Employer needs to make a SEP-IRA contribution, and an employee is unable to open an account to receive her contribution because she could be undocumented, and that's blocking custodians from opening an account for her. Any idea what the employer should do if a custodian won't open an account to receive the contribution?

A parent company plan sponsor has affiliates that are part of an affiliated group as defined by the Code. The plan document states that employees of the affiliates can participate in the parent company plan as long as the affiliated companies adopt the parent's plan. Unfortunately, employees of the affiliates participate in the parent's plan, but the affiliates never adopted the plan, and the plan is now under investigation by the IRS. My proposed solution is that SCP allows for self correction of insignificant operational errors even if the plan is under investigation. I can make a good argument that this is an operational error since the plan document was not followed, and that its insignificant since it only involves a handful of employees and the dollar amounts involved are very small. Thus, I propose having the affiliates adopt the parent plan and such adoption would be dated and signed currently by the affiliates, but it would be drafted to have retroactive effect back to the date the affiliated employees started to participate in the plan. Any comments or concerns with this approach using SCP?  

Have a new client where they have both a Cash Balance and Profit Sharing Plan:

• Profit Sharing is immediate entry
• Cash Balance is 21 & 1 (1/1 & 7/1 entry dates)

So we have people eligible for the Profit Sharing and not the Cash Balance.  When we do the testing for both plans (like the Rate Groups), do we include the people who are in just the Profit Sharing Plan?  I just wanted to confirm, because those profit sharing contributions significantly help the testing.

Thanks in advance!

I'm trying to assess what services a benefits manager needs from their benefits broker.  For instance, do you have them provide employee manual help, vendor evaluations and compliance updates?  Of course, help with health insurance design, claims assistance and renewals is requisite but what other services are important to you that your benefits broker provides?  I would welcome a call to discuss your thoughts.  

I have a stubborn married person who wants to retroactively rescind his election of a J&S annuity to get a lump sum.  Obviously the answer is no, no, a thousand times no, but I am having trouble getting through to him.  Any suggestions?

We recently took over  CB/DC plans and discovered that they have a large number of leased employees.  In looking at the history of these leased employees - they work substantially full-time and have been there over a year.  The plans currently exclude leased employees - but as we all know they need to be counted in our coverage testing.  The DC document has fail safe language - so question number one - are we then precluded from performing the Average Benefits Test to satisfy 410(b) - my initial thought is yes (however I'm not sure how it works with the CB plan also failing).  Does the corrective measure then mean we need to begin to bring in the leased employees based on the fail safe criteria until such time we pass the ratio percentage test?  IF we are able to go to the ABT to pass coverage - it looks like we need to really ramp up the level of contributions people are getting - to the point where some NHCE (non-leased) are getting almost 40% of their compensation in an allocation.  The other thought is we could do a corrective amendment to bring in the people (leased) needed to pass the ABT.  

Sadly, it appears that the prior TPA did not do anything with respect to the leased employees.  Population is roughly 18 employees - of which 4 are highly - 5 haven't met the eligibility requirements and they have 13 leased employees that must be counted in the testing as not benefiting.  

Any thoughts?  I feel terrible for the client as they have had this relationship with the leased employees for years - and it's now just being addressed. 

A school with 300 FTEs hires 90 summer counsellors each year. The Plan for the 300 FTEs does not require a waiting period, or minimum hours, or last day of the year employment. Fully vested contributions are made with each payroll period. 

Counsellors are excluded as a job class. They work no more than 400 hours a year and are terminated at the end of each season. 

Am I correct the counsellors are excludible employees simply because they are terminated in the year with less than 500 hours?

I don't believe it matters that the Plan for the FTEs does not require hours or last day of the year employment. 

Thoughts?

Accountant has a client who is not a resident of the US, but has income paid to her LLC.  She is in this country more than 90 days each year.

Can she set up a qualified plan for the LLC income.

Here is a question that I have regarding a plan document.

I took over a couple of plans as the TPA from a partner who retired back in 2016 from our firm. When the partner retired, they provided me the documents for the plans. They are all EGTRRA documents, with dates in 2009. The partner utilized the Relius volume submitter document for the restatement. They were filed as individually designed plans, and have a determination letter from the IRS, under the company name. I also have executed 415 and PPA amendments. One of the companies is in the process of being sold, and the purchasing company is looking for a copy of the PPA restatement for the plan. I have searched our company archives and can find no mention of a PPA restatement. 

I have reached out to Relius to see if there is a PPA restatement completed before the 4/30/2016 deadline. My question is was a PPA restatement necessary, as the plan was submitted as individually designed? I only work with Prototype plans, and have never utilized a volume submitter plan that was submitted to the IRS as an individually designed plan. Sorry for this really dumb question, but I truly have no idea.

Thanks for any replies.

Are options counted for purposes of determining key employees under the 1% owners prong?

The regulation says a 1% owner is any employee who owns “more than 1 percent of the value of the outstanding stock of the corporation or stock possessing more than 1 percent of the total combined voting power of all stock of the corporation.” Treas. Reg. §1.416-1 T-16.  Assuming the options don't have voting rights, to me this says you don't count options as they're not outstanding stock. Is there any authority that says otherwise?  Perhaps if the options are fully vested the employee might own 1 percent of the value?

Hi

Friday late, fried brain, cannot think straight. Checking a design for someone.

401k+SH match+PS are the provisions. Plan is top heavy.

401k+SH has age 21 and no service for eligibility.

PS has 21/1. The sponsor will be making a PS contribution (all in their own group). All satisfying the eligibility get the gateway (a little over 3%).

