Client currently has a grantor trust and wants to convert it to a VEBA. 

Is there any IRS guidance or practical considerations on converting an existing grantor trust to a VEBA? Is conversion of the existing trust even possible or should a health plan deplete the existing grantor trust and then transition to the new VEBA? Or should the existing trust document just be amended to comply with the VEBA requirements on a go-forward basis? 

Worked 14 years 1997-2010, took lump sum from defined pension. Returned to hospital in 2016 at age 62 with intent to work until age 70. Was told I would need to work 5 years to be vested. In 2021 hospital was bought out and pension was frozen, employees were gifted an additional 4-7 years of vesting deep on age and wages. Moneys were give to an actuary and all employees are now being offered a window to receive a lump sum. I don’t want a lump sum. I had returned to work specifically to earn an annuity and expected that if I were offered an annuity of $1000 at ERA after 14 years at half the wages that I would now at double the wages and 8 years vested look forward to at least half of that. In addition my lump sum in 2010 was over $100,000. So I would expect a lump sum of at least half of that after 8 years vested at double wages. I was offered a tiny annuity and small lump sum. When I question it to the actuary handing the funds, this is the reply I got….  Can anyone here help me understand this? I feel discriminated against because I am over 65. and disappointed because I thought I could keep working and earn another pension to help me when I planned to fully retire at 71.  

Hello, This email is in reference to your recent question regarding your XXX Pension Benefit. The current benefit amount that would commence on 11/01/2021 is $14,589.23 as a lump sum and $127.86 as a life annuity. This benefit is less than your previous lump sum benefit in 2010 because of how the plan calculates benefits after a benefit has already been received. The plan states that if a participant is rehired after receiving a lump sum payment, and earns additional benefit service, their benefit is calculated as if no payment was made. The amount of the lump sum previously paid is increased with interest at 8% per year. Therefore, because of this high 8% interest rate being added to your previous lump sum during the calculation, your benefit is less than before. If you chose to wait until you reached age 70 your benefit would decrease to $0.00. This is again due to the high interest rate being added to your previous lump sum benefit during the calculation. If you have any other questions, please let us know. Thank you,

I asked for clarification… and got this…

We apologize for the confusion.  Let us try to explain the offset better so it may make more sense.If a Participant is rehired after receiving a lump sum payment (which fits your scenario as you took a large lump sum in 2010) , and earns additional benefit service, their benefit is calculated as if no payment was made. The resulting lump sum value, at the new payment date, is reduced by the amount of the lump sum previously paid increased with interest at 8% per year. The final present value is then converted to an annuity.  In your case what is happening is, since the plan froze and no benefits are being earned, the offset is growing faster and will eventually wear away any additional benefits. Since you were over 65 at 2/1/2021 you should have received a separate packet prior to the lump sum offering that back dates your lump sum amount to the first eligible payment date.  That is the date that your lump sum will be greatest since the offset will continue to wear away your benefit.  If you need that reprinted please let us know.

I have not received a reprinted backdated offering  even thought I asked. 
Nor can I get them to give me a copy of the pension plan with the rules they are stating. One customer service person told me it was federal law being followed. I am real savvy with my nursing skills but I am lost with this stuff. I really feel like they are stealing my pension. Thanks 

Hi

I was just asked to do a 2020 run for controlled group situation - employers, 2 plans (because the payroll company will not do it - shall not be named) as a favor. Must do it prior to 10/15. No good deed goes unpunished i.e. I just checked all the provisions and unpleasantly surprised.

If any of the gurus have some suggestions on testing for top heavy and also coverage, would appreciate it.

Plan B is not top heavy but not sure about plan A yet as I am waiting for assets. I also do not know if combined plans will be top heavy - to be determined.

Provisions of each plan are as follow:

Plan A (Company A's plan) has 3% non-elective safe harbor, 401k deferral and profit sharing (1000 hours and must be employed at EOY). No compensation exclusions. For all provisions, entry date is the month following age 21/1 year service.

Plan B (Company B's plan) has enhanced match (100% of elective not in excess of 6% of compensation, 401k deferral and profit sharing (must be employed at EOY - no hour requirement). Only for match, compensation is from date of entry (No way for me get this unless payroll company will provide it). For all provisions, date of entry is the next payroll period (Plan is run by a payroll company so they can do this, I guess) upon satisfaction of age 18/1 year of service.

They want to have PS allocation in Plan A and none in Plan B. PS allocation for Plan A is group based i.e. needs to be tested.

I need to combine both for top heavy even if each plan passes 410b and 401a4 on its own (they do).

