I have another mandatory distribution question. My understanding is that if a retiree has an account balance over $5000, participant consent is required before a distribution can be made. However, if the balance is between $1000 and $5000 then per 401(a)(31) the plan has to notify the participant that they can direct a rollover to a named bank or take a lump sum, but if there is no response from the participant then the plan must do a direct rollover to an IRA selected by the plan. Thus my interpretation is that if the balance is under $1000, no such rollover notice is required and the plan can write a check to the participant and W/H 20%. However, if the balance is less than $200, mandatory 20% W/H is not required. Is there agreement on my interpretation?. Finally, what about spousal consent? Does the plan document have to specifically state that distributions of balances less than $5000 does not require spousal consent. What if the plan states that balances over $5000 require spousal consent. Is that sufficient?

Is anybody familiar with Maryland trust rules?  This falls into the category of doing a friend a favor, so TIA for any insight.

Client set up a living trust and then dies a few years later.  There are 2 beneficiaries of the trust (two of the client's three children).  Upon the death of the client the Trust named the youngest of the three children, who is not a beneficiary of the trust, as Trustee. All goes well for a few years. The now trustee (and youngest of the three children) develops some health issues which focuses the attention of the beneficiaries on the successor Trustee provisions of the Trust.  

The Trust names one of the other children (who is 1 of the 2 beneficiaries) as Trustee if the youngest of the three siblings dies or is unwilling to continue in her role as Trustee. 

Nothing further is specified in the Trust as far as Trustee succession goes.

Assume that (1) the youngest of the three children dies; and, (2) the named successor Trustee acts as Trustee for a few years; and, (3) the named successor Trustee dies.

The Trust doesn't contemplate this sequence of events.  There doesn't appear to be any provision in the Trust that grants the remaining beneficiary Trustee authority. 

The trust holds two assets: an investment account at a national brokerage and an annuity issued by a large insurance company. Both the brokerage firm and the insurance company have a copy of the Trust itself.

Assuming the above, is there something that the named successor Trustee should do (after the youngest sibling dies but obviously before her own death) so that the brokerage firm and insurance company understand that, upon her death, they should listen to the remaining beneficiary for all things they would otherwise look to the Trustee for?

Does Maryland trust law have a provision that says if a trust becomes trustee-less that trustee powers automatically vest in the remaining beneficiary?

TIA

me22

never had a spouse of an owner only (and spouse) plan terminate before. No idea if 8955-SSA required in this case.

Hi, 

The plan year end in 12/31 however since the plan terminated in June it will be a short plan year, so will the client still need to do the True-up?   I believe YES please confirm. 

Thanks

Plan's definition for compensation is 3401(a), no other adjustments. This would exclude group term life amounts from deferrals & employer allocations, correct? It must be close to the deadline my mind is mush.

For the 11/27/2020 payroll the payroll company did not withhold deferrals from a bonus.    Can this be corrected?   The employer is asking how to correct it and I'm not sure there is a way.   It wasn't caught at the time, the employer just realized it last week.   

Can anyone tell me the impact on 401k plan between Related Employers & Multiple Employer Plan?
Sometimes, I've found mark on Related ER in the plan document, some times marking on Multiple Employer plan.

Thank you in advance!

Hi,

EZ filer (owner only plan) received a compliance notice that forms 5500EZ for the periods after 12/31/16 were not received by the IRS. The notice stated that if the forms had indeed been previously filed, then if you provide copies of these filings and they are signed, then the IRS will update their records. The client send in copies of the previously filed forms for the plan years December 31, 2017-2019, back in December 2020. Now almost a year later the client received three separate late filing penalty notices for 2017-2018, and 2019. 

In addition, then 2017 and 2018 penalty being charged is 150k and 187k. This is well above the 15,000 max for these years.

It appears that the IRS Input  these copies of the previously filed forms as first being filed in December 2020 and that is why they are sending these late filing penalties. Any advice, would be greatly appreciated. Thank you.

Audited 401(k) - auditors found missed deposit of deferrals.

TPA is calculating lost earnings, and plan sponsor will deposit missed deferrals plus lost earnings.

Client will file Form 5330.

But - when Form 5558 was prepared and filed, the problem had not been discovered so the 5330 was not extended.

Will the Form 5330 be rejected?

Hi,

We have a terminated participant who would like to transfer the loan from our 401k plan to another 401k plan.

How would this process be done in terms of reporting. Would we use code "G" for the transfer of loan?

Thanks,

Section 4225(a) requires that there be a bona fide sale of all or substantially of the "employer's" assets in a arms'-length sale to an unrelated party.  Where you have another member of the selling and signatory employer's control group (here a company that owns the building that was leased to the signatory employer), must there be a sale of assets of both the signatory operating company and the related real estate company for Section 4225(a) to apply?  I think the issue is whether under ERISA the concept that all companies in the control group are deemed to be the same employer applies to Section 4225(a) so that all companies in the control group must be sold.  I have not found any precedent for this but this does not sound correct to me.  If any one has any thoughts, they would be most appreciated.  Thanks.    

