For a hardship withdrawal, is the 20% tax withholding required?

Thank you

The Employer terminated a Cash Balance Plan and 401(k) Plan 2020.   The last distribution in the 401(k) Plan was June 1, 2020.   Will start new plans effective 6/1/2021 with short plan years from 6/1/21-12/31/21.  Looking for confirmation:

1. Cash Balance participants will earn full Contribution Credit for 2021.   Cash Balance TNC for both minimum and deduction is not prorated and essentially is the same if the Plan was effective 1/1/2021?

2. The maximum annual addition for the 401(k) Plan is prorated for the 7 month plan year.

3.  The maximum Compensation used for allocations is prorated for the short plan year.

4.  Nondiscrimination testing Compensation can be average of 3 full calendar years?   So the Employer Contributions to the 401(k) Plan could be allocated on Compensation after 6/1/2021 but testing is annual Compensation?

Thank you.

I setup a plan for a CPA.  He is a single member entity and files an EZ form .  He called me in a panic this morning after reading the EZ instructions.

Mandatory electronic filing.   A filer must file the Form 5500-EZ electronically using the EFAST2 Filing System instead of filing a paper Form 5500-EZ with the IRS if the filer is required to file at least 250 returns of any type with the IRS, including information returns (for example, Forms W-2 and Forms 1099), income tax returns, employment tax returns, and excise tax returns, during the calendar year that includes the first day of the applicable plan year. If a filer is required to file a Form 5500-EZ electronically but does not, the filer is considered to have not filed the form even if a paper Form 5500-EZ is submitted

Now as a CPA he prepares a myriad of returns for his clients.  He is telling me that because he prepares more than 250 returns on behalf of his clients  that he is required to file his EZ return electronically.   I don't think so and tried to explain to him that my interpretation of the instructions is that if his business files 250+ returns on behalf of the business itself then he would need to file electronically.  Because he as a CPA who prepares returns on behalf of his clients, those returns don't count.    

Correct?

Plan offers loans that are paid back via payroll deduction.

Is there any reason how/why loan repayments can stop?  Can the participant ask the plan administrator to stop loan repayments citing they can't afford it?

"One month of vesting service is provided for any month during which an Employee is credited with at least 1 hour of service."

This seems like one of those unusual circumstances where a provision appears to be quite generous, but just does not check the boxes in the right way. This provision is neither elapsed time, nor based on a minimum number of hours in a vesting computation period.

Therefore, I don't see how this rule complies with ERISA?  Do others agree?

The husband is a Participant in a Plan that will reduce his pension annuity benefits when he begins to draw Social Security benefits, that is, it is an "integrated" plan.  The parties have agreed that the wife will receive 50% of the marital portion of his retirement benefits (and are agreeable to either a shared interest allocation or a separate interest allocation). 

The question is whether or not it's possible to somehow freeze the wife's share of the husband's pension annuity so that her share will not be reduced when the Social Security causes the reduction in the husband's pension benefits.  As you may know, Social Security benefits are not considered to be "marital property", so if I cannot fix the problem her share of his benefits will decrease, and his benefits will increase, by an amount of his Social Security benefits not paid to his wife.  It is too late to consider workarounds like paying alimony equal to the wife's net loss. 

I have prepared QDROs for 33 years and never seen this addressed in any QDRO packages prepared by any Plan Administrator, or any any of the QDRO treatises I have on my desk.  

Thanks for your thoughts.

David    

We have a new client who is tax-exempt as a 501(c)(13) company.  They are looking to establish a 403(b) Plan, but based on what I've read it doesn't look like they'd be eligible to establish one.  Would they be eligible, or would they have to instead go with a 401(k)?

Thanks in advance!

I have an owner-only plan that has no 401k provision, it's pure profit sharing. He W-2's himself $20,000 per month, so he's paid himself $140,000 so far this year.  He would like to contribute $30,000 to his profit sharing plan for 2021 this week. 

His current TPA is telling him that he needs to wait until after the end of the year; that "the rules say" he can't fund it during the plan year. 

I've never heard of this - is there anything in the regs that disproves this? Thanks in advance - 

Sue

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/temporary-implementing-faqs-lifetime-income-interim-final-rule.pdf

Business will be terminating this year as owner is retiring.  They want to terminate the safe harbor 401k effective 9/30/21 as to get everyone paid out by YE.  Not sure of actual termination date of business but intent is to get everything wrapped up by eoy.  I assume this would qualify as a reason that a plan could maintain safe harbor status for a short year but want to confirm.

