There is a rumor going around that those disclosures are due by 6/30/2022.  Is that correct, and how is that even possible?  Some of those plans we don;t get census data in a timely manner, etc. so may not be in a position to issue statements until say October 14th.

Thoughts?

This post is intended to gather the groups thoughts about auto enrollment to pretax or Roth. Let's assume the document allows for either choice. 

Among our clients who auto enroll, 100% auto enroll with pretax. At the time of making the decision to auto enroll to pretax, there is no analysis done to determine if it should be pretax or Roth. The decision is always made solely based on the idea that pretax is most common and therefore must be the right decision. I feel like no one wants to be the first one sued over a Roth default. Even though pretax is the most common default and little thought goes into the decision, a decision is still being made by the sponsor to determine that pretax is better and more prudent than a Roth default. Either choice impacts the participants tax situation. 

Does anyone see auto enrollment to Roth among your clients? I think there is a valid argument to say Roth auto enrollment may be better for certain employers. Are there any publications that suggest auto enrolling to Roth is not a prudent decision?

Thanks for your thoughts.

Hi, 

I have a plan that is terminating due to asset acquisition, the sale date was 12/31/2021 however they had a transactional service agreement due to which the participants are contributing until 04/30/2022 and on 05/01/2022 there will be part of the acquiring company plan.  The termination date will be 04/30/2022, since the part are still contributing into the plan we will not be able to start the termination process.  When there is a TSA I thoughts its only for administration reason but did not know the part could contribute into the plan, can the contribution continue? 

Thanks 

Accountant is checking as to whether his client could have taken COVID distributions from his SEP as well as from his defined benefit plan.

Distributions both taken prior to 12/31/2021.

Client was talking about taking a plan loan, which we thought never materialized; I can only assume the client had taken a loan prior to September 30th and has not started repaying.

Too late to do anything about it now.

The EGTRRA volume submitter DB plan had a failsafe provision that covered both 410(b) and 401(a)(26) failures. The PPA document only addressed 410(b). I couldn't find any guidance from the IRS in the Cumulative List that addressed this change. Does anyone have any cites or guidance as to why the reference to 401(a)(26) was eliminated from the VS document?

Following Vanguard’s announcements about renaming and reorganizing Vanguard Prime Money Market Fund as Vanguard Cash Reserves Federal Money Market Fund, a recordkeeper and the custodian it works with processed the changes for their retirement plan customers—without advance notice to those plan sponsors.

A retirement plan’s sponsor/administrator received no prospectus or other fund document from any Vanguard service provider. (That happens because a fund’s duty is to deliver a document to its record shareholder. Even if a fund might volunteer to send some communications to beneficial owners, often a fund cannot do so because it might lack names and addresses for beneficial owners.)

About this reorganization of a Vanguard fund, neither the custodian nor the recordkeeper asked for their customer’s approval or acceptance, not even as an implied-assent “unless you instruct us otherwise” email. Further, neither the custodian nor the recordkeeper did anything even to inform a plan’s sponsor/administrator about the change before processing it. (Arguably, a diligent fiduciary ought to have asked a question after reading the first employer report that showed the new fund name.)

I recognize the practical needs for a recordkeeper and custodian to follow a fund’s change (if the plan’s sponsor/administrator has not delivered a different instruction).

But is it usual for a recordkeeper to process a fund’s change with no advance notice?

Is this the common practice for all or most recordkeepers? Or do some provide more service?

If a recordkeeper’s standard service does not include informing employers about fund changes, in what circumstances is it feasible to negotiate an extra service?

Section 318 attribution applies for determining ownership for ASG and HCE purposes.  Can a child be an HCE through attribution if the child is not an employee?

Example:  Company A is owned 95% by father, 5% by unrelated individual.  Company B is owned 100% by adult son.  Company A and Company B are both service organizations.  Company B receives 80% of revenue from Company A.  Child is not an employee of Company A.

Under the B-org definition of ASG, child is deemed a more-than-10% owner of Company A (the FSO) but is he deemed an HCE of Company A?  He is deemed a 5% owner for HCE purposes but he's not an employee. 

All other requirements of B-org are met.  Is there an ASG?

Thanks for your comments.

Plan is effective 1/1/21, but deferrals are effective 7/1/21.

per doc, match is cal'd on a plan year basis.

Do we calculate the match using all the comp, or just the comp after 7/1?

Quick question:  Is my understanding that the annual additions limit is a "per employer" limit such that an individual may receive contributions up to the annual additions limits in two different plans of two different, unrelated employers in the same year?  If so, does that change at all if the individual is a partner in two partnerships and so is self-employed?

