I need some help

i have 3% nonelective safe harbor plan

eligibility for deferrals is 6 months with quarterly entry.  eligibility for safe harbor is 1 year with quarterly entry.  plan uses entry date compensation for those that enter mid-year

The plan is top-heavy for 2020.  I know I have to give the top heavy contribution to those that are only eligible for deferral, to satisfy top heavy.

I assume i need to make an additional contribution to those that entered mid year for the safe harbor, so that they receive 3% of full year compensation. 

is this correct?

Thank you for your time!

Hello, I am new to the VEBA world..

Where can I find detailed information regarding 1099s and compliance testing.

Hello,

I hope this post finds everyone happy and healthy. I'm relatively new to prevailing wage plans, so I have a few questions. My understanding is that a prevailing wage contribution is treated as a non-elective contribution, so it's included in the gateway and it counts towards top heavy. In this particular situation, the prevailing wage contribution has no eligibility or allocation requirements and it's immediately and fully vested. The ADP test is failing, so to what extent, if any, can the prevailing wage contribution be treated as a QNEC and be included in the ADP test? Can an immediately fully vested prevailing wage contribution be treated as a safe harbor non-elective contribution and, if so, can this be done operationally or does it need to be stated in the plan document?

Client has a simple 401k new in 2020. There are 2 employees in this company. Neither are owners. My Ft. William system keeps giving me warnings that I should be filing an EZ instead of an SF. When I run the edit checks, I get the error. When I "lock it" to get ready to notify the clients to sign, I get another pre-validation error.

Is anyone else running into this?

What is the exact rules/law for first year participant count in 5500-SF submission?

Thanks in advance.

I work with a MEWA and the association is questioning the 20 employee minimum for the COBRA subsidy.  Can someone point me in the direction of the reg that explains how the subsidy works with a MEWA?  If an employer that participates in the MEWA has fewer than 20 employees, do they still fall under the COBRA subsidy since they are part of the MEWA?

Thanks!

Hi.  Company A is being acquired by Company B (A's 401k plan is merging into B's).  Company A mistakenly terminated its employees and distributed the accounts.  My understanding is that this is an improper in-service withdrawal and is treated as an overpayment under EPCRS rules.  The correction rules (6.06(4)(b)) provide that the affected participants should be notified and asked to return the distributed amounts, plus earnings.  My question is related to the earnings.  Is it permissible to have the participant return the distributed principal and use the forfeiture account to fund the earnings?  My concern is that the participants will already be upset.  To add insult to injury, it is possible that the earnings rate on their 401k plan account outpaced their earnings rate on wherever they put the money after distribution; meaning that they may have to come out of pocket to make up the earnings.  

I am getting conflicting advice on my end.

Does the default 10% withholding apply to RMDs (unless they opt otherwise on W-4P)?

An entry on Investopedia says this:

Quote

Nonperiodic distributions paid directly to an employee are subject to a 10% withholding tax, unless the beneficiary elects to have no taxes withheld. Nonperiodic distributions do not include individual retirement account (IRA), transfers or rollovers, systematic withdrawals, or required minimum distributions (RMDs) [1]

However, that [1] points to the early withdrawal tax, not withholding.

Does anyone have a specific site as to whether the default 10% withholding applies to RMDs?

I always thought it did.

Reviewing a plan for takeover. The base document provides for a default beneficiary of:

1. Surviving Spouse;

2. Participant's issue, per stirpes;

3. Participant's surviving parents, in equal shares; or

4. Participant's estate.

Fairly standard stuff. Now, in the Appendix, this default is modified to be:  "the Participant's spouse, children, or parents, then estate."

My question to you legal dudesses and dudes is, other than no per stirpes for the children, what, if any, is the real legal effect of this? How would a Plan Administrator determine, for example, anything other than a 50/50 split for the parents? Etc.? Is there a good reason you can see for this modification of the default? Seems to me it can only cause confusion.

Thanks.

I'm taking over a Plan and working on the Cycle 3 Restatement.  What I find interesting is that there are two different sets of eligibility requirements for 401(k) contributions:

Senior Managers - 21 and 6 months of service

All Other Employees - 21 and 1 year of service

To me this seems discriminatory since it's benefitting the managers (upper level) and allowing them to participate sooner, but I wanted to see what everyone else thought.

Thanks!

Yes, it is that time of year again – the annual tax lament, to the tune of “Yesterday” by the Beatles. Remember, it is only when the final line is truly sung from the heart that one can appreciate the scope of anguish and angst that the artist is attempting to convey…

Yesterday...

Income tax was due, I had to pay...
All the funds I tried to hide away...
I don't believe, I'll eat 'till May.

Suddenly...

I'm not sure that I am fiscally...
Ready for responsibility...
Oh yesterday, came suddenly.

Why, I

Owed so much, I don't know, I couldn't say
May be
Forms were wrong, how I long, for yesterday.

