Does anyone know if there is a floor for the Mandatory Withholding requirement? I know that you don't have to issue a 1099R if the distribution is less than $10. But is there mandatory withholding on the $10? if not, does anyone know what that floor would be?

A covid distribution was processed by the TPA without the trustee’s authorization. Are there penalties/consequences? What should the TPA do?

I did search for the below IRS Section 125 POP Eligibility Safe Harbor link, but have not found the correct one yet. Does anyone have it to share as I did not see it in other blogs or posts for Section 125 Non-Discrimination testing?    NOTE: A safe harbor exists where the POP will be deemed to satisfy all nondiscrimination tests if it "satisfies the safe harbor percentage test for eligibility." For example, a POP that might fail the Key Employee Concentration Test would be deemed to pass all tests if it passed the Eligibility Test. See §1.125-7(f) for more information. 

 I get https://www.irs.gov/irb/2007-39_IRB from September 24, 2007 of which I do not see the Eligibility Safe-Harbor.  Attached is from Zywave without the link, however lists a Eligibility Test from 2014 on pages 1-2. 

Thanks,

Nondiscrimination-Tests-for-Cafeteria-Plans-02-04-14 Zywave.pdf

Would you agree that HCE and Key Employee status do not factor into Form 5500 filing for welfare plans, even 401(k) and other Pension Plans?  Thanks, SAD

I think this is correct, but as a sanity check since it seems harder than expect to find authority on this - if a 401(k) plan is frozen, it's still permissible for participants to take out new loans and hardship withdrawals, correct?

Hi,

In a DB Plan Document (the plan uses a Safe Harbor benefit formula), in the eligibility section, are the following provisions:

"(1)           Eligible Employees. For purposes of Section 2.1(b), all Employees are Eligible Employees except for the following ineligible classes of Employees:

(A) Union Employees; (B) Non-Resident Alien Employees; and (C) Employees not listed on Exhibit A."

For each plan year the Exhibit A is updated to list the employees that are eligible and all employees that are not listed are ineligible . The plan covers,  each year, enough employees to cover 410(b) and 401 (a)(26) each year. A new Exhibit is created for each plan year , and the document contains the yearly Exhibits. Are there any potential issues with this method? Thank you very much for your insights.

Hi

I hope all are well. If a pension  plan in the covered area, is under IRS audit and the IDR response due date falls between Sept 1,21 etc...would the plan now have an extension until.Jan to respond to the agents questions etc.?  Thank you for any help with this.

Recently deceased Age 75 IRA owner named estate as beneficiary, is there a way his wife can roll it to her IRA? The wife is the sole heir in the deceased's will. The death claim has not been paid to the estate yet, just waiting on a few documents.

Thank you.

Ray

I just want to make sure I'm reading all of this correctly.  Under the Hurricane Ida Relief it says:

The IRS also gives affected taxpayers until January 3, 2022 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 IRB 990 (Dec. 10, 2018), that are due to be performed on or after September 1, 2021, and before January 3, 2022, are postponed through January 3, 2022.

As part of Treas. Reg. § 301.7508A-1(c)(1) it says:

(c) Acts for which a period may be disregarded—(1) Acts performed by taxpayers. Paragraph (b) of this section applies to the following acts performed by affected taxpayers (as defined in paragraph (d)(1) of this section)—

(iii) Making contributions to a qualified retirement plan (within the meaning of section 4974(c)) under section 219(f)(3), 404(a)(6), 404(h)(1)(B), or 404(m)(2); making distributions under section 408(d)(4); recharacterizing contributions under section 408A(d)(6); or making a rollover under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3);

Paragraph (b) discusses the delayed deadline.  So does this mean contributions due by 9/15 are delayed to January 3? 

Thanks in advance everyone!

In 2020, a participant took a distribution and it was thought that she was 20% vested. However, in 2021 it was discovered that she should have actually been 40% vested. We've contacted the participant and she wants to do a distribution for the portion that incorrectly vested. I've done some research and it looks like the incorrectly forfeited amount must be adjusted for earnings (https://www.irs.gov/retirement-plans/plan-sponsor/fixing-common-plan-mistakes-vesting-errors-in-defined-contribution-plans).

My question is how to determine the earnings on the incorrectly forfeited amount, since the participant's balance was $0 after the distribution was taken?

Thanks!

Where do you indicate a deemed distribution due to loan default on 2020 Form 5500- Schedule H? Would it appear on line 2e(2) or line 2e(1)?

Scheduled to be published 9/15.

Includes audit waiver eligibility based on account balances rather than eligible participants.

https://www.federalregister.gov/public-inspection/2021-19714/annual-information-returnreports

Company A is 100% owned by Husband and has a 401k plan. His spouse works there but has no direct ownership, just the required family attribution. The spouse started her own business in 2020 and is doing so well that she would like to do a SEP for 2021. Husband has no interest in her company and does not work there.

Under section 1563 rules = attribution does not apply if all four of the following conditions are satisfied

1. Spouse does not hold direct ownership in the business

2. Spouse is not an employee and does not participate in the management of the business

3. Business income form passive investment does not exceed 50% of the gross income for the year; and

4 Owner's interest is not subject to disposition restrictions in favor of his/her spouse and the couple's minor children

Based on item 2 if she works and is paid by his company they don't meet all the conditions and thus would be considered a controlled group - correct?

Years ago we used to send a letter to the IRS when the name of a plan associated to a Trust ID number changes.  Is this still required?  To what address?

So hey, what if there's a first, vested, accrual (in my case, a cash balance credit) as of 12/31/2020 for the owner and no money's been put in the plan by his RBD of 4-1-2021?

