Can a plan run the ADP test on a disaggregated basis and the ACP test on an aggregated basis or do these have to be run the same way?  In this example, I know we would have to disaggregate the 410(b) test for the deferrals and would aggregate the 410(b) test for the match contributions.  This is a single employer plan and there are no controlled group members.  Thank you

My firm is taking over a calendar year Profit Sharing Plan where the current document indicates that the vesting computation period is Hours of Service (1000) commencing on the date the employee is hired and each anniversary thereof.  We are checking with the client and prior TPA to confirm that is how the vesting has actually been calculated for the participants, but are considering recommending changing the computation period to coincide with the plan year, rather than the employee's employment year.  If this change is made July 1, how does that affect the current participants?  Will we need to treat it similar to a short period of time and determine hours in 2021 based on their employment anniversary as well as based on the calendar year 2021 and possibly credit them with 2 years of vesting service?  Are there other pitfalls to consider with such a change?

Has anyone moved their desktops out to a cloud based environment, and if so with who?  We just started talking to "Infinitely Virtual" which seems like an interesting approach.  Unlike Azure, where we have to hire an IT firm to build the whole thing out, this platform seems like it's ready made with all the bells and whistles.  I know there are other firms out there like them, and curious to know what others have used.

Is a company in breach of contract if they specifically state that the employee is entitled to a 401k but never provides even after being asked repeatedly when the eligibility period has already passed?

I have an LLC with an S-election, which has been nominally profitable for over a dozen years. The S-Corp just has myself and my wife as the shareholder-officers. We have a DB plan coupled with a 401k plan. We draw a reasonable salary from the S-Corp, and the S-Corp contributes to the DB plan as well as some 401k profit sharing.

In the year 2020, at around tax return filing time for tax year 2019 (July 2020), the funds in S-Corp were running low due to loss of business, so I made a personal loan to the S-corp to cover the DB plan contributions along with 401k plan deferrals and 401k profit sharing contributions. Let's say this amount was about $100K. Also note that for tax year 2019, the S-corp had a small profit.

Due to continued loss of business in 2020, the S-corp for tax year 2020 had an even bigger loss, but in calendar year 2021, business is looking up a bit and there's some cash in the bank by May 2021. 

Question 1. Even though the S-Corp has a loss in tax year 2020, but because there is money in the bank earned in 2021, can the S-corp still contribute to DB plan and/or 401k Profit sharing, even though this will increase the S-Corp's loss? Note that even without the DB plan and profit sharing contributions, the S-Corp had a sizeable loss in 2020.

Question 2: Because of the $100k loan I had made earlier in 2020 to the S-Corp, I think that may have increased my "basis" in the S-corp? If so, can the S-corp's loss of tax year 2020 flow to my personal tax return for 2020, and could I deduct this loss against my personal income (from a second W2 job that I had to start in 2020 due to poor business) because I have "basis" in the S-Corp?

Thanks

John Bliss

We know that no signature required on Form 5558, but we have always dated the form.

I seem to remember the form has to be dated, but my software vendor says no.

Curious, I've got about 75 calendar year extensions, I'm doing currently, and if they don't need to be dated, great.

I have a client that sponsors a 401(k) plan & has been allowing employees the option to have 401(k) deferral elections applied to their bonuses. The plan document states that Bonuses are subject to the same deferral election as regular wages. Can this failure be self-corrected under Rev. Proc. 2019-19 by adopting a retroactive amendment to allow special elections for bonuses? Would this amendment be considered an increase in a benefit, right or feature?

I have about a 250,000 lump sum option i can take from the job i had in NH which has no state tax. 

if i take that lump sum while living in kansas, will kansas take state tax, even though i never worked in this state? 

or is it time for me to move to another tax free state? 

I can't say I know what it means to be 'legally separated' as opposed to simply separated or divorced, but can medical benefits be denied to a legally separated spouse?

Participant in her 40's terminated in 2017 with an outstanding loan in an ongoing 401(k) Plan.  She continued to make loan payments and was current with repayments when she elected to receive a distribution from the plan in the form of rollover to her traditional IRA in October 2020.  The total amount of her distribution, i.e., her total account balance, was offset by the outstanding loan balance, and the remaining amount was rolled over to her IRA.  Two 2020 Forms 1099-R were issued in January 2021.  The rolled over amount was reported on one 1099-R with $0 taxable in Box 2 and distribution code "G" in Box 7.  The other 1099-R reported the loan offset amount as taxable in Box 2 and used distribution code "1L" in Box 7.  The participant is now asking for the plan sponsor to issue a corrected 1099-R for the loan offset using distribution code "1M" to indicate that the offset was a Qualified Plan Loan Offset (QPLO).  She wants to avoid the early distribution penalty on her tax return.  No withholding was deposited for either the loan offset amount or the rollover amount.

Side note:  the 401(k) Plan did not allow for Coronavirus Related Distributions (CRD) or Coronavirus Related Loans (CRL) in 2020.

