The former plan sponsor of a plan that terminated and was paid out in 2011 just received a check at her home from the fund platform that held the old plan.  The accompanying letter says that, as plan fiduciary, she needs to handle this $1,400 which comes from a settlement from 2012 by either allocating it among the plan participants or applying it as plan fees, so this leads me to think that this isn't specifically for her account.

Ignoring the fact that a settlement is arriving in 2021 from nine years ago... there were 8 or 9 participants with balances in the final year of the plan.  Distribution fees alone could easily eat up 1/3 of that.  Throw in some consulting time...

The problem I see is that there is no trust any more to pay the participants from.  We'd have to re-establish the accounts back at the platform, probably sign new paperwork, send distribution forms (find the participants!), etc.  And if the trust has assets again, doesn't that mean the plan is active again and we have to file a 5500?  Update the document?  By the time all those fees are tallied up, this money is definitely spent.

On the other hand, taking this money pre-emptively but not doing that work to 'earn it' seems wrong, unless consulting for it is a very long process.

Any suggestions?  Thanks...

What type of person/organization would you reach out to if you had a client who wanted to establish an Employer Educational Assistance Program?  Anyone you can recommend?

Thanks

I have a db plan frozen 12/31/2013

SPD is really old 12/1/2000

I am assuming at least an SMM should have been done?

plan doc was restated 1/1/2015

are there different requiremnts when a DB plan is frozen;ie. 5 years after a major change, 10 years otherwise?

Much thanks

Lexy

Sometimes I gotta ask a question that seems obvious but who knows...

Are there options for types of pay to consider as eligible pay for a one-person S-Corp other than W-2 pay?

Looking at the Plan Doc is not an option as plan is being set up right now.

Elective deferral plan states that upon attainment of age 65 deferred amounts will be distributed in 120 monthly installments beginning the first of the following month. A new Director joined in May 2019, elected to defer his fees and turned 65 six months later (Nov. 2019). He has been allowed to continue deferring his fees and no distributions have been made to him yet.

I’m trying to identify exactly what the failure(s) are here and am looking for input/opinions related to the amounts deferred after he turned 65.  

Should he have been allowed to defer at all after age 65? If not, the entire amount deferred after age 65 must be paid out this year and the entire amount deferred in prior years is likely subject to penalties.

Or was he allowed to defer after age 65, but the distribution installments should have begun immediately following the deferral? For example, could he defer fees in May 2020, but distribution should have begun immediately since he was over age 65? Still on a 120 installment schedule? If this is the case, only the installment amounts that should have been distributed so far must be paid out this year and subject to penalties.

Thanks in advance for your input!

So, in this situation, where due to the QACA the 2-year vesting is being utilized, if you amend the plan mid-year to take it out of safe harbor stratus, does the 2-year vesting still apply to the safe harbor piece? It would seem reasonable top me that it would immediately become 100% vested, but I've not seen this issue. Thoughts?

Our TPA firm has just been engaged by our first client that makes employer contributions to their non-governmental Section 457(b) plan. (We have 5 other clients with non-governmental Section 457(b) plans, but none have employer contributions.)  The plan also permits the participants to make deferrals from their salaries.

I have a very basic question for which I have not been able to find the answer--does the participant in this 457(b) plan need to make a deferral election with respect to the employer contribution?  If so, must the election be made the month before that employer contribution is made to the Section 457(b) plan, just like deferrals from their paychecks?

The deferral form that this new client has been using does not seem to address a deferral election for the employer contribution because it requires the participant to elect either a dollar amount or a percentage of his/her compensation for each payroll period.

Thank you for any guidance to which you can point me.

With all the new hardship distribution rules, is anyone still advising the Plan Administrator to get proof of hardship in case of plan audit?   Participant wants to take 100% of his funds ($360,000 plus).  He provided the wording below from the IRS to show he did not have to submit proof:    Also, he claims the IRS told him via phone call he did not have to submit proof. Thank you! 

3. How does a participant show that he or she is experiencing a hardship?

Generally, if a 401(k) plan provides for hardship distributions, the plan will specify what information must be provided to the employer to demonstrate a hardship. Most 401(k) plans use the "deemed necessary" rules described in Q&A-2 above, so that inquiry into the employee's financial status is not required. In other cases, an employer may generally rely on the employee's representation that he or she is experiencing an immediate and heavy financial need that cannot be relieved from other resources. However, an employer cannot rely on an employee's representation if the employer has actual knowledge that the employee's need can be relieved: (1) through reimbursement or compensation by insurance; (2) by liquidation of the employee's assets; (3) by stopping elective contributions or employee contributions under the plan; (4) by other currently available distributions (such as plan loans) under plans maintained by the employer or by any other employer; or (5) by borrowing from commercial sources. (Reg. Section 1.401(k)-1(d)(3)(iv)(C))

I have a very unique plan situation, one the plan that is terminating due to acquisition some of the participants are 72 1/2 and are eligible for RMD now they Advisor has stated since the participants are not terminated  from their employment in terminating plan and are just acquired by the acquiring company these participants will not be subjected to RMD  since they are not terminated employees is that true? 

Does Employment status play a key role in RMD? I thought once the participants attain 72 1/2 they are required to take the RMD also since the plan has terminated and they will be a distribution event so the participants will require to take the RMD correct?  

A participant in a 401k plan deferred more than the 402g limit in 2020. An appropriate refund check was issued timely. But the participant never cashed the check. Now it's past the deadline. If he cashes the check now, is everything ok? If the check goes stale dated and a new one has to be re-issued, can it be done under the original check date? If not, I assume the funds just have to stay in the plan, leading to double taxation on the excess.

