Would appreciate any experience or guidance around the special 15-day 204(h) notice period rather than the usual 45-day notice period when an amendment reducing benefits is adopted in connection with certain qualifying business transactions.  The "in connection with" language seems fairly broad and flexible but I cannot find any guidance on how broadly that is to be interpreted or applied.  For example, is it possible to freeze a plan using the special 15-day rule before a pending deal is signed up?  The deal is proceeding and expected to close soon and will expressly require that the seller freeze and terminate its cash balance plan but if the plan is not frozen using the 15-day rule (and thus in advance of closing) additional benefits will accrue for 2021.  Thanks.

Say an employer has a deferred comp agreement in place that provides a retired employee a fixed amount per year for a defined period. Call it $100,000 per years for the next five years. The employer wants to add an earnings component by basically converting the payments to a $500,000 "account balance" and allowing the retired employee to select investments. The amounts would be paid out in five installments over the next five years (same time and form as the original terms) but instead of being a fixed $100,000 per year, it would be 1/5 of the account balance in the first year, 1/4 in the second year, and so on.

Would this be simply a change of "amount" (and not a change in time or form) such that they could amend during the payment period without violating 409A?

If not, could they add a new earnings component that says on the date of the last fixed payment, the employer will pay the employee an additional amount equal to the (positive) earnings accruing on the total remaining benefit amount as if it were invested in, say, the S&P 500 over that period (and that the employee would forfeit any negative earnings)?

It seems like adding only an earnings component would generally be acceptable, but I'm having a hard time squaring it with the existing nonaccount balance status. Would appreciate any thoughts.

Has anyone looked at the Form 8881 to use for the Start Up Credit? What would you enter into line 6? Line 8 adds 5 and 6 and would seem to double the credit or what am I missing? Thanks

Good morning!  I have a new client that is currently maxing out a SEP, but also has the opportunity to start a Profit Sharing or Cash Balance Plan.  I don't believe the SEP has any bearing on the maximum contribution into the other plans, as the companies are unrelated, but I wanted to make sure someone could max out both a SEP and a Profit Sharing (or receive a contribution in a Cash Balance).

Thanks in advance!

The Internal Revenue Manual directs an Employee Plans examiner not to challenge a plan for failing to meet § 401(a)(9) if the plan’s administrator could not locate the distributee after a diligent search that included IRS-specified steps.  IRM 4.71.1.4(15)(d) https://www.irs.gov/irm/part4/irm_04-071-001

But that direction does not speak to a situation in which an individual-account (defined-contribution) retirement plan paid no involuntary minimum distribution because the plan’s administrator did not know the participant died.

Should the IRS relax strict adherence to § 401(a)(9) if the plan’s administrator shows it followed reasonable procedures to detect participants’ deaths?

What should those procedures be?

How often does it happen that no one has filed a claim within ten or eleven years after a participant’s death?

Several of our plans use the Empower platform and receive plan net credits.    Empower reports this as negative fees.     On the Form 5500-SF is it correct to report this as a negative expense under Administrative service providers?

A participant had a loan default in 2020 and there was a deemed distribution (he was still employed but not repaying the loan).

I understand that the deemed distribution amount needs to be shown on Line 8e on Form 5500 and the Ending Balance should not include that loan amount.

However, would you still include the amount of the deemed distribution on Line 10g ("Did the plan have any participant loans?")?

Thanks!

Can you go from a 3% non-elective Safe Harbor contribution to a flexible (maybe) 3% safe harbor contribution mid year? Would you need to provide a seperate notice for this under SECURE, or can you just make the change when writing the Cycle 3 document?

Would there be anything legally preventing a recordkeeper from commingling the assets of multiple Solo 401(k)s into a single trust account to achieve efficiencies for the all the individual plans? I know certain parts of ERISA do not apply to a Solo 401(k) plan, but I'm wondering if any of the sections that do apply would prohibit this practice?

2 Plans in a controlled group.  Plan A is a 6/30 year end, and Plan B is a 12/31 year end.

How do I determine who is an HCE?

It is my understanding that at one time - forfeitures were not allowed to be used to fund safe harbor contributions.  I can't find when/if that changed and is it ok to use forfs now to reduce the safe harbor contribution to employees.

Curious as to what approach you take. A sole prop has Schedule C from two different businesses. One has income of $100,000, one has a loss of $50,000. Defined contribution plan.

Do you
A. calculate based on $100,000?