Since each plan has different safe harbor assumptions, separately top heavy for each plan is not an issue, one is 3% non-elective and the other one is enhanced match.

Do I need to test them all together for coverage and non-discrimination? What would the answer be if

• If Plan A is top heavy, Plan B is not and combined not top heavy
• Neither plan is top heavy and combined not top heavy
• If Plan A is top heavy, Plan B is not and combined they are top heavy

What am I not asking properly? I never had to test two DC plans like this.

Any words of wisdom is appreciated.

Thanks

Plan had basic safe harbor match in 2020 but payroll company calced as 100% on 4%.

epcrs says I can amend retro to increase a benefit but 2016-16 says I can only increase safe harbor match by 10/1 (right?).

which one wins?

We have a pooled plan that had the standard 'after the end of year valuation is completed', but the plan sponsor wanted to be nicer to the participants, so over our objections amended the plan to allow for immediate distributions.

Here we are, just getting the data for 2020, and there's a 2021 terminee who is demanding a payout Right Now because that is what the plan allows.  And she doesn't want to wait the couple of weeks until we get 2020 done.  Our first instinct was to go with the 12/31/19 balance and pay that out and deal with any residual later, but then maybe a percentage of that is better in case there's a loss in 2020 (OK, there probably isn't, but we're setting precedence and administrative policy here).  The timing makes this extreme, but I suppose this really goes for any distribution request we're going to encounter once the next plan year is completed.  Any thoughts or guidance or best practices out there that we can be following on this?  Besides being better at saying "no" to our clients?   Thanks.

My question is how far back do people normally go to amend forms?  Taking over a case that had a mistake in the amount of loan repayments were made back in '14, so the loan balance was off (and subsequently was off every year since).  The client has supplied copies of the checks, etc., so I know the mistake is accurate.

Is this the type of situation where you would amend every form since 2014?  I have all of the information to do it, just wanted to make sure it was necessary.

Thanks in advance everyone!

Plan wants to start 1/1 of the next year (1/1/22) for both 401k and PS.

With the plan being adopted prior to 1/1, is there a reason the plan cannot make the PS effective the prior year (1/1/21) even though there is currently no intent to make such a contribution.

What if they have an existing SEP in current year and made the plan effective 1/1/21, would there still be an issue with no contributions for the plan year to the PS?

It's one of those days and this just came up

A client that does not currently offer a retirement plan just (like last night) acquired a new division with employees who are under a CBA.  The CBA states that the employees must have access to a 401(k) plan with a safe harbor match and an additional fixed match. 

He currently has about 40 employees, and the new division will add 7-8 employees covered under the CBA.  Since it is last minute, he wants to put the plan in place today, but exclude all employees not covered by the CBA.  The 7-8 CBA employees are all NHCEs, all owners and HCEs are part of the excluded group.

I know I can do it from a document perspective, and since no HCEs will benefit I'm thinking that covering a small number of employees will still work, but something is telling me Im forgetting something....

Anyone see a an issue with only the CBA employees having access to the plan even though they are all NHCEs?

Thanks

I don't think there's a conflict of interest issue here, but just curious for anyone's thoughts -

Turns out that my spouse knows professionally a business owner that has been referred to me. Is that something that would typically be disclosed up front?

Good morning everyone!  I just wanted to make sure we are using the correct segment rate for the calculation of the Normal Cost.

The calculation should be:

Contribution Credit x The Assumed Interest Rate (to the power of the number of years until retirement)
--------------------------------------------------------------------------------------------------------
Segment Rate (to the power of the number of years until retirement)

For the segment rate being used, it should be:

• First segment rate: 0-5 years from retirement
• Second segment rate: 6-20 years from retirement
• Third segment rate: More than 20 years from retirement

Thanks in advance for confirming

I left employment to return to school. I used my portion of the 401-k for tuition. I had to leave the employers match until retirement age. Previous employer reported the matching funds to Social Security 2 years later. The funds were reported, but no account was set up on my behalf. Are the administrators, fiduciaries responsible for making me whole?

Plan participant passed away a few weeks ago. Wife, listed as sole beneficiary, has reached out to find out what do to. We let her know we need a death certificate along with her identification and then we can discuss her options. 

Today, we received a "concerned phone call" stating that the wife was a conservatee with her husband as conservator. The caller also indicated that they are trying to get the conservatorship changed to a living family member.

Absent any court documents to the contrary, I am inclined to treat this like any other death distribution and pay out as the wife wishes. It seems to me that if he had a conservatorship for her, he would also have made arrangements as how to protect her after his death. Does anyone see any liability or issue in proceeding with the distribution assuming that the wife has all documents in order? 

