I have a client with a one-participant 401(k) that has always qualified for the maximum deferral and contributions.  In anticipation of that, in 2019 they made their allowed 2018 contribution and they went ahead and made a $25k contribution towards the 2019 contribution.

After receiving the documents from the investment folks, I filed the 5500-SF timely and included the 2019 $25k as a contribution along with the allowed 2018 contributions.

Well lo and behold, said client, in the process of retiring, didn't qualify for anywhere near the 2019 max contribution, let alone the $25k payment made in 2019- so we had the investment folks remove the $25k + some earnings.  This occurred this past month, in 2020.

Here's my question:  Do I need to amend the 2019 5500-SF that shows the 2019 $25k contribution that was made in 2019 but removed in 2020?  Or do I show a negative contribution on the 2020 5500-SF?

Maybe I'm cracked. Plan has 2 year eligibility. (Money Purchase plan) Years of Service for eligibility are 1,000 hours, measured on employment ANNIVERSARY years. Participant must have "two consecutive years of service" without an intervening break year to be eligible.

Let's call the end of the employment anniversary years in question, for ease of discussion, 2017, 2018 2019, 2020.

So first employment anniversary year ending in 2017, has 1,000+ hours. Terminates before the end of the first employment anniversary year, then is rehired during second 1-year period. Has LESS than 1,000 hours, but MORE than 500 hours, during the second employment anniversary year period, so no break in service for Anniversary year 2018. Has 1,000+ for both employment anniversary years ending in 2019 and 2020.

Since there was no break year, I believe the 2 year requirement, even though it is a "consecutive" years requirement, is satisfied on employment anniversary year ending in 2019. Participant isn't treated as a new hire, to start counting "2 consecutive years" from rehire date, since no Break in Service. So year two is "washed out" and year 3 counts as the second "consecutive year."

Agree/disagree? Should it still have to be two "consecutive 1,000 hour years" STARTING AFTER the rehire? I don't think so... 

Gracias.

Hopefully a quick question that I think I know the answer to.....

Regardless of penalties and other fees, filings, etc and assuming a flat $ CB credit for simplicity...

If a sole prop reports $200,000 on a Schedule C for 2018 and 2019 and has a $50,000 minimum required contribution to their CB plan for 2018 but does not actually make the contribution, the Plan compensation for 2018 is $200,000 minus 1/2 SE Tax and no other adjustments.  

If they make a contribution in 2020 of $120,000 for 2019 and 2018 and deduct those contributions in 2019, then the plan comp for 2019 is $200,000 minus 1/2 SE Tax minus $120,000.  Is this correct?

I don't know why I'm blanking on this, but we have a client where the only active "employees" are the husband and wife owners.  There is one former employee who still has an account.

Is this considered a 1-participant plan?

MY gut says no, because I would think that the existence of that third account would require bonding of some sort.

I have a last-minute startup 401(k), calendar year, going with 3% non-elective as the safe harbor with discretionary profit sharing.

Prior to the SECURE Act we would make the plan effective 1/1/2020 for the profit sharing portion of the plan, and the deferral and safe harbor portions effective October 1 allowing for implementation time and the safe harbor notice.

Now that the SECURE Act no longer requires a safe harbor notice (although for now we are going to continue to provide safe harbor notices for non-elective plans), and the nonelective can be added after the fact, is there any reason the safe harbor cannot also be effective January 1, 2020, or does the safe harbor still need to be effective on or after the date the deferrals are effective for the first year?

Or let's say they want to wait on the safe harbor until the year is over and are ok with the 4%.  The deferrals still need to start 10/1/2020 so we have a 3 month initial plan year for the deferrals, but what date would we make the safe harbor effective in this case?  The nonelective must apply to all of 2020, correct, so wouldn't the effective date need to be 1/1/2020?

Or possibly I'm overthinking this because the recordkeeper needs the plan design yesterday to set up for Oct 1.

Thanks for your help.

Three companies are owned by husband and wife, two s corps and an LLC.  One plan.  The owners get a W-2 in each company, also K-1s in the third company.

Irregardless of which entity sponsors the plan, K-1 income can not be used for pension purposes??

Our adoption agreement gives employers the option to exclude compensation from nonsignatory related employers.  I am trying to understand the practical implications of that selection.  From what I can find, I believe that regardless of whether this selection is chosen, there are some plan purposes for which you must combine all compensation from related employers:

415 testing

top heavy minimum contribution calcs

determining HCEs and Keys

calculating deduction limit

minimum gateway allocation

rate group testing

I believe that for ADP/ACP testing, the plan can choose to only use pay from the participating employer(s), as long as 414(s) testing is passed with that definition of pay,  EXCEPT there is a requirement for HCEs that all pay/deferrals must be combined for testing in every plan in which the HCE participates if the companies are related.

So it seems that the only practical implication of excluding pay from nonsignatory related employers is that it lets the employer calculate employer contributions on just pay from the participating employers (except for top heavy/gateway).  Is that correct?  I may be totally off base on this

415(c)(7) says that an employer can make a contribution above the 415 limit (100% of pay or $57,000) as long as it does not exceed $10,000 more than said limit.  This special election can be made each year, but the total overall amount used under 415(c)(7) cannot exceed $40,000.

