While reviewing my tax form before filing, I realized the amount that was used to pay the 2019 service will be taxable (Box 29 of Form 2441). I never had this experience before since I always used up the $5000 DCFSA annual limit.

Scenario: *All amounts are not true amount.

• DCFSA Plan Year 2020 - covers Sep 2019 to Dec 2020 (incl. grace period)
• Contribution for Calendar Year 2020 - $3000 as shown on Box 10 of W2 (The other $2000 was contributed from Sep to Dec 2019 that paid CY 2019 service.)
• Total Paid for Calendar Year 2020 Service - $2000 based on the statement by the daycare each yearend (My kid stopped going to daycare last March 2020 because of Covid.)
• Year 2020 - Form 2441 - Box 29 - The $1000 is showing as taxable. This $1000 contributed in 2020 was actually reimbursed for 2019 Service Paid.

Please note that in Year 2019 - Form 2441, I declared $9000 as qualified expenses based on the statement by the daycare for that year. Part of that $9000 is the $1000 that is showing as taxable in my Year 2020 Form 2441. I did not get any credits as it was already over the $5000 DCFSA annual limit.

Question: Can I claim the $1000 as 2019 service paid in 2020 even though I declared it as qualified expense (part of the $9000) in Year 2019)?

Thank you and appreciate any insights.

I have a 401k plan where the participant died in 1998.  He has a small balance in the plan.  The employer who sponsors the plan has been purchased several times through-out the years and does not have any records going back that far.  The participant has a small balance and we were attempting to do a small balance cash out when we found he was deceased.   There is no beneficiary designation on file with the recordkeeper or the plan sponsor.  We have done searches and have not been able to determine if the participant had any family.  The plan document states to distribute to the estate of the participant.  Our dilemma is that we do not have any information on an estate to distribute to and the check will go uncashed.  The recordkeeper refuses to escheat the balance.  

Does anyone have any guidance they can offer to us?

Plan has 3 HCEs (2 contribute) and 12 NCHEs. Doctor/owner has until his tax filing deadline to contribute.  Last year I gave him 11000 and 6000 was categorized as catch up. Test passed.  This year I gave him 8850 and the test passes, the 11000 wouldn't work (change in demographics); however, it show a refund to HCE #2 in the amount of $550 (no SBJPA/Allocable Income/total Refund Amount)-- this in Relius. Then it shows the $550 as catch up to the doctor.  Does that make sense? 

Thank you in advance. 

I know that there are multiple (I think three) different options when it comes to entry dates for otherwise excludable employees (not satisfying statutory entry requirements).

My question is, can you choose a different entry date when testing coverage in different plan years, as long as you treat everyone the same in the individual plan year being tested?

For example, let's say you normally use statutory entry dates when determining the otherwise excludable group.  Then one plan year an HCE is in the otherwise excludable group and is messing up testing, but if we used, say the plan's actual entry dates to determine the otherwise excludable group, can we make that change for the plan year as long as everyone is treated in the same manner?

Thanks very much.

I have a scenario where the employer declared the 2019 discretionary profit sharing contribution before the tax filing deadline for 2019, signed and filed the 5500 with the contribution on it, and provided the participant statements showing the contribution.   Due to a change in bookkeepers, the check never got issued and is still outstanding today.  I believe the plan is owed the contribution and it should still be paid, but deductible in 2020.  

Are there thoughts on if the missed contribution can/should be paid to the plan since the participants were notified and it was declared?   The current CPA is going to amend to remove it from the 2019 tax return and believes is CANNOT be made to the plan now and that the 2019 5500 and participant statements should be amended as well.  

I may be on the wrong forum, if so I apologize and no need to reply.

My father recently passed away and had a pension that pays my mom the same monthly payment that he had been receiving for the past 30 years.  When we notified Fidelity (plan administrator for BP) they questioned my mother's DOB since their system indicates 1948 when her actual DOB is 1938.  They can look back at the original paperwork from 30 years ago and see that her DOB was correctly reflected as 1938 in writing, but it says 1948 in their system.  They requested a copy of her birth certificate to change their system.

