If a plan wants to amend its rule for crediting interest to folks taking a lump sum (before: pro rata credit up through payment date, after: no such partial year credit), is that deemed a cutback even if done only prospectively on future distributions?

I could argue that my annuity value drops if I won't get that extra interest credit from 1/1 of the year I turn 65 up through the actual NRA and take my dough.

But if anyone knows of an exception or if there's been any IRS guidance, that'd be cool to learn.

Thanks.

--bri

Hi, 

When a 403(b) plan is terminating is there an exception they need not do 5500? example if the plan was set up in 2005 and has only 1 participant will a 5500 be required once the plan goes to zero?

Thanks

Hi, 

Can participants still take CARES distribution? I thought June 2021 was last. 

Thanks

Since a sole proprietor reports all his contributions(including any elective, if any), what triggers reporting his elective (if any) on 5500 form

Our client, a sole proprietor, took on a partner and formed an LLC in late 2017.  We did a resolution of the LLC changing the sponsorship of the plan to the LLC from the SP, as a sole proprietorship never dissolves.

We faxed a letter to Ogden informing them of the change.

A Form 5500-SF was filed for 2017 under the SP EIN; we filed a 2018 5500-SF under the LLC and used the LLC EIN, noting the change in sponsorship in item 4.

Our client receives a letter from the TE Compliance Unit inquiring as to why the 2018 Form 5500-SF for the sole proprietorship had not filed a 5500-SF.  The Notice mentioned that this was not an audit, just a compliance check.

I spoke at length with the IRS person that wrote the letter and explained the circumstances (without a POA at that!)- she said she would note the file and that we call main IRS number; and they would be able to make the change, but we must make one of the two selections: 

a.  either file the two plans as a merger, which makes no sense at all; or

b.  file the sole proprietor plan as a "final return" and $0 at the end of 2017; show the LLC plan as a "new plan and show the money transferred from the sole prop plan in 2018.

Neither of these choices really make any sense, but the woman at the IRS when I did call only mentioned that "this is the way they told us to handle".

Usually when we receive an IRS Letter or Notice, we attach an explanation and receive about 4-5 love letters before the matter is resolved..

I am inclined to go with option b., if, as they say "this is the only way to handle."

I have a one man 401(k) Plan where they are looking to put in a Cash Balance Plan as well.  If the owner makes $165k, the maximim Profit Sharing contribution would be 6%, correct?

So they could do $19,500 in 401(k) + 6% of Comp + $108k into Cash Balance (he's 42-years old)?

Is there anyway to get the contribution to be more than 6% into PS?

My client has a fiscal ending 9/30 but their 401k plan year is calendar. We started a cash balance plan for them and wrote the plan document to use fiscal year comp, thinking that this is what they do for their 401k so it would simplify things to use one census. Also, because the two plans are combined plan tested. 

In February after the second plan year, we discovered that they are actually giving us calendar year comp and that the 401k plan document does base contributions on calendar year. Can I now amend the CB plan retroactively to use calendar year as well? Or is it too late to do that, being after the plan year end?   (The differences in comp would only affect NHCEs since the HCEs all earn over the 401a17 limits.) 

I am unclear about the cutoff date for needing to do the Cycle 3 for DC plans. Have numerous plans that were terminated by resolution/amendment but slow in distributing out all the assets. If there are assets remaining as of 7-22-2020 do the plan have to be restated. Have some where client didn't want to file for the closing letter.

On the DB side, I believe the cycle won't start for another 2 years and lingering assets now won't be a problem.

Also my sponsor is FIS and wonder if I am getting a bad deal of $250/mo and what others are using. Thanks

Plenty of advisors are preaching to retirement plans’ fiduciaries (mostly, employers) that they ought to do something about cybersecurity.

Imagine an employer takes heed, and tries to follow EBSA’s Tips for Hiring a Service Provider with Strong Cybersecurity Practices.  https://www.dol.gov/sites/dolgov/files/ebsa/key-topics/retirement-benefits/cybersecurity/tips-for-hiring-a-service-provider-with-strong-security-practices.pdf

Step 6 is about what a fiduciary should seek to include in (or delete from) a service provider’s contract.  It includes a list of five or six provisions a fiduciary should seek.

But is this realistic?  Imagine a plan’s size limits its negotiation with a recordkeeper to engaging it (on its standard terms) or not.

For the points the EBSA guidance mentions, are there meaningful differences in what recordkeepers offer?  Or are recordkeepers’ provisions so much in a common mainstream that there’s nothing much an employer would compare?

We have an issue.  Stock options were granted and, under the terms of the options, they were scheduled to vest next month or expire if the participant is terminated before vesting.  Several employees terminated last month, under the understanding that vesting would accelerate to vest on their termination dates (giving the participants up to 3 months to exercise post-termination), subject to board approval.

