Anyone try to file a 5500-SF with 2 participants?

Mine keeps getting rejected.

I get a warning in Relius saying that if I qualify to use the EZ I now have to use that form.

But this is plan is not a 'one participant plan.' It's an owner and an employee.

Relius says it's probably a DOL problem, but they didn't seem to know anything about it.  A co-worker saw a posting on Datair's forums about a similar issue.

LLC has owner and one employee

What with the pandemic, owner ended up taking zero in W-2 pay in 2020 while supporting the employee. Owner took draws though as I'm informed. Plan doc defines comp as W-2. Owner files main taxes as S-Corp.

Owner now wants to make a profit sharing contribution to both her and employee and wants to know if there is another way to calculate it for herself. I said no but she asked me to try to research it.

I've been asked if a 2020 year end profit sharing contribution deposited in 2021 can be included in the PPP Second draw application for calculating the loan amount, not for how to use the funds. I really don't know, although I feel like it's more of a cash basis situation.

We have PA ( not state of, but Professional Association) that sponsors a plan.

The PA is in the process of being sold, projected to be 1/31/21; plan termination set for 1/31/21, as well with appropriate notices given timely.

We know IRS does not recognize a plan without a Sponsor and the IRS does give up to 12 months from the termination date to distribute all funds.

Obviously impossible to distribute all funds by 1/31/21.

Technically, when all assets are distributed, rolled over or cashed out, the "Sponsor" will not exist.

Maybe I'm being too technical, but how to handle such a situation?

Scenario:  Employee's spouse's employment was terminated.  She is eligible for 12 months of fully subsidized COBRA continuation coverage followed by an additional six months of unsubsidized coverage as required by COBRA.

The spouse is nearing the end of the 12-month period of subsidized coverage and the employee wants to enroll the spouse in his employer's plan effective at the end of subsidized period.

HIPAA's special enrollment rights would, in general, permit the employee to enroll the spouse in his plan in lieu of her electing COBRA (i.e., 12 months ago) and again at the end of the 18-month COBRA period.  But there is, in general, no special enrollment right to add coverage in the middle of COBRA continuation coverage.

In the COVID-19 relief (which in my view was not the previous Administration's best effort), the requirement that a participant inform an employer of a special enrollment right within 30- or 60-days (depending on the event) is tolled until basically the end of the pandemic.

Must the employer permit the employee to enroll his spouse in the plan as he requests because the notification requirement is tolled?  Or did the employee's special enrollment right for his spouse go away when she elected subsidized COBRA?

Any thoughts are appreciated.

If a deferral only plan wants to use a non-safe harbor definition of compensation for deferral purposes such as excluding commissions I believe there is no discrimination issues if the plan passes ADP testing using a definition of compensation that satisfies 414(s).  The question is ... are there any restrictions in the Code or regs (cites appreciated) for how compensation may be defined for deferral purposes - with regard to reasonableness or nondiscrimination and so forth?  Thanks.

I had a 401k loan outstanding when I was laid off at the end of 2019 (I made all required payments in 2019).  I was unable to pay it off at that time.  The loan went into default in mid 2020.  I thought I still had until I filed my 2020 taxes before it was treated as taxable income(per the 2017 Tax changes).  I repaid the loan in November 2020, but I still received a 1099R with code 1L on it.  Should I be receiving a revised 1099R? or how do I prove to the IRS that I repaid the loan?

Plan termed in 2020 and all payouts completed in 2020 along with the required tax withholding and dpeosits.  Plan was a monthly schedule depositor for 2019 (total tax liability was < $50k).

Due to the plan termination and the number of distributions during August of 2020, the withholding deposits for August were over $100k.  If I'm reading the 945 instructions correctly the Plan became a semiweekly depositor because the tax liability in August exceeded $100k.

This means the client must complete and attached Form 945-A instead of Line 7 on the 945. 

Agreed?

Due to an acquisition, a small plan that has a self-directed brokerage account option for participants is merging into a larger plan that does not have self-direct. The purchasing company does not want to amend the larger plan to allow for self-directed brokerage. Would it be permissible to map the funds in the self-directed brokerage account into the age-appropriate target date funds, which are the plan's QDIA, upon conversion?

Is there any service that helps clients rollover their 401k's to IRA on their behalf? A lot of people don't want to do it themselves.

Hi. We have a client who has a group of employees that are now under a union contract. They are still employed by our client. New contributions are being sent to the union plan which is administered by another vendor. The broker has requested that we amend the plan they have with us to exclude this group of employees from being eligible to participate in the plan and transfer these assets to the union plan. There are fringe wages and deferrals in this plan - don't know if this matters, but wanted to mention it.

Our base document states:

3.4  TERMINATION OF ELIGIBILITY

In the event a Participant shall go from a classification of an Eligible Employee to an ineligible Employee, such Participant shall continue to vest in the Plan for each Year of Service (or Period of Service, if the elapsed time method is used) completed while an ineligible Employee, until such time as the Participant's Account is forfeited or distributed pursuant to the terms of the Plan. Additionally, the Participant's interest in the Plan shall continue to share in the earnings of the Trust Fund in the same manner as Participants

We are not convinced that changing the eligibility status of the participant population, while still remaining employees of the same company, permits a plan to plan transfer. Our attorney agrees but we're getting push back. The broker has stated that one of his colleagues had this exact situation and that's what his client did. Is there any code that anyone can direct me to that would help us resolve this?