Could this incorrect date affect the monthly pension my father received over the past 30 years and the amount my mother would receive going forward?  I want as much information as possible before bringing this up with Fidelity.

Sorry if this was asked before:

I own an S-Corp and own 100%.

My adult son is my employee and participant.

2020 5500-EZ instructions for who can file EZ:

2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC 1372(b), as a partner)

1372(b)2: 

(b)2-percent shareholder defined

We have a new 401k/PSP plan with an effective date of 1/1/2020, but a special effective date of 11/1/2020 for 401k deferrals and safe harbor (3% non-elective) contribs (it was adopted late in the year), so the 401k & SH provisions were just effective for the last two months of the year (from adoption date forward).  Note - the plan will be top-heavy.  If the only contribs for the year are the two months of deferrals and the SH 3% will the plan be deemed to satisfy top-heavy minimum?  Or will the employer need to top off all employees at 3% of comp for the entire year?  We don't know if, as long as the 401k deferrals and SH 3% for 11/1-12/31 are the only plan contribs for the year, if the plan will be deemed to satisfy top-heavy minimums, or if they still need to do 3% top heavy min for entire year since overall the plan has a 1/1/2020 effective date.  Our hope is that the entire year TH minimum would only be due only if the employer decided to add any additional profit sharing.  IS this correct?

We're doing 1099Rs for some clients that have brokerage accounts and the brokerage firm will not prepare the 1099s.

(No surprise).

Should we be getting the name, address and TIN of the brokerage house, as they prepared the check and note them as the Payor on 1099R, or use the Trust ID number for the Plan and make the plan the Payor

Hypothetical situation:  2019 plan fails the ADP test, and they correct it with refunds August 2020.

The 5330 tax is $1,050 and was paid.

Then this January, they realize that some HCE comp was lower than in reality.  With the new numbers, the plan passes.

What happens to that $1,050 excise tax?  The plan didn't really need to be corrected, so it couldn'tve been late.  Can you ask for a refund of your tax?

Does anyone know, I know that there is not a distribution hierarchy for withdraws from Designated Roth 401(k) plans, unlike a Roth IRA (contributions, rollovers, than gains). But on a withdraw from a Designated Roth 401(k), if the Roth is made of $10,000 salary deferral, $10,000 gains and $10,000 IRR(Internal Roth Rollover), and a client does a distribution of $3,000, would the distribution source have to be $1,000 from the salary deferral, $1,000 from gains, and $1,000 from the IRR; even though the IRR has not satisfied the 5 year rule. Or could the distribution source be $1,500 from salary deferral and $1,500 from gain? 

When running component plan testing, we're supposed to make sure the separate plans would pass coverage testing as though they were separate plans.  The divvying up of participants would generally not satisfy the nondiscriminatory classification test.  

1.401(a)(4)-9 (c)(4)  indicates that the average benefits percentage test is deemed to pass for each component plan if the test is passed for the plan as a whole.  However, this "deemed passing" does not cover the nondiscriminatory classification test.  As a result (so the story goes) the Average Benefits Test is not available to pass coverage for the component plans and therefore they need to pass the 70% ratio percentage.

I'm curious to see if others have found differing interpretations.  In reading through the ERISA Outline book for example, you would have thought there would be a big disclaimer "Average Benefits Not Available for Coverage!!" but nothing...

So for example, Component Plan Testing is being run for nondiscrimination, so perhaps one could argue that the reasonable business classification test doesn't apply (perhaps the IRS came to the same conclusion when they didn't mention this in aforementioned "deemed to pass" reg).  I note that my "normal coverage testing" of course is passing no problem.  That's the kind of interpretation I am curious to know is out there. 

Now as many of you have likely discovered, because of the patterns of including/execluding HCE's and NHCE's to pass things, getting the ratio percentage above 70% is not particularly challenging, but I do question whether it is even necessary. 

