Hello, thank you in advance for your help with this. 

Situation: Company A, Owner A has 100% ownership. Company B, same Owner A has 85% ownership. Both companies have around 10 employees.

Company A has offered a 401k since 2017, converted to SH 401k in 2019.

Company B does not have any 401k

Am I correct that Company A and B are in a controlled group and the 401k should have been offered to Company B since inception? If so, what is the mechanism to correct this? Would company B employees be due the SH contributions over the last 2 years?

Thank you

One of the participant rolled the funds to an IRA ( since the plan terminated) the rollover occurred in Feb 2021, now since the acquiring company will be setting up a 401K plan the participant wants to rollover the funds from IRA to the new 401K that will be set up in April, I believe the participant can rollover to the 401K plan however I believe the tax record may needs to be corrected - Correct? 

Good morning everyone!  I just wanted to confirm what people use for the definition of compensation for plans.  Generally we use W-2 compensation, but we have a case (about 35-40 participants) where the owner is being taken off W-2 and instead will simply be paid by a draw whenever the company profits allow it.  Obviously he still wants to remain a part of the plan.

Thanks in advance!

The Rescue Plan Act was passed by the House today and is expected to be signed by the president on Friday. The bill adjusts (increases) the segment rates for minimum funding starting in 2020, and (optionally for plan years starting in 2019, 2020, and 2021, and starting for everyone in 2022) replaces the 7-year shortfall amortization with a 15-year amortization.

How are you planning to handle the changes? Hopefully most of us have our 1/1/2020 valuations finished by now, are you contacting all your clients and letting them know they should expect a new minimum contribution calc? Are you going to discuss the shortfall amortization option with them, or just opt them all in (or out)? Or wait until your software supports it before even bringing it up?

Any other ideas or concerns about the new law?

Due to a failed coverage test, I need to prepare an 11 (g) amendment.    Our firm does not prepare the plan document, can I still prepare the amendment?   

I was looking over some correspondence that a national carrier put together for sponsors to send HCEs before they get ADP refunds.

One of the blurbs says that Roth excess contributions are not taxable, and pre-tax contributions are taxable.

But it also says that the earnings on BOTH Roth and pre-tax contributions are always taxable.

Is that true?  Even if the Roth account is eligible for a qualified distribution (ie the 5-yr rule was satisfied)?

Excess deferrals due to 402(g) limit are paid out by 4/15.

Question is the 1099-R with Code P generated for the prior year in which it is taxable, or for the current year it is distributed, even though it is taxable in prior year?

I'm a little confused by this. So let's say you have a plan with a Health FSA, that has a rollover provision, but NOT a grace period. It does have a 30 day "runout" period to submit claims for prior year.

Now assume they executed a CARES amendment, which states, to paraphrase, that the plan's claims procedures and other statutory deadlines are temporarily extended by the "outbreak period" , and the outbreak period extends until 60 days after the end of the National Emergency, etc...

We of course are not past the end of the National Emergency.

So, would you interpret this as allowing the 30 day "runout" period to be extended, for submission of 2020 claims?

I know there is a 10% limit for the first year, and a 15% limit for all subsequent years, on automatic contributions under a QACA.  However, if you have just a straight auto enrollment/auto escalation (not an EACA or QACA), are there any legal limits on how high the level of contributions can be?  I'm not finding any, but proving a negative is always hard.

There's a deceased participant ("wife") whose estate is producing an executed Separation and Settlement Agreement that says, after going on at length about the husband's State retirement benefits and how that will be split, that "each party hereby waives any legal or equitable interest which he or she has or may have in and to the value of any Retirement Plan owned by the other party.  The term "Retirement Plan", as used herein, shall include, but not be limited to, any Pension Plan, Profit Sharing Plan, Keogh Plan, 401(k) Plan, deferred compensation plan, or Individual Retirement Account titled in the name of either party.  Upon the execution of this Agreement, any such Retirement Plan shall become the separate property of the party in whose name the Plan is titled."  This was executed in 2019 (the deceased had been a participant since 2000), and it was signed by a Notary Public (two, in fact).  Fine, this is a 403(b) plan, but I'm willing to say that falls under the "not be limited to" provision (though, really, she had been there for 19 years at that point - they couldn't have added that in or gotten that right?).

