Client has an existing EACA.  Plan is a calendar year plan.   The EACA provisions state that all ees who make an affirmative election remain covered under the EACA. 

Question 1:  Mid Year increase

Am I correct that making this change mid year would cause the ACA to no longer qualify as an EACA?

Question 2:  Previously defaulted EEs

Let's assume for the sake of Question 1 that they are going to wait until 1/1/2022 to make the change, and assuming the document does not state specifically, is it permissible for the previously defaulted ees to remain at the old default rate? 

Or, because all ees are still covered under the EACA, would they need to be increased to the new default rate to avoid a conflict with the "Uniformity Requirement"?

Thanks very much.

When a plan terminates it has to be updated for recent law changes. But what about when a plan merges into another plan. Does the same requirement apply to the plan that will not survive the merger?

A 457(f) plan was drafted for an executive of a 501(c)(3).  The employer is making non-elective contributions and the executive is able to make additional elective contributions.  The plan document is in an adoption agreement format and the contribution section shows:

Contributions to Defined Contribution Accounts are permitted (check all that apply):
a. [ X ] Participant Contributions.
b. [ ] Matching Contributions.
c. [ X ] Nonelective Contributions.
d. [ ] 401(k) Wrap Contributions.

The CPA for the 501(c)(3) has posed the following: "We’ve run into some issues regarding the 457(f) plan implementation with the various payroll providers that we have engaged with. They have been unable to implement a pre-tax Employee 457(f) code with no limit on contribution amount per the plan documents.  Is there an IRS publication that supports this provision?"

I have some, but not a lot, of experience with 457(f) plans and I've never had this questioned.  Has anyone out here with more 457(f) experience run into this, know of any specific publication, or have a suggestion about how to respond?

Working on a 401(k) plan's trust accounting.  Calendar year plan.  I noticed one participant's balances from 12/31/19 to 1/1/2020 changed.  The safe harbor match source at 12/31/19 was $1.58; at 1/1/2020 it was $0.99.  The Employee Pre-Tax source at 12/31/19 was $1.27; at 1/1/2020 it was $0.65.

When I asked the investment company what happened to the differences, the response was:

"At 12/31/2019, the participant had deminimus balances in various source/fund combinations (for example, 7 cents in American Funds New World R6 fund / Employee Pre-Tax source).  The $1.21 difference comes from these small amounts that were removed from the system at 1/1/2020.    Our understanding is that this essentially amounts to rounding in the recordkeeping system."

I'm not used to money just disappearing from a participant's account.  Others find this "normal"?

A multiemployer pension plan terminated due to a mass withdrawal in 2003.  A few employers are still paying reallocation liability, and the number of participants has dwindled down to about 150.  The trust agreement reflects the Taft-Hartley / LMRA section 302(c)(5) requirement for two employee trustees and two employer trustees.  The two most recent employer trustees retired (their companies closed, too) without appointing successor trustees, and no one at the remaining employers has stepped up to serve as an employer trustee.  

If a multiemployer plan is unable to engage successor employer trustees, what happens?  Can the employee trustees continue the plan on their own?

Any insight would be greatly appreciated.  Many thanks.

We have a client who is a dentist selling his practice and terminating his plan.  All 7 participants are rolling their money over to IRAs.  I expect this should be complete by the end of the week.

Is there any way to issue the 1099-Rs now rather than waiting until January?

I need to help understanding when to use a short plan year.    Employer closed the business 01/31/2021.    Plan amendment has been done terminating plan as of 01/31/2021.    Is this a short plan year for just the one month, even though we'll be processing withdrawals in the coming months?       Do we date the 5500 01/01-01/31/2021 or 01/01-12/31/2021?     

We took on a client - 403(b) plan - that never filed Form 5500. The plan was in existence since 2004.

We are filing the late returns under the DFVC program.  Since 5500-SF is not available for years prior to 2009, is it ok to file Form 5500 from 2004-2008 and Form 5500-SF for 2009-2019 or should we use the same Form for all open years?  

Thank you.

I would have sworn there was an option to mute someone but I cannot find it. Maybe it never existed?

Many retirement plans, in provisions for an involuntary distribution needed for a plan to meet a tax-qualification condition under Internal Revenue Code § 401(a)(9), define that required beginning date (with some variations) as April 1 of the calendar year following the later of the calendar year in which the participant attains age 70½, or the calendar year in which the participant retires.

One suspects many plan sponsors, if not falling in with a form document, might have preferred to provide the latest age or date that does not tax-disqualify the plan for failing to meet § 401(a)(9).

For IRS-preapproved documents of the cycle now or soon to be presented to users:

Do some change 70½ to 72?

Do some avoid stating a specific age, instead referring to § 401(a)(9)(C)?

Or does a document not change anything about this point?