We have not yet received board approval, but it is soon forthcoming.  So, now, we have a issue that the options technically expired before they were officially accelerated, even though acceleration was anticipated (subject to board approval) prior to them expiring.

Would it be at all advisable for the board to approve the acceleration now?  Or have we already blown it with respect to ISO status and 409A compliance (assume the stock price has gone up since grant, so they would not have an exercise price of FMV if treated as a new grant today).  Alternatively, can we treat them as accelerated prior to termination (and, consequently, expiration of the options), and the acceleration was simply ratified by the Board at a later date?

Thank you!

A SIMPLE-IRA plan was adopted by an employer that already had a 401(k) plan, and both plans operated side by side for a number of years. The employer has been notified of the operational failure and agrees to stop contributions to the SIMPLE-IRA plan immediately and terminate the plan. Is a plan termination notice required before stopping contributions?

Hello all,

I recently qpplied for a hardship withdrawal through Vanguard to cover orthodontic expenses for my child. I sent in everything that was requested, but they are still insisting that I send in a pretreatment estimate. So i contacted mydental insurance and asked for one but they could not provide one to me due to her treatment starting already. Is there anything that I can do or someone I could talk to, to escalate this situation?

Say payroll date is 12/31.  Paychecks are not typically issued until the following week, ie in the following month.

Loan payments were stopped.  Would the loan default day (at end of 2nd quarter following first missed payment) be 6/30 or 9/30?

A Canadian company has a US subsidiary.  The US company sponsors a 401(k) plan with a One Year of Service eligibility wait, and excludes non-resident aliens.

An employee in the Canadian company is moved to the US company.  While working for the Canadian company the employee had earned more than 1 year of service as measured under the US plan.

Does the Canadian service count under the US plan?  I'm thinking it would just as it would with any other controlled group member?

Thanks very much.

Hi, 

When a plan is terminating, should there be an amendment to terminate the plan? or will a BOD resolution suffice? 

Thanks

Hi

Here is a new one for me.

New 401k plan, effective 1/1/2021 (no short plan/tax year)

They decided to hire a new employee on 9/1/2021 and will pay 350k salary for calendar 2021. This employee will have an immediate entry of 9/1/2021, a special entry date amendment otherwise plan has 21/1 and dual entry for eligibility.

For 401k deferrals, profit sharing allocation and testing compensation, what needs to be prorated? Assume no hour requirements for ps and 401k.

Thank you

Hi, 

Should the PS send in the SMM once the plan has terminated, when should they send it?  

Thanks

Sorry for all the questions lately!

For a Plan that does their Safe Harbor Match on a payroll-by-payroll basis, are they required to do a true-up at the end of the Plan Year for those participants who started their contribution mid-year (or for those who maxed out prior to year-end)?  Or can they put in the document that they will not do a year-end true-up?

414(n) gets into all the rules about leased employees, and the code sections it applies to... and doesn't mention 403(b).  So I was thinking that the time that an employee worked for a leasing agency would never be considered for the plan sponsor's 403(b) plan because the leased employee rules wouldn't apply.  And this article from Plan Sponsor magazine seems to support that theory:

https://www.plansponsor.com/blines-ask-the-experts-leased-employees-and-403b-plans/

But then I happened to come across IRS Pub 7003 (revised June 2021).  On page 2, it specifically says... well, let me quote it:
 

Quote

Unless the plan provides that all leased employees within the meaning of section 414(n)(2) of the Code are treated as common law
employees for all purposes under the plan, a determination letter issued with respect to the plan’s qualification under section 401(a) or
403(a) of the Code will be a determination as to the effect of section 414(n) upon the plan’s qualified status only if the application includes:
1) A description of the nature of the recipient organization;
2) A copy of the relevant leasing agreement;
3) A description of the function of all leased employees within the trade or business of the recipient organization (including data as
to whether all leased employees are performing services on a substantially full-time basis) and whether services are performed
under the primary direction or control of the recipient organization; and
4) If the recipient organization is relying on any qualified plan(s) maintained by the leasing organization for purposes of qualification
of the recipient organization’s plan, a description of such plan(s) (including a description of the contributions or benefits provided
for all leased employees which are attributable to services performed for the recipient organization, plan eligibility, and vesting).

Am I getting twisted up in the legalese, or is this being contradictory?  It sounds like this is saying that the 403(b) plan has to comply with 414(n)... but 414(n) itself doesn't reference that 403(b) plans have to subject to it.

Thanks for any help setting me straight...

Hi,

I hope all ae well and healthy. A doctor owns a PC, with no other employees. He received a 1099 from the PC for quite a few years. Can this 1099 income be used as compensation for his DB Plan? Thank you.