a PBGC coverage determination filing is made. The PBGC determines that as of 10/1/2021 the CB Plan is no longer covered. As a result, does the combined deduction limit (the 31% limit is not really practical for this plan, so it would be the CB contribution + 6% on the DC side) apply for 2021?

Owner only plan's spouse has terminated employment so is now a terminated vested participant.

Is it common in this situation to remove the spouse as the second trustee on the plan?

I'm trying to better understand the potential HIPAA discount/surcharge issues where spouses and dependents are involved (setting aside ADA, GINA, etc. for the moment). 

Is it permissible to require all covered individuals (or perhaps at least spouses and adult dependent children) to be vaccinated to receive the discount (or avoid the surcharge)? I don't see the nondiscrimination regulations drawing a clear distinction, other than allowing the 30% incentive limit to be determined based on the cost of coverage including spouses/dependents where the spouse/dependent is also eligible for the incentive.

Or if the employee alone (or spouse alone) gets vaccinated, do you have to extend a partial incentive based on their individual compliance with the requirements?

Any input would be greatly appreciated.

A participant left employment for 1 day and was then rehired and is currently employed.  She wants to take her money out of the 401k  plan due to her being unemployed for that 1 day.  She cannot take it though because she is now employed again, correct?  No other in service withdrawal options would apply.

Thanks 

One of the Plan sponsor changed their Non-prototype plan to a prototype 401k plan, there also have a ESOP plan with a different record keeper.  The plan sponsor failed to amend the plan document when they changed it from Non-Prototype to Prototype.   The Plan sponsor now sent us the document stating they have amended the plan to include ESOP feature effective 07/31/2021, I believe they cannot do such an amendment on their own and it should be done by us since we are the record keeper for the 401k plan correct?  The plan sponsor states they were advised by they lawyers that when they added the Roth provision for ESOP purposes it required creating a KSOP. they were also told that this required (per government rules) both 401(k) and KSOP features be captured in a single document. They cannot be separate documents.  I've never encountered this before any thoughts how we can proceed with the termination on the 401k plan? 

Thanks

Good Morning - 

A participant took out a loan from his 401(k) plan on January 1, 2018 with repayments over a 5 year period ending on December 31, 2022. Participant was a qualified individual under the CARES Act and requested a suspension of the loan back in June 2020.  The loan was reamortized in January 2021 which extended the original repayment end date out one year to December 31, 2023. Participant is wanting to take out another loan, but the plan only allows one outstanding loan at a time.  However, the plan does permit loan refinancing and the participant is now requesting to refinance the loan.  The participant is looking to take out an additional amount and refinance to December 31, 2023.  Is there an issue since the replacement loan is technically more than 5 years from the existing loan's origination date of January 1, 2018? 

Hello, 

My company froze and canceled our CB plan. The payments are being distributed shortly, we were given a page to sign so we knew what $ we were each getting(it was the same amount for each person, 7 employees) minus the owner. But then, we were told there was “excess” funds and before distribution these excess funds would need to be figured out. 

what I don’t understand is this excess came out to $100,000 and it’s being split between all of us employees.. however, I am 27 and I am getting $300 of this 100k but someone whose 68 is getting $20,000 , someone whose 85 is getting $3,000 …. How does this make sense?? 

could I suggest they do an even split amongst all of us employees ? $300 seems ridiculous.  Seems age discriminatory.

I don’t understand all this CB stuff so bear with me, all I know is my boss put in $1k each year for EVERYONE 5% interest credit. I don’t see why the excess would be so randomly distributed 

Hi

I have almost no experience with missed funding deadlines - dealt with twice in my life time but both deposited prior to December 31st of the same year, following 9/15 deadline.

A brand new cash balance/401k-ps plan combo for 2020. Was told that 401k deferrals and safe harbor match was contributed timely.

The issues are the CB deposit and PS deposit.

I was approached for advice on the following:

• As the plan sponsor is totally broke, they can not make the 200k CB deposit (assume it is the minimum required - do not have the report to check), whatever the PS amount due (must make it to pass combo plan testing) or the 10% penalty on missed contributions. It is very unlikely that they will come up with the monies by 12/31/2021 and possibly never - business went south suddenly.
• Possibly covered by PBGC, not even sure if PBGC was alerted about missing contributions - I believe form 10?
• All participants were provided statements of benefits for both CB and PS for 2020

They want to send the IRS form 5330 with a letter explaining their situation and ask for any kind of  relief.

Based on my understanding, they may be late for filing 5330 unless they filed 5558 for a possible 6 month extension, but definitely late for 10% excise tax, correct? From what I read, IRS may impose additional late interest charges.

Not even sure if AFTAP was done and/or 101j notice was provided by 10/31/2021.

My immediate reaction was to freeze the plan asap but apparently they were told by the actuary, not doable. What???

Given that they may never be able to make any of the contributions, what can they do? If anyone has any experience, would appreciate any comments/suggestions.