Questions:

1) This is not written into the church plan document that we use and the document provider indicates that it is simply an employer election. It seems to me as though it should be referenced in the document.  Do you all agree that it is simply an administrative election to exceed the document specified 415 election for a given year?

2) Is the $40,000 cap on this limit based upon the participant's entire time working in the religious order, as opposed to just with the church sponsoring the plan?  Seems very difficult (impossible) to track if it is a limit applying to all years in the religious order.

Thanks!

We have a potential client coming to us for help closing their solo 401(k) Plan. He filed a Form 5500SF in 2010 and then an EZ in 2011. Assets never rose above $20k and no further Form 5500s were filed since. It was my understanding that one a Form 5500SF was filed, they would need to file one every year afterwards even with assets under $250k. Therefore we would need to go back and file the missed returns and corrections. I contacted a colleague who differed in opinion that they could switch between Form 5500SF and EZ and would not be required to file if under $250k which would change things in closing his Plan.

If a 401(k) plan has no service requirement and does not exclude part time employees, will the vesting service criteria change to 500 hours for those employees that work more than 500 but less than 1000 hours for the plan year once the SECURE Act provision goes into effect in 2024?

Company A is purchased by Company B.  Company A's 401(k) plan is merged into Company B's existing 401(k) plan mid plan year (both calendar year plans).

After the merger a final 5500 is filed for Company A's plan showing the transfer of assets to Company B's plan.

Is a final SAR also required for Company A's plan, or does the fact that Company A's plan is continuing on as part of Company B's plan mean that no SAR is required?

Thanks very much.

Hi

Revisiting the life insurance issues in combo plans. This time not a floor-offset.

DB or CB plan combined with a DC plan.

All HCE's are at maximum benefit under DB/CB and rank&file minimum to pass 401(a)(26).

DC plan, in addition to the deferrals+3% non-elective SH has PS allocations, say minimum 4.5% to pass gateway (SH+PS=7.5% of compensation).

Agent wants insurance in the DB/CB only. is this not a BRF issue?

If additional insurance is provided under the DC plan, the rank&file is forced to pay from their portion of contributions as their benefit is primarily provided under the DC plan.

What am I not seeing clearly here and if there is a way to pass BRF, how is it accomplished?

Thank you for you thought/comments.

Florida Swampland Realtors is a sole proprietorship, no common-law employees. The owner and sole employee, I. M. Cheating, defers maximum based on a salary draw for 2020. After end of year, taxes get done, and it turns out he has zero earned income - actually a big loss. So there's a 415 excess, plus earnings,  to be refunded. Refunded in February of 2021. 1099-R is issued with the amount being shown as taxable, right? In other words, no way to use a special code to report this as non-taxable? A CPA is questioning this, and I want to make sure I'm not cracked. Thanks. 

If I received half of my ex husband’s  pension at the time of our divorce (2006), I am not entitled to anything more once he retires next year, right? There is a QDRO listed in his benefits from our divorce. 

I'm winding down and as clients retire or move on, I'm wondering about record retention.  I've got filing cabinets worth of old 5500s, Plan Documents, valuations, trust accountings, etc.  All my paper has either been provided to me, or generated by me and sent to the clients.  

So, the questions are, how long do I have to keep this stuff?  Does anyone charge for "Record Retention?".  Do you offer to send the client all  your files?  

Shredder's looking hungry. ?

I'm nto talking about the data, but the definition of the DER itself.  I have an access program that builds my takeover transaction data file for import. We have to manually create the DER itself one column at a time.  I was wondering if there was a way to import the DER definition into DER set-up somehow.

I don;t think there is but thought I would ask...

Unclear from DFVC FAQ: when paying DFVC fee electronically online, is there a requirement to also submit pdf's of the applicable 5500's electronically, mail in paper forms, or no such requirement?

Also, no response from hotline so asking the question here.

Does anyone know where I can find an EGTRRA advisory/opinion letter for a DATAIR VOLUME SUBMITTER CASH OR DEFERRED PROFIT SHARING PLAN 06-070.  We don't use Datair and I tried calling them with no answer.

Hello all, 

This is a rather complex one. 

Suppose an employee has a separation agreement that entitles him to 50% of his annual salary in a lump sum. Employee is also entitled to equity in the company (25% is vested upfront, and 75% with accelerated vesting upon termination for any reason). 

The parties agree that, in lieu of receiving the lump sum severance payment and other benefits, the company will repurchase 75% of the stock held by employee at a predetermined price, on a pre-determined future date (after the 1 year capital gains date). 

1) Upon signing the separation agreement now, would the employee be in 'constructive receipt' of the cash from the repurchased stock, or would receipt only occur when the cash hits his account? This matters for the 1 year capital gains treatment, which occurs 2 months after the separation agreement will be signed. 

2) Also, would cash from the repurchase of employee's stock be taxable as capital gains or ordinary income? This transaction would be arranged as a stock transfer agreement, but the purchase price would be set in the separation agreement, and is binding upon the employer. 

Many thanks for your help!

Short plan year 2020.  Plan terminated 6/30/20.  ER wants to do PS.  Has last day/500 hr rule.

Does that 500 hr threshold get prorated to 250?