Hi, 

One of the terminating plans has after-tax and funds of all non-responsive participants is to be rolled over to an IRA account.  Since few part's have funds in after-tax, I believe the after-tax money will needs to be put into ROTH IRA and the earnings into Traditional IRA?

Hi

DB/DC combo plans. DC is straight PS only, no other provisions. DB is covered by PBGC.

3 participants, owner/HCE, non-owner HCE and rank&file NHCE.

Both the non-owner HCE and NHCE terminated on 6/30/2021 but worked over 1000 hours. Assume each had final salary of 50k for 2021 i.e. the 2021 w-2's will show 50k for each.

Sponsor wants to terminate the PS plan as of 9/30/2021. His salary as of 9/30/2021 will be 200k and as of 12/31/2021 will be 290k. He has always been at maximum limits for the past 3+ years.

The DB plan will stay active for the time being - no 401a26 issues for 2021.

They are asking me to finalize the PS contributions for 2021 now. I have thoughts on performing all on a very conservative level but want to check on the following.

What salary do I use for the owner for deduction of PS portion and what salary do I use for testing?

If I did not ask the question properly, please feel free to correct.

Thank you

Hi

I think it is ok but want to see what others say.

Calendar plan for 2021. Only PS provisions. It is cross tested with a DB plan. Top heavy provisions only provided by the PS plan

2 rank&file employees terminated with 1000+ hours but plan has EOY requirement for allocation.

Only one rank&file in the DB and already accrued the 2021 benefit.

Sponsor will terminate the PS plan during 2021. However will continue working for the company.

Sponsor wants to provide PS contributions in excess of gateway requirements (combo testing passes easily with minimum gateway). Cannot do that with an 11-g so need to remove last day requirement.

I can do the amendment now retroactive to 1/1/2021, correct?

I also have a deduction and testing related question but will ask separately.

Thank you

I can't think of a better title to this issue, but here's the situation. DB Plan is terminated early in 2020 and the SB is filed along with the F5310 showing a contribution of $170000 made in Jan 2020. Approval letter received in June. The SB shows the $170,000 contribution. This is sole prop employer and the actuarial report is not filed with the F5500. The plan is quite overfunded and it is intended to set up a QRP Plan for the excess assets.

But  the client subsequently elects on his own to remove $170,000 from the Plan and as Employer he amends the business return and pays taxes on it. The question is what would you  do with the 2020 SB, which is the last SB for the Plan?  1. do nothing. 2. amend the SB  and file it with IRS Agent who approved the DT? The MRC is zero in either case and the plan remains overfunded in either case. What would happen if the plan was audited?

Regarding the requirements that elective deferrals and safe harbor contributions cannot be distributed to employed participants until they attain age 59.5 (assuming the doc permits such payouts), I was recently speaking with someone who mentioned that recent legislation (he said either the SECURE or CARES Act) now permits inservice distributions from all sources including deferrals and SH money.  I normally defer to him since he's a TPA, but I haven't been able to locate anything in writing that backs up this change - have the inservice rules changed in this respect?   

I have a plan that did not want to allow CRDs.  A few were paid by the recordkeeper and the Plan Sponsor noticed and shut them off.  I assume that the recordkeeper contacted Plan Sponsors to tell them the "default" was to allow unless they communicated that they did not want to offer.  When they noticed that some were paid, they shut them off.  The recordkeeper tried to recoup the money recently but the employees either didn't respond or had been terminated and had received a full distribution.

How should they correct?  I suggested having the Plan Sponsor adopt the CARES amendment but to only allow until they were shut off.  Any other ideas?  If they don't adopt the CARES Act CRD  - then don't they have a operation error where they did not follow the plan document?

I'm seeing that there is relief for the 5500 filing due date for those impacted by Hurricane Ida but I wanted to verify that this does not currently extend the date required contributions are due past September 15th.

I don't believe it has, but wanted to double check.

We have a plan with an effective date of 1/1/2020 but the plan didn't start contributing until March of 2021 and they are not going to make any Contributions for 2020 so they'll have NO Assets. I believe we still need to file a Form 5500-SF just putting zeros in the financials? Also since nobody has an account balance under 5c on the 5500-SF I assume I put 0 (zero). 

Client does not want to change the effective date to 1/1/21 which was suggested.

If a SH plan terminates with an effective date of 8/31, the termination is due to the company being acquired.  The final paycheck is not due to be paid until 9/9.  Can the plan continue to accept pretax and SH match contributions from the 9/9 paycheck?

This one I'm pretty sure is easy, but I just wanted to make 100% sure since someone asked me.

Can a sole prop, schedule-C have a solo-k AND cash balance plan?