Husband/wife solo-401(k) plan.  They were not using a TPA, have self-directed brokerage accounts, and used a loan recordkeeping system to take out 4 loans back in 2019 - 2 for each of them.  As a TPA I have never dealt with this loan recordkeeping system so I don't know the whole story, but it allowed 2 of the loans to be taken with a 1% interest rate.  Not Prime + 1% - just a flat 1%.  The other two loans had Prime + 1% applied.

Their financial advisors wised-up and brought them to your friendly local TPA.  There are numerous other issues with these loans that we will help them fix through re-amortizing and consolidating.  My questions for the BenefitsLink community:

1.  Is there any possible way that a 1% interest rate would be a "reasonable interest rate" for a solo-401(k) loan in the eyes of the IRS?

2.  Does anyone know how to shut down these loan recordkeeping systems when their services are no longer needed?  They send monthly "invoices" for the repayments (which have been wrong - long story) and they charge a monthly fee that we need to end.  I don't want to mention a name because I think they have botched these loans, but again, I don't know both sides of the story.

The husband is a Participant in a Plan that will reduce his pension annuity benefits when he begins to draw Social Security benefits, that is, it is an "integrated" plan.  The parties have agreed that the wife will receive 50% of the marital portion of his retirement benefits (and are agreeable to either a shared interest allocation or a separate interest allocation). 

The question is whether or not it's possible to somehow freeze the wife's share of the husband's pension annuity so that her share will not be reduced when the Social Security causes the reduction in the husband's pension benefits.  As you may know, Social Security benefits are not considered to be "marital property", so if I cannot fix the problem her share of his benefits will decrease, and his benefits will increase, by an amount of his Social Security benefits not paid to his wife.  It is too late to consider workarounds like paying alimony equal to the wife's net loss. 

I have prepared QDROs for 33 years and never seen this addressed in any QDRO packages prepared by any Plan Administrator, or any any of the QDRO treatises I have on my desk.  

Thanks for your thoughts.

David    

A 401k was effective as July 1, 2020.  It had only two participants (non-spouses).  They put deferrals into the plan for a couple of months , but then terminated the plan as September 15,2020.  They took distributions before year end (12/31)...

.Do we have to file a 5500-SF?  If so, do we file it as the first and final all on the same form?   

Hi, 

One of the plan is terminating due to bankruptcy, the company is in the process of implementing the 3(16) services how does that change the plan termination process? will the record keeper company will need to do things that is normally done by the plan sponsor?   

We only prepare the NDT and 5500, will this needs to be filed by us in case the 3(15) service is implemented.  What our responsibility will need to be taken care?

Thanks

I see your baseball logo is being fazed out, as they now be called the Cleveland Guardians.

Get with it man! 

We have 3 companies that are part of a CGroup and each wants to sponsor a separate 401k plan just for their eligible participants.  Lets assume that there are owners who would be eligible for all 3 plans.  Would each owner (or participant) have separate 415 limits in each plan?  Or does the CG mean that they share only one 415 limit across all 3 plans?

Thanks

When testing a 401(k) plan that has made the determination to terminate the plan. Would the plan year end date for purposes of non discrimination testing be the date the termination resolution was signed?

Here is a example:

The company is going out of business and the resolution to terminate the plan was signed in March. Would non discrimination testing be run from 1/1 - March (the plan is calendar year) or would the compliance testing run from 1/1 - the date the assets are at zero?

An employer is required to fund additional money due to market fluctuations to pay out the final benefits and close a plan. The date of the funding is past the  deduction deadline (9/15/20)  for the year of plan termination (2019).  Can they deduct the contribution for the year it is made even though the plan was not active for that year?  I am being told that it's not deductible for 2020 since they do not have a plan for 2020.  

Here are some example dates:

Plan termination date 12/30/19

Tax deadline 9/15/20.

Contribution date  11/1/20.

Hi. How do you handle the contribution calculation for an HRA when a participant makes a mid-year change in coverage?  We (the employer) provide a $1,500 HRA contribution for Employee + 1 (spouse or child) coverage and a $750 contribution for Employee Only coverage.  We have a participant that changed from Employee + 1 to Employee Only coverage on April 1st.  Is the calculation simply pro rated for the remainder of the year?  

Here is an illustration of my thought process:

$1500 divided by 12 months = $125 per month for January - March = $375.00

For remainder of the year, $750 divided by 12 months = $62.50 per month for April - December = $562.50

 $375.00 + $562.50 = $937.50

Is this the correct approach?

Can a "regular" HRA be amended mid-year to either increase or decrease what the employer will cover? Received this question from a CPA, and while I believe it is possible (although I'd also think that if benefits are being reduced, it would only be for amounts not already incurred prior to the amendment date) I'm not sure.