We administer a combination CB/401(k) which we recently took over.

The 401K is calendar, the CB is 9/1-8/31.  Client wants to bring the CB to calendar year, so we have a short plan year in the SC 9/1/2020-12/31/2020.

Client is in cash flow (who isn't these days) and wants to keep the CB as low as possible.

The limitation year is calendar for both plans.  Thinking of doing CB with actual salaries 9/120-12/31/20 and full cal year for 401K, but that does not sit right.

Full calendar salaries for both and then pro-rate the CB contribution?

Owner                        Company 1         Company 2

1 Husband                 50%                     100%

2 Wife                         50%                     0%

Company 1 has a 401k plan - although plan allows form employer match all they do is allow for 401k deferrals - no match has been made to plan over the years.

Husband recently acquired company 2 - only has 5 employees and he is only HCE.  Wife has no part of company 2

Husband and Wife have one child under age 21

Am I correct that because they have a child under age 21 there is a controlled group situation here?  If they did not have a child under 21 than there would not be a controlled group? 

Hi All:

One of our clients, who historically filed a 5500-EZ Form, filed their final 5500-EZ Form for their 10/31/2019 plan year.  The form was marked as a final form.  The client received a letter from the IRS dated 12/7/2020 with a heading:  Filing Requirements Reminder:  Review to determine if you must file Form 5500-EZ or 5500-SF.  The letter references the Plan period ending 10/31/2020, for which the client will not be filing a form.  There doesn't seem to be anything in the letter that requires a reply of any sort.  It appears to just be a reminder to the client that if they are required to, they must file either an EZ by mail or an SF via EFAST2.  

Has anyone else had clients receive such a letter, and is it safe to just file this in our records for future reference?  Anyone know why the IRS is sending these?  Are more to follow?

In the case of a 2020 regular taxable ESOP distribution with NUA reported in box 6 of Form 1099-R, if you self-certify for COVID relief from taxation, Form 8915-E does not allow you to claim beneficial capital gains tax treatment on your COVID distribution.  Capital gains on an ESOP distribution with NUA are normally reported on Form 4972, line 6, and the instructions for Form 8915-E (page 2, left column at the very bottom in the "Note") specifically mentions no capital gains from Form 4972 are allowed.  The link to IRS Form 4972 and its instructions are here:  Form 4972 and Instructions.  Form 8915-E and instructions can be found here:  Form 8915-E Instructions; Form 8915-E

Accordingly, from what I can tell, COVID impacted recipients of 2020 ESOP distributions with NUA will have a choice to make with respect to claiming COVID relief on Form 8915-E:  1) file Form 8915-E and forego capital gain treatment, but pick up the waiver of the 10% early withdrawal excise tax (plus get 3-year ordinary income tax spread & ability to rollover); or 2) don’t file Form 8915-E for COVID relief and keep capital gain treatment, but pay the 10% excise tax if applicable (and lose the 3-year tax spread & ability to rollover).  

In my opinion, if the CARES Act is going to allow taxes to be spread over three years, then spread the taxes normally due over three years.  I doubt the CARES Act contemplated the IRS recharacterizing capital gains into ordinary income as a consequence of getting COVID relief.  If any income tax preparers out there can think of a workaround like attaching a Form 8275 statement or similar, please let me know.  I’ve complained to the ESOP community and LinkedIn.  I’m not sure if anything will happen, but the IRS makes mistakes now and then, and ESOPs are complicated, even for the IRS.  Alternatively, the CARES Act didn't address this issue and it would take an act of Congress to fix.  Any thoughts?

Hello,

My company I work for is currently undergoing asset purchase. In the company there are number of employees fully vested in Stock Appreciation Rights. 

In our case buyer will payout all debt and wants specific amount of left over proceeds to be paid as an earn-out based on company performance in the next year.

My questions is how Stock Appreciation Rights should be treated in case like this? Do you pay them out in full or they become part of earn-out. This is a bit confusing since company is doing asset purchase rather than stock buy.

Any advice is much apricated.

Hello,

We tested our cafeteria plan late in the year and found we failed the DCAP 55% test. We have just one pay period left in the year, and we're working with our payroll vendor (ADP WFN) to create an imputed income code to include the amounts that caused the plan to fail in HCEs' gross income. However, does Box 10 of the employee's W-2's need to be modified as well? We have been scrambling to find assistance with how to make the corrections, but we haven't found any guidance on how this would actually appear for employees on their W-2's. 

If deferred compensation was supposed to vest on December 31, 2019 and be paid out within the next 10 days (per plan document), and it wasn't paid, is the "year of failure" 2019 or 2020? 

We have a plan with after tax contributions and the only participants making after tax contributions are HCEs.  The employer makes a basic safe harbor match.  The question has come up as to whether or not safe harbor match can be used in the ACP testing in order to pass/help the ACP test that would otherwise fail and require refunds.  I can't find anything in the Regs addressing this so I'm assuming that this in not allowable.  Has anyone else run into this question or can point me to I may be overlooking this being address in the Regs?

Hello,

First post, hope this is the right place - I have a plan sponsor that wants to start their 401(k) Jan 1, 2021. However, they have had a SIMPLE, and they did not give proper term notice to the employees. Say they just stop contributing to the SIMPLE, as of the end of the year, and start contributing to the 401(k) - I know this isn't allowed , but what are the repercussions? If the IRS doesn't require to be informed of the termination, how would they even know? It seems like their violation would be not filing proper SIMPLE notices - but the 401(k) would still be valid, yes?