What a mess.

Have a one person DB plan with no loan provision in the plan document. Apparently the owner / sole participant took money out of the plan because his CPA said he could do that and he had 5 years to pay it back. What is the proper way to correct the problem? Thanks.

Several articles have been published to the effect that Cannabis businesses can sponsor 401(k) and other qualified retirement plans. The basic theme of these articles seems to be that IRC sec. 280E would only restrict the employer's deduction for contributions to the plan, possibly affecting only a portion of the contributions, and that the Section 280E does not jeopardize the employees' tax treatment or the trust's tax exemption. Those points seem generally sound to me, but what about the 10% excise tax on nondeductible contributions under IRC sec. 4972? Are folks taking the the position that 4972(c) only describes contributions not allowable under IRC sec. 404, and the amounts would, generally, be allowable under 404, but it is only 280E that knocks them out, so IRC sec. 4972 does not apply? That seems like a possible argument, but somewhat aggressive, and I'm surprised that the articles I've found advocating 401(k)'s for cannabis businesses don't seem to mention the IRC sec. 4972 problem. Anyone else run into this?

A small profit sharing plan under audit was brought to us as their plan document was not amended timely.  It was amended for EGTRRA around 2009 and that was about it.  The auditor recommended updating their document, which was done and they now have current document.  However, while the auditor accepts that, since the document was not timely amended, they auditor is moving forward with audit cap to avoid DQ.

The plan appears to have been operated properly in all other areas.

Just checking on what an estimate amount of penalty the IRS would likely impose in this situation.  Any ideas?

Also, while hiring an ERISA attorney is never a bad option with audit cap, will it really make much difference in this case?  Is the ERISA attorney mainly there to negotiate a lower penalty?

Thank you for any replies

I understand it's likely permissible for a 401(k) plan participant to make elective deferrals on compensation in excess of the 401(a)(17) limit (assuming all other limits are not exceeded). Most plans I've looked at permit this with fairly obvious and simple language. Fidelity's document reads: 

In lieu of requiring an Active Participant to cease making Deferral Contributions for a Plan Year after his
Compensation has reached the annual Compensation limit under Code Section 401(a)(17), the annual
Compensation limit shall be applied with respect to Deferral Contributions by limiting the total Deferral
Contributions an Active Participant may make for a Plan Year to the product of (i) such Active Participant's
Compensation for the Plan Year up to the annual Compensation limit multiplied by (ii) the deferral limit
specified in Subsection 1.07(a)(1)(A) of the Adoption Agreement or Subsection 5.03(a), as applicable.

This is a strange way to say it to me. The AA has an elective deferral max of 100%, so pursuant to the formula in the above, the max a person's elective deferrals could be is $290,000 in 2021 (for a person whose comp exceeds 401(a)(17) in that year), and 402(g) would bring it back down to $19,500. Why does Fidelity's document make it this complicated? 

I have a group that was a MEWA for seven years. They never filed as a Multiple Employer although on their 5500 (they marked multiemployer by mistake). We will be amending. However, as a MEWA they were also to have filed the Form M1. They are petrified of dealing with penalties. We thought to attach a letter to explain. Has anyone witnessed a group paying hefty fines for not filing the Form M1? Did they go through an audit for amending the 5500 to be a Multiple Employer? Many thanks in advance for your help.  

A participant in RMD pay status passed away this year, and her plan beneficiary is her estate.  However, the estate is not responding to the plan paperwork to have the RMD processed.  What can be done?  I know there's generally a 50% penalty to the participant if the RMD isn't paid by 12/31/21, but I don't think the participant herself cares at this point - would the penalty pass through to the estate?  Thanks.

Plan terminated.

MOST of the assets paid out.

One recalcitrant participant keeping brokerage account open, and not heeding calls to distribute the account.  About $50k in there.

Participant is NOT lost.  She still works for the company.  In fact, she answers the phone!

Can the plan administrator still force her out?  What is the cite?

I have a participant in a plan that had a signed TEFRA election to delay RMD processing.  This is the only one I've ever seen.  The participant is now fully retired as of 12/31/2020 so I believe he now has no choice but to take an RMD for 2021.  Per the election signed in 1983 it states

Specifically, I request that funds held for my benefit shall not be subject to distribution prior to my retirement, death or other separation from service with the corporation, or any successor employer

Thus since he is now retired from the employer it appears he has to start taking his RMD - is there anything I could be missing?  

A plan’s sponsor wants to provide an automatic-contribution arrangement for some specified classes of non-highly-compensated employees, but not others.  (All highly-compensated employees would be excluded.)

May a plan provide this without tripping on a tax-qualification condition?

Is it feasible to provide this using an IRS-preapproved document without losing reliance on its IRS letter?

Looking for billing software that works well with quarterly billing, flat fee+ per participant formulas.  Anyone had great success with a particular package?  Not quickbooks.