I've gotten conflicting answers on this - but if someone is overpaid from a payroll perspective, and it causes an overpayment on a deferral and a match - 

Does the overpayment for both have to be put into the forfeiture/suspense account? Or can they be refunded back to the company as a mistake of fact?

Does Code 4 on the 1099-R qualify for the Coronavirus tax relief for Tax Year 2020?

Company deposits 250K during 2020 to their DB Plan.  This is below the maximum deductible amount.   Can they deduct 150K in 2020 and save the remaining 100K deposited and deduct in 2021?

Thank you.

Hi, I have some employees who elected to participate in my plan this year who are per diem. Their longevity and income over 2 prior years made them eligible.  However I am seeing recently that some employee's may not work for a couple of weeks at at time. My payroll company is accruing their contributions and are planning on withholding on the next paycheck.  Since its an employer sponsored plan, they are not giving me any guidance - they are saying they will do what every I advise. 

Are there any rules around this?

Given the workforce I employ, withholding 4-5 weeks of accrued contributions, even though it will go into their plan, will still be large hit to the employees in question and I suspect they will not be happy about. Trying to get ahead of this. 

appreciate any insight. thanks Vincent

Here's the question from the CPA - Owner (age 40) owns 20% of a Real Estate firm (no qualified Plan).  The Other Owners are parents (65%) and someone else unrelated 15%.  I have been told that ALL of the Sales Commissions are paid to the Individuals (about 50 of them) and they are reported on 1099 income.  The CPA would like to set up a SEP with the 40 year old above, and I have been told there is no management function here either.  I just don't think it's passing the sniff test, but I could be wrong.  Any suggestions?

Hi

A hypothetical question. Please ignore any testing other than deduction.

Assume a DB/DC combo plan. DC is 401k deferral and profit sharing only.

Plans are not top heavy and also not covered by PBGC.

In the DC plan, have a bunch on HCE's deferring only.

To determine the 6% limit (or 31% combo limit), are the HCE's compensation included? 

One scenario, include them in the DB and another scenario, exclude them from DB.

Thank you

Former Employee left in 2019,turned 70.5 in 2020.  Her first RMD was for 2020, but that was suspended.  Initially, she needed to take that one by 4/1/21.

But since she didn't have to take it, the 2021 RMD will be her "first."  Does she have until 4/1/22?  Or is is due by 12/31/21?

What I have come up with may just be me re-inventing the wheel, so if that is the case call me out on it.

I am looking at retirement in terms of having 3 'types' of money.  Tax deferred, which is the worst kind.  Money with capital gains tax.  And the best kind - ROTH.

My plan is this:

Out of the traditional 401ks that my wife and I have gotten during our life I am going to pull out 24k a year in retirement.  That number is important because with the standard deduction I will not pay taxes on it.  From there, I will pull out money out of our brokerage account, amounting to roughly 56k, which puts me just under paying long term capital gains tax.  And lastly I will pull out whatever else I want from our ROTH accounts which by their nature I do not pay tax on.

Is this a good strategy, because as best I can figure it I will pay nothing in taxes and have an income in retirement over 100k.

Hi, 

Terminated employee in DC Plan elected a lump sum and 20% was withheld as required. The 20% sat in the plan until the following plan year when it was sent to the IRS. The 80% that the employee received as a lump sum was shown on the 5500SF in the year it was received and the 20% withholding was shown on the following year 5500 SF (since it sat in the plan assets until the following plan year).  Are there potential penalties for this and can this be rectified? Thank you very much.

My wife and I have developed a new strategy for our retirement, but I have run into a bit of a snag in figuring out in what way taxes are taken out of her paycheck.

My wife makes 40k a year, and her employer offers a ROTH 401k which we are now taking advantage of.  It matches 4 percent at a 100 match%.  My wife is 55 years old.  We have decided that for the remainder of her working life she will contribute as close to the max of 26k a year that we can, which currently translates to her contributing 70% of her income to her 401k.  I make enough money to where I can cover all of our expenses and we should be able to live comfortably until retirement.  However, although I make good money (over 100k a year) my employer offers nothing in the way of benefits, so we get all of our benefits from her employer. 

The max her company will allow her to contribute is 75%.  We have no issue if she has no actual income coming into the house, and all of her money goes into her ROTH 401k. However, we do have an issue with too much money being taken out and not enough left in there to cover our health insurance.

So this is my question.  Do employers first take out tax and insurance and than use what is left over as a percentage?   So with her 40k lets say tax and insurance equals 10k a year, leaving her with 30k, of the 30k $22,500 would go to her ROTH 401k.  Or, do they take out the money first from her gross income of 40k (which would be 30k), and than subtract tax and insurance? 

I am aware of the 26k limit for her.  Or to put it more plainly, if her employer allowed a 100% contribution would they take out the insurance and tax before putting the rest in, or would she not have money left for her insurance?