Hello, 

I am working on a new plan for 2020 that has 4 employees, husband and wife and 2 NHCEs.  I received the census and there were no deferrals in Box 12 and Boxes 1, 3 and 5 are the same (telling me that no deferrals were deducted).  Roth is not permitted in the plan. 

When I received the brokerage statements, I noticed a large deposits and when I questioned the employer, he said that was $19,500 for both he and his wife. 

I am going to call the CPA and discuss with him.  I think I remember something about that even if it's not on the W-2, they can report it on their 1040 and still deduct it?  I want to make sure before I tell the CPA that they have to file corrected W-2s. 

Thanks!   

Our interpretation of the CARES/SECURE act enables the adoption of a DB (or CB) plan effective 1/1/2020 as long as it is adopted no later than their tax filing.

Does this also apply to a retroactive amendment increasing benefit formula or unfreezing plan?  Adopt as late as tax filing rather than the "normal" 2.5 months?

We are using Datair for our Cycle 3 plan documents. They advised us they should become available by end of March but I'm not sure I trust that timeline.  What do I do with new 401k plans effective 1-1-21?  Draft using the old document, then restate next year?  Seems unfair for the company to spend the extra money on 2 documents a year apart.  Is there any way around this?  My answer may lie with the investment firm handling the investments but I am wondering what others are doing in this situation?

Alright, so my question concerns the merging of a safe harbor plan with a non-safe harbor plan and the potential pitfalls which may arise. 

We have a client who is currently involved in a corporate acquisition, not yet known whether a stock or asset sale, and their company is acquiring another company who currently sponsors a SH plan. Note, our client's company currently sponsors a non-safe harbor plan. I would like to provide them with a few bullet points of what to look out for and potential issues which may arise as a result of the merger. Based on my research, the IRS hasn't really provided guidance in this area and it appears the safest thing to do would be to move the participants of the seller's plan to the buyer's plan at the end of the year. However, playing devils advocate, what if they were to merge mid year? Also, how would deferrals be treated with respect to the safe harbor plan? I would greatly appreciate any input.

Hi

I was asked the following:

Terminating overfunded defined benefit plan (DB) - small plan covering husband&wife - both over age 72). Overfunded portion will be rolled over into a QRP - just a profit sharing plan (PS)

Can they pay their retiree medical benefit directly from the overfunded portion? I never heard of but..

Thank you

Hi

There is always a first time.

Husband&wife (owner and spouse - no other employee) - Virginia sub-s corporation, investment advisors

Just found out that, they may have deposited over 6% of profit sharing limit during 2020 (not in 2021). The 31% test does not work as it is a large CB contribution.

6% PS was supposed to be 34k but possibly put in 50k during 2020 thus 16k overage. This is separate than the 401k deferrals.

CB was 300k

31% limit is 176k

If they made the excess 16k PS contribution during 2020, can they simply pay 10% excess tax and still take 334k deduction?

What other solution(s) can be recommended?

Thank you

Client has made his 2020 profit sharing and safe harbor contribution, just received some PPP money and wants to know if he can reimburse the PC.

I know he can use PPP money to make the contribution, but not sure about reimbursements.

In 2016, a taxpayer inherited the IRA of his brother, and he elected to stretch the IRA. In 2020, he passes away, and the beneficiary is his spouse.

Question is can the spouse take the IRA as her own and continue payments over her lifetime? Or is she subject to the CARES Act 10 year rule?

Thanks for any replies.

I have a large plan, 1600 participants, 7 companies, controlled group.    5 of the companies are eligible for a profit sharing contribution, 2 are not.    They also have a safe harbor match.   

Each individual company passes 410b for the profit sharing separately, but when testing together, it is failing, also fails the Average Benefits Percentage test.   

It appears the software is not testing separate the participants with less than 1 year of service nor is it excluding terminated participants with less than 500 hours from the companies that do not receive the profit sharing.   The software provider says it is because they are not eligible for the contribution.    Is that correct?    

any helpful hints to get this to pass? I'm just so frustrated with all the manual input 

I'm getting all turned around on this one...

Due to purchases, a controlled group has ended up with two plans.  Plan R (that I just found out about) is 401k and safe harbor match with no HCEs but ~1/2 of the NHCEs excluded in a "per diem employee" class ("well, we have no HCEs because the owners don't take compensation, so we don't have an issue").  Plan N, my plan, is 401k and regular match, and has 2 HCEs.  So I'm pretty sure this is going to fail coverage:

R total NHCEs: 216
R benefitting NHCES (under either deferral or SHM): 114
N benefitting HCEs: 100%
N benefitting NHCES (under either deferral or regular match): 33

I tried for a QSLOB, but the owners say that they are involved in managing both businesses... yet they don't draw pay from either one.

