Two separate questions: (PY 7/1 to 6/30)

1)  PSP has last day requirement only.  If someone's last day worked is 6/30, do they a PS allocation?  Why or why not?

2) For 5500 participant count.  If last day worked is 7/1, are they considered 'active' for 5500 purposes at BOY?  Why or why not?

Total compensation for all eligible participants = $950,000

Then, 25% of total compensation = $237,500. 
Which sources will be counted for this deduction? (Profit sharing, Safe Harbor, Match.. which sources are to be count

Thanks in advance.

Participant maxes out his 401k at Employer at $26,000.  He starts a new job in December with immediate eligibility and a match.

My advice is go ahead and contribute to get the match and then request a refund of your 401k after year-end.  My recollection (which I cannot confirm) is that such a refund request would not kick off an orphan match situation requiring match forfeitures.  The logic of course is the employee could request the excess refund from either plan.  Anyway if someone can set me straight one way or the other I would appreciate it. 

Completely different of course then someone getting matched on 401k over $26,000 in the same plan or even for the same employer.

I wanted to revisit a post that I reviewed  from a few years ago relating to the acceleration of vesting/payment that is appropriately treated as a short-term deferral (see prior post here https://benefitslink.com/boards/index.php?/topic/63098-accelerating-payments-under-short-term-deferral-exception/ ). The question I have is generally whether company discretion to accelerate the vesting payment could serve as a premise the payment is no longer subject to a substantial risk of forfeiture. below is a brief fact-pattern of a situation that may present this issue, of course the facts are exhaustive so add in any points or items that may impact the analysis. 

Example - under a long-term bonus plan an employee is entitled to as a bonus payment of a portion of net company earnings for years 1 with 50% of the bonus being payable on 3/15 year 2 and 50% payable on 3/15 year three. The plan provides the employee must be employed on the payment date to receive the bonus. An employee wants to retire 1/1 Year three, and the company decides to move up the vesting date and payment of the second 50% payable on 3/15 to the employee's retirement. 

My understanding from the previous post is that since the payment was not covered under 409A to begin with, as a short term deferral, the acceleration is permissible and not a 409A violation. My question however, is whether the employer's discretion to accelerate the payment could be argued to no longer make the amounts subject to a substantial risk of forfeiture due to the risk of forfeiture not being substantial due to the company's discretion to voluntary accelerate the payments, cause the payment to fall outside of the short-term deferral. I know this is a facts and circumstances test, but does anyone have any insight on whether the company discretion may impact the substantial risk of forfeiture analysis? Thanks in advance for your time in reviewing and responding!

If a company with 1 employee - the owner - claims SIMPLE contributions on the tax returns and has not made the contributions for 2019, 2020, and 2021, what is the best solution?  It is not a lot of money that is owed to the plan (under $15,000 plus earnings I suppose).  All of the contributions go to the owner as employee and employer contributions.  Any insight is appreciated!  Thank you!

A client closed down her single member plan and it's final liquidation occurred on 11/23.  The balance is $0.  My next step is to prepare a final form 5500-EZ.  

Do I  use the 2020 EZ?  and change the year end to be 11/23/2021?

Just want to do it correctly, cross the T's and dot the I's

Thanks

Current 401(k) Plan will have around 140 participants as of 12/31/2021, thus making it subject to a certified audit. The plan sponsor, to avoid the cost of an audit, desires to split the plan into two (plans are identical), effective 1/1/2022, so that each plan has 70 participants, making them not subject to audit. The assets of the plan will not be split, but, rather, will remain in the current trust, and will be administered and "record-kept" by the current TPA.

Questions:

As the old plan will technically have 140 participants on 1/1/22, and then, later in the day, will be at 70/70, is the old plan subject to a one day audit?

Second, is it allowable for the assets of both plans to be in the same trust? I would say yes if the trust were designated a Master Trust, but the TPA has no idea as to what a Master Trust is. I did some reading and came upon a Group Trust, but this appears to cover plans of different employers.

Any comments would be appreciated, thank you!

Hi, 

one of the client would like to know if the 16b indicator can be removed any idea how this can be done? 

