Hi

Looking into designing a new CB plan for an existing 401k plan and trying to determine if Joe is an HCE or not for 2020.

Joe was 50% owner in 2019 and received 75k in salary.

Joe terminated in 2020 (not informed about the hours yet but let's say over 500) and sold his share to the other owner on 5/15/2020.

The new plan will be effective 1/1/2020 but adopted in November 2020. The val date will EOY.

As Joe was an HCE as of 1/1/2020, is he an HCE for all year by ownership?

Anything I am not thinking of? May be top 20% rule (not sure how it would apply here and effectively when).

Thank you

Large plan with late deposits in 2017.  Corrected in 2018 with applicable earnings deposited in 2018 and 5330 submitted in 2018. All done.  According to the 5500 directions, these late deposits go on the 2019 5500 for the last time, correct?  See below---

The total amount of the delinquent contributions must be included on line 10a for the year in which the contributions were delinquent and must be carried over and reported again on line 10a for each subsequent year (or on line 4a of Schedule H or I of the Form 5500 if not eligible to file the Form 5500-SF in the subsequent year) until the year after the violation has been fully corrected by payment of the late contributions and reimbursement of the plan for lost earnings or profits.

Brain freeze here:

Plan has dual elig. & entry, 3 months svc. & quarterly entry for deferrals, and 1 year, semi-annual entry for safe harbor match, safe harbor added in 2019.  Two scenarios need help on:

1. Former participant termed 2018, rehired 8/1/2020, was a participant for several years prior to 2018 termination.  Is this person eligible to defer and receive safe harbor immediately starting on rehire of 8/1/2020?
2. Similar scenario, but this EE has been working for several years, was eligible in past, but never wanted to defer, he now wants to.  Can he start deferring now in paydate 9/25/2020, and also receive the safe harbor for 9/25, or, would he have to wait till 1st paydate after 10/1 deferral entry and would he have to wait till 1/1/2021 to start receiving safe harbor?

Thanks in advance.  

Broker came to me with a question.  I have not been involved with the SIMPLE;  years ago, we heard the expression "SIMPLE plans for simple minds."

His client has a SIMPLE IRA with the 3% match.  Apparently the owner has already contributed more than the max deferral.

Can a SHM be set up to fund the difference for 2020 so the owner does not have to take any money back; or would the excess need be returned?

We have a plan where the owners did not contribute the full allowable safe harbor match for themselves for  2019 (4% basically).  They did max out deferrals for 2019.  We have always though that the owners SH  was just like everybody else - had to be trued up at year end.  they get K-1s..... Has that changed?  I was thinking I heard a discussion recently on a Relius webinar.  

With those recordkeepers and third-party administrators that offer a § 3(16) service for the service provider to decide claims for a distribution, including a hardship distribution:

(1)   Does an employer/administrator want a power to override the service provider’s decision?

(2)   Does a § 3(16) service provider want the employer/administrator to have such a power (even if the employer/administrator doesn’t want the power)?

BenefitsLink mavens, what’s your experience about what’s happening?

does anyone recall whether there was any general relief concerning the timing of notices such as the safe harbor notice. i recall something general coming out in the beginning of the pandemic. 

EDIT: Ok i found it. it wan an EBSA extension for title I notices. i do not think that applies to safe harbor notices. 

Has anyone found a good comparative chart that is a resource/tool for comparing the various aspects of MEPs, PEPs, and various group plans that providers might define as an exchange or a MEAP? 

Per CPA of a married couple's plan, for self-employed, 415 contribution limit is apparently based on 'Total Income'. Total Income includes Wages and items on Schedule E such as rental and passthrough, as well as Schedule D for cap gains. The amount that was contributed for the plan exceeded what was determined to be Wages. Self-Employment tax was based on the full Total Income, can contributions as well? I hadn't seen that before. In this case it exceeds what was assigned as Wages.

Doctors' group has one main 401(k) plan for staff and each doctor has separate plan (due to historically having separate plans even though plan provisions and investment opportunities presently mimic the main plan).

Eligibility requires 1 yr of svc.

I'm wondering -  can a doctor start their own plan in the year of hire and make contributions to that plan even though they would not have been eligible to make contributions in the main plan?

Establishing new safe harbor 401(k) plan. Have established 401(k) effective for October 1st, using 3% QNEC.  Effective date of Plan January 1, 2020.

Employer mistook when the first payroll would be in October.  Instead of being October 8th it is October 1st (actual payroll date).  The enrollment meeting scheduled for September 30th, after when the October 1st payroll will be called in.  Next payroll to be paid October 15th (bi-weekly).

I see nothing except the "3 month rule".  And find no exceptions.

As we are using the QNEC for the safe harbor does anyone have an opinion on delaying until October 15th the first 401(k) deferral from employee's pay?

Any assistance or thoughts greatly appreciated.

I am curious to hear the group’s thoughts on what to do about UBIT shares (that is, shares in an S-corp that were long ago transferred from an ESOP to a non-ESOP portion of the plan in order to avoid a failing 409(p)).

Here are the ideas we've come up with so far:

1.       Have the trustee sell the UBIT shares to the employer.

2.       Provide NHCEs with a one-time, voluntary election to use cash allocated to their accounts in the ESOP portion of the plan to purchase UBIT shares, with purchased shares returning to the ESOP portion of the plan, and tracked so that they are not re-allocated to disqualified persons. 

