Good afternoon everyone, 

We recently had a client express interest in qualified disaster distributions (QDD's) as they are allowable under the Consolidated Appropriations Act 2021 and prior law. I realize that these cannot be used if COVID is the only major disaster declared in the area. However, this client is in an area that experiences frequent and intense hurricanes, so I think they are good on the first prong below. A "qualified individual" is an individual:

1.  whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster; and
2.  who has sustained an economic loss by reason of such qualified disaster.

My question is surrounding what we, the TPA, would need to include on the form we provide to this client specific to proof. In certain distributions, we've required a showing of proof that the individual meets the requirements. I'm not sure if this can be treated like COVID distributions (CRD's) where they self certify, or if we need to include some other showing of proof that participants would be required to include in their submission for such a distribution. 

Wondering if anyone has thoughts on what type of proof a participant would need to submit for this type of distribution? Thanks in advance!

I've been trying to research this issue but so far have fallen short. The plan's eligibility for employee deferrals is age 21. But eligibility for Safe harbor NE and Profit Sharing is age 21 with 1 year of service. We are assuming because eligibilty for the Safe Harbor is more restrictive than that of employee deferrals, we do not get the "free pass" on ADP testing. The question becomes, who then do we include in the ADP test? What we think is the employees that need to be included would be those who have met eligibility for employee deferrals, but NOT eligibility for Safe Harbor contributions. However, we are having difficulting finding that anywhere. Thoughts? 

Group:

I inherited from another esop advisor a client whose S Corp (Acme Inc) is OWNED 100% by an ESOP. 

Said bank account is titled 'Acme Inc.'

New TPA (former TPA retired) is suggesting there should be a bank account only in name of ESOP that reports all transactions. With no support or cite to a DOL reg. 

Fwiw, in a number of successful no change audits over last 12 years with S ESOPs, all with almost identical bank account names, no auditor has ever said there's an issue. 

Anyone have a cite/regulation or case that stands for position that an esop bank account needs to be titled with the name (ESOP)? 

Thank you in advance. 

I’m wondering whether a 401(k) or other individual-account retirement plan’s summary plan description ought to include a part that explains risks about an individual’s data security, and ways for the individual to help manage those risks?

Is it a good idea?  Is it a bad idea?

What are your reasons for including or omitting such an explanation?

I have a plan who failed the adp/acp test and refunds were processed.  I included the gains from their late deposits in the test as they were not transferred to earnings at the investment house.  It affected about 30 people and except for 2 people the amounts were well below $1.00.  The other 2 were around $2.00.  Is this a huge deal?

I have a CPA asking for advice on completing the tax returns for a client who has a cash balance plan (I thought that was a CPA's area of expertise, but I digress). Plan sponsor is a LLC filing as a sole-proprietor. The CPA wants to know how much of the cash balance contribution applies to the owner and how much applies to employees. He is also asking if it is appropriate to report the owners "portion" of the contribution on Schedule 1 of the 1040 while the amount applicable to employees will be reported on his Schedule C.

1. Is it proper to report part of the cash balance contribution on Schedule 1 instead of reporting it all on the Schedule C?

2. If the answer to #1 is yes, how do we break down the cash balance contribution between the owner and employees?

I am neither an expert on tax returns nor an expert on DB plans. I tried to figure this out from Publication 560 and it does say "Sole proprietors and partners deduct contributions for themselves on line 15 of Schedule 1" but I'm not certain if that is referring to just DC plans.

Suppose you have a business that has been filing 5500 forms separately for Vision, Dental, Medical plans, etc.

Now they switch to a Wrap plan. So only one 5500 filing. Do they have to file a "final" form for the formerly separate plans? That seems crazy, but if they don't, will they get nasties from the DOL?

Geez - look at 2019...

A plan is amending vesting to a more liberal vesting schedule.   They want this to apply to all balances active and terminated.  We are getting push back from the administrator that the new vesting can only be applied to current employees and terminated employees are required to stay on the prior more restrictive schedule.  I have never run into this below and does not seem correct.  Anyone else run into this?