And does the answer change if the plan was adopted before the RBD, such that "we knew this would be due...."

(I expect the RMD to be paid via an in-service distribution of his entire benefit so that he can use the DC method, too, and roll the rest to his IRA.  That's got me thinking about an interest adjustment for the late payment, too.)

Any thoughts appreciated.  thanks.

Oh wait, am I okay since the 4-1 date would have been the 2020 RMD which was based on $0 accrued benefits, and then at some point in 2021  we adjust for the new 2020 accrual?  Getting my DB/DC RMDs swirling in my brain.

-bri

I've always filed the Form 5500 on an accrual basis, but we've been taking over quite a few Plans that have been filing the Form 5500 on a cash basis.  Now I'm curious if there's a benefit to utilizing either method, or does it not really matter?

In these cases, would it be best to keep moving forward on a cash basis for consistency or would moving to an accrual basis be alright?

Thanks in advance (and as always, sorry for all the questions!)

Two situations: (i) the 401(k) plan provides for a segregation of the A/P's entitlement into a separate account; and, (ii) the 401(k) plan does not mention segregation into a separate account but seems to contemplate a direct rollover or distribution to the A/P.  

Question:  Is there any time period within which the A/P musttake a distribution or rollover?  I am looking at 1.409(a)(9)-8 Q/A-6(b)(2) and don't have a clue if it says what I think it says - that the A/P can leave the funds in a segregated account until the Participant reaches age 70-1/2.   

The language is: 

"(2) Distribution of the separate account allocated to an alternate payee pursuant to a QDRO will satisfy the requirements of section 401(a)(9)(A)(ii) if such account is to be distributed, beginning not later than the employee's required beginning date, over the life of the alternate payee (or over a period not extending beyond the life expectancy of the alternate payee). Also, if the plan permits the employee to elect whether distribution upon the death of the employee will be made in accordance with the 5-year rule in section 401(a)(9)(B)(ii) or the life expectancy rule in section 401(a)(9)(B)(iii) and (iv) pursuant to A-4(c) of § 1.401(a)(9)-3, such election is to be made only by the alternate payee for purposes of distributing the separate account allocated to the alternate payee pursuant to the QDRO. If the alternate payee dies after distribution of the separate account allocated to the alternate payee pursuant to a QDRO has begun (determined under A-6 of § 1.401(a)(9)-2) but before the employee dies, distribution of the remaining portion of that portion of the benefit allocated to the alternate payee must be made in accordance with the rules in § 1.401(a)(9)-5 or 1.401(a)(9)-6 for distributions during the life of the employee. Only after the death of the employee is the amount of the required minimum distribution determined in accordance with the rules of section 401(a)(9)(B)."

Thanks for any help.  

David

Can an employer use health FSA forfeitures to defray administrative expenses of other ERISA benefits (for example among many, pay heath plan TPA fees) without violating ERISA's "exclusive benefit" rule if the heath FSA and the other ERISA benefits are part of one ERISA "wrap plan"?  Assume that the plan document so provides and that the employer keeps all FSA and other employee contributions in its general assets in accordance with DOL guidance.  Also assume that there are different participants in each of the employer's ERISA benefits.

Thanks!

I have a client who wants to open a Solo 401(k) for his S corporation; He is a real estate agent and the S corporation is the entity that gets the agents portion of the real estate commission. However, he owns 33% interest in the brokerage firm that he sells out of (the brokerage firm is a partnership) and he owns this interest individually. The brokerage firm pays his S corporation the real estate sales commission when a property is sold. The brokerage firm has 3 employees. It is very common in real estate for real estate agents to be independent contractors and have their own entities separate from the brokerage firm that they represent. In this case though he has an ownership in both his real estate entity that he uses for houses he sells and he has ownership in the brokerage firm.

I have determined that there isn't an A-organization relationship because the S corporation doesn't have an ownership interest in the brokerage firm and vice versa. I also don't think there is a management group because the S Corporation doesn't get paid to provide management services to the brokerage firm or vice versa. 

I originally thought that this would have been a B organization with the S corporation being the B-org and the brokerage firm being the FSO until I read the following from the ERISA Outline Book:

• 1.a. Significant portion test. The B-Organization must derive a significant portion of its business from the performance of services for the FSO, or for the A-Organization(s) related to that FSO, or any combination of such organizations. Notice that the indirect service test under the A-Organization definition (i.e., regular association in providing service for third persons) is not applicable here. The services performed by the B-Organization must be for the FSO and/or A-Organization(s).

The underlined portion above makes me think that in order to be a B-organization the B-Org has to provide services exclusively to the FSO and not to third persons (like people who go to a real estate agent to help them buy/sell a property). I think the argument could be made that both the S corporation and the brokerage firm are providing services to third parties and are not providing services exclusively for/to each other. Based on the wording in the ERISA Outline Book this wouldn't be an affiliated service group and the owner would be okay to open a 401(k) plan that just covers the S corporation; he wouldn't have to consider the 3 employees that work for the brokerage firm in coverage testing. 

Does anyone else have any other thoughts? Would love to see anyone else's opinion on this. 

New user.  Appreciate the forum.  

EPCRS 2021-30 provides that for a 401(k) plan that does not satisfy § 401(k)(3) by applying the safe harbor contribution requirements of § 401(k)(12) or 401(k)(13), "...missed deferrals are determined by multiplying the actual deferral percentage for the year of exclusion..."  

The plan did not do a nondiscrim. test, and I am wondering: can we use a different calculation to correct this issue?  

Grammar edit