If the plan frozen benefits in 2003 and its termination date is in 2021, is the compensation entered in column (e) compensation to 2021 or 2003.  If the former, do you need a separate schedule for plan compensation to 2003?

Hi, 

Participant had taken a CARES Distribution and had sent a cashier check ( repayment of the CARES Distribution).  Th plan is terminating and the participants status was flipped to "T" and since the part has a "T" status in the plan, can this check be posted into the terminating plan? or an IRA account? 

If we can not post it into the terminating plan, is there a reason why we cant do it? 

Thanks

This plan is a non-standardized profit sharing plan.   I'm working on the restatement and the client would like termination distributions after a 1 year break in service, unless they terminate due to retirement, then they would like after 30 days.    Would this be allowable?    I'd have to add it under "other" in the adoption agreement.  

may a plan document reference a plan provision in it's current document by reference to a prior document?

If a client plan starts 10/1 - are they able to defer the max 19,500 as long as they have adequate compensation?  Is the safe harbor  basic match -the full 4% or is it pro-rated?  Thanks!

We took over administration of a small defined benefit plan.  The Plan covers Husband and Wife who each own 50% of an S Corp.  The Plan also covers a son and his wife, both well over age 21.  All four individuals have been in the Plan since it was effective.  The prior administration firm indicated in both the Plan Document and Form 5500 that this was not covered by the PBGC.  The Plan Sponsor is not a professional service corp.  I believe that this plan was covered by the PBGC from its inception in 1998. 

We would like to know in advance what sort of penalties might be applied to the Plan for not filing PBGC Forms since 1998.   I am assuming that we will receive an inquiry from the PBGC when we file a 2021 PBGC form for a plan that has been in existence for over 21 years.

Any comments would be appreciated.

State pension plan

Company A has a 401k plan (A Plan) with no safe harbor feature. Company B has a Safe Harbor 401k plan (B Plan).

Company A purchases (stock purchase) Company B on July 15th, 2021.

Company A wishes to get rid of Plan B either through merger or termination.

Termination:

1. If they terminate Plan B are the actively employed participants of Plan B required to roll the money into Plan A?

2. Would the rollover have to be accounted for as the original sources (401k, SH, etc.) or would all the money be considered related rollover?

3. Is Company A required to make Safe Harbor contributions based on compensation earned until July 15, or the date of plan termination?

Merger:

1. Would the rollover have to be accounted for as the original sources (401k, SH, etc.) or would all the money be considered related rollover?

2. Is Company A required to make Safe Harbor contributions based on compensation earned until July 15, or the date of plan termination?

Is there a benefit or requirement that Plan B be terminated or merged?

I'm dealing with an issue that has occurred over the past nine years. The TPA of our NQDC plan, a bank, issued 1099-Rs to report distributions made to our ex company President (not an owner). Last year it was realized that the company should have been issuing W2s to the ex employee once his distributions began back in 2011. We worked with our tax accountant to rectify the situation for the previous three years. We submitted W2s and paid FICA taxes on the distributions but did not report federal income withholding taxes. The problem is that the ex employee has received a letter from the IRS stating that he underreported income. The reason is because his total distribution was reported twice - a W2 from the employer and a 1099-R from the bank (TPA). I'm trying to convince the bank to void the 1099-R. Their argument is that they withheld income taxes and it needs to be reported. Has anyone dealt with this issue? Can anyone provide a good argument to provide to the bank?

Sponsor had excess DB assets and moved to a QRP in a suspense account.  We have been transferring roughly $50k a year (whatever the 415 max is per year).  2019 was the 7th year.

There is still about $180,000 left in the account.  What happens to those funds?

Hi, 

The 401k plan that is terminating, there are few participants who have balance from prior ESOP deferral, Match. Will I need to follow the normal plan termination ( 401k plan)  or since they is balance from the prior ESOP plan I need to consider anything else? 

Thanks

A client of mine just received a letter from the IRS about their 2018 Form 5500.

Apparently the trigger for the letter was a "significant reduction in plan participants" and also showing more than zero participants who terminated with unvested benefits on the 5500. For the year in question, the total number of participants at the beginning of the year was 15, and the total at the end of the year was 10, which is a 33% reduction. However the reduction was all terminated participants who took their distributions. The 20% number for a presumed partial termination is in regards to turnover, which means active employees, right? You can't have turnover of people who left in prior years.

The number of active participants at the beginning of the year was 7 and at the end of the year it was 6. Only one person actually terminated during the year and that person was less than 100% vested under the plan's vesting schedule.

What is the IRS doing sending letters and scaring sponsors over non-issues like this? Has anyone else seen a letter like this recently?

Hi

Company A had a DB plan which terminated 12 years ago and paid out all during that time - it was PBGC termination.

They started a new CB plan effective 7/1/2019 with plan year ending 6/30/2020.

Vesting service started with the inception date i.e. 7/1/2019. It is 3 year cliff.

Owner's spouse was in the old plan and had been working however without any salary for the past 10+ years.

Suddenly, they decided to include the spouse effective with 7/1/2020 plan year. Did the amendments and even added a special eligibility clause to add him effective 7/1/2020, just in case.

