Hi

A hypothetical question.

Company A wants a DB plan starting in 2020 but they have filed their tax return on time without any extension. However, they have lots of monies and want to generate a required contribution for 2020 and deduct for 2021 tax year together with 2021 deduction (assume there is enough room for both under 404(o).

What do you think?

Thanks

If I understand the current rules correctly, if I retire at age 62, I can use my HSA funds to pay COBRA health insurance premiums, but after that (18 months) I cannot without paying taxes on the withdrawal.  Seems like a rule that wasn't very well thought out.  Is this correct?  Anyone else think this is unfair?

I have a client whose employee was fired & convicted of embezzling company funds. There is still an outstanding restitution amount.  Employee has a 100% vested benefit in the plan. It is a Safe Harbor Plan so employer contributions (match) are 100% vested. Anyone know I there is of a way to forfeit the employer portion of the benefit?  I am almost 100% sure there is not. 

I am trying to determine Top Heavy (TH) obligations in a safe harbor (SH) plan for an employer who has multiple plans.

The employer (ER) has both union employees and non-union employees. The ER contributes to 2 union plans (DC & DB) under a collective bargaining agreement. The ER also sponsors a "frozen" ESOP plan in which both union and non-union employees are eligible. And, the ER has a safe harbor 401k, using a SH match formula, for non-union employees. Historically, only non-union employees have been Key employees. Last year was the first year in which a union employee personally owned enough company stock (outside of the ESOP) and earned enough salary to be a Key employee. Based on my understanding of the TH regs, an ER must aggregate all plans in which there is a Key employee. And, based on my understanding, this would include multiemployer, collectively bargained plans that include a Key employee. To confuse matters a little, the regs (1.416-1, T-3) seem to indicate that all of the plans must be aggregated to determine TH status, BUT the TH rules do not apply to union employees if benefits are subject to collective bargaining. So, I'm assuming that even if the plans are TH, I do not need to provide TH minimum benefits to any union employees, only non-union employees. Since the ESOP is frozen, and all of my non-union employees are in the SH plan, I am focused on TH obligations, if any, in the SH plan. 

Here's my first problem, the union plans do not have any sub-accounting. The account balances/accrued benefits for union employees include amounts earned/accrued with OTHER employers. Logically, it seems wrong to use this data, as it could skew the TH results in one direction or another. The Internal Revenue Manual says an employer can use a simplified method to compute TH ratios (overestimate Key, underestimate non-key). Let's say we do this, resulting in the plans being TH (on purpose!). QUESTION: If the plans are TH, and I do not need to provide TH benefits to union employees, and my non-union employees are participating in a SH match plan, do I have any obligation to provide additional TH benefits to non-union employees who don't get any SH match??? The ER is not making any additional contributions to the SH plan other than SH match. But the ER is making additional contributions to other plans, namely the 2 union plans: union plans that are part of the required TH aggregation group, but benefit employees who are not required to get TH benefits. 

For the ultimate conservative approach, could I suggest the SH plan switch to a 3% NEC? Or suggest that they simply provide all non-union EE's with a minimum 3% benefit each year?

I'm just not sure how I could ever prove that these plans, in aggregate, are TH or not TH. I'm wondering if the best approach is to simply assume the plans ARE TH. Any thoughts you have would be appreciated. Thank you.  

To present a hypothetical situation, Myra R----- works at Entity W and enters retirement plan 3. She later transitions to work at Entity T, an entity within the controlled group in which Entity W occurs. Entity T has not endorsed plan 3; she attains normal retirement age while at Entity T. To prevent ambiguity, Myra R----- transitioned from Entity W prior to having attained unequivocal vesting, though with a sufficient balance to thwart § 401(a)(31)(B) distributions.  Must she receive full vesting while employed at Entity T?   

Here are the details:

Calendar year plan.

2019 MRC before ARP Relief = $1,000,000

$200,000 quarterly contribution requirement satisfied by credit balance election on 4/15/2019. Remaining contributions satisfied timely with cash, but after 4/15/2019. 