So this is a 410(b) problem on both the deferral and the match side.  This is where I'm stuck - I don't see a way forward.  Even making the N plan safe harbor for 1/1/22 might not fix this, because with all those excluded NHCEs in the R plan, that's always about 40% of the NHCE population.

How do I fix this?  Thanks.

Hello, I first freely admit that I am not able to understand the inner workings of captive insurance. It remains as a mystery. Never the less, I am preparing a health and welfare Form 5500 and the group notes that they have a self-funded captive benefit. I assume to treat this as a self-funded benefit and ask for no Schedule As. However I thought best to check. Can anyone provide some insight for me on this subject? Many many thanks! 

Good afternoon to all:

An existing client with a 401(k) plan for his Company A at John Hancock has made us aware that he owns 50% of another very small Company, B. An unrelated partner owns the other half of Company B and has nothing to do with Company A.  Company B has 5 employees, 2 of whom want to participate in the 401(k) plan of company A. 

Since our client does not own 80% of company B, we do not have a controlled group.  We just also found out that we definitely do not have an affiliated service group.  We are going to do a separate plan for Company B.

However, only for purposes of funding the plan for Company B, could the two people who want to participate be added to the existing plan at John Hancock for Company A?  It's probably going to be expensive to set up a separate trust arrangement at John Hancock for just two people in a tiny plan, and we were wondering if they could be added on to the Company A plan just for funding purposes.  They could be listed as a separate "division" just to make it easy to spot them on reports, but is there anything "wrong' or "illegal" about putting on two employees who are in a different plan?

Thoughts?  Your advice is appreciated.

If  a participant rolls over their qualified retirement plan into an IRA, are the assets protected from creditors like they are in the qualified plan? 

Have a plan that failed the adp acp test.  Participant is 60% vested. Relius is showing Allocable Income on the ACP correction.  Is it 60% of the Refund Amount that is forfeited? How does the Allocable Income  come into play then? 

This involves a fairly standard smaller 401(k) Plan that started in 2016.  At that time, all participants completed a beneficiary form.  The one participant completed his, naming his spouse as primary beneficiary and his son as contingent beneficiary.

2018 the participant divorces and then marries spouse #2.  But never changes the beneficiary form.

2020, the participant passes away.  

Even though a new beneficiary form was not completed, the new spouse would be the beneficiary, is that correct?  Is that automatic?

Thanks

Can two plans be aggregated for ACP testing, but not ADP testing?  (Note:  I'm using "plan" in the colloquial sense here.)

I understand the the 401(m) and 401(k) components of the plan are separate "plans" under 410(b), but Treas. Reg. 1.401(m)-1(b)(4)(iii) and (v) indicate that this treatment does not apply for purposes of permissive aggregation under the ACP testing rules.  I take that to mean that, if you aggregate plans for ACP purposes, you also have to aggregate them for ADP purposes.  However, I have found surprisingly little discussion on this topic thus far.

Has anyone ever seen a document for people getting ADP/ACP refunds that addresses the following critical point: What you do with the refunds dictates the ultimate impact.  So others can probably write more eloquently (and with more expertise) than me on:

-Availability of deductible pre-tax IRA's

-Availability of current year 401k contributions for you or your spouse to offset

-Availaiblity of Roth IRA contrbiutions (if not over limits)

-Availability of back door Roth IRA contributions

-Simply ivnesting in an after-tax account (capital gains, municpal bonds,etc).

It seems to me that if there were such a document it would go a very very long way...  I could probably write such a thing with all appropriate disclaimers.  I could even do a bit of a choose your own adventure (whats your AGI? Are you married? etc).

A 401(k) plan mistakenly allowed one of their ineligible employees to enter the plan and fund salary deferrals. We know the correction for this under SCP is a retroactive amendment allowing just that NHCE to be eligible to make salary deferrals when they did, just for that year.

If this is done, does it automatically then make this otherwise ineligible employee entitled to employer contributions or safe harbor contributions? It would seem that the intent of a corrective amendment is to only correct the plan with respect to what was violated.

Anyone agree or disagree? 

Thanks.

It seems that several folks responded differently about completion of the Form 5500 (EZ). Is an individual required to complete &file 2 separate 5500's one each for solo401K and DB plan when assets exceed 250K together?

Do plan administrations search public records for marriage and divorce certificates?

example would be filling out the pension application to start drawing a regular pension and not checking the divorced box. If you did not check the box saying that you had been divorced do they search public records to verify?

thanks