We administer a plan that was amended from a 12/31 year end to a 6/30 year end, creating a short plan year from 1/1/2020 to 6/30/2020. 

The limitation year is the plan year.

The plan has an Officer (not previously a key employee) who has compensation of $93,000 for the 6 month short plan year ending 6/30/2020.

Regarding the top heavy test and key employee determination (Officer Test) for a short plan year. From what I've found in the EOB, it indicates that while there is not specific regulatory guidance, it would be reasonable to either prorate the compensation test for the short period, or it would also be reasonable to annualize an employee’s actual compensation for the 6 month plan year.

Curious to what others may have done or would do in this scenario for key determination.

Thank you.

I have a client under age 50 who makes $500K annually and has been contributing the annual additions limit under his 401(k) plan and also contributing to a backdoor Roth (via traditional IRA) for the past half-dozen years or so. I just learned about the client funding the backdoor Roth. The client's investment broker says, all is well. I admit that I have not been this close to a backdoor Roth before. Is it possible to contribute the annual additions limit in the 401(k) plan (all pre-tax) and fund a backdoor Roth? How is it possible without exceeding the annual additions limits? And if it is wrong, how is it corrected?

Companies A and B were related due to a controlled group. Company A sponsors a qualified plan, Company B is a participating employer. Due to recent ownership changes the companies are no longer related. Company B decides to terminate all employees and the entity will no longer exist. Company B will be removed as a participating employer. Company A does not want the balances of Company B participants to remain in the plan due to administrative concerns. 

Question: What can be done with the balances of the terminated Company B participants who have funds in the plan? Is there any exception to forcing out a participant whose balance exceeds $5,000 in this situation?

I have not found this situation addressed in the plan document.

Thank you

I just want to confirm...

I have 3 companies

Father owns 100% of company A & B

Daughter (over age 21)  owns 51% of company C and Father owns 49% of company C

A & B are controlled

C is not controlled.

I appreciate your help!

Thank you !

Can someone please offer clarification on the final filing deadline for a DB plan with short plan year and extension? The short plan year is for 2020 and the assets were all liquidated on 2/7/2020. That said, without an extension, the 5500 is due by 9/7/2020, right? Also, would the 5558 need to use a plan year end date of 9/7/2020 with an extension date of 11/22/2020. I have researched but did  not find situation with odd dates like this ours. Thanks!

My client maintains a cash balance and PSP.  Plans were top heavy for 2018, so the TH contribution has to be made.

Plan calls for both HCE and NHCE to get TH, which is provided in the PS.

DB has been funded for 2019 and has terminated 2/28/2020.

Can the owners waive the SH contribution to the PSP if money is an issue?

Do you need to report the Distribution Total for the plan participant on the Final FOrm 5500-EZ?

1 person plan, terminated plan, rollover all assets to IRA....do I report the rollover assets on Form 5500-ez somewhere, or just simply put $0 at the end of the year?

When do you use the Total Plan Liabilities in Part III?

I think I probably know how this is likely to have to play out but welcome any suggestions from the leaned group here.

Company has had a 401(k) plan for a few years now.  They have over 300 eligible employees / "participants" but have never had more than 50 active participants in the plan in a particular year.  They have timely filed 5500s (well--actually 5500-SFs) for all the years but misconstrued how "participants" are determined and counted and so reported only active participants.  As a result, audits have never been conducted / filed for the plan.  With even fewer people participating due to COVID and the employer facing financial issues, they have decided the plan is not worth the expense and want to terminate altogether.  Then, some helpful soul early on in the termination process noted the need to file a final Form 5500 and audit in connection with terminating which got them asking "what audit."

Without that helpful notation of the audit requirement, they likely would have terminated the plan, filed a 5500 as in the past with no audit and rolled along without obvious issues and been blissfully ignorant.  Now that they know the errors of their ways, however, nobody can sign the final Form 5500 without an audit without perjuring themselves.  And they'll need to get audits for the prior years in order to get an audit for the 2020 final year.  Which is, of course, all going to be very expensive for a company that headed down this path because of financial concerns.

Oh, and my suspicion is that, like the mistake in counting participants, there are likely to be some other "issues" that may get surfaced as the result of any audit.

Any ideas for coming at this in an appropriate but most efficient and least costly manner?

Small payout to a beneficiary. No other assets distributed to this beneficiary before or after.

$416.23 gross amount in pretax Code 4 monies 

$425.03 gross Roth Code 4B monies of which $329.75 is basis ($85.28 in Roth earnings)

What's the mandatory withholding? Don't read anything fancy into the situation. It's just a basic, non-CARES Act related payout to a beneficiary.

Let me know if I've left out a pertinent fact, though. Thanks.

Four different 401(k) plans for a control group.  The plan sponsors have always calculated and deposited their safe harbor match every pay period - since 2012. When the documents were restated for PPA their TPA (not me) did not check the box in the adoption agreements to indicate the safe harbor match was calculated and deposited every pay period - instead they are shown as being calculated and deposited at the end of year. I do not have copies of the SPD or Safe Harbor Notices but I would assume they state the same. There has never been a true-up of the safe harbor match in any of the plans.