I've been lurking for awhile, getting great information, but decided to finally hop-on and pose a question.  Apologies, if I missed any formalities or unwritten rules, let me know and I will make sure to address in the future! Thanks. 

I know the cross-tested profit sharing allocation being treated as a deemed CODA in a partnership setting has been addressed in a number of different posts, however, I had a question that I did not see addressed directly, and I wondered if anyone would like to opine on the below. 

Assume a plan has a profit-sharing feature that is allocated to individual allocation groups and tested on a cross-tested basis. The sponsor is a professional group treated as a partnership for federal tax purposes, with more than ten partners. The question stated as summarily as possible is whether a deemed CODA is created (or could be arguable be determined to be created by the IRS) if the partners year end partnership distribution (or bonus) is reduced by amounts they received as a profit sharing contribution. Stated differently, the plan sponsor/employer takes into account the profit sharing contribution in determining the partner/participants year end partnership distribution/bonus.  Assume that the plan sponsor fully complies with plan formalities in regards to declaring the profit sharing contribution amounts and directions to the Trustee as to the allocation of the contribution to each individual allocation group/account, and there is no paper trail showing individual elections/requests of the partners relating to the amount the would desire to have contributed to their account. 

I have looked for agency determinations and formal/informal guidance on the matter and have not been able to find anything other than the "we will know abuse when we see it" response. Was wondering if anyone had either (A) firsthand experience with a similar matter or (B) could point to any guidance informative on the matter. Thank you! 

Our client (ABC bank) is sponsoring a pension plan with 85 participants.  ABC bank also holds the investments and some of the assets are invested in the ABC money market fund.

The auditor stated that because the ABC bank holds the investments (they are the trustee and custodian), the plan is required to be audited.  More than 95% of the assets are qualified assets and there are less than 100 participants so we think the audit waiver requirements are met.

The fact that the plan sponsor is also the custodian might be a potential fiduciary issue (prudent rule) but that should not preclude the plan sponsor from waiving the audit requirement.

Do you agree or is the client required to have an audit? 

I've got a hardship request for a casualty issue where the participant says that he and his buddies have the skills required to do the work themselves, but they need the hardship to cover the costs of the materials, and, hey, why shouldn't he be able to compensate his buddies for their time, too?  OK, the materials I can see, but the rest of this is sounding alarm bells...

Assuming that the Plan Administrator wants to approve this as a true casualty situation hardship, is a fair recommendation to suggest that the participant get an estimate from a licensed contractor and use that for the hardship distribution amount?  Technically, once the amount is paid to the participant, it's not on the Plan Administrator to ensure that the money is used for that purpose, anyway, but if the participant wants to do the job with his friends and pay them instead, as long as the amount isn't unreasonable (which is what the bona fide estimate is going to be used to substantiate), isn't the plan on solid ground?

I have an inquiry to make that I hope would be fairly simple to answer, which I know is normally not that case -

I never knew this but then the year before last in a conference call a client was stopping SH mid-year because they were acquired by another company. As a result, I was advised that the SH provisions continue to apply, even if the SH is removed mid-year, if it results from an acquisition. Again, I was never aware of this so I would appreciate it if someone could confirm whether it is in fact true if SH is removed mid-year because a company is acquired by another company, then the SH provisions DO apply for that year and you don't need to worry about ADP testing.

We have a brand new start up plan.  The effective date of the plan is 9/30/2020.  Calendar year plan.  Document indicates a short plan year.  Compensation is defined as plan year.  So, I believe I need to prorate the compensation.  The question is do I use 3 months or 4 months?  Or should I be using days?

For the 415 limit for contributions, there is language in the document that states:  The Limitation Year for Code 415 purposes will be the 12 month period ending on the last day of the Plan Year instead of the "determination period" for compensation.    Based on this language, do I need to prorate the 415 for contributions?