Hi, 

One of the terminating plan there are few participants with balance in the MPP source, this was from the pervious plan.  The plan has elected for optional, so if a participants does not take action can the plan sponsor direct to have the funds rolled over to an IRA account for the ones who have balance in the MPP source? or should it be an Annuity? 

Thanks 

Assume a tax-exempt entity, "Parent," has a for-profit subsidiary, "Sub."  One of the executives of Sub is also an officer of Parent.  As an officer, he would (at least typically) be considered an employee of Parent.  Assuming the plan language permits it, any issue with him participating in 457(b) and 457(f) plans of Parent?

Presumably, any 457(b) deferrals should be limited to his compensation received from Parent for his officer duties.  

Any limits to what he can get on the 457(f) side?  It seems like this might have 4958 or 4960 implications.

i put this out here once before but struggle with the right answer. 

I have a participant over age 72 that passed away in 2020.   Non owner –  The RMD was waived in 2020

His spouse (beneficiary) passed away in 2021.  She was over age 72 as well.   Money is still in the participants name in the plan.

The plan is terminating, assets will be rolled over to an inher IRA

The 3 children are the beneficaries.

RMD is required for 2021, based on 12/31/2020 value.

I am trying to figure whose age I would based the RMD on.  Owner?  Spouse or oldest child?  Any thoughts?

Thanks, I appreciate your help.

We have a plan that we just took over as TPA.  In reviewing the information it was discovered, that yhere is a loan that was issued 8/2012 that is still showing as active.    Does not appear that any loan payments were ever made nor was it ever defaulted.

If I am reading Rev Proc 2021-30 correctly, 6.07(3)(d)  -  it look like i can use the SCP if the participant would pay the loan off in full, plus interest.

Am  I reading correctly or does this have to be filed through VCP?

Thank you!

A single member plan a year ago (2019) rolled into the plan a large sum and the sponsoring business intended to hire employees.  COVID hit and no employees were hired.  A form 5500-SF with the "one participant plan" box was checked and filed for 2019.  Due to COVID the owner/single participant took a distribution and the assets of the plan are now only $51,000. No employees.... just the owner.

Do we need to file for 2020?  

I know the question of filing without the audit has been discussed many times. However, my question seems to not be addressed in prior discussions and this bothers me. I am looking for any clarification. The following sentence is above the signature line of the 5500:

Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete. (emphasis mine)

I know the DOL has issued FAQ25 on EFAST2 Q&A https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf

I understand there are extraordinary circumstances that cause the audit to be late. However, in my experience, 99% of the time audits are late due to procrastination. 

My question up for discussion is: does the penalty of perjury sentence mean nothing to the DOL? Or does it apply to all the data besides the audit? Does the perjury sentence mean nothing to CPA's and those under Circular 230 who recommend filing without the audit? 

Filing without the audit seems to just be a way to buy another 45 days of "extension" and the DOL seems to be okay with it. 

Thank you

Just want to see if you agree with my interpretation. Plan with many operational violations. The plan does NOT provide for the 20 hour exclusion, but they have been operating as if it did.

Now, since employees were incorrectly excluded form deferring, there will have to be make-up contributions, etc.

My question is this - under 1.403(b)-5(b)(4)(i), if any employee in the "less than 20 hour" exclusion category is permitted to participate, then no one in that category may be excluded. So, in this case, since some of the "under 20 hour" folks are going to have to participate since they weren't previously excluded, then this precludes amending the document for future years to institute this exclusion? Or have I got that wrong?

Hi all

I am asking the following 2 scenarios on behalf of someone who is not my client but asked me about it. They deal with a payroll company for their plan.

Scenario 1:

3% non-elective safe harbor for 2020, they do not have the money to make it by Friday. They already missed the 9/15/2021 deduction deadline.

I thought that they had till 12/31/2021 to finalize the 2020 SH, I thought wrong?

Assuming that it can be done by 12/31/2021 (after 10/15/2021), it will be deductible for 2021.

However, it will not affect the 2021 415c limits, correct?

Scenario 2:

Plan sponsor did not make any contribution for 2020 by 9/15/2021 corporate deadline

Plan has 3% non-elective safe harbor for 2020 plus they want to make profit sharing for 2020.

For the profit sharing to be for 2020, they need to deposit by 10/15/2021, correct?

How about the safe harbor, let's say similar approach as in scenario 1 i.e. can make it by 12/31/2021?

In both scenarios, they will have anough payroll in 2021 for the 2020 and 2021 contributions to be deductible. 415c issue, another story.

Thank you

Received the following question from an auditor friend of mine, who is trying to wrap up a 12/31/20 plan audit before Friday:
 

Got a plan that dropped its interest rate down to 1% due to the pandemic....not sure why they did this, but we are not sure that this would be considered "reasonable rate of interest" per IRS standards and that if it is determined that it is not, then isn't there a risk that the "Loans" would be considered distributions?  We have a call into the client to see why they did this and if anyone weighted in in terms of ERISA allowability. 

Any thoughts on this one?