Their TPA had a new account manager take over all four plans for the 2019 plan year and the plan sponsors have been told that they need to go back to 2017 and provide true-up Safe Harbor Match - this is for a few hundred participants each year so we are talking about $100k or more total. Per the TPA's instruction two of the four plan sponsors sent letters to the affected participants notifying them that they will be receiving an additional Safe Harbor Match due to the error. I don't know why they only went back to 2017 instead of when the document errors were created (2014-2016), but those were the instructions given.

My initial thought was to retroactively amend the plan documents to conform to its operations, but I could see 411(d)(6) issues. I believe the IRS has accepted retroactive amendments in similar situations. Has anyone had a similar experience that could share how the error was corrected?

A participant is 63 years old and per the plan, he can take an ISW (59-1/2) of all of his money.  The NRA is 65.  He has Roth, rollover, 401k, safe harbor and PS money in the plan.  He is 100% vested.

He wants to take an ISW from the plan just from his Roth.  Is he required to take the ISW first from any of the pre-tax accounts?  The recordkeeper is saying that but I don't see where in the plan document that is required.  Is that an IRS requirement?

Thanks

If an employer has a SIMPLE IRA plan and starts a 401k are they eligible for the start-up credit?  I wouldn't think so, but i can't seem to get any fine print information... 

Is adding a Managed Account option to a Plan a fiduciary decision or a settlor function? 
This would be giving participants the option to enroll in a managed account feature for a fee; they would not be autoenrolled.  A company wants to add the option but we think the fidcuiary committee would need to vote on it. Thoughts?

Do any practitioners on this message board have a checksheet template you are using when you developed the processes you would put in place each year to help your administrators get acclimated with the steps that would need to be performed on a 457 plan each year from a recordkeeping standpoint- trust accounting, tracking of increased salary reductions in 3 years before NRA, processing and timing of distributions, etc?

Plan has a fixed match with last day/1000 hours requirement (waived for RDD)

12/31 PYE

Effective 7/1/2020 they amend to remove the match.  Are they obligated to fund the match through 7/1. I say no since no participant (except RDD) met the last day/hours.  For the RDD, I would think if the terminated prior to 7/1 they would be owed the contribution.

What if the plan is a 6/30 PYE and they amended the plan effective 6/30 to remove the fixed match? (Plan has last day/hours requirement)  I am thinking they owe the match since it was removed on the last day.  Had they amended the plan on 6/29, I think they would not owe the match.

Thoughts?

former participant received a notice from Social Security she had a benefit under her former employer's plan.

the participant terminated back in 1989. The plan has changed TPAs and recordkeepers a couple of times since the 1989 termination date and finding the detail as to what happened to her account (paid/rolled to default IRA) has been challenging.

What is the employer's responsibility regarding this matter. If they can not prove the benefit was distributed is the employer responsible to pay the former participant?

Does the employer have to fund the amount on the notice to the plan then have the plan issue payment and tax reporting to the participant?

thanks

Good Morning - 

Could someone please provide me with the actuarial formula (possibly by way of example with the answer) for calculating lifetime income out of the new DOL Interim Final Rule?  I understand generally the assumptions used (age, balance, interest rate and mortality), but my numbers seem way off.  

Thanks!

Hi

Here is a new one for me.

Sole prop pays spouse consulting X amount as 1099 income, first time in 2019, can 2019 be considered as date of hire for the spouse? Spouse works for another company and receives a W-2, totally unrelated to all here.

Sole prop will do the same for 2020.

Sole prop wants to set up a db plan for 2020 and wants the spouse included as well.

As the spouse is getting income in form of 1099, she is considered as a sole prop as well, correct? Hmmm, not so sure here.

Can a db plan be set up for 2020 and have the sole prop adopt the plan and the spouse adopts as a second employer (assuming that she can be classified as a sole prop)? Each entity will fund their own portion of the db plan. easy to do as only HCE's and different groupings. The sole prop will/cannot fund the spouse's db portion, if necessary, correct?

Thankfully no other employees other than their youngish children which are excluded.

Something does not smell right here, what am I not seeing?

Thank you

Mid-size 401(k) Plan (773 Participants) had ADP and ACP Testing done in late February 2020 for 2019 calendar year.  Plan did fail testing and remedial distributions were paid timely to correct failure.  Subsequent review of participant accounts found that Compensation and Deferrals Values provided by the Client's payroll system were wrong!  Corrected values were finally provided (August 2020, delays were related to "COVID impact" at Client), so testing was rerun.  End result is that testing results were improved for both ADP and ACP; therefore, remedial distributions paid were in excess of amounts defined by corrected testing.  It is my understanding that the Plan Sponsor is expect to collect the over payments, and return those monies to the accounts of the impacted people.  (Amounts range from $2 to $100.)  Questions are (1) is this correct, (2) how would this be done, and (3) how are taxes impacted/addressed by these refunds to the Plan?  Any assistance is most gratefully appreciated!

LLC has elected to be taxed as a corporation. For purposes of the attribution rules under 1562(e)(2), do you still have to look at 5% owners of the LLC in determining whether a controlled group exists? 

Does it matter whether it is an S-Corp or a C-Corp? 

I cannot find anything in the 1563 regs, but my guess is that the answer to both questions is no. 

Any thoughts appreciated. Thx!