ARP shortfall relief is elected for 2019 plan year reducing MRC to $500,000. New quarterly contribution = $112,500. The sponsor wants to revoke the original election to apply credit balance per guidance on ARP relief. Since all contributions for 2019 are after the first quarterly deadline, would revoking the prior election result in a later quarterly as of 4/15/2019 in the amount of $112,500? I didn't see any relief in Rev Notice 2021-48 but this seems like a ridiculous result - which might actually make it perfectly in line with everything else related to credit balance. 

Hi, 

One of the 401k plans that is terminating, the plan sponsor has a huge balance in the forfeiture account.  The plan document does not states if the balance in the forfeiture can be re-allocated to the eligible participants.  I believe they can have the funds re-allocated however will this require a plan amendment since the plan document does not states anything about this.  I thought IRS permits re-allocation for terminating plans isn't?

Thanks 

Plan has the standard force-out of terminated participants option:  under $1,000 cashout, and under $5,000 roll to an IRA.  Plan is ongoing, not terminating.

If the plan administrator cannot locate someone with less than $1,000 can they roll the money to an IRA and let the new custodian work it out?  This is assuming the PA has satisfied her due diligence by sending mail to last known address and subsequently sent mail to a more recent address obtained via commercial means.  All attempts resulted in returned mail.

What happens is the mail is not returned, but the PA has reason to believe the participant is not at any of the addresses available through commercial investigation?  I guess the people living there now are just throwing away any correspondence to the participant at that address.

I have a current year tested plan with 3 HCEs, no ownership, and a new hire that will become an HCE next year but entered this year with no deferrals. The NHCE can be classified as otherwise excludable since it's immediate entry. Plan does not allow for top paid group. All 3 HCEs basically maxed deferrals.

Can the plan automatically pass ADP testing under the non-excludable participants since there were not any NHCEs or would the non-excludable participants calculation be 0% HCE max as well?

TIA

I know that the Safe Harbor isn't mandatory for the Highly Compensated Employees, but could the client make a lesser match for those people (say 1% to all HCE and the typical 100% of the first 3% + 50% of the next 2% to the Non-Highly)?  Basically the client doesn't have the cashflow to accomodate the contribution for all of the highly, but they want to make something to them.

It's not an issue we've run into before so I wanted to be sure.  Thanks!

A Plan failed to timely file Form 5500-SF for Plan Years 2018 and 2019 (12-31 Plan Year Ended) until July 2021.  Upon filing the returns, the Plan Sponsor receives notice from the IRS of penalties for failing to file for those years.

My question is related to relief from penalties under DOL.  I know that the Plan is not yet disqualified from relief under DFVCP, however what if the delinquent returns have already been filed before applying for relief under DFVCP?  Should amended returns be refiled showing the box labeled “DFVC program” located in Part I, Line D of the Form 5500-SF checked? 

For sponsors who have bond coverage greater than statutory limit of $500,000, I'm curious if 5500's are generally prepared with the actual coverage amount or the higher amount?

Does it matter? Not necessarily for audit purposes, but it does matter when the 5500 signer cares.

Sorry to be a traditionalist, but I don't think my kids deserve "participation" trophies (you need to actually win for a trophy!), and I wasn't aware that it has become acceptable to list every single designation you've ever earned, especially where they are requisites of another higher-level designation you've earned, ie Chadsworth T. Snobbyfellow, CPC, QPA, QKC, QKA, RPF.  After all, Dr.'s don't list their undergraduate degrees (do you really want to know that your trauma surgeon was a Journalism major?), and neither do attorneys or other higher-education professionals.  Since these are industry-specific, and really only within the industry because Plan Sponsors don't know or care what they mean, who do these people believe they're supposed to be impressing?  And why would an EA bother with listing any of them??

Here is a new one for me.

Brand new CB plan. It was confirmed that 50k was deposited in March 2021. Prepared all certifications accordingly (not filed the 5500 yet).

I just got a follow up statement showing a withdrawal of 30k in April 2021. Was never discussed with me not disclosed. Does not affect the MRC so it is good on that end. Does not affect 404o so no issue with deductibility.

Anyone had experience like this and what is the correct course of action here? I want to make sure that I go on record with them about the penalties, if any. I also want to let them know, very sternly, that this is not a bank account, once in, stays in.

