We have a 401(k) Plan participant with a balance in the plan, DOB in 1946, still employed, is a non-key.  

This year (2021), the company was purchased by another business.  The old company is no longer in existence and the 401k plan is being terminated (not a plan merger).  The new owner has hired most of the prior company's employees, including the above individual, and is crediting service with the prior business for all purposes in the new owner's 401k plan.  Balances from the old plan can be rolled into the new plan immediately.

Would an RMD be needed for this individual this year?  We could do the RMD before she rolls her balance into the new employer's plan or after the rollover?  And if one is required from the old plan, would it also be required from the new plan in subsequent years even though she would continue to be employed?

Thank you.

I have a new client that hadn't funded a required contribution for multiple years.  They funded those contributions, with added interest, in '21.  The question is, when are these contributions deductible on their taxes (they hadn't been taking the deduction, since the contribution had never been made).

1) Is it deductible in the year it was originally due?

2) Can they take the deduction in 2020 (it was funded in early '21, before the due date of ER contributions)?

3) Is it deductible in 2021, since that's the year it was made?

I'm not an accountant, so I'm not sure.

Thanks in advance!

We have a catch-up eligible employee who is participating in two "plans" adopted by unrelated employers. The employers are part of the same MEP, but tested separately. 

If the participant is due an ADP test refund in both plans, can we use up to $6,500 catch up to offset in each plan? 

I believe the regs allow catch up offset exceeding $6,500 across unrelated employers in SEPs, but we are wondering if the same rules apply to an MEP. 

Hi Team! Looking for a Study that defines Roles/titles as well as Compensation levels for the Employer Sponsored Retirement Plan industry.

As our team grows it's important for us to have an idea of what the industry is calling for so we stay competitive.

Hoping someone has a resource or contact.  Thanks!  

I have an individual client who's employer is stating he voluntarily terminated employment because of job abandonment.  However, he did not abandon his job but left (with the employers permission) on a Tuesday after they refused to pay him a commission on a large deal which violated his employment agreement because he was very upset.  His attorney sent the employer a demand letter the next day requesting how they were changing his prior employment agreement and indicated the employee would be taking vacation days until the employer responded.   The issue is that employer is stating he voluntarily resigned when he didn't and wanted to remain working there but couldn't get them to agree that they were changing his employment agreement.

He elected COBRA, (the employer has less than 20 employees so  it officially falls under the state continuation plan) but without knowing the monthly premium cost.  When he received the amounts($3,400/month for he and his family), he did not proceed with COBRA and didn't make any payments.  He is still within his COBRA eligibility window and therefore submitted his request for treatment as an AEI, but the employer returned it to him denying coverage due to "loss of employment was voluntary".  

The DOL/EBSA cannot assist because they don't have jurisdiction over state continuation plans and his state department of insurance is indicating they can only help with Insurance Company or Agent issues.  

Does anyone have any suggestions on how he can either get this resolved or where he can get legal assistance?  Most of the law firms he has spoken to deal with employers and not individuals so he's at a loss of where to turn.

Thanks in advance for your thoughts!

C

I have a plan that hasn't had a distribution is a few years (since 2016).  How can I find out if the Trust ID has been deactivated?

Ahoy, could someone do me a big favor and take a call from an attorney friend of mine who might be taking a plan sponsor into the PBGC mediation program that was started in 2019? He'd like to find out a little more ahead of time. It's a single-employer plan.

Feel free to post a reply here, or contact me via the "Message" button on my "profile" (click on my name). Thanks!

We have an opportunity to establish two DB plans for a municipality but our actuary does not have a plan document that can be used.  Does anyone know a good actuary or attorney who can draft these documents?  Illustrations have been done following the provisions of another municipality (we have their plan documents) and the decision-makers were happy with the results so the provisions can be copied from that municipality's plans.  We are in the finalist stage and need to get a quote together so please reach-out if you can do them or if you have a good recommendation.

I have a client where the owner sold the company, with all of the employees being hired by the new company.

The Plan itself is staying open for a few years, as the owner working as a consultant for who she sold to and getting paid through the old company.

Basically, all of the employees are terminated except the owner and her son.

The question is, in this type of situation what happens to the participant's vesting?  I know on a plan termination everyone is automatically 100% vested, but this isn't a plan termination.  But in this case, does that still apply?

Thanks in advance!

Hey, everyone - First time caller!

I have a client with a Standard Health FSA. It operates on a calendar year basis. However, the employer's payroll processes two weeks in arrears. 

