Hi,

An owner only DB Plan (one participant the owner) elected a 100% Joint & Survivor (spouse) annuity and stared taking benefits (RMD). After 11 year of taking benefits, his spouse passed away. 1. He cannot change his election, even though his survivor passed away since he already started taking benefits. Correct?  2. The plan is very overfunded , what will happen in the event of the passing of the participant since he cannot change his election of the survivor? Will the assets revert to the estate and the estate will owe the excise tax for the overfunding reversion. 3. Can the estate sell the overfunded plan to an underfunded plan to avoid the excise tax? Thank you very much for any insights on this.

Group:

Plan is on an off-calendar plan year 10/1/2020 - 09/30/2021

Participant defers $34,500 during the plan year - divided as follows:  18,000 from 10/1/ through 12/31/2020 & 16,500 from 01/01/2021 through March 31, 2021 when he quit.

Does he have a 402g issue or is he ok.  He was not in another plan before this one during 2020.  However, we do not know what he did after he quit.  Thoughts??

Hi

First time doing a PBGC termination with excess assets being transferred to a qualified replacement plan - QRP. Just cannot seem to figure out the following:

Here is a breakdown

All participants:                          $3,000,000 - all rolled over to the QRP - existing DC plan - not relevant if consensual or not

Excess (overfunded portion):   $   300,000 - transferred to the QRP

Total DB distribution:                $3,300,000 - all to QRP

How do you show the $300,000 on 501?

Thank you

Hi, 

A terminating plan the plan sponsor terminated the plan as of 09/05/2021.  All contribution were stopped, the termination activity stated as of the term date were all part status every changed to term in the plan and everyone became 100% vested and also  communication was sent out to the part's about the term part and asking them to take action on their account balance.  The forced distribution is set for Dec-2021, however now they advisor has got back asking with the term date can be changed to a future date 10/15/2021 since they would want to allow contribution for few of they employees.  

Can the term date be changed now and contribution be allowed?  what will be the repercussion.  

We were the TPA on this one person plan, and the owner stopped paying our invoices.  We went back and forth a couple of times over it, he rolled his money out, we told him we wouldn't prepare the final 5500 until he paid us per our client service agreement, and then he never responded.

Just found out that he recently passed away.  So, clearly, we're not getting paid.  But... just wondering... what is going to happen with the 5500?  At some point, they'll figure out that a filing is missing and send a letter to the business that is no longer there.  The guy is dead.  Does the IRS have the authority to levy any penalties against a spouse, estate, heirs, etc.?  It's more of a morbid curiosity at this point.

Hello, newbie here (but long time reader 🙂)

I've run into a scenario where individuals were matched on Catch-up contributions when they should not have been. This has happened for a couple of years and was recently discovered when investigating another issue. Anyways, the good part is that the payroll system has a cap on the match so no one was overmatched. We perform a true up every plan year (early the following the year) and deposit true up amounts early in the following year for the prior plan year. 

My concern is that our plan document explicitly states match is not calculated on any catch-up contributions. While no one is getting more match than they are entitled to, what does this mean from a compliance standpoint? Amounts matched on the catch up should really be included in their true up. These are folks who already maxed out at 19,500 and their match should have stopped (and then that's where the true up comes in to play)...but instead the payroll system started calculating match off of their catch up, which, per our plan documents, is not an eligible source for match.

Any ideas on if we need to correct this and what that correction might look like? Thanks!

While I understand that plan participants are required to receive an SPD within 90 days of becoming a plan participant, where is the support under IRS or DOL regs. that employees eligible to participate must also receive the SPD even if they never become plan participants?

Ongoing DB plan fails to limit distribution to restricted employee (HCE benefitting under plan) as per 1.401(a)(4)-5(b)(1) and fails to obtain secured repayment obligation per Rev. Rule. 92-76. Occurred during 2019 plan year. As to correcting this, it seems like the choices are either contribute so that assets equal/exceed 110% of current liabilities, and/or obtain a properly secured repayment arrangement. But these would not reach back to when the violation occurred -- they'd be done currently (of course, no harm in last 20 months so no foul?). Any thoughts? Also, probably needs to be VCP -- Thoughts are appreciated.