Hi

Owner only plan. The first year of plan is also the first year of the company. Therefore, there is at this point, only one year of salary. If the plan's benefits are based on a salary average of the three highest consecutive years of salary, how is the average determined for this first year? Thank you

Hi, 

Have a terminating plan and I don't believe the plan went through an amendment regarding the UNITED STATES v. WINDSOR Act, now that the plan is terminating will it require an amendment. 

Thanks

If a real estate partnership pays commissions to the two partners which are reported on Form 1099, is the 1099 earnings considered self employed earnings for sponsoring a SEP on behalf of each individual partner? A partner is not considered an employer for SEP purposes but a 1099 individual is considered an employer for SEP.

In 2020, ER deposited $100,000 to a holding account in the plan (I know!).

Maxing out the owner and giving 5% to the EEs results in a $70,000 allocation for 2020 and passing of tests.

Does he have to allocate the remainder to the participants?  Or can he take back the funds as a Mistake of Fact?

I have a participant in a plan that, as a result of her employer moving her from one location to another (and then having to also move her parents, as she is their caretaker), is requesting a hardship withdrawal to "lease" (i.e, rent) a house in her new location. She has no other source of funds and the employer would like to grant this request.

As the lease is for, technically, her principal residence, would you be inclined to grant the withdrawal?

Thanks for any replies.

I'm not perfectly clear on how you would test this design, and would appreciate any insight. 

A 401(k) plan allows immediate eligibility for deferrals on date of hire; the only condition is age 21.

The plan also provides a safe harbor nonelective (also age 21). Eligibility for this portion is the January 1 or July 1 after working 1000 hours (not January 1 or July 1 following a full 12-month period in which the employee completed 1000 hours). So, if a full-time employee was hired on July 1, 2021, they may work 1000 hours before the end of 2021 and enter the safe harbor portion on January 1, 2022. 

This does not seem (to me at least) to impose the maximum permissible minimum age and service conditions in 410(a), so it's not clear that dividing line for ADP/safe harbor would necessarily correspond to the participants actually getting those contributions when using the otherwise excludable employee rule (i.e., some participants who have not satisfied the maximum permissible age and service requirements would be getting safe harbor nonelectives). 

If that's the case, how would you test? Would it be everyone with less than the maximum permissible conditions subject to ADP (even if some are getting safe harbor nonelectives) and everyone with more than the maximum permissible conditions exempt from ADP testing due to the safe harbor? FWIW, this is what ERISApedia and Who's the Employer seem to suggest.

This might actually be a more general question, but since the plan I'm working on is looking to allocate just a safe harbor, I figured it went here...

A doctor owns 100% of three businesses: Sole Prop A, Sole Prop B, and S-corp C.  They are all part of the plan.  For the first time, I've got an issue with the compensation.  Sole Prop A has a net Schedule C (before pension expense) of $34K.  Sole Prop B has a net loss (before pension expense) of -$127K.  And the S-corp paid him a W-2 of $278K, including $18K of 2% shareholder health insurance premium.

Normally, all the numbers are positive and combine to be way over the compensation limit (even after the safe harbor expense for the participants), so this is nothing to worry about.  But 2020 was, well, 2020.  I'm sure it isn't as simple as combining the three numbers.  I thought I remembered hearing that you combine the self-employed amounts, and if that is less than zero, you can treat that as zero... but I can't find that in writing at the moment, so I'm reluctant to go with that until I've got something to hang my hat on.

Any thoughts or directions to point me in?  Thanks.

I have been talking with a consultant that is working with an advisor who set up a "solo(k)" early last year and funded their deferrals (at that time) for the year; later that year, the business owner hired new employees and was operating on the idea that the next year (now) they would adopt a 401(k).  However, the advisor now thinks no document, associated with the "solo(k)", was prepared, thus no eligibility criteria was established.

So is the solution:
1. Treat it as though no document has been created and remedy that matter
2. Then remedy missed deferral opportunity based on step 1 (design/eligibility criteria)?   

Let's say an executive is currently employed and on his employer's group health plan. The executive is being terminated in connection with an M&A transaction but will become an consultant to the company for six months as an independent contractor. As part of the termination, the employer has offered to pay for COBRA coverage for him and his dependents for six months. The executive is already eligible for Medicare.

Assuming he is not enrolled in Medicare, he's still eligible for the COBRA coverage, correct? He would lose COBRA coverage if, after the COBRA coverage becomes effective, he then enrolls in Medicare. Do I have that right?

TYIA

Just curious- how do you handle HSA accounts and escheatments? Do you treat the HSA like an IRA because it can make investments in Mutual Funds or do you treat it like a checking account? I've looked and couldn't find any guidance about how if or when to escheat a HSA account. Any guidance would be appreciated here, thanks