I read up on QPLO requirements, but have not seen an example similar to this situation.  Yes, the participant was current with the terms of the loan, but the offset occurred well after 12 months from her severance from employment date.  Did this loan offset qualify to be a QPLO and reported using the "1M" distribution code?

Hi,

A client recieved a letter that New York requires all employers with five employees to offer a retirement plan. Is this true?  It appears from research that this program is voluntary in NY. Thank you

Health plans and COBRA are not my area of experience. A question has arisen from my employer regarding COBRA continuation of health plan coverage. It seems a basic question, but I have not found any discussion on this point.

Say an employee voluntarily terminated his employment in January 21, 2021. He was covered by our health plan at that time, and his coverage ended that day. Under the current rules, he has until the earlier of (1) one year from January 21, 2021, or (2) 60 days after the announced end of the Covid-19 emergency to elect to continue health coverage under our plan.

If he does not obtain health coverage during the ensuing months, we understand that he remains eligible to elect COBRA under our plan until that deadline.

What if he is covered by a health plan with his new employer and then he terminates that employment before the deadline to elect COBRA coverage under our plan--could he elect COBRA under our plan rather than the new employer's plan? Or, does the intervening coverage under another plan mean that he can no longer elect COBRA coverage under our plan?

Thank you for your guidance/thoughts/comments.

Hi

Drawing a blank for a change.

Looking into a cash balance/401k combo plan. Non PBGC therefore 6% limitation on DC plan deduction limit.

401k plan with deferrals, 3% non-elective safe harbor and profit sharing provisions.

HCE's are excluded from the profit sharing portion only i.e. they defer and received the safe harbor - top heavy plan.

Do I count their salaries towards 6% deduction?

Thank you

Need help on understanding COB with COBRA.  Situation: I had medical COBRA after being laid off.  After getting laid off, my spouse obtained a FT job with benefits and I am included as a dependent on her medical insurance.  For one month, these two policies overlapped before I terminated COBRA.  For my claims during this "double-coverage" month, is COBRA still primary for me or does it switch to secondary and my spouse's insurance becomes primary for me?  Thanks for help in navigating the COB.  Makes a big difference with meeting deductibles.  

This is a question I’ve never seen come up - apologies if it has and I didn’t see it.

We have a terminated participant in a US ESOP who is a resident of Great Britain (a nonresident alien).  He rolled over the non-stock portion of his account balance to an IRA in the US (apparently he plans to work in the US again some day), and had his employer stock distributed to a US investment account so he could benefit from the net unrealized appreciation rules.  We reported his basis as a taxable distribution on a 1099R, putting  his NUA in box 6, and put the total value of his total stock distribution (basis + NUA) on the 1042-S.  He is now telling us that we should have put all the  info on the 1042-S, and there was no reason to file a 1099-R.  I’ve read the instructions for both forms multiple times now, and can’t see where NUA treatment is discussed at all.  That seems reasonable to me, as the purpose of a 1042-S as I understand it is to identify US-source income so the appropriate treaty provisions may be applied to it.  Has anyone else ever faced this issue?

Thanks! 

Entrepreneur has two separate businesses, no employees.  Is he able to sponsor multiple plans on his own behalf, each with their own limits?

Group:

Client, who has an ongoing DOL audit and pending US Tax Court petitions related to its S esop, received a very weird looking email asking them to be part of the DOL Dallas TX data collection dept for national collection of data re monthly payroll. 

And that a representative will be calling to discuss various payroll related items. 

I don't believe in coincidences with the Govt. Are many of your clients receiving  similar letters and emails? 

We also have a pending FOIA request for a number of items related to the clients ESOP. 

I'm inclined to not have client interact with DOL given all pending matters. 

Thoughts and comments appreciated. 

Thank you 

We have a plan that had 121 participants in 2018 so we had to file as a large plan with audit.  In 2019 the participant count fell to 113 (but we found out this year that number was overstated due to employees really terminating on 12/31/2019 that weren't reported as such on the 2019 census).  These same employees did not have account balances so if we were to amend the plan's 2019 5500 filing the participant count would be less than 100.  As of PYB 2020 the participant count stands at 80.  

Not sure I'm understanding the 80/120 rule.  Do we have to continue to file 5500 with large plan audit for 2020 or can we go back to filing the 5500-SF?  This plan also terminated 12/15/2020 and paid out all assets by 12/31 so we really don't want them to have to do another plan audit if not needed.  Thank you anyone for clarifying.

I'd like someone's opinion on this subject.

We have a 401(k) Profit Sharing Plan that terminated on 12/31/2019.  They have still not paid out the participants even though the vendor and TPA have been encouraging and trying to help them to do so.  As this plan is now considered "on going" does it have to be restated for Cycle 3?  I'm thinking yes!

LLC elects to file taxes as a corporation. 

Owner receives  broker commission paid to her c/o LLC.

She reports commissions on 1040 Schedule C and does not take W2.  

Would these commissions be eligible earnings for 401k purposes?