Tax question as to whether the employer can deduct the final payroll from 2020 when the final payroll for 2020 is actually not paid out until the first payroll period in 2021. In other words, the work performed between December 15 and December 31 is paid on the January 15 payroll. That first payroll for 2021 is included as income for the 2021 W-2s - not 2020.

Has anyone dealt with this? The plan language is vague as to "compensation". Trying to determine whether there are different deductibility rules for cash basis versus accrual basis accounting.

Thanks!

Schedule H to the Form 14568 requires an explanation as to why the IRS should waive penalties under 4974 in the case of an employee-owner who failed to take RMDs on schedule. What are the circumstances that would qualify here? I am not sure why you need an explanation specifically for an employee owner and not anyone who doesn't take an RMD. Thanks. 

I'm hoping to get others' input on the correct standard for the future performance of substantial services under 457(f) for non-elective employer payments. Under section 1.457-12(e)(1)(ii) of the proposed regulations, "the determination of whether an amount of compensation is conditioned on the future performance of substantial services is based on the relevant facts and circumstances, such as whether the hours required to be performed during the relevant period are substantial in relation to the amount of compensation." There is no minimum vesting period in the proposed regulations or preamble.

When adding to current compensation or extending a substantial risk of forfeiture, proposed regulation 1.457-12(e)(2)(iii) requires performance of at least two years of future substantial services.

Under example 1 in proposed regulation 1.457-12(e)(3), a one-year (January to January) vesting period is implemented, which goes unmentioned as the example is aimed at an insubstantial amount of post-termination consulting services. One would think that if a two-year minimum deferral were required to begin with, the example would not need to resort to measuring the amount of work performed during the one-year period (or would use a longer duration). But the general substantial risk of forfeiture rule only looks at the amount of work performed, not the duration of the future services.

I know there has been a general rule of thumb stemming from section 83 that a minimum two-year deferral period is required to validly delay a substantial risk of forfeiture.

While it may be a matter of degree, I'm interested to hear others' takes on the following, all non-elective employer payments, all outside the short-term deferral date if the substantial risk of forfeiture is deemed not to take hold because it's less than two years:

• On July 1, 2021, employer awards employee a bonus payable on June 30, 2022, provided they remain employed full-time until the date of payment. 
• On December 1, 2021, employer awards employee a bonus payable on June 30, 2022, provided they remain employed full-time until the date of payment.
• On December 1, 2021, employer awards employee a bonus payable on June 30, 2023, provided they remain employed full-time until the date of payment.
• On December 1, 2021, employer awards employee two separate bonuses, one payable on June 30, 2022, and one payable on June 30, 2023, provided they remain employed until each separate payment date.
• On December 1, 2021, employer awards employee five separate bonuses, one payable on each succeeding June 30, provided they remain employed until each separate payment date.

Would anyone argue that some or all of these would immediately vest and be taxed on July 1, 2021, or December 1, 2021, as the case may be?

Participant dies and has no designation of beneficiary form.  The participant's spouse died 15 years ago.  The plan document provides for default beneficiaries as first spouse, if no spouse, then children equally.  There are 2 children.  I believe the 2 adult children are to both receive 50% of the participant's account.  The plan sponsors asked if this should go through probate.  It never entered my mind that this would go through probate since there are living children.  I'm not a lawyer.  I started to doubt myself.  I did a little research and it does appear that this would not go through probate.  It's not a large amount but still - need to be sure.  The plan administrator (doctor) would make the decision on this - but of course looks to us as TPA to tell them what to do.  Comments?  Thank you in advance.

I've been reading up on all of the rules regarding loan offsets and the ability to recontribute those amounts through the extended due date of their tax return following loan offset.  But what has not been made very clear anywhere is how these rules interplay with the ability to rollover the note itself following offset.  So in my example, loan offset was processed by the Plan as of April 30th based on their loan policy.  This employee was included in a group of employees that are "Spinning off" into a new entity. They want the employee to be able to roll the balance over to the new plan.  

Can I still rollover the note even after the loan offset?  That's the big question.  The final regs that came out 1.402(c)(3) seem to make no mention of this whatever.  1.401(a)(31)-16 definitely talks about rolling over notes following offset, but its not clear to me if the new regs extend the date on which that is allowable.  And even if it did, it raises other questions about the 5 year term as follows:

-What if the note is not rolled over for a year?  Presumably the loan would be reamortized as on an approved leave, but I figure someone must have written this down somewhere by now.

