I've been lurking for awhile, getting great information, but decided to finally hop-on and pose a question.  Apologies, if I missed any formalities or unwritten rules, let me know and I will make sure to address in the future! Thanks. 

I know the cross-tested profit sharing allocation being treated as a deemed CODA in a partnership setting has been addressed in a number of different posts, however, I had a question that I did not see addressed directly, and I wondered if anyone would like to opine on the below. 

Assume a plan has a profit-sharing feature that is allocated to individual allocation groups and tested on a cross-tested basis. The sponsor is a professional group treated as a partnership for federal tax purposes, with more than ten partners. The question stated as summarily as possible is whether a deemed CODA is created (or could be arguable be determined to be created by the IRS) if the partners year end partnership distribution (or bonus) is reduced by amounts they received as a profit sharing contribution. Stated differently, the plan sponsor/employer takes into account the profit sharing contribution in determining the partner/participants year end partnership distribution/bonus.  Assume that the plan sponsor fully complies with plan formalities in regards to declaring the profit sharing contribution amounts and directions to the Trustee as to the allocation of the contribution to each individual allocation group/account, and there is no paper trail showing individual elections/requests of the partners relating to the amount the would desire to have contributed to their account. 

I have looked for agency determinations and formal/informal guidance on the matter and have not been able to find anything other than the "we will know abuse when we see it" response. Was wondering if anyone had either (A) firsthand experience with a similar matter or (B) could point to any guidance informative on the matter. Thank you! 

Our client (ABC bank) is sponsoring a pension plan with 85 participants.  ABC bank also holds the investments and some of the assets are invested in the ABC money market fund.

The auditor stated that because the ABC bank holds the investments (they are the trustee and custodian), the plan is required to be audited.  More than 95% of the assets are qualified assets and there are less than 100 participants so we think the audit waiver requirements are met.

The fact that the plan sponsor is also the custodian might be a potential fiduciary issue (prudent rule) but that should not preclude the plan sponsor from waiving the audit requirement.

Do you agree or is the client required to have an audit? 

I've got a hardship request for a casualty issue where the participant says that he and his buddies have the skills required to do the work themselves, but they need the hardship to cover the costs of the materials, and, hey, why shouldn't he be able to compensate his buddies for their time, too?  OK, the materials I can see, but the rest of this is sounding alarm bells...

Assuming that the Plan Administrator wants to approve this as a true casualty situation hardship, is a fair recommendation to suggest that the participant get an estimate from a licensed contractor and use that for the hardship distribution amount?  Technically, once the amount is paid to the participant, it's not on the Plan Administrator to ensure that the money is used for that purpose, anyway, but if the participant wants to do the job with his friends and pay them instead, as long as the amount isn't unreasonable (which is what the bona fide estimate is going to be used to substantiate), isn't the plan on solid ground?

I have an inquiry to make that I hope would be fairly simple to answer, which I know is normally not that case -

I never knew this but then the year before last in a conference call a client was stopping SH mid-year because they were acquired by another company. As a result, I was advised that the SH provisions continue to apply, even if the SH is removed mid-year, if it results from an acquisition. Again, I was never aware of this so I would appreciate it if someone could confirm whether it is in fact true if SH is removed mid-year because a company is acquired by another company, then the SH provisions DO apply for that year and you don't need to worry about ADP testing.

We have a brand new start up plan.  The effective date of the plan is 9/30/2020.  Calendar year plan.  Document indicates a short plan year.  Compensation is defined as plan year.  So, I believe I need to prorate the compensation.  The question is do I use 3 months or 4 months?  Or should I be using days?

For the 415 limit for contributions, there is language in the document that states:  The Limitation Year for Code 415 purposes will be the 12 month period ending on the last day of the Plan Year instead of the "determination period" for compensation.    Based on this language, do I need to prorate the 415 for contributions?

Hello,

We have a client who is purchasing the assets of a seller. In  the purchase agreement, the buyer (client) has specifically excluded the welfare plans so that the client will not be purchasing the welfare plans; however, there is a transition period under which employees will remain part of the seller's welfare plans before being transferred over to the buyer's plans. 

We have learned that the seller has failed to file a Form 5500 for its health plan for the past couple of years. Will our client (buyer) be at risk for DOL/IRS penalties if these delinquent Form 5500 are not corrected? I am having trouble finding sources to support whether successor liability will apply in this case. Any insight is appreciated. Thank you. 

Background: A non-profit operates a 457(f) plan for a select group of management. Only Non-Elective contributions are permitted. The plan uses a 5-year graded vested schedule and participants are fully vested at NRA (age 65). The Plan's substantial risk of forfeiture risk (SRF) such that participants who terminate for cause will forfeit 100% of their account balance, even if already fully vested. Plan allows payment upon the later of separation of service or attainment of NRA. 

Questions to clarify my understanding: 

1. As I read the regs, a participant is taxed when the SRF lapses. In this case, then, a participant who may be 100% vested in his account is not taxed on that amount until he terminates employment in good standing (since the SRF doesn't lapse until he terminates). 

2. If a participant terminates in good standing at age 65, the participant is taxed on their vested balance, since the SRF lapses. Based on the timing of the payment of benefits (later of separation of service or attainment of NRA), then, there really is no constructive receipt doctrine, in this example. 

3. If a participant terminates in good standing at age 55, the participant is taxed on their vested balance, since the SRF lapses. But, the participant cannot commence payment until attainment of NRA (age 65). In this case, the participant is taxed, without actually having taken a distribution (constructive receipt doctrine). 

