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

Client with about 50 employees in its 401(k) plan wants to change TPAs.  The new TPA (major insurance company) has suggested a third party ERISA 3(38) investment manager (major investment firm) to select and monitor investment options to be made available to participants. Big emphasis on how 3(38) allows fiduciaries to avoid or minimize their fiduciary liability.

Seems like a good idea until I read the service agreement with the 3(38) investment manager (“IM”) which states that:

1. Employer is responsible for determining that the investment lineup chosen by the IM is “appropriate for the plan”. Wait, isn’t that the IM’s job?

2. IM will indemnify the plan (but not the fiduciaries) against losses arising  from its breach of fiduciary duty, willful misconduct or breach of the agreement (but not from its negligence). First, you can’t sue the plan for a fiduciary’s breach of his fiduciary duty. Second, the whole point of 3(38) is to protect the plan fiduciaries, not the plan. Third, the IM should indemnify if the loss is attributable to its negligence.

3. The Employer and the plan indemnify the IM for any losses arising in connection with the services provided by the IM unless attributable its breach of fiduciary duty, willful misconduct or breach of the agreement. So, the Employer and the plan have to indemnify the IM for it losses even if those losses are due to the IM’s negligence.

Bottom line is that the Employer is not receiving the protection from statutory fiduciary liability that the marketing materials promised and, in fact, is assuming contractual liability to the very party that is supposed to assume that fiduciary liability.

Am I missing something?

I am getting old fast and  new to DB plans as I've been looking to find good TPA for solo401K and defined ben plan for single owner/employee. I have been working for just over 30 yrs and finally decided to set up a CB plan and solo 401K already established in Dec. All of my accounting etc. is straightforward with no complicated matters and it's just myself in my owner-only small business (LLC.).

Does anyone know if I really need a TPA to do anything for the solo401K I setup and administration or can I use the general plan/ adoption agreement template that the large brokerage house already has?? Any recommendations on TPA for the CB plan as it seems hundreds of TPAs that are selling services with large fees and mostly geared towards larger businesses. I know DB plans are complex and although mine is straight forward, I'd like to find someone/group that may actually want to help me:)

Thanks for any help in advance.

Plan contains the following provision:

"Solely for purposes of determining the amount of an employee's Pick-Up Contribution, Earnings shall be determined without regard to the limit on Earnings imposed by Code Section 401(a)(l7)."

Is that acceptable? If so, any cite.

A company has a plan that runs from 1/1 to 12/31. It pays employees once a month on the first of the month. An employee is hired in December of 2020 (enters the plan right away as there is no eligibility condition) and has no pay through the end of year (he receives his first paycheck on 1/1/2021). So, the employee cannot possibly defer / receive a match for 2020.

Should this participant be included in the ADP/ACP test for 2020?

Also, should the participant be included in the active participant count for the Form 5500 purposes for 2020?

Thanks!

Small business owner (no employees) would like to set up a Solo K plan - however he wants to add his child (minor) to the payroll and have the child participate in the plan.  I've read that in order to qualify as a Solo K ("Owner-Only")  an employer must have no full-time employees other than themselves, a business partner and a spouse. - What about children?

Question -Would the plan continue to qualify as a Solo K if the child is eligible to participate? 

Thank you