3.       Add an in-service distribution option to the non-ESOP portion of the plan.

I am curious to hear thoughts on the following:

•        Do you read CCA 201747007 as precluding option 2?  We had a client do something similar years ago and get a determination letter on it, but that occurred before the CCA came out.

•        If all of the participants in the non-ESOP portion of the plan are HCEs, we think there’s a 401(a)(4) problem with option 3, since the ESOP portion of the plan will not offer the same in-service distributions.  We do not think Treas. Reg. § 1.409(p)-1(b)(2)(v)(B) addresses the problem. Other than adding the same in-service distribution to the ESOP portion of the plan, do you see a way out of the 401(a)(4) problem?

•        Any other ideas? If so, have you gotten a determination letter on them? 

Lifestyle spending accounts are a trending after-tax benefit consisting of employer after-tax reimbursement of lifestyle products and services such as personal coaching, fitness wear and gear,  pet boarding, personal training, etc. Employers choose a yearly maximum and only pay out documented reimbursement requests, up to the maximum limit.  Employer deducts reimbursed amounts as taxable compensation to employees.  Just wondering if anyone out there has formally classified this "benefit" as either a payroll practice, benefit plan, or addressed potential constructive receipt issues.  

I am a S Corp owner planning to set  up Defined Benefit plan. I do my own taxes. Any recommendations for a plan setup and  administrator ? I found  Charles Schwab to be expensive. Does TD Ameritrade offer full service like Schwab ? Any recommendations on Emparion? 
 

Good afternoon,

This is a "what is your shop doing?" question.  Some years back, before each participant could be in his or her own group for new comparability contribution allocations, groups were specified in the plan document.  For example "partners, family members of partners, supervisors, clerical staff, the office manager, and Top Heavy minimum participants".  Each year, we (where I worked at that time) did a document something like a resolution of the board of directors approving a specific dollar amount of contributions per group for the year in question.  We got it signed by the employer and provided them with a copy for their records.

With the advent of each person being in his or her own group, those resolutions of the board of directors went by the wayside.  The employers I worked for stopped doing them.

My current employer was wondering if that's really okay and wants to know what the rest of you are doing.  

I did look it up in Sal Tripodi's bible, and found "Written direction could take the form of a separate letter, the acceptance of a proposed allocation report that shows how the nondiscrimination test would be satisfied, or an entry in the memo section of the contribution check."  I believe my predecessor in my current position was using the part in italics above to justify not doing the resolution anymore.  We run the numbers, we test, we send the employer a proposed contribution allocation, he accepts it and makes the deposit, say, at John Hancock in accordance with the contribution report.  Later the employer gets that contribution report and the accompanying testing in the annual report for his archives.  With that, my predecessor said that was enough, and there was no longer any need for further documentation.

What are the rest of you doing?  Thank you as always.

We are looking to acquire a TPA, but want to know more about how these are priced by looking at comparable transactions. There aren't many comps with data around profitability, and so its hard to figure out what is a good price to offer. Would anyone have direct experience with M&A in TPAs that we can speak with? Thank you.

Paychex set up a non profit 401k plan.  No employer money, no loans etc.  Can they terminate the 401k and start a Non ERISA 403b?

Dr Doogie Howser (age 47) and Dr John Trapper (age 51)  are eye doctors who both own 50% each of Lazy Eye, Inc (an S-Corp).  They have 7 employees and don't own any other businesses.

They currently in 2020 sponsor a 401(k) Safe Harbor with a Basic Match.  In 2021, they will be selling their business (it's a stock sale) to another entity and the expected proceeds from the sale will be $5 Million.  The doctors are expected to stay on as employees for the forseeable future.

They want to add a Cash Balance (CB) for 2020 (before the stock sale), so that will be Year 1 of the CB.  For 2021, they will amend the Safe Harbor 401(k) to the 3% Non-Elective and it will be year 2 of the CB.  In 2021, they expect the Stock Sale to go through.  

They would like to take advantage of the transition rule under 410(b)(6)(C) for the 401(k) and to let the CB run through 2021 and 2022.  At the end of 2022, they would like to terminate the CB.  

Of course, in the negotiations, the Buyer would most likely have to agree to all of this and it would most likely effect the $5 Million purchase price of the business.  For example, lets say it's sold for $4.2 Million instead.  By doing this, the doctors would be able to shelter some money away and not have to pay taxes right away on the sale of the business.

What challenges or issues do you see with this strategy of adding the CB (assuming the Buyers are ok with this format)?  In regards to the CB, do you think the IRS would disapprove of it being used in this fashion?  This seems like a great strategy and way to take advantage of the transition rule.  Am I missing something?

Hi.  Company started 3 new welfare plans effective 1/1/2019.  Extensions were filed timely, but it was just discovered that the wrong sponsor/EIN was used on all three.  The Sponsor/EIN of our existing plan (501) was copied over and not corrected when the extensions were filed.  The correct plan numbers were used on the extensions (502/503/504).

I am ready to file the 5500SFs, but unsure how to fix this error.  Should I go ahead and file with the wrong EIN and then amend with the correct EIN?  Or should I file with the correct EIN and wait for the late filing letter?  I hesitate to use line 4 since there are no previous returns/reports filed.  Other options?

Thank you!

Is a sole-proprietorship or partnership who wants to establish a 401(k) considered a Keogh plan? My understanding is there is no longer a distinction as they are now qualified plans that include a self-employed individual. If that is the case, I would like to confirm that SEC rule 144A does not apply then to restrictions regarding the use of CIT's for these plans.