Due to unexpected W-2 income in 2020, I have excess employer non-elective contributions to my solo traditional 401k. I am a sole proprietor. Any advice on how to handle this situation with the IRS would be appreciated. I have not filed my 2020 taxes yet.

-  2020 tax year 401k excess employer non-elective contributions of $3984

I've read about this but seem to be having a brain freeze so seeking some help here.

My March 2020 my wife made an employee deferral for the year 2019 (which is clearly permitted) in her solo 401k and miscalculated the allowed amount (that was my mistake), then two weeks later we discovered the error, and contacted Fidelity and had the excess ($3k) removed from the solo 401k, still in March 2020.  We reported the correct deferral amount on the 2019 tax return by ignoring the excess.

What are the tax consequences? Are we taxed on the $3k excess deferral just as if it was a withdrawal in 2020 from a retirement account (we are age 61) -- that seems odd to me but perhaps it's the law?

We did get a 1099-R from Fidelity for the $3k stating the amount was taxable in box 2a and stating distribution code as "E" in box 7 which is EPCRS.

Other?

Thank you.

Does covering non-employee directors under an employer-sponsored health plan make the plan a MEWA? Does it make a difference if the plan is fully-insured or self-insured? 

We have a plan that has a short plan year for 2021. A participant exceeded the 415 limit because of the short-plan year.

Would the distribution code be "E" or "8"?

I think it's time for plan documents to update the NRA to something more realistic....such as 66 1/2,  to be more in line with social security retirement ages. 

I represent a labor-management relations fund which is intended to comply with Section 302(c)(9) of the Labor-Management Relations Act, under an amendment adopted by the Labor-Management Cooperation Act of 1978. The DOL has consistently taken the position that since such funds provide neither a pension benefit nor a welfare benefit that they are not subject to ERISA. Ironically, there are a number of court cases in which such funds sue to recover delinquent contributions under ERISA Section 515 which have been accepted by the courts (presumably because the opposing party never raised the ERISA issue as a  defense). Does anyone have a sample or specimen trust agreement that can be used for such an arrangement to the extent it is funded by employer contributions?

A 401(k) plan has 1000 hour and last day requirement to receive match - fails the 401(m) ratio % test for 2020.  In regards to correcting Coverage, the plan document states:

"The Employer Contribution will also be allocated to individual Participants in the order specified until the Plan satisfies the minimum coverage requirements. A Participant, and all similarly situated participants, will be included only if necessary to satisfy those requirements."

It then goes on to say you start with participants that worked the most hours that were still employed on the last day of the year, then work your way down to terminated participants with the most hours...

We need to bring in several NHCE that terminated prior to 12/31/2020 to pass the ratio % test for 401(m).  We have two HCE that are not benefiting under 401(m) because they terminated employment before 12/31/2020 who worked more hours than any of the NHCE we are bringing into the match.  Does the "only if necessary to satisfy those requirements" allow us to ignore those two HCE's?  I sure hope so because we can't pass if we have to include those two HCE.

The following formula is provided for computing interest rate for Form 5500:

i = 2 x I/( A+B-I),

where i= effective rate of return, I= total interest or net gain/loss  A=Beginning Balance, B=Ending Balance.

It seems to work fairly well but can't find the source or prove it myself. Has anyone else looked into this?

EE gross comp is $2000. They contribute $1900.

What is their ADP rate using net comp? Is it 1900/$100?

Group:

Wasn't sure which section to post so I apologize in advance for duplicate posts. 

Is Ft Williams the best (or just one of a few) in marketplace to help create esop plan documents? Are they owned by Wolters Kluwer? 

I'm looking for a resource (or service provider. Ie attorney/TPA) familiar with esop plan document design and plans with participants in excess of 100. Along with knowledge in participant notice requirements for material changes. 

Not looking for freebies. And willing to pay to consult. 

Thank you in advance. 

Hi

Not thinking straight.

DB/DC combo - top heavy plans.

DC is 3% non-elective safe harbor, PS requires 1000 hours+last day rule

DB required 1000 hours for accrual

Top heavy requirement is under the DC plan i.e. DB is not required.

Gateway is 7.5% i.e. 3% of safe harbor plus 4.5% of PS

Participant works 750 hours during the year and employed as of end of year.

Does not get a DB accrual though covered.

Needs to get 4.5% of PS as must satisfy gateway, correct?

Thanks

Please excuse my ignorance, but I'm looking at a life insurance annuity inside of a 412e plan that has an account value that exceeds its guaranteed cash value because more than just the premium payments have been paid to it it over the years. Is this a cause of concern?

Hello. I have a client with an existing SEP Plan (prototype w/ TD).  I know we can still make a 2020 contribution of course, but not sure on this:  Can a 2020 contribution be made to the SEP, we then terminate the SEP, and finally establish a Simple for 2021?  If so, does the SEP termination need to be retro to 12/31/2020, and is that even possible?

Thank you in advance.

A small employer sponsors a PSP that allocates contributions on a comp-to-comp basis - everyone gets the same percentage of pay.  There are 2 HCEs (owner and daughter) and 1 NHCE.  The owner would like to allocate 25% to both herself and her long-time NHCE.  However, since she only has a specific amount to contribute, her daughter would be left getting only 15% of pay - which is OK with the owner, as the daughter just entered the plan and will not be staying long.  Having the daughter waive participation is not an option - the owner wants her to get the remaining allocation.  How much of an issue do you think this would be if the plan were audited since it's the owner's kid who was shortchanged?  Would they likely assess penalties for not following the terms of the document even though no NHCEs were affected? 

Hello, thank you in advance for your help with this. 

Situation: Company A, Owner A has 100% ownership. Company B, same Owner A has 85% ownership. Both companies have around 10 employees.

Company A has offered a 401k since 2017, converted to SH 401k in 2019.

Company B does not have any 401k

Am I correct that Company A and B are in a controlled group and the 401k should have been offered to Company B since inception? If so, what is the mechanism to correct this? Would company B employees be due the SH contributions over the last 2 years?

Thank you

One of the participant rolled the funds to an IRA ( since the plan terminated) the rollover occurred in Feb 2021, now since the acquiring company will be setting up a 401K plan the participant wants to rollover the funds from IRA to the new 401K that will be set up in April, I believe the participant can rollover to the 401K plan however I believe the tax record may needs to be corrected - Correct? 

Good morning everyone!  I just wanted to confirm what people use for the definition of compensation for plans.  Generally we use W-2 compensation, but we have a case (about 35-40 participants) where the owner is being taken off W-2 and instead will simply be paid by a draw whenever the company profits allow it.  Obviously he still wants to remain a part of the plan.

Thanks in advance!

The Rescue Plan Act was passed by the House today and is expected to be signed by the president on Friday. The bill adjusts (increases) the segment rates for minimum funding starting in 2020, and (optionally for plan years starting in 2019, 2020, and 2021, and starting for everyone in 2022) replaces the 7-year shortfall amortization with a 15-year amortization.

How are you planning to handle the changes? Hopefully most of us have our 1/1/2020 valuations finished by now, are you contacting all your clients and letting them know they should expect a new minimum contribution calc? Are you going to discuss the shortfall amortization option with them, or just opt them all in (or out)? Or wait until your software supports it before even bringing it up?

Any other ideas or concerns about the new law?

Due to a failed coverage test, I need to prepare an 11 (g) amendment.    Our firm does not prepare the plan document, can I still prepare the amendment?