Hello,

We have a client who is purchasing the assets of a seller. In  the purchase agreement, the buyer (client) has specifically excluded the welfare plans so that the client will not be purchasing the welfare plans; however, there is a transition period under which employees will remain part of the seller's welfare plans before being transferred over to the buyer's plans. 

We have learned that the seller has failed to file a Form 5500 for its health plan for the past couple of years. Will our client (buyer) be at risk for DOL/IRS penalties if these delinquent Form 5500 are not corrected? I am having trouble finding sources to support whether successor liability will apply in this case. Any insight is appreciated. Thank you. 

Background: A non-profit operates a 457(f) plan for a select group of management. Only Non-Elective contributions are permitted. The plan uses a 5-year graded vested schedule and participants are fully vested at NRA (age 65). The Plan's substantial risk of forfeiture risk (SRF) such that participants who terminate for cause will forfeit 100% of their account balance, even if already fully vested. Plan allows payment upon the later of separation of service or attainment of NRA. 

Questions to clarify my understanding: 

1. As I read the regs, a participant is taxed when the SRF lapses. In this case, then, a participant who may be 100% vested in his account is not taxed on that amount until he terminates employment in good standing (since the SRF doesn't lapse until he terminates). 

2. If a participant terminates in good standing at age 65, the participant is taxed on their vested balance, since the SRF lapses. Based on the timing of the payment of benefits (later of separation of service or attainment of NRA), then, there really is no constructive receipt doctrine, in this example. 

3. If a participant terminates in good standing at age 55, the participant is taxed on their vested balance, since the SRF lapses. But, the participant cannot commence payment until attainment of NRA (age 65). In this case, the participant is taxed, without actually having taken a distribution (constructive receipt doctrine). 

Am I missing anything? 

Can anybody provide a hyperlink to download the text of Rev. Rul. 74-307?

Much appreciated.

This got shifted a year, but my head may not be shifting it, so I think I've got dates that don't line up...

As I recall, this was originally effective sometime in 2019 in proposed regs that could be followed, and we expected that the amendment itself could be done before 12/31/20 but effective in 2019 - we drafted a whole bunch of them then (that we held awaiting for a document restatement package that we still can't prepare, but that isn't part of this issue other than to say that these amendments are drafted to have an effective date of 2019 but not signed).  Then there was a one-year extension, and it had a "soft opening" in August 20, 2020, but was really truly effective starting 1/1/21.  So now I presume the amendment has to be done before 12/31/21 (never mind the tri-cycle restatement for the moment).

Can the amendment still be effective for 2019?  Or is that off the table?  Thanks.

 

I am trying to figure out the 5500 deadlines for this calendar year-end plan..

Plan was terminated in October 2020 but still held funds through the end of the year. Would the 12/31/2020 Form 5500 be due 7/31/2021 (or 10/15/2021 if extended) like normal?

Final payout/transfer of funds in plan was April 2021. ($0 balance left in plan as of this date). When would this final Form 5500 be due?

Hi

Can anyone provide/point me to a link that provides good and simple information on the suspension of benefit rules (or even articles)? Need to check a few things.

Thank you

Can 402(g) catch-up from the previous calendar year be used in the calculation of 415 annual additions maximum for the plan year?

Example for a PYE 3/31/2021

401(k) deferral amounts for Participant X:

    - 1/1/2020-3/31/2020  = $5,200

    - 4/1/2020-12/31/2020 = $15,600

    - Total 2020 calendar deferrals = $20,800

In PYE 3/31/2020 - $5,200 of the 2020 402(g) catchup was used to allow for a Participant X's annual additions of $62,200 ($57,000 + $5,200).

    - This should mean $1,300 ($6,500 - $5,200) is still available for 402(g) catch-up, for the 2020 calendar year  - The question is regarding the use of this $1,300.

Deferrals 1/1/21-3/31/21 = $6,200 – using as 415 catch up

Would the maximum annual additions for the PYE 2021 be $65,500 ($58,000+$6,200+$1,300) ?

OR would the maximum annual additions for the PYE 2021 be $64,200 ($58,000+$6,200)?

Thanks!