Situation involves a lawyer who was a partner in one law firm for 3/4 of 2021 and had enough income there to receive a profit sharing contribution and 401(k) deferrals equal to the 2021 annual addition limit under the terms of Law Firm 1's plan.  Lawyer then moved to a second, unrelated law firm and had significant compensation there--not enough comp to receive full profit sharing under Law Firm 2's profit sharing plan but still a significant profit sharing contribution--and wants to receive profit sharing contributions across both plans.  Lawyer realizes the 401(k) elective deferral limit is per individual and so is capped across both plans (did not participate in 401(k) at Law Firm 2) but is there any similar concern with the profit sharing contributions being capped or can she receive all the Law Firm 2 profit sharing to which she is entitled even though already hit the annual additions limit at Law Firm 1?

Thanks.

PS Plan has no allocation requirements for contribution. Participant terminates in December of 2020, has eligible post-severance comp the next year (2021) so receives 2021 allocation, but has zero hours.

Would you include in coverage testing for 2021, or toss out? I'd include - I don't see how this meets the 410(b) requirements for the term w/<500 hour exclusion. A bit of discussion going on with this question.

Thanks for any opinions.

Hi

A one person employer has a 401k plan and for 2021 already put in max deferral and PS and also filed the corporate tax return by 3/15/2022.

Now wants to set up a DB plan for 2021 but take the deduction in 2022 (given the level of 2021 salary, the 31% rule will yield only 9k of DB maximum for 2021 but 2022 will have a high enough cushion to have 2021 and 2022 deduction).

If the corporate return is filed without any extension, too late to amend for 2021 and have a low DB deduction as well as adjusting any other deductions, correct?

If filed with extension, can he go back and redo the deductions (2022 will be an issue as well but easier to deal with).

Thank you

Hi

A question for someone.

I inherited an IRA from my parent. Can I roll over this IRA into my profit sharing plan?

Thank you

Let's say there is a problem with a 401k plan and we come up with a fair correction method not listed in EPCRS.  Is automatically ineligible for SCP treatmnt out of hand because its not listed?  Or if we went with this outside-the-box-correction, is the correction acceptable assuming an IRS auditor thinks it was reasonable and justified.

I don't want this question to be distracted by a particular fact pattern.  My question really is just is there flexibility for SCP corrections not specifically delineated (in my case the issue is that the fact pattern is not listed in EPCRS).  I completely understand that there would always be risk under audit that the auditor could find fault.  This correction involves 1 person and is therefore not remotely in the zone for a costly VCP filing.

I have an IRA which was entirely funded with embezzled funds.  The employee embezzled funds from the employer into the er 401(k).  The 401(k) distributed the account into an IRA.  The IRA was distributed to the account owner.  (The embezzlement information did not come to light until after these events.)  I am thinking the appropriate code for the 1099-R distribution from the IRA is code 5 Prohibited Transaction as the account was funded by the employee who embezzled funds.  The gross distribution would be the amount distributed,, the taxable amount would be the earnings on the distributed funds.

My thoughts are that it would be ok and be the closest explanation as to why taxes and penalty taxes are not being withheld?

What do you think?

My understanding is for self directed 401(k) accounts - that the Income illustrations must be reflected on the June 30th statement.  What are administration firms doing that have plans that utilize brokerage accounts?  I do not believe broker dealers and going to show the illustrations and the simple answer is to make sure the compliance reporting and statements are prepared before June 30th (for those plans not utilizing a nice recordkeeping platform).  However, that might not be that simple for my firm to accommodate (a. need to identify these particular plans, b.  document restatements due) - Just wondering if anyone had any creative thoughts they are willing to share, heard if it might get extended, would doing by 10/15 in these cases be considered okay?, etc. Thanks in advance for any comments. 

Can a service provider agree to pay fees that would have otherwise been charged by a different provider and taken from plan assets?

I have just inherited a new client, and, in looking at their documents, there was never a PPA restatement filed before April 30, 2016; the last document that I was provided was the EGTRRA restatement.

The client searched their records and they agree that the PPA restatement was never prepared, and have authorized the preparation of the PPA document and the VCP filing.

In 35 years in this business, I've never had to do a VCP filing, thankfully. My only question on this is: What should be the effective date of the PPA restatement? Is it something before 4/30/2016 (like 1/1/16), or should it be current, say 1/1/2022?

Thanks for any replies.

Is there a minimum 402g excess that does not require the Plan Administrator to provide a notice to the participant regarding making a withholding election?  We have a 402g excess of $12.  

Thank you.

A Money Purchase Plan invested in art work that has appreciated in value. The art work will be sold by the Plan in state. Typically when art wok is sold within state, sales tax must be paid. Are there any justifications for to a qualified ERISA plan being exempt from state sales tax upon sale of a plan asset, art work? I don't see an ERISA preemption argument since the art work will leave the plan and be taxed as a non-plan asset when distributed and sold. 

What's the best way to word the definition of the pay credit in a Cash Balance Plan, if you want to allow it to rise each year?  I'm not an actuary, but I've seen charts that show limitations for Cash Balance contributions based on their age (like a 40-year old may only be able to contribution $100,000).

I know it's not the 415 limitation, so just trying to figure out the best way.

I apologize for all of the questions, I'm just trying to learn more about these plans so I can be more helpful to the people in my office.

Thanks in advance!