So... does this count for plan purposes?  It's not a typical QDRO, and it was never submitted to the plan sponsor before.  Can the plan honor this?  Does this remove the separated husband as the deceased wife's beneficiary under the plan?

For calendar year 2020, if a plan covers only 1 individual and that individual is not the owner or spouse, would they file a 5500(S/F) or a 5500-EZ?

Thank you

Hello, 

I am working on a new plan for 2020 that has 4 employees, husband and wife and 2 NHCEs.  I received the census and there were no deferrals in Box 12 and Boxes 1, 3 and 5 are the same (telling me that no deferrals were deducted).  Roth is not permitted in the plan. 

When I received the brokerage statements, I noticed a large deposits and when I questioned the employer, he said that was $19,500 for both he and his wife. 

I am going to call the CPA and discuss with him.  I think I remember something about that even if it's not on the W-2, they can report it on their 1040 and still deduct it?  I want to make sure before I tell the CPA that they have to file corrected W-2s. 

Thanks!   

Our interpretation of the CARES/SECURE act enables the adoption of a DB (or CB) plan effective 1/1/2020 as long as it is adopted no later than their tax filing.

Does this also apply to a retroactive amendment increasing benefit formula or unfreezing plan?  Adopt as late as tax filing rather than the "normal" 2.5 months?

We are using Datair for our Cycle 3 plan documents. They advised us they should become available by end of March but I'm not sure I trust that timeline.  What do I do with new 401k plans effective 1-1-21?  Draft using the old document, then restate next year?  Seems unfair for the company to spend the extra money on 2 documents a year apart.  Is there any way around this?  My answer may lie with the investment firm handling the investments but I am wondering what others are doing in this situation?

Alright, so my question concerns the merging of a safe harbor plan with a non-safe harbor plan and the potential pitfalls which may arise. 

We have a client who is currently involved in a corporate acquisition, not yet known whether a stock or asset sale, and their company is acquiring another company who currently sponsors a SH plan. Note, our client's company currently sponsors a non-safe harbor plan. I would like to provide them with a few bullet points of what to look out for and potential issues which may arise as a result of the merger. Based on my research, the IRS hasn't really provided guidance in this area and it appears the safest thing to do would be to move the participants of the seller's plan to the buyer's plan at the end of the year. However, playing devils advocate, what if they were to merge mid year? Also, how would deferrals be treated with respect to the safe harbor plan? I would greatly appreciate any input.

Hi

I was asked the following:

Terminating overfunded defined benefit plan (DB) - small plan covering husband&wife - both over age 72). Overfunded portion will be rolled over into a QRP - just a profit sharing plan (PS)

Can they pay their retiree medical benefit directly from the overfunded portion? I never heard of but..

Thank you

Hi

There is always a first time.

Husband&wife (owner and spouse - no other employee) - Virginia sub-s corporation, investment advisors

Just found out that, they may have deposited over 6% of profit sharing limit during 2020 (not in 2021). The 31% test does not work as it is a large CB contribution.

6% PS was supposed to be 34k but possibly put in 50k during 2020 thus 16k overage. This is separate than the 401k deferrals.

CB was 300k

31% limit is 176k

If they made the excess 16k PS contribution during 2020, can they simply pay 10% excess tax and still take 334k deduction?

What other solution(s) can be recommended?

Thank you

Client has made his 2020 profit sharing and safe harbor contribution, just received some PPP money and wants to know if he can reimburse the PC.

I know he can use PPP money to make the contribution, but not sure about reimbursements.

In 2016, a taxpayer inherited the IRA of his brother, and he elected to stretch the IRA. In 2020, he passes away, and the beneficiary is his spouse.

Question is can the spouse take the IRA as her own and continue payments over her lifetime? Or is she subject to the CARES Act 10 year rule?

Thanks for any replies.

I have a large plan, 1600 participants, 7 companies, controlled group.    5 of the companies are eligible for a profit sharing contribution, 2 are not.    They also have a safe harbor match.   

Each individual company passes 410b for the profit sharing separately, but when testing together, it is failing, also fails the Average Benefits Percentage test.   

It appears the software is not testing separate the participants with less than 1 year of service nor is it excluding terminated participants with less than 500 hours from the companies that do not receive the profit sharing.   The software provider says it is because they are not eligible for the contribution.    Is that correct?    

any helpful hints to get this to pass? I'm just so frustrated with all the manual input