Thanks!

Jen

We have some plans done by a former administrator that have individual brokerage type accounts.  I believe these accounts were set up using the ER's EIN instead of a Trust EIN.

What are the ramifications of this, if any?

I always get a separate TIN when the accounts are either in a pooled account or individual brokerage accounts.  The former admin ceased doing that because he got tired of the pushback when the TIN was retired due to inactivity.

I was setting up a new plan, and was told it was OK to just have the sponsor's EIN as the Trust EIN in the doc.

A Solo 401(k) Plan effective 1/1/2017 crossed the $250k threshold as of 12/31/2020. 

When reporting on the Form 5500-EZ for 2020:

The plan year will be 1/1/2020 - 12/31/2020. (not the effective date through 12/31/2020, right?)

The beginning assets are actual assets on 1/1/2020 (as opposed to potentially $0 assets because it's the first return). 

Thanks!

The 404a-5 Regs. require that plan participants be notified of any fee changes 30-90 days prior to the effective date of the change. From a practical standpoint, how are TPAs handling this requirement if you takeover a plan and the distribution/loan fees are different from what you charge? Do you make a note in your system not to change the fees until XX date? 

Employer has committed to a 20% contribution to a defined contribution SERP. The time and mode of payment are fixed in the document. 

The employer wishes to freeze contributions mid-year, and the plan document permits this. The reason is that the employer intends to substitute 409A-exempt stock options and bounuses for the amounts it would have contributed to the SERP. 

I don't see a problem with this, but would appreciate  input:

1. Substitution is not really the issue. The accrued amounts will be paid as scheduled and the employees are not relinquishing rights. As stated, the plan allows for a freeze with advance notice.

2. Changing a deferral amount mid year should also not be a problem. Although mid-year changes are prohibited for elective deferrals, absent hardship, this does not seem to apply to plans funded solely with contributions by the service recipient.

Thoughts? 

We were just told yesterday that effective 12/31/20 Company M sold out to Company S in a stock sale such that M is a wholly-owned subsidiary of S.  We are the tpa for M's plan (401(k), safe harbor, profit sharing), and S's goal is to terminate M's plan in 2021.

M's employees are still being treated as belonging to a different entity, and are still deferring into M's plan.

Obviously, we want to take advantage of the transitional relief rules so that we don't have to deal with S for testing in 2020 or 2021.  This brings up a few questions:

1. Can M as a corporate entity be the plan sponsor of M's plan post-12/31/20?
2. Can the trustees of M's plan (who were the former owners of M) stay on as trustees of M's plan?  I don't see why not, though they may not particularly want to.

If we amend, we lose the transitional relief, so I'm wary of that.

It's funny - the articles about this topic all seem to be written from the point of view of the purchaser, not the seller.  Maybe I should be dumping this all on S and telling them to have their TPA figure this out!  Oh, wait - they don't really have one; they use a bundled low-cost product, so they have no one to give them any advice (except their attorney, who I'm sure charges much more per hour than I do!).

Thanks.

Employer was bought in an asset sale.   Most participants are to be employed by the purchaser.  Plan accounts are held at larger brokerage with self-directed accounts.  Plan termination date is 12/31/20.  Distribution forms have been distributed with the option to roll the self-directed accounts in large brokerage to self-directed accounts at same or other brokerage, to new company 401(k), or in cash.

Looking at the Plan's AA now, it says distributions can be made in cash only.  Would like to amend (post-termination) to "cash or in-kind".  

Is this OK.  Who signs, authorises?  No distributions have been finalized.  Is current date OK?

Hi there - our plan recently had the forfeitures reallocated automatically due to "pass through processing" and they were distributed to plan participants (myself excluded). We had intended to use these for plan expenses and told the recordkeeper this back in March, however, they did not do so. We've asked the recordkeeper to reverse the transaction, but they will not and are requesting a hold harmless letter and want us to take on the risk.

They mentioned there could be a fine or penalty for removing funds from the participant's account, although they incorrectly allocated to them in the first place. My questions are:

1)            What the fine would be if this reversal came up in an audit?

2)            What the risk is that this reversal would cause an audit for a small plan filer?

3)            Would an auditor be understanding since the recordkeeper has even confirmed via email that we had requested the fees be applied to plan expenses back in March?

From what I understand, the Emergency Sick Leave isn't paid as regular pay.  Is is accurate that 401K plans should not consider this as income and defer or calculate employer contributions?   Ie.  reduced from gross wages when submitting income for the 2020 plan year?

(Rhetorical question.)

Updated for 2021 numbers:

https://benefitslink.com/cgi-bin/inte-greater/

Not sure how useful it is nowadays, but the free, online "Inte-Greater" determines the integration level that provides the greatest share of the contributions for one or more "favored" employees.

More than a bit clumsy on the input end, and no way to save the data, but maybe fun to play with. I enjoyed writing it in Turbo Pascal in 1992. The online version is written in Perl.