H and W divorce. Both are under 59 1/2. H is awarded $11,000 from W's IRA. He does not intend to roll it over. An Order Transferring IRA Incident to Divorce (similar to a QDRO) is drafted, signed by H and W and approved by the court. If this were a distribution from a qualified plan under a QDRO, H would include the distribution in his income but would not be subject to the 10% early withdrawal penalty. Question: Is H subject to the penalty tax here? 

Hello,

We have a law firm client that is looking for options to making their partners whole because they have to pay 100 percent of the cost of their coverage outside the cafeteria plan. This may not make them whole, but  the only option I can think of might be for the partnership to pay a flat amount to each partner (or maybe just the cost of EE only coverage)  for the coverages as a business expense? I would recommend the same flat amount as each partner shares in the partnership’s profits, so the dollar amount contributed to the partnership should not favor family coverage over single or spousal coverage. The partner may need to include the payments in gross income, which he should be able to deduct on his income tax return.   Are there any other options?

Thanks in advance!

Does anyone have a Disclaimer of Benefits form I can use?  I'm sure there's a standard or I could probably create my own, but I don't want to re-create the wheel.

We have a spouse who wants to disclaim the benefits of his deceased spouse and have the kids get the money. 

As I understand it, he cannot disclaim the benefit and choose who it goes to, but that's not an issue as terms of the plan say after the spouse, the benefit goes to children equally.

In this case, not in RMD pay status.

I don't work at all with SIMPLE Plans - client with 401(k) (my client) and another client with SIMPLE Plan are merging in a stock sale.  There will be a third, brand new Company [effective 01/01/2022] with a new EIN for all employees.  The new Company wishes to continue the 401(k) plan with the new Company as Plan Sponsor and terminate the SIMPLE Plan, which would happen regardless because there will be well over 100 employees after the merger.

I believe I understand the transition year, which in this instance will be the 2022 plan year.   However if all employees are now on the same payroll in 2022 (under the "new" Company and EIN) is it still possible to have the SIMPLE participants making SIMPLE contributions and the 401(k) participants contributing to the 401(k) Plan for the 2022 transition year?

Thanks in advance.

edited to add:  So is this a dumb question because of course they would all be on the same payroll for the transition year? 

Also - the SIMPLE participants are going to be excluded by amendment prior to the start of the 2022 plan year.  (Coverage is ok regardless.)

Looks to me like original plan doc preparer neglected to check off to exclude union, nonresident aliens and leased employees from a plan doc.

Never having seen this, curious if, as part of restatement, such exclusions could be added moving forward.

No such employees have been employed per plan sponsor.

Plan excludes bonus from compensation and there are post entry compensation for two participants (as per plan document). 

How should I determine total 404 (25% Deduction Limit) compensation for any plan year? excluding bonus & post entry compensation or only consider gross compensation

Thanks in advance.

if a plan is on a PPA document right now, and was merging into a plan that had a cycle 3 document by the end of year, is there any requirement for the plan to do an amendment before merging? I wouldn't think so but curious what the experts here think.

Here's hoping you and yours have a great Thanksgiving holiday weekend!

To my friend in Canada, Happy Belated Thanksgiving.

To those elsewhere, have fun working tomorrow!  LOL

Is there an updated template for the QDIA notices?  I can't seem to find one for some reason.

Thanks everyone!!

An ESOP sponsor is controlled by husband and wife, who are direct shareholders in the sponsor and are also the ESOP's trustees.  Is there a prohibited transaction or fiduciary breach if the ESOP sponsor leases or purchases property from a company that is in a controlled group with the ESOP sponsor?  The ESOP is not a party to the lease or purchase transaction, but it seems there is opportunity for abuse, for example, if the ESOP sponsor pays more than fair market value to lease or purchase the property.  The value of the plan sponsor is thereby diminished, to the detriment of ESOP participants, while the controlled group member is unjustly enriched.  Would an independent valuation of the leasehold interest or of the property offer protection against any prohibited transaction or fiduciary breach concerns? 

Just putting this out there, does anyone have a resource that provides a good comparison or mid-level information for various plans. Like 401(k), 403(b), 403(b)(9), 457 plans, 457(f) plans, etc. Thanks

Participant terminates and submits full distribution paperwork.  Prior to distribution check being written, he is rehired.  Is there any reason the check still needs to be written?