-What if the 5 year term is already over?  Presumably the new sponsor should not accept it (or maybe if the loan payments would exceed their paycheck).

Again it just seems like this should be addressed one way or another.  Can anyone point in the direction of what I am missing?

As many probably remember, initially it was indicated that a participant could take up to a $100,000 participant loan through the Cares Act. It was also described that the repayment could be deferred for up to a year. Then after reviewing closer, the year was to be no later than January 1, 2021. In any event, there was confusion on this. I thought I read something about how a repayment will be considered timely if it was made on or prior to February 28, 2021. Did anyone else remember this? I cannot seem to find anything on it. 

Thanks!

The plan document provides that the plan year end is the last Friday of the December. 

The plan runs from 12/28/2019 - 12/24/2020 so form 5500 and 8955 were filed on the 2019 Forms.  For 12/25/2020 - 12/31/2021 the Form 5500 and 8955 will be filed on the 2020 Forms.

My biggest concern is that 2021 form 5500 and 8955 would then be skipped because there is no plan year that starts in 2021. The next plan year is 1/1/2022-12/30/2022.  Due to the fact that the plan year starts in 2022 then the form 5500 and 8955 should be filed on the 2022 forms not the 2021 year.

 Another issue is that the year after would also be reported on the 2022 form 5500 and 8955 because the plan year is from 12/31/2022 – 12/29/2023. 

Any suggestions on how to handle this situation?

So, here's the question - plan Trustee liquidates funds to pay a terminated participant. Doesn't open a trust checking account - deposits the funds to corporate account, and SAME day sends check to participant, or directly to the participant.

Now, I know this is a no-no, but it happened. Question is if this in any way invalidates a rollover, since it technically didn't come from a "trust" account?

Plan provides that normal retirement age is 65.  However, early retirees and vested terminated participants can elect to receive unreduced benefits as early as age 60.  Is there any requirement that benefits be actuarially increased if a terminated vested participant does not apply for benefits until, for example, age 65?

The only authority I can find on this is Code section 411(b)(1)(G) and Treas. Reg. section 1.411(b)-1(d)(3), which say that an accrued benefit cannot be decreased on account of increasing age or service.  From an intuitive standpoint, it would seem obvious that if you can get a particular monthly benefit at age 60, providing only that same monthly benefit at age 65 constitutes a reduction in the benefit (because the same amount will be received for fewer years).  However, Code section 411(a)(7) defines the accrued benefit as "in the case of a defined benefit plan, the employee’s accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annual benefit commencing at normal retirement age."  (Subsection (c)(3) deals with the portion of the accrued benefit attributable to employee contributions, and is not relevant here.)  So since the plan is not decreasing the amount payable at normal retirement age (age 65), is it free simply to tell the participant who applies late, "Sorry, we know you could have started receiving full benefits at age 60 if you had applied on time, but because you didn't, you won't receive either a make-up for the missed payments or an actuarial increase"?

Need some guidance please.  Had a client consult with an attorney who you know informed them of retirement plan options.  I'm sure they were all knowledgeable.  Yes I'm being sarcastic.  At any rate, they have approached me with adding a Roth IRA as a plan option so they can offer more to long term employees.  They have Roth in their B plan.  It's not a Safe Harbor B plan just as an FYI.  I know everything I can do with the B plan but I suspect they don't want everyone to benefit.  It's also an ERISA B plan.  Apparently they can put together an Employer sponsored Roth IRA and just contribute for who they choose, of course the contribution they make is taxable to the participant.  But how does this coordinate with the ERISA B plan?  Are there combined testing requirements since both Employer sponsored.  Can they do this free and clear???  I've never in 30 years had a client do something like this so insight on whys and such or other options, pros and cons of this, would be great?  Thank you.

Participant submitted the paperwork for a Coronavirus Related Distribution on December 24, 2020. The assets were transferred out of the participant account and plan trust account on December 26^th. They were transferred to a paying agent. The paying agent didn’t send out the distribution until January 4, 2021. 

The paying agent is refusing to treat this as a coronavirus related distribution because the check wasn’t sent until January 4, 2021. (Past the 12/31 CRD deadline.) They will be issuing a 2021 1099 distribution for the full $100,000. Thus the participant will have to incur immediate tax consequences and penalty for taking this money out.  

Has anyone else had any issues like this? We are trying to build a case that because the money left the participant account and the plan’s trust account on December 26^th that this should be credited as a 2020 Coronavirus Related Distribution and the paying agent should treat it as such.