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.

Good morning

SECURE Act allows pension plans to be set up in 2021 for 2020.

If a corporation, though can set up a 401k/PS plan for 2020 in 2021, the deferral option has to start in 2021 and after the plan is executed.

How about for a sole-proprietor and/or partnership where there are no employees?

Thank you,

My title may not clear, but the situation is thus. I have a situation with a DB covering 2 participants and a corresponding DC Plan. Both plans were terminated in 2019 and distributions due to be completed in 2020. In the DB 415 lump sums were paid to the 2 participants. But  on July 1, 2020 the custodian of the investments transferred $4000 from one of the DB  accounts to one of the 401(k) accounts.  The oversight was discovered Jan 15th and we are trying to correct it. 

Under the regulations for correcting plan defects it tell us to make a correction that would put in the plan(s) in the same situation has the error not occurred. So for the DB Plan, we need to transfer $4000 from the DC Plan back to the DB Plan. We can also calculate the lost earnings on the $4000 for the months in was not in the DB trust. So if the earnings rate in the DB plan was 6% for the year of 2020, an amount equal to 6% x 50% x$4000 =$120 would also have to be deposited back to the DB plan. 

What I don't understand is where must the $120 come from? Can the company make a $120 corporate deposit into the DB Plan to complete the correction for the DB Plan? Then there is the issue of the DC Plan, since it also has an operational defect since it accepted $4,000 it wasn't entitled to receive. Let's say the DC Plan earned 13% for 2020 on the $4000 deposit so it earned 13% x 50% x $4000 or $260.00. Who is the $260 paid to? Can the DC Plan pay the $120 back to the DB Plan and keep the rest? What if the DC Plan had a loss for 2020-- would it return $4,000 less the allocable loss and then have the corporation pay the balance.  I  can't find a good example how to fix this problem. Any insight would be appreciated!

I had an original QDRO filed in Denton County at the 211 District Court on June 20th, 2011. It was for a pension plan distribution to my ex spouse as part of the divorce settlement.

When I turned 65 (I'm now 66), my pension plan administrator required that I start receiving benefits. Due to the wording of the pension documents for my former employer, I now have to amend the original QDRO since I retired and remarried. My benefit payment has also been reduced starting in Dec. 2020 to meet the terms of the original QDRO.

 I have submiitted the correct form work to my pension plan administrator for review and approval.  I now need to know the logistics and forms needed to resubmit the revised QDRO to a judge in the 211 District for his/her signature.

Since I'm now on a fiixed income, I'm unable to hire an attorney to make these changes.  Please advise how I can do this myself.

One of our carriers inadvertently sent us a file for another client of theirs.  We sent an internal email to all those who received the email by mistake notifying them that it was sent to them in error and requested a response back that the email had been deleted.  We also notified the carrier and informed them of the same.  The carrier is now requesting that we sign a certification that we in fact deleted the email and did not view it.  Are we under any sort of an obligation to sign this certification?  We notified them of their error and confirmed via email that we deleted the file and did not keep it, but they have said that isn't sufficient, they need a certification signed by us.  This just seems a bit overboard.

We took over a cash balance plan that is a c-corp but they have a large group of doctor/owners.  Historically the doctors review their plan annually and request an amendment to adjust of the doctor's contribution credits.  Our actuary is concerned that this  series or pattern of amendments changing the benefit structure violates the definitely determinable benefit rule. He feels the plan should only be amended every 3-4 years.   The other concern is that these desired allocations could be construed as a CODA and will exceed the 402g limit.  Since the previous actuary allowed it and we have some other plans that amend to adjust their contribution credits (albeit not as frequently) I'd like to get more opinions on it.  Thanks!