The DOB is 7/15/1950.

When is his first RMD due?

Thank you for your comments.

I am working with someone who was named as the primary (non-spouse) beneficiary of a 457 Plan.  Two (2) days after the plan owner's death, the mother phoned Human Resources of the deceased employee's business and had them (Human Resources) submit a beneficiary change to her - the mother....and they did !   Is there a scenario where this is actually legal ?   

 DB Plan adopted for lawyer back in 2010 and used prior service to establish high3 EI comp, which is $175,000. 

Current yr is 2020, EI  after "salary"of $80,000 and before pension=$200,000. 

2020 DB MRC is $225,000.  The company contributes 200,000 by due date for 2020 tax year  ( 4-14-21) and $25,000 after 4-15-2021.

Company will deduct $200,000 for 2020 and $25,000 for 2021 under 404(a)(8), with the total $225,000 contribution reported on 2020 SB. ( covered at '16 EA meeting.)

This will reduce the 2020 taxable Earned Income ( after pension deduction) for 2020 to zero.

Nevertheless CPA recommended client to also make a 25% profit sharing contribution for 2020 based on the estimated EI of $200,000 and pay and deduct it for 2021.

Questions:

The MRC is based on the original high 3 EI per the plan doc and unrelated to 2020 EI, at least as far as pension contribution is concerned.  But how does this impact the current EI for DC benefit computations? Wouldn't the EI be zero and therefore no DC contribution possible?

Appreciate any feedback. TY

Can someone point me towards any applicable rules prohibiting cafeteria plan contributions without a reasonable expectation of use?  I feel sure this can't be allowed, but I'm struggling to find specifics.

Obviously, the goal is to increase compensation on paper to allow for a larger profit sharing distribution annually.  The non-ERISA plan funds would typically all be forfeited back to the business each year.  

You could argue that anyone could 'acquire' a dependent any given year, but I wouldn't try to argue that's a reasonable expectation.  It doesn't seem to pass the sniff test, but I can't even find what sniff tests might apply.  Any help would be much appreciated.

Companies A and B are a controlled group.  Both had their own plans... both exactly the same design (hey, they wanted 2 separate plans).   I was handling the 2 plans up to the point where ADP stepped in with a bigger better way to handle everything.  My services were terminated.  This all occurred December 2020.  I pressed to let me finish 2020 and let ADP take over first of the year nice and fresh.  I was told that was not necessary that ADP would handle the 2020 Form 5500 (in writing).  

Come to find out they terminated Company A's plan and rolled it into company B's plan.  All assets liquidated and transferred.  Thing is.... Company A's plan was not whole.   They moved the money even though the SH Match wasn't deposited.   Is that ok?  Since A's plan merged with B's, can B's plan accept the receivable SH Match?  It is a control group situation.  

Thanks

In a profit-sharing only plan, is anyone aware of a problem with paying a terminated participant an amount equal to any account forfeitures upon termination? For example, a company hires a "turnaround" CEO with all parties planning on, say, a three-year employment period with immediate eligibility in a PS-only plan with a six-year graded vesting schedule. As an incentive, the company offers to pay the employee a bonus upon termination of an amount equal to the unvested portion of the employee's PS account that is forfeited upon termination. 

The payment would be taxable and entirely outside the plan. The forfeitures would stay in the plan and be used according to its terms. There are no deferrals (or elections not to defer) so the contingent benefit rule would not come into play. I don't think the BRF rules would apply as the payment would take place entirely outside the plan. All contributions, vesting schedules, etc. are applied according to the plan's nondiscriminatory terms. 

The bonus payment itself would become nonqualified deferred compensation subject to 409A, but one payment upon termination is straightforward. On a quick pass, the linked plan rules seem manageable.  

Am I missing anything that would make this problematic?

Hello,

Made a Roth IRA contribution in April 2021 for Tax Year 2020. 

Got an extension to file taxes.

Found that I have made 1K contribution more than allowed. 

I thought Fidelity could just reduce the amount for 2020 by 1K and put 1K as contribution for 2021 as this is Roth IRA and contribution was made in 2021.

But it seems that they cannot do it past filing deadline of May 31 this year.

What is the best/easiest way to handle this? There seem to be a few ways here.

Age less than 57

Thanks

I would like to understand implications of extending the expiry date of vested ISOPs beyond the plan expiry date for optionee and employer -

Optionee had vested options provided by the employer. Employer is a privately held company. Before the options expired, optionee, over email expressed to the CEO, Founder-Chairman, intentions to exercise all the vested options and requested for paperwork and guidance on the next steps. CEO emailed back to optionee explicitly stating that optionee's options stand extended for another 5 years and during this period they will continue to remain vested exercisable. 

Fast forwarding 2 year later, optionee continues to be the employee of the company. Founder-Chairman has brought new CEO who is rolling out a new ISOP plan with different terms and conditions than the previous plan. 

Questions seeking answers for -

1. What choices company has to make true to the promise previous CEO made to the optionee? 

2. In each of the choices what are the tax implications to the optionee? 

3. Optionee's preference is to exercise the options and would like company to issue the stock instead of any cash options. How does company fulfill this?