I am a small business owner (sole proprietorship / schedule C) interested in opening a SEP plan for my 2 employees. I understand that I have to contribute a similar % of their salaries, however I would prefer not to make contributions for myself as the owner / employer. If I don't make contributions for myself, does that prevent me from helping my 2 employees equally with their SEP?

Merger date per legal documents is 3/31/2020, but assets did not transfer until the end of July.  No extension was filed by 10/31/2020.  Is it reasonable to say that short plan year ended July 31, 2020?  That gives until 2/28/2021 to file the extension.

Interestingly the plan merged into ADP Total Source and as such my presumption is ADP will only report activity on its won platofrm, not anything before the transfer date. 

Employer wants to give 3% PS contribution to everyone in the plan - except the owner does not want to take a contribution at all.  Owner has a son who happens to be youngest employee in plan and giving his son 3% will not pass rate group testing.  He fails.

- Can you still give son 3% and just say that the allocation in pro-rata other than the owner is taking $0.00

or 

Becuae owner is taking $0.00 do you lose the pro-rata design and have to test the plan and thus limit the son to a smaller than 3% contribuiton to get plan to pass testing.

...

Has anyone seen this also?

Our firm normally files an extension for both the Form 5500 and Form 8955-SSA at the same time.  We always extend both of them. 

We did that last summer for a 12/31/2019 PYE ESOP.   

We determined later they did not need to file an 8955-SSA so we did not file one.   The Form 5500 was filed timely.  In the past that would have been the end of it.  We however just got forwarded by the client a letter from the IRS informing them the Form 8955-SSA is late.  It should have been filed back on 10/15/2020.  

Is this a new trend?   Do we really have to know by 7/31 if a Form 8955-SSA will be needed or not? 

If someone has gotten this kind of letter before did a simple response saying no form was due enough to satisfy the IRS?

Jack and Jill are a married couple who both own 50% of company A.  Their adult son works for them and is considered a 100% shareholder through family attribution.

Son owns Company B 100%.  Company A and B have completely unrelated services and clients.  Are Company A and Company B a controlled group?  Or is this double attribution?

Thank you,

Tom

DBP participant has an annuity benefit that is less than his/her 415 limit but their lump sum exceeds the maximum allowable. Can the plan pay the maximum lump sum which, for example, converts to 90% of the accrued benefit using statutory assumptions and then pay the remaining 10% of accrued benefit as an annuity (assuming the plan document allows for bifurcated benefit distributions in general)?

Good afternoon folks - new to the boards.

I've received inconsistent responses to an issue I'm facing, and interested in the expert opinions found here on the board. 

I have a Solo 401k/profit sharing plan for my business, which includes my spouse and me. In 2020, I added a DB Cash balance plan. We have both contributed the max employee deferral for 2020, including catch-up contributions. Typically throughout the year, we contribute 25% of compensation to the plan as the profit sharing contribution, rather than waiting until the end of the year. 

We continued this practice even as we were exploring the adoption of the DB Cash balance plan, which we adopted prior to year-end 2020.

We now find that we have made profit sharing contributions in excess of the 6% limit for combined DC/DB plans, when considering the minimum funding contribution for the DB plan will be in excess of 25% of compensation (we are both over 55). I had hoped that since we were in the same plan year, and the contributions affect both my spouse and I equally, that we could transfer the amount exceeding the 6% of employer profit sharing contributions to the DB plan as part of the minimum funding DB contribution for the same plan year.  However, it appears more likely that we need to keep the contributions and any earnings in the DC plan, and report them via 5330 to liquidate against future year contributions.  

Has anyone dealt with a similar situation, and what was your solution? Ideally, I'd hope to transfer the excess 2020 profit sharing contribution to the DB/Cash Balance plan as part of the minimum contribution for 2020, as a correction. Open to any suggestions (the one I'm taking for sure is to let someone handle this going forward as it's too much to do this and run a business). 

Thanks in advance -