Yesterday...

Seemed like prison time was on its way...
Now I need a place to hide away...
While keeping IRS at bay.

Why, I

Owed so much, I don't know, I couldn't say
May be
Forms were wrong, how I long, for yesterday.

Yesterday...

Taxes due, I filed come what may...
Losing all deductions that's my way...
Of giving IRS my pay.

mm - mm - mm - mm - mm - mm - mm.

Small business owner established a SEP IRA 3 years ago and the business contributed to the SEP IRA for the owner each year.  During that 3-year period, the small business had no other employees but operated with Independent contractors.  On January 1, 2021, the independent contractors were converted to employees and some additional employees were hired.  The SEP Agreement (Form 5305-SEP) provides, in part, that the employer agrees to provide discretionary contributions to IRAs of all employees who are at least 21 years old and "have performed services for the employer" in at least 3 of the past 5 years.  Does the 3-year eligibility clock for the employees start to run as of January 1, 2021 (when they became employees) or does it go back to the time that one or more of the employees started working for the business as an independent contractor?

Does anyone know if the additional Medicare tax on high earners gets factored in when calculating Earned Income for a Self-Employed individual?  Since that tax is entirely on the employee, my guess is that it can be ignored and does not factor into the SE calcs.

I've got a client that is asking whether Medical Loss Ratio (MLR) rebates paid back to employees from a health insurer can be considered retirement plan compensation.

The plan has the following exclusion: All fringe benefits (cash and noncash), reimbursements or other expense allowances, moving expenses, deferred compensation, and welfare benefits are excluded. No other exclusions are chosen. The plan uses 3401(a) as the definition of compensation. 

The client's argument is yes since it is the participant's compensation that is being rebated. This isn't like a flight, hotel, or car rental, but an overpayment that would have otherwise been in their salary. 

What I've seen is that these amounts typically are for a prior year's premium payment and I wonder if it wasn't already considered plan compensation during that year? I know the paycheck reduction is pre-tax for the health plan premium but I believe that it is still considered plan compensation under "Elective deferrals or salary reductions made pursuant to §125, etc" The payroll code is currently no but no documentation exists for why.

Some context: https://www.irs.gov/newsroom/medical-loss-ratio-mlr-faqs Scenario D seems the be the relevant scenario

Anyone gone down this trail already?

I'd also be interested in hearing about best practices for taking the numerous contemporary payroll codes and properly assigning them to plan's compensation under the little guidance that the retirement plan regulators and plan documents provide. The IRS used to post a chart online Definition of Compensation Chart.pdf, until 2013 or so, but even this only has 20 categories.

Thank you in advance.

Our current document provider doesn't have language/options that allows a Plan sponsor to set a minimum that they'll allow an employee to rollover from one year to the next in their FSA, but we'd like to add an appendix/amendment to limit rollovers to $25 and anything under $25 will be forfeited. Do you all know if anything in the Regs that would prohibit that type of language? Thanks all.

We have a situation where a participant erroneously took their first RMD in 2020 because they met the old rule's requirement for RMDs rather than the new one. Is she required to continue taking an RMD annually even thought she isn't 72 yet? For reference: DOB: 4/1/1950, Retired 12/31/2019, Took RMD 2020. 

On the one hand, she isn't aged 72 yet (which is her RMD age), so I would think it's not necessary to continue her RMDs this year. But on the other hand, we haven't had a problem like this before so I figured I would see if others had any input. 

Thanks!

Brain cramp!!! Suppose corporation A sponsors a plan. Newly formed corporation B now purchases the assets of corporation A. Corporation A still exists.  No controlled group/affiliated service group involved.

Can corporation B assume the liabilities of the corporation A plan and become the new plan sponsor, if both corps. are willing? I feel like I'm missing something...

P.S. - I think they can - just concerned I'm missing something.

Thanks.

Does anyone know where in the regs (or if it does) state that contributions need to be funded prior to the filing of the tax return?

(i.e. this year someone filed their tax return in April, but didn't pay their employer contribution until early May since the filing deadline was extended to 5/17).  The accountant is asking me if this scenario is acceptable.

Trying to do final ADP test for a terminating plan.  Short plan year 10/1/2020 to 2/28/2021.

However, I am coming off of a short plan because of plan year end change.  6/1/2020 to 6/30/2020 ***meant 7/1/2020 to 9/30/2020****

By experience, I know of one employee that is HCE because he has been HCE last several years.  There may be one more.

I think I am looking for compensation for the time period of 10/1/2019 to 9/30/2020 to determine if HCE, correct?  And being that the plan year started in 2019, I'm looking for compensation over 125,000, correct?

I have a participant that passed away late last year.  He's been taking his RMD for years.   In 2021 his two children will split the benefit and are rolling their portion of the account into Inherited IRA's.   Do we still have to distribute the RMD based on his life expectancy first?   I am having trouble finding a definitive answer.