Already starting on wrong foot, time to fire the client? Already becoming a liability.

Thank you,

So a small employer (1 HCE and 4 HCEs) has a SHM plan. we take over tpa work and discover they are a controlled group with another entity with no plan (1 HCE and 2 NHCEs). the hce is the same person in both scenarios. So now their nice and simple safe harbor plan fails coverage.  

we can pass coverage using ABT with some QNECs (this option is reserved to be used whenever needed). But, the fail-safe in the document is to add excluded otherwise eligible employees until it passes. Cannot really find anything definitive on whether it is permissible to add a participating employer in this scenario. 

the qnec to pass abt is the cheaper option but still good to know what the friday morning experts of benefitslink think.

thanks 

Plan set up beginning of last year with a certain definition of compensation.

On payroll, a different definition of compensation was used.

To what extent can plan be amended retroactively to match what has been done in practice (ie self-correction)?

Hi

DB plan with life insurance that has cash value and 5500-EZ filing.

Looking at instructions for 2020 5500EZ/SF. The wording on the instructions is " an insurance company qualified to do business under the laws of a state e.g. investment contracts with insurance companies". Also from 29 CFR 2520.103-1(c)(2)(ii)(C) "investment and annuity contracts issued by any insurance company"

I remember a while back instructions were specific about inclusions of insurance cash value on the 5500 forms.

Do I need to include the cash value?

Thank you

Still new to ASGs and want to make sure I fully understand the rule. Consider this example from IRS publication on Controlled and affiliated service groups:

Allen Averett, a doctor, is incorporated as Allen Averett, P.C. and this professional corporation is a partner in the Butler Surgical Group. Allen Averett and Allen Averett, P.C. are regularly associated with the Butler Surgical Group in performing services for third parties.

The Butler Surgical Group is an FSO. Allen Averett, P.C. is an A-Org because it is a partner in the medical group and is regularly associated with the Butler Surgical Group to perform services for third parties.

Accordingly, Allen Averett, P.C. and the Butler Surgical Group would constitute an affiliated service group.

My scenario:

Individual owns 25% of medical practice (S Corp). In 2019, the individual created a SMLLC which provides similar services to a hospital. The initial contract was with the medical practice for the individual's services and the income was paid to the medical practice. As the medical practice was essentially just a flow through, the contract was renewed with the SMLLC.

This would not be an affiliated service group because the SMLLC is not the shareholder in the medical practice and the individual is providing services as an employee.

Any guidance would be much appreciated. Thanks.
 

An employee made a 5% deferral rate election effective January 1, 2020; however, due to a mistake in plan operation, this 5% deferral rate was never implemented. This would likely be classified as the "failure to implement an employee's election" for an entire plan year as described in Appendix A.05(5)(a) of Revenue Procedure 2021-30. The Rev Proc states that:

"...the Plan Sponsor must make a QNEC to the plan on behalf of the employee to replace the “missed deferral opportunity.” The missed deferral opportunity is equal to 50 percent of the employee’s “missed deferral.” The missed deferral is determined by multiplying the employee’s elected deferral percentage by the employee’s compensation."

The plan sponsor normally allows employees to make 401(k) contributions on compensation in excess of the 401(a)(17) compensation limit of $285,000 for the 2020 year (as permitted by IRS Employee Plan News Issue 2012-1). The employee's compensation for the 2020 plan year was $340,000. My question is....is the "compensation" used in calculating the missed deferral $285,000 or $340,000?

As best as I can tell, the Rev Proc does not say that compensation under the corrections in Appendix A or B must limited to the 401(a)(17) limit, and quite frankly, if the plan had been operated correctly, the participant would have had the 5% deferral rate applied to the full $340,000 of compensation. Thoughts?

DB plan was closed to new entrants and partially frozen several years ago. Employees meeting service requirements continued to accrue benefits and accruals were frozen for all other employees. Plan sponsor wants to pay out benefits to vested termed participants and active frozen participants. Can they do a spin off termination and include active employees with frozen benefits in the spun off terminating plan? 

I can't find anything either way. Thanks!