I have 2 participants employed in 2021 (both worked over 1000 hours in 2021) and entered the plan in 2021 and also deferred (I have 5 others employed late 2020 or in 2021 but did not defer). So, they got the SH match. But they do not get PS/gateway as they are otherwise excludable employees. The other 5 who did not defer got no match and no PS/gateway.

Am I correct?

Thank you

Last summer a participant took a maximum loan equal to 50% of their VAB, to be set up for repayments via payroll deductions twice a month.  No repayments have been made to date.  The outstanding balance of the loan went over 50% of the VAB once the first repayment was missed due to accrued interest, though eventually it went down below 50% due to continued deferrals.  It's a PT if a loan for an amount exceeding 50% is taken and a Form 5330 should be filed for the excess - is it also a PT if the loan's initial amount is OK but the 50% max is breached due to accrued interest from non-payment?  If this is a PT, does a 5330 need to be filed even if the OB went below 50% before the end of the year?  Hopefully not, since the excise tax in this case would be far less than $100.

It seems that section 6.07(3)(d) of Rev. Proc. 2021-30 permits self-correction of loans whose IRS maximum cure period has expired (this occurred on this loan 12/31/21) if the participant pays a lump sum for the missed payments with interest to bring the loan current.  So it appears the loan becoming a deemed distribution won't be an issue if the participant does this, even if it happens in the following year.      

I suspect that the employer neglected to set up the automatic payroll deductions for the repayments, and I remember hearing that the employer may be liable for some of the repayments?  Does anyone have any info on this, or know where I can read about it?        

It's surprising to see that some of the major recordkeepers do not add interest for missed payments onto outstanding loan balances - I thought they were required to do so.  

Question is relating to a defined contribution plan.  Have a client who passed away in 2018, after his required beginning date.  He had a spousal beneficiary who has dutifully been taking RMDs since his passing.  Plan Document states that we established her annuity factor in the year that he died, then we reduce the factor by 1 every year moving forward.

Question that I can't seem to find an answer to is if and/or how the new life expectancy tables will affect her.  On the current tables, her annuity factor at age 60 (when he passed) would be 27.1, but on the old table which the RMDs have been calculated previously, it was 25.2.  Do we just continue subtracting 1 from 25.2 for every year that passed, or can we use the new tables, and subtract 1 from 27.1 for each year that has passed, and calculate based on that?  Basically, am I going to use 21.2 or 23.1 as my factor for 2022 RMD?

Any citations of code would be greatly appreciated, and I looked through Pubs 560 and 575, and can't find an explicit answer.  Haven't checked 1-401(a)(9) yet, as I assumed guidance would be forthcoming.

Plan custodian distributed participant's account upon his termination of employment and withheld required FIT, issued him a 1099.  Participant was a union employee and filed grievance to be re-hired, which he won.  Now he has been rehired and wants to put his money back in the plan, including the FIT withheld.  The only guidance I can find says that the employer has to "repay" the FIT withheld into the participant's account and then apply for a refund from the IRS.  Thoughts?

Sole proprietor with no employees, business started in 2018, plan effective in 2018. This is a takeover plan. Using made up numbers this is what has happened each year from 2018 - 2020: earned income = $100,000 and pension contribution = $99,000. In my mind that means that "plan compensation" is $1,000, which means that since there is no salary history prior to the plan effective date there are going to be a number of problems, not the least being the 415 limit since since 3 year average average comp is $1,000. Am I missing something here wrt plan comp and 415?

Plan is failing ADP test.  One HCE getting a refund had both Roth and Pre-tax deferrals during the year.

What is the protocol for doing the refund?  From which source(s) do you start using amounts?

Is it a plan document issue?  Administrative procedure?  Does the participant have to make the final call?  (Is that even feasible if we are coming up on processing deadlines?)

As usual, your thoughts are appreciated.

For purposes of computing the equivalent accrued benefit at NRA in a cash balance plan, can the benefit decrease at a later point in time due to a decline in the projected interest crediting rate?  Practically it will likely not matter since a participant will opt for the cash balance account value.  There is no early retirement date in this plan for what it is worth. I would think it could decline,but not sure if the IRS has ever opined on this. The 411 regs were written with traditional defined benefit plans in mind so not much guidance there.

Does anyone have the formula for a self employment integrated contribution calculation.  My formula is not working correctly with the check and I am not sure if it’s the way I am checking it that is the issue. 

Quick Question:

Company A - Husband owns
Company B - Wife owns, currently all work done for Company A

The plan is for Company B to start expanding and doing legal services for additional clients.

What is the fallout for setting up separate plans for Company A and Company B?  Can they do it, or do we have an affiliated service group issue?

A small corporation wholly owned by a husband and wife has a solo 401(k) plan that they established in 2020 and includes a 1-year eligibility provision. The plan uses a prototype document from a major financial company designed for individual owners and SE companies. The corporation is about to hire their first employee and knows that the plan needs to change, which would require a new restated document and additional help with plan administration. The financial company, which is also the trustee, states that they only provide these services to clients with 20+ participants as their minimum annual fees starts at $20,000. The corporation’s payroll service, which uses a bundled approach to administer or provide recordkeeping for the smaller companies quoted annual fees less than $2,000. However, claims that they cannot convert the prior plan to a traditional or safe-harbor (SH) 401(k) plan because the current financial institution uses unbundled services. The payroll service which uses Guidelines states that they could not setup a new traditional or SH-401(k) plan until the current solo 401(k) has be terminated for 12 months.

My goal is to find a service provider that will convert or restate this plan and provide annual recordkeeping/administrative services for a 3-participant plan for a reasonable fee.

Any takers?