With the final regulations published Jan 6th, I want to make sure I am understanding these new requirements.

A plan loan offset that occurs in a DC plan solely due to either termination of the plan; or, termination of employment AND an offset that occurs within 12 months after the employee's termination date (NOT 12 months after employee takes the distribution) is a QPLO.

Example:  Participant terminates employment on 2/22/2021. Participant elects to take a distribution of the account balance in August.  Total account balance is $50,000.  Of this balance, there is an outstanding loan in the amount of $10,000.  Participant receives a check in the amount of $40,000 as the $10K loan balance was offset.

To report this distribution in January 2022, a 1099-R is issued reporting the $40,000 as a lump sum distribution (code 7, 1, or 2 depending upon the situation) in Box 7.  A second 1099-R is issued to report the $10,000 QPLO using code M in box 7.

For 1099-R purposes from the plan it doesn't matter if the former participant does a rollover of the $40,000 within the 60-day period, and also does not matter if the participant funds and rolls over the $10,000 amount before their tax filing deadline for 2021.  

Correct?

Thanks in advance for your help!

An employer wants to pay end of year bonuses to employees based on a percentage of revenue they brought in to the company.   This company also has a 401(k) plan with a dollar for dollar safe harbor match up to 4% of compensation.   The owner wants to count the employer safe harbor match as part of the bonus. 

For example, employee Z is due an $8,000 bonus.  Employee Z is also due a $2,400 safe harbor match based on his deferrals into the plan during the year.   The employer says the bonus is $8,000 minus the $2,400 safe harbor match that will be made on behalf of employee Z = $5,600 remaining bonus to be paid in cash to employee Z.    So, employees that get a bonus and do not defer into the plan get their full bonus in cash.

Is this allowed, legally?   If it is not allowed, can anyone provide a reference to a statute or something so we can explain to the owner why this is not allowed?

Thank you!

I was debating this with someone, so I just wanted to get some clarity.  Company of 10 EE with 4 who were "highly": 1) Owner, 2) Owner's spouse (despite only making $50k) 3 & 4) Regular employees.

If we were going to determine HCE with the Top 20% (meaning 2 HCE) who would be considered?  Would it just be the owner and his spouse due to attribution?  Or would it be the owner, the highest paid non-owner and the spouse?

Thanks in advance!

Kind of a convoluted question, and I don't have full information available. 1.403(b)-5(b)(4)(ii)(B) provides that you can exclude employees who are eligible under a 401(k) plan of the employer. (my emphasis) The Employer sponsors a 403(b) plan which excludes union employees. Now, the union employees can defer into a 401(k) plan. I don't yet have information here, but I don't have much contact with union plans. I'm not sure if the employer is technically the plan sponsor, or if the union is the plan sponsor.

Does it really even matter? If the employees are eligible to defer into the 401(k) plan, doesn't the employer have to be a "participating employer" in the union plan in order to even submit deferrals on behalf of the employees? 

Also, what happens if a collective bargaining agreement excludes union employees, but there ISN'T a 401(k) Plan? This would seem to require e change in the CBA, or the 403(b) plan is in violation of the universal availability requirements. Anyone ever seen such a situation? This question is theoretical, as thankfully I haven't (yet) encountered this.

My organization adopted a SARSEP while they were still permissible. Later, the organization incorporated as a non-profit. The IRS has told us that nonprofits cannot have a SARSEP. I see in the code where a nonprofit can't create a SARSEP, but if an existing SARSEP is in place and then nonprofit status is attained, is that a bar to keeping a SARSEP?

so SECURE act eliminated the notice requirement for SHNE plans. our plan document requires a plan amendment. does the amendment need to be done if they are making the contribution and can it be adopted by March 15?

edit: well the plan document says needs to be adopted 30 days before the end of the plan year.  

Hello, a colleague asked me a question and I just don't know the answer. 

Client wants to purchase real estate in the plan but they don't have enough of a cash balance in their account.  They are asking if they can take out a bank loan to purchase the RE (apparently, he wants to use current property in the plan as collateral to borrow the money.). 

We both don't believe it's possible (PT?) - the plan would be basically taking out a loan?    

Thank you!

A 401(k) plan excludes some compensation for allocation purposes.  414(s) passes the ratio test, but ADP results, although failing using gross and net comp, are better using gross comp.

Here is the question.  

Suppose a participant's gross comp is $40,000, and for extremes let's say allocation comp is $10,000.  Let's say we give the participant a QNEC of 20% of allocation compensation, which is 5% of gross compensation.  This the only ee getting a QNEC so the representative rate would be 0.

If we are using gross compensation in the ADP test, are we allowed to use the full $2000 QNEC (as 5% of testing compensation) in the ADP test, or are we limited to 5% of allocation compensation, even though we are not using allocation compensation in the ADP test?

Thanks very much.

Seems ok, but smells funny. Medical practice hires a new Doctor, NOT as an owner or partner. Plan has 1-year eligibility for everything but they want to let this Doctor in immediately. Amends plan to credit service with prior employer so that Doctor enters immediately.

This Doctor will not be a HCE for 2021, as there is no lookback year comp, so it doesn't technically seem discriminatory. Thoughts?