B. Calculate on $50,000?

C. Give your opinion (mine is that you do not net the two, so $100,000) to the CPA/Client and let them choose?

Posting for an ex-colleague.  Their company is paid bi-weekly and had 27 pay periods in 2020 instead of the normal 26.  One of their payroll people miscalculated their own 401(k) contribution, intending to contribute the maximum  $19500 over 26 pay checks, but instead overcontributed by $750 because of the extra paycheck.  But instead of having the excess paid to them out of the plan like you are supposed to, the payroll person took it upon themselves to adjust their own W-2 and adjust their own paycheck so that they could get the money back from the employer instead of taking it out of the plan.  No 1099 issued, no earnings on the excess.  It is a large company and no one is likely to notice but my colleague thinks this is a problem.  I am being careful not to express my opinion but I sure know what I think.  How big a problem is this, if it is?

The alternate payee's attorney is questioning the valuations and wants a full accounting.  It's is a pooled profit sharing plan.  The client is asking if there is anything in the code that prevents the disclosure of this information as it relates to other plan participants.  I believe there is but I can't find it.  Any suggestions on how to handle this situation?

Say you have a sole prop with one employee. Sole prop's Schedule C is low enough so that taking into account the contribution for the employee, and the earned income reduction, the sole prop's net "plan" income is, say, $25,500. Sole prop is catch-up eligible, and deferred $26,000.

Now, under IRC 414(v)(2)(A)(ii) the sole prop deferral can't exceed $25,500. So I assume the excess $500 is considered a 415 violation? I don't see what else it could be - not a 402(g) violation nor an ADP failure...

Plan sponsor switched recordkeepers mid year.  During first part of the year, participant took $100,000 covid distribution from recordkeeper before transfer to new recordkeeper.

Participant went directly to new recordkeeper and requested $30,000 Covid Distribution.  New R/K processed distribution without approval from plan sponsor or TPA.  Recordkeeper relied on participant’s self certification.

Am I correct that in order for the plan to remain in compliance, the $30,000 adjusted for earnings needs to be returned to the plan by the participant as an “overpayment”? (Participant not otherwise eligible for an in-service distribution.  Not term’d.  Not 59 ½.)

Participant does not have the money to put back into the plan.  Who is responsible for returning the money?

Would appreciate any thoughts on the following.

An ongoing governmental defined benefit plan provides a small death benefit (under $5,000) upon the participant's death in various scenarios. There is an order of payment (spouse; named beneficiary; children; estate). However, in some cases, the sponsor is (1) unable to contact a beneficiary, but believes they have the beneficiary's correct information, (2) is unable to identify the correct beneficiary at all, or (3) is unable to obtain a name, address, valid SSN, etc. for someone they believe may the correct beneficiary.

Assume no relevant state law, no representative has qualified on the estate, and that the sponsor has conducted a diligent and reasonable search under the circumstances.

Under scenario (1), I believe they could forfeit the death benefit subject to reinstatement, force an IRA rollover, or possibly escheat. 

What are valid options under scenarios (2) and (3)? My understanding is a forced IRA rollover would require establishing an IRA in the beneficiary's name, which may not be known (or may be suspected but an SSN not known). Same with escheating, which would require withholding and 1099-R reporting.

Does this leave forfeiture and reinstatement as the only alternative as it requires no taxation, withholding, or reporting? 

Plan allows for in-service withdrawals at age 59.5 for deferrals and SH, and PS at NRA.

Participant was told she could take an in-service withdrawal from the plan.  She was not told about the age requirements.

She took a $100k distribution from the brokerage account in September 2020, and a 1099-R was issued.

Problem is, she is only 35.

Can we retroactively amend to allow in-service w/d from Non-Elective contributions at age 34?

I see in EPCRS you can do that for hardships and loans.  Nothing about "regular" withdrawals.

If not, what's the correction?  Return the money and reverse the 1099-R?

Client forgot to file form 5558 yesterday and was told by accountant o file one today, send overnight and also to get"into gear" and file Form 5500-SF today and check off the box for Form 5558.

I know Ogden is backed up, but what are the odds this one would slip by with no penalty?

I mean, I have never heard of a penalty for a form 5500 being one day late.

I am having a hard time finding rules on the two year of service eligibility requirement.   I thought you could not have dual entry dates because someone could actually be excluded from the plan for more than two years.    

Example:  Joe is hired 7/15/2018.  He meets eligibility 7/15/2020.  Does he enter the plan on 1/1/2021 or can there only be one entry date for the beginning of the plan year.   

Am I confusing rules with 1 year of service and more than 18 months?