Brain cramp! Assume calendar year MP plan. Client wants to convert to a PS plan mid-year. Let's say July 1. 204(h) notice is done timely. Mus the AMENDMENT be signed by July 1, or can it be signed by December 31, as long as the 204(h) notice was provided timely?

Hello,

This is a complicated question, and I am hoping for some help. I was recently laid off from a company with an outstanding loan balance against my 401k. The 401k, was originally 2 different 401ks that my company merged together. Now, before the merger is when I took the loan. The loan amount was around 16,000 and all from account A. Account B had no loan against it and was worth about 11k at the time of the 401k merge to account C. 

Now, when I got account C it started off by saying I had a vested amount of 11k and an outstanding loan of 16k. Over the next year as I paid back the loan and the investments the loan balance the vested balance shifted. Loan balance got smaller and between contributions and earnings my vested balance increased. Now the company is trying to tell me that my vested balance, which it has listed as 18k needs to be offset by the 12k I owe, but that doesn't feel right as all the loan repayments, earnings, and other money that was not involved with the original loan had accumulated to the 18k, and somewhere on the site I saw a spot that said total account balance was 30k. Am I confused? Or are they trying to yank me?

Hi All,

Our employee came to me, indicating her parents are going through open enrollment effective for changes 11/1/2021.

Our employee (under age 26) is under her parents plan currently. Her parents are considering dropping her since she can get medical though us.

Our open enrollment starts in Nov effective 1/1/2022

Can we allow her to add medical due to losing coverage under her parents plan effective 11/1/2021? She will not be be 26 until next Sept.

I believe the answer is Yes due to being a QLE

I know COVID had muddied the waters a bit during 2020 and for health FSA extended relief again for 2021 regarding QLE’s. We did adopt these enhancements due to COVID for both 2020 and 2021.

Your input/comments would be appreciated.

Regards,

Lexy

Does anyone have experience filing Form 5500 without a signed SB?  Could you let me know what happen in your situation (i.e. penalties paid, Form rejected/accepted).

Thanks in advance.

I am being asked if this person's plan can have total assets of only their pension loan.  Here is what I know.

Woman intended to start a business (did actually) and opened a 401(k) plan.  She rolled into the plan $200,000+ worth of IRA and pension money from her previous employer.  She took a $50,000 loan and was making quarterly payments.  COVID hit and her business went nowhere.  She ended up rolling her IRA and previous employer plan money out and into an IRA (felt it was safer).  She ended up stopping her loan payments as well so all that is in the plan is the loan balance.  

I told her that if she wanted to close the plan her loan would be a deemed distribution.  She does not want that.  Can it go along with only the loan as an asset?

Here is our situation:

Company A sponsors a NQDC Plan.  It later split into Company A and Company B.  Several years ago, Company B was sold (no longer related to Company A), but the sale did not trigger payments under the NQDC Plan due to the "same desk" rule.  However, now we have a problem where Company A is sponsoring a plan that still contains Company B employees.  Company A has to rely on Company B for things like informing when one of the Company B participants has a separation from service.

Company A would like to divide the plan and send the Company B portion to Company B.  At that point, Company A doesn't care what happens to the Company B portion -- Company B can administer the plan itself, or it can terminate it.

Obviously this should have been done at the time Company B was sold, but it wasn't.  So, is there any problem with doing this?  Since Company B is the true service recipient here, it seems legit.  But I can also see the potential for abuse here -- giving a NQDC to a different company to terminate so other plans aren't aggregated with it and don't also have to be terminated.  Has anyone run into this issue before or have any advice?

Every company I'm aware of allows employees to participate in their Health FSA at the same time they become eligible for their medical plan.

Apparently, there is a company that only allows participation in the FSA effective at the start of the enrollment period after being hired, ie anyone hired in current plan year can enter the Medical plan (if eligible) but their FSA start date is 1/1 of next year.

Is there any reason this is not allowed?

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