Any tips on how to enter the definitions of statutory and plan compensation where the statutory definition is 415 compensation and the plan comp definition is gross comp on the W-2?

Background: 403(b)(9) Non-electing Multiple-Employer Church Plan

A church mistakenly sent employer contributions to the plan for two terminated employees. This church did not intend to provide post-employment contributions and is asking the funds be returned. Generally, when the plan receives an employer contribution that is in amount higher than intended, it applies it to another employees(s) of the employer for a future contribution, but these were the church's only two employees in the plan. The church intends to hire someone, but timing is uncertain.

Can the funds be returned to the employer, or must they stay in the plan for a future contribution since the church intends to stay in the plan.

Group:

I wasn't sure which area to post I'm hoping this is proper message board. 

Client's ESOP had a DOL investigation (Plantation, FL EBSA office) start early 2020. I represent client as their Tax/ERISA Attorney. Throughout 2020 I provide all requested documentation. Then from Sept '20 we don't hear anything. 

A few days ago I get an email from a new investigator saying he will be issuing new subpoenas. We've provided everything I can think of. 

Anyone else represent clients from this DOL EBSA dept? There happens to be a related US Tax Court matter in its beginning stages related to tax deficiencies and disqualification of clients ESOP.

Any other practitioners been successful in filing declaratory actions in Federal Court? instead of waiting years on end for the DOL to conclude its investigation? 

Thoughts and comments appreciated. 

Any Relius users have plans at T. Rowe price that can give guidance on how to import T. Rowe's trust report for annual compliance?  Being told by Relius that we need to have the file "trimmed" and then can be used in the "Hartford" interface which is the same used for American Funds. Are users "trimming" files and if so is there software available for that or how is that done?  Or is there another interface or solution to avoid that trimming process? 

Hi,

I'd like some advice on the following scenario.

The DR owns 2 companies – one company will have a Simple IRA (he will not contribute to the SIMPLE) and the other company (he is the only employee) will have a SEP and he will participate in the SEP.  He is also 50% owner in a 3^rd company which has a 401k – can he contribute to the 401k as well?  Can he max out on both the SEP and 401k?

Thank you!

Is it optional for a Multiemployer plan to change into a Multiple Employer Plan arrangement as long as all the parties agree to such a thing occurring? Or is a plan locked into a Multi for life?

Alternatively, if the CBA parties agree, could all the employers transfer assets to a MEP who is sponsored by a PEO and terminate the Multi?

Code Section 401(a)(28)(B) requires an ESOP allow qualified participants to make a diversification election within 90 days after the close of each plan year and distribute or invest the amount to be diversified within the following 90 days. In my experience, privately held plan sponsors who may not have a valuation or allocation completed within the first 90 days have met this requirement by issuing a preliminary diversification notice in the first 90 days and following up with a final notice when allocations are complete. 

The IRS sample pre-approved ESOP language issued in 2015 allows for the 90 day election period after the close of the plan year to be extended, eliminating the need for a preliminary notice followed by a final notice. 

Does this extend to individually drafted ESOPs? I am somewhat uncomfortable with the assumption that it does, as the statute is very clear and I would appreciate hearing others' thoughts. 

An owner of an LLC has his interest of the company sponsoring a plan held in trust, would the owner be able to use the income earned by the interest to participate in the plan? Is this even an issue?

For an Individual Retirement Account not held under an ERISA-governed plan:

Does any IRA custodian require a spouse’s consent as a condition to the custodian’s willingness to follow a designation that names a beneficiary other than the IRA holder’s spouse?

Does any IRA custodian have in its form a spot for recording a spouse’s consent to a beneficiary other than the IRA holder’s spouse?  (Even if no public law requires this.)

For either question, if you know any, please name names.

What I’m looking for is whether an IRA custodian does something, before there is a dispute or claim, to protect the community-property rights of an IRA holder’s spouse (or make it convenient for an IRA holder to show her spouse’s consent to a potential transfer).

I have a prospect who is interested in a triple stack match.  Owner, spouse, and adult child with two additional employees where neither wants to participate - which is insane in this scenario, but I digress.  Company is a S Corporation so the owner and family members keep their W-2 wages well below the 401(a)(17) limit - they are around $125k each.  I think I have this correct but I really hope someone is more comfortable with this than I am.  I believe they can each get a match equal to 16% of their $125k W-2:

Stack 1 - enhanced safe harbor match 100% up to 6%

Stack 2 - discretionary match 100% up to 4% (I know this can be structured differently but no need in this scenario)

Stack 3 - fixed match 100% up to 6%

Everything I've read on other posts and in literature only refers to the standard safe harbor match formula and assumes the owners have the maximum 401(a)(17) comp.  I hope those of you with more experience with the triple stack match can help me out here.  Does this stacked formula, giving participants a 16% match if they contribute 6% of pay, still safe harbor?

Plan terminated a bunch of years ago, and accounts were paid out in drips and drabs. 

The only accounts left are for the owners and several people who left the company long ago (like 2010, 2011-ish).

The employer doesn't have SSN for these people, so rollover places wont take the accounts.

Pooled PSP, not at a nat'l provider or anything like that.

What becomes of those accounts?