Am I missing anything? 

Can anybody provide a hyperlink to download the text of Rev. Rul. 74-307?

Much appreciated.

This got shifted a year, but my head may not be shifting it, so I think I've got dates that don't line up...

As I recall, this was originally effective sometime in 2019 in proposed regs that could be followed, and we expected that the amendment itself could be done before 12/31/20 but effective in 2019 - we drafted a whole bunch of them then (that we held awaiting for a document restatement package that we still can't prepare, but that isn't part of this issue other than to say that these amendments are drafted to have an effective date of 2019 but not signed).  Then there was a one-year extension, and it had a "soft opening" in August 20, 2020, but was really truly effective starting 1/1/21.  So now I presume the amendment has to be done before 12/31/21 (never mind the tri-cycle restatement for the moment).

Can the amendment still be effective for 2019?  Or is that off the table?  Thanks.

 

I am trying to figure out the 5500 deadlines for this calendar year-end plan..

Plan was terminated in October 2020 but still held funds through the end of the year. Would the 12/31/2020 Form 5500 be due 7/31/2021 (or 10/15/2021 if extended) like normal?

Final payout/transfer of funds in plan was April 2021. ($0 balance left in plan as of this date). When would this final Form 5500 be due?

Hi

Can anyone provide/point me to a link that provides good and simple information on the suspension of benefit rules (or even articles)? Need to check a few things.

Thank you

Can 402(g) catch-up from the previous calendar year be used in the calculation of 415 annual additions maximum for the plan year?

Example for a PYE 3/31/2021

401(k) deferral amounts for Participant X:

    - 1/1/2020-3/31/2020  = $5,200

    - 4/1/2020-12/31/2020 = $15,600

    - Total 2020 calendar deferrals = $20,800

In PYE 3/31/2020 - $5,200 of the 2020 402(g) catchup was used to allow for a Participant X's annual additions of $62,200 ($57,000 + $5,200).

    - This should mean $1,300 ($6,500 - $5,200) is still available for 402(g) catch-up, for the 2020 calendar year  - The question is regarding the use of this $1,300.

Deferrals 1/1/21-3/31/21 = $6,200 – using as 415 catch up

Would the maximum annual additions for the PYE 2021 be $65,500 ($58,000+$6,200+$1,300) ?

OR would the maximum annual additions for the PYE 2021 be $64,200 ($58,000+$6,200)?

Thanks!

I don't see anything against but wanted to make sure, is there a restriction that prohibits an in-service distribution from a 403b plan being rolled back into the same plan within 60 days? I don't think so but not 100% sure either.

 Can a forfeiture account be used to fund QNECS that cover a lost opportunity to defer (plus gains)?  

I am aware that testing corrections can be funded from forfeitures, but i was looking for clarification or consensus on QNECS to cover LOTD.

One other hanging question.... For missed matches, are they included in the ACP, posted as a QNEC/QMAC,  or  can it be a non-elective subject to the same vesting as the match source?

Seeing as how SAR's are distributed many months after the end of the plan year, to what extent do Plan Sponsors need to provide the SAR in the following instances:

1 - retirement plan where the terminated vested participant has zeroed out their account since the plan year end.

2 - health and welfare plan COBRA participant who is no longer on COBRA

We have a plan that has been frozen since 2010 and currently only pays monthly benefits.  The plan is covered by the PBGC.  They're debating terminating and are exploring the options of adding a lump sum option/window to "unload" some of the liabilities.  To use round numbers, let's say this plan has: 1 participant who is active on deferred retirement, 10 participants who are terminated but not yet at NRA, 10 participants retired and in pay status (5 of these are at RMD age).  My questions here primarily circulate around possible discrimination issues..

-If they amend the plan to add the lump sum option (without the use of a window), this would only open the lump sum option up to participants that have terminated and are not yet in pay status, correct?  Would this potentially cause discrimination issues since it would not allow participants currently in payout status to elect a lump sum?

-If we add a lump sum window for the participants already in pay status, would it be ok to only offer it to any employees who are not part of the "Top 25 paid HCEs"?  We have 3 HCEs: 2 are in pay status and the other is the active deferred retirement.

The plan is fairly well funded an probably won't have any issues with the 110% asset rule for the top 25 paid HCE's, but we're hesitant to jump right to terminating and offering lump sums and/or annuity purchases for everyone since that could potentially be a high cost.  Ideally, we'd like to stagger the payouts so we can analyze after each step.

I am preparing a Form 5500-SF for a 401k plan with only 47 participants.  The asset platform provided information for Schdule D & C.  I know I don't need to attach a Schedule C, but I am second guessing about whether I need to prepare and attach the Schedule D  to the 5500-Sf.  Thanks for feedback.  

A participant had medical expense about 3 years ago. He has not paid the bill and it is now in collections. Can he request a hardship distribution request for this expense?

Thanks.

Hi all, 

Could you help me understand two questions with regard to health insurance plans? 1. Should premiums for covered family members be counted in the premiums paid to insurers? 2. Should covered family members be counted in the number of participants? 

Thanks so much!!!

Group:

I'm drafting a Self Correction Plan (SCP) to correct insignificant operational failures

for an ESOP and looking to see if anyone has a sample (redacted?) document they are willing to share?

Also looking for robust article on SCP's its history and recent changes including

Rev Proc 2019-19? other than what I've found in my initial research.

Willing to pay if needed. 

thank you in advance.