Thanks in advance,

Plan currently has a QACA provision (3% nonelective - 2 yr cliff vesting). They have amended the Plan to remove the QACA provision. Client made 3% nonelective contribution. Does vesting still apply?

The sub is NOT a wholly owned LLC.  It's a for-profit corporation.  What are the rules concerning whether or not they can adopt a 403(b) Plan sponsored by the parent?

Floor Offset Plan is top heavy minimum of 5% Profit Sharing (PS) Highest HCE Allocation rate comes to 25.12 resulting PS testing Minimum Gateway will pass with total PS 7.50% (

But if I reduce the PS to owner to total 4.50% (PS 1.50% plus SHNE 3%), then highest HCE Allocation rate comes down to 24.92% and Minimum Gateway pass at Total 5% (PS 2% plus SHNE 3%). 

My question is do I have to offset in 5% or 4.5% for all participants in DB plan?

Hi

Having a discussion and curious about the following for a 2021 RMD:

Plan year changed during 2020.

9/30/2020 AB 2000/monthly

12/31/20 AB 3000/monthly - short plan year from 10/1/20 to 12/31/20

What is the AB used for 2021 RMD?

Another scenario

9/30/2020 AB 2000/monthly but 20% vested at 400/month

12/31/20 AB 3000/monthly - short plan year from 10/1/20 to 12/31/20 but 40% at 1200/month

What is the AB used for 2021 RMD?

Thank you

We are a small TPA firm that services pooled plans. Now that Relius is no longer sponsoring 1099 software, was wondering if anybody had any recommendations.

For 2020, we have between 25-50 1099-R. We also need to print the 945's and 1096's.

Defined contribution guy here hoping for some clarity from a cash balance expert or two. A small business owner with 5 employees has decided to start a 401(k)/cash balance combo in 2020.  The 401(k) is safe harbor and he got it in just under the deadline - the plan effective date was 10/1/2020, however the limitation year and the compensation computation period are both set to calendar year so we can include full 2020 compensation and limits.

We have proposed to do the exact same with the cash balance plan - 10/1/2020 plan effective date with the limitation year and compensation computation period set to calendar year. It is my understanding that the plan years must be identical for the plans to be aggregated for testing so we would have to use 10/1/2020 for the cash balance plan effective date. The actuary I am working with is telling me the benefits would have to be reduced by about 75% of what was originally projected for 2020 because of the short plan year. The cash balance plan document is from the same provider as my 401(k) document and the language regarding the limitation year and the compensation computation period are consistent in both.

I trust the opinion of my actuary but I am having a hard time accepting this. Does 401(a)(17) force a cash balance plan to prorate compensation in a short initial plan year even if the plan document permits us to use the full calendar year compensation?  I don't see that it does (although I could be wrong) so is there something else that forces proration of compensation or contribution limits?

Background:

Susan dies and has left her 403b to a specific "Ministry A" within a religious denomination.

The named "Ministry A" no longer exists.

In the words of the religious denomination: "Ministry A" is now "Ministry B" - a likeminded ministry who also serves the mission of "ministry A". 

To my knowledge there was not a formal merging of entities but rather maybe a reorganization in which Ministry A dissolved and Ministry B took over some of roles of Ministry A.

Susan never named a contingent beneficiary. In the absence of a living/existing primary beneficiary and there is not a contingent beneficiary, the Plan's default is to push to the estate.

Question:

What does the plan need to know about Ministry B to determine if it can serve as the beneficiary of Susan's account?

Does anyone know or be able to provide a source. I have a sole spouse beneficiary of a qualified plan worth around $500,000. She wants to take $200,000 and move it to a Roth IRA (so do a spousal assumption of $200,000 into a IRA and then do a conversion once the funds are in a Traditional IRA in her name) and move the $300,000 and keep it as a beneficiary designation so she wants it moved to a Inherited Traditional IRA FBO her benefit. Can a sole spouse do a partial spousal assumption of the account?

I'm reviewing an existing document that so obviously does not comply with 409A that I feel like I have to be missing something.

1. "Becoming a party to an agreement" providing for the sale of all or substantially all the company's assets is not a permissible payment trigger, right? Doesn't it have to be the actual transaction? The regs read that way... 

2. Also, is amending a retention bonus agreement to extend the retention/payment date by 2 years permissible?  No, unless the bonus is increased by at least 125%, correct?

Somebody tell me what I'm missing here!

A recordkeeper is asking for approval from a TPA in order to process a Internal Roth Rollover. TPA is saying that it's not warranted b/c they view it similarly as an asset-reallocation. I disagree and view believe the TPA needs to provide the approval because IRRs are governed by the Plan, has reporting requirements, and tax implications while an asset-reallocation does not. Any thoughts?

I have a client who wants to give phantom stock to a director.

The phantom stock will vest and pay out upon a change in control.

However, the client wants to be able to remove the director at any time before the liquidity event but the director (now former) will still get paid out upon the change in control provided he hasn't violated his non-compete/non-disparagement, etc. agreement.

This feels problematic but I can't really pinpoint why except I don't know how the company can deduct any payment to this guy if he is no longer a director.  

What else am I not seeing?