An owner of a sole proprietorship made deferrals from compensation. However, the owner also had losses and the net compensation for the year was $0. How would you distribute the excess? Would it be using code "8" (assuming the deferrals were pre-tax)?

Thanks,

This should be simple but I am struggling for an answer..

I have a participant that requested the maximum loan available. 

Did the loan paperwork.     He returned paperwork and the market has gone down. 

Can i process for the amount on paperwork or do can he only have the maximum on the date it is processed?

If the later, do I have to redo the paperwork for the new amount?

Thank you!

Pretax eligibility is 3 MOS     SH Match eligibility is 1 YOS   Plan is now top heavy

It is my understanding the plan cannot use the top heavy exemption.  Based on this, it is my understanding that the top heavy minimum contribution needs to pass coverage testing.  Well, it does not.  The coverage ratio is 48.75%.  The plan passes ABT, but since the coverage ratio is below the 50%, it does not pass coverage.  I believe the only solution is to add people back into as "benefiting".  Does this seem reasonable? 

The plan design is not ideal for top heavy plans.  I would have the plan change the eligibility requirements going forward, but they are in the process of terminating the plan.    

I had a case recently where an ERISA qualified union plan provided a pro forma set of QDRO procedures and a Model Order for a shared interest in it's defined benefit plan.  There was no mention of survivorship, that is, no mention of the availability of a QJSA or QPSA options.  I used their Model Form as a rough guide, but added language providing the Alternate Payee with a 100% QJSA and a 50% QPSA as agreed to by the parties in their Marital Settlement Agreement incorporated in the Judgment of Absolute Divorce. 

The Plan's attorney responded that the Plan did not permit QJSA or QPSA options.  I responded quoting IRC 414(p)(5), IRC 401(a)(11), 26 CFR § 1.401(a)-20 - Requirements of qualified joint and survivor annuity and qualified preretirement survivor annuity, Q. 3-5 and Appendix C of the attached DOL, EPSA pamphlet, and referring them to https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qualified-joint-and-survivor-annuity.  

The attorney responded that they would permit the QJSA or QPSA options, but that I could not specify the percentages.  (The Plan provided that the QJSA had 50%, 75% and 100% options available; and the QPSA had 50% available.) I responded by reminding them of their obligations as Plan Administrators to provide informations about plan benefits to Alternate Payees (Questions 2-1 and 2-5 of the attached DOL,EPSA pamphlet), and sent them a copy of the PBGC Model Order Booklet,PBGC booklet,  Page 12, Section 10  reflecting the option of inserting any available QJSA or QPSA percentage agreed to or ordered by the trial court.  I also suggested that legal fees were awardable to the Alternate Payee for their failure to fulfil their obligations, citing 29 USC Section 1132(g), 28 USC Section 1927, and Chambers v. Nasco, Inc., 501 U.S. 32, 44–46 (1991) outlining the court's inherent power to assess attorney fees especially when a party is litigating in bad faith.  https://scholar.google.com/scholar_case?case=12894484016394117131&q=chambers+v.+nasco,+inc.&hl=en&as_sdt=20000003  

The QDRO was finally approved as I have drafted it.  

It was unmistakably clear that the attorney for the Plan was intent on protecting their Participants to the detriment of their former spouses, and hoped that persons less knowledgeable than I would not know the difference.  Perhaps this happens all the time and I am just naive.  But it never happened to me in the 33 years I have been preparing QDROs.     

What do you think I should do, if anything?  Any ideas?  

Thanks, 

David        

DOL re QDROs.pdf

Partner in plan had ordinary business loss on K-1 of -470,100 but had guaranteed payments of 302,576.  Line 14 ED loss of -168,060.  Partner made $17k in deferrals during year and received match of $7500. 

Question 1 - Is it correct that due to the negative SE earnings he should not have been able to do deferrals or recieve a match?

Question 2 - Plan terminated and all participants including partner have been paid out.  Partner rolled his assets to IRA.  If he could not do deferrals for year - I believe we have to get the IRA custodian to liquidate and pay him out the excess deferrals - correct - most likely with some sort of earnings.

Question 3 - if he can't have the match - that too has to come out of the IRA with earnings - but since the plan participants have all been paid out and the CPA doing the plan audit and TPA who did the compliance work have both been paid in full in advance - what if any options exist for the excess match?  Does it have to be allocated to all the participants in the plan and supplemental distributions be complete?

Do the successor plan rules apply to a one participant plan?

My client is self employed, sponsors a DB plan, no employees.

For 2020, he is not showing any Schedule C income; he has arranged to deposit $6000 per month into the plan brokerage account.

The accountant at least knew he could not deduct as a pension expense and "buried" the amount.

Would this amount be shown as contribution on SB?

Plan fails 2019 ADP test, but refunds never done.  Correcting now under EPCRS using the one-to-one method.

Are the refunds still considered "late" and therefore subject to the 10% penalty tax?

Are they late in filing the 2019 5330 and thus subject to more penalties?

I have a scenario where a one participant plan recently terminated their plan and is hoping to start a new 401k plan. Do the successor plan rules apply here and must the client wait 12 months before establishing the new 401k plan?

Here is the situation.  We are filing Form 5330 for a prohibited transaction between a plan and the employer.  The plan is on a 12/31 calendar year, and the employer is on a 6/30 fiscal year.  Do we have the option to file the Form 5330 with either a 12/31 or 6/30 fiscal year end?  The instructions seem to indicate that is the case.  Thank you.

Specific Instructions for Form 5330

Filer Tax year.  Enter the tax year of the employer, entity, or individual on whom the tax is imposed by using the plan year beginning and ending dates entered in Part I of Form 5500 or by using the tax year of the business return filed.