Thanks in advance!

MP Plan, so 'individual rate groups' are not currently an option, nor do they seem to be an option in the current restatements.

So plan uses 'Defined Groups' wherein all regular staff receive the same percent contribution.  Owners, HCE's and other senior positions receive different defined percents which are defined by group.

Question - aside from what the regular staff receives, does the SPD need to disclose what percent the owners and other groups receive?  I think no, but curious for another opinion.

Furthermore, can a Defined Group be an individual person, in the way 'individual rate groups' are?

Reason for the question - there is one defined group that the ER is hiring a new employee in, but they would like to grant that person a higher percent than the other person currently in that defined group, but they have the same public title.

Encountered what was (to me) an unusual situation on a possible takeover. Details a little sketchy at this point.

John Doe, Sole Proprietor, sponsors a 401k plan, using a volume submitter pre-approved document. John has several employees, all covered under the plan, everything seems fine.

However, it turns out that unbeknownst to the prior TPA (and if there's a problem, likely not their fault, as apparently neither client nor CPA ever informed them) the employees of John are actually PAID through another company. Details on this other company not yet known, but apparently has a different EIN than John.

The reasons why it is handled this way are unknown. The CPA likely had good reasons for it - I'm not making any judgments since this is outside my sphere of knowledge.

Now, my understanding has always been that the IRS will only issue one EIN to a Sole Prop. If true, (?) then this other company, apparently 100% owned by John, must be something other than a Sole Prop?

At any rate, my question is this: Assuming these are "employees" of John, is the fact that payroll is run through another company in the controlled group a problem in and of itself? This other company has NOT signed on as a Participating Employer, and the document provides that employees of another member of a controlled group are not covered under the plan unless a Participating Employer Agreement has been signed. Although it is the CPA's purview, can John deduct contributions if payroll is through another company?

I'd love to hear any thoughts on the situation. Thanks in advance.

I filed  5500 EZ Delinquent Filer Penalty Relief Program along with $1,500 check, solo 401k.  IRS cashed the check but later sent me a letter asking me to pay.  I replied that I already paid, that was in March 2021 with me sending proof of the cashed check.

Now I got a CP 283, demanding I pay $300,000 within 30 days!  I called the IRS number and the rep told me to fax documents, responding to the CP 283.

1.    Should I contact the tax payer advocate?

2.    What happens at end of October when the CP 283 is due in 30 days?

Any help is greatly appreciated as I am in a state of panic.  Let me know if this is the best place to post or another sub-forum.

A volume submitter document defines compensation as W2 wages. The only exclusion listed are fringe benefits. The document does not elaborate or provide any additional details of what a fringe benefit is. IRS Publication 15-B and IRC 132 provide some assistance.

A plan sponsor pays non-statutory stock options during 2020. This is clearly taxable income reportable on Form W2. The taxable compensation was not taken into account for deferrals and/or employer contributions. 

Question: IRS Publication 15-B mentions stock options as a fringe benefit. Usually we specifically exclude stock to avoid any confusion, but with this plan, other circumstances caused the exclusion not to be written in. Can we rely on the 15-B to define non-statutory stock as excluded pay as a fringe benefit? 

If we can't consider it a fringe benefit, we are looking at VCP and asking the IRS to approve a retro active amendment.

Thank you

Tax-exempt org CEO died in svc;two children as beneficiaries.. I believe no required federal withholding  on the beneficiary distributions and no rollovers allowed  but could be transferred to another tax-exempt 457(b) plan of beneficiary(if it exists)  without any tax. Don't do alot in this area so just double checking..attorney provided client with general qualified plan distribution paperwork which I think is no good. Any confirmation appreciated. Plan was funded at a mutual fund company..

If an employer sets up a db plan now, before the due date of the 2020 tax return, has the employer already missed the minimum funding deadline?  I know that the 2020 SB doesn't get filed until the 2021 5500.  But what about minimum funding and excise tax?

Thanks.

If an employer overfunded their employer contributions throughout the year, would you report them as contributions on the Form 5500 even though they are being moved to an unallocated account? 

Our situation is a little unique. Our DB plan business is growing and we are looking for another actuary who can provide SBs, etc. We have done a good job on the servicing side, so we would like to take over the plan servicing while still having the actuary do the back end work. The actuary would also receive add'l work thanks to our DB plan growth.

Is this type of transaction realistic? It is a great chance for an actuary looking to get out of the client servicing side and just focus on the actuary work.