I don't usually worry about $5 or $10 in earnings in forfeiture accounts, but recently I am seeing large plans with $3500 and $5000+ in annual earnings. The employer is using forfeitures and their earnings to offset discretionary contributions. It feels wrong - the earnings part, I mean. Wouldn't this be a prohibited transaction? I feel more confident that it would be a PT if it were Safe Harbor/QNEC/QMAC contributions they were using earnings to offset. Your thoughts and guidance will be appreciated! 

A plan participant asked me if they could cancel their plan loan because they were finding it hard to make the payments.  I wonder if the loan balance could be considered a distribution... a COVID distribution not subject to the 10% excise tax.  Thoughts?  

Note:  this participant does qualify for the COVID Dist... works for a dentist and has not worked for months at this point.  

Hi all,

I'm a little confused regarding partner 401K contribution calculations and how to report this on the Form 1065, K-1, and Form 1040.

The situation is this: I have a partner in a general partnership with $200K self-employed income and they want to make the maximum allowable contribution to the partnership 401K ($62K since they are over age 50). I use the deduction worksheet for self-employed provided on Pub 560 and lo and behold they are allowed to take the full $62K deductible contribution. I believe at this point the $62K should be reported on line 13d of schedule K (code R), $200K self-employment income should be reported on line 14a of schedule K. The schedule k-1 should show the same thing: box 13, code R will be $62K, and box 14, code A will be $200K. These amounts then go on the 1040 and the $62K deduction is reported on schedule 1.

The CPA is telling me that the amounts in excess of $25K are the partnership matching contributions and that they'll need to pay SE taxes on the excess. Is this the case? I don't see anything on Pub 560 talking about adjusting self-employment earnings, so this just threw me in a loop.

I think I explained the situation well, but let me know if I've missed out on any crucial details. Appreciate the help!

Checking if the following eligibility condition could be used in a plan.  The employer wants to keep PTimers out of the plan and those who are PT will work less than 1000 hours.  But the employer also wants to bring FTimers into the plan after they meet 1000 hours, but bring them in immediately or the month following they get to 1000 hours, even if they meet that in less than 12 months.  

Using a prototype document, if we use less than 12 months for eligibility, we cannot have an hours requirement and the PT would be able to enter the plan.  So we need eligibility to be 12 months and we want the 1000 hours with it.  

While our prototype does not have this specific eligibility condition as an option, it does have an "other" eligibility allowance and we could state this in that section.  But is this eligibility condition allowable othewise? 

Thank you

Are Health Care Sharing Ministries subject to ERISA if the benefit is endorsed by the  employer/Plan Sponsor? Many, many thanks for your help!

A client maintains a self-funded group health plan for its employees. There is a proposal to amend the plan to subject reimbursement for infertility services to a lifetime maximum of $25,000 per family  for in-network and out-of-network care. Are infertility services considered an essential health benefit which would make the proposed lifetime limit illegal?

Hi

Drawing a blank.

Looking at a combo plan design which is not the way I do but asked to look at it.

DC plan provides ADP SH Match, standard 100% up to 3% + 50% between 3%/5%.

PS portion has 1000 hours plus last day rule.

2 participants terminated with 750 hours and prior to EOY however they bot deferred.

Employer wants to make a profit sharing contribution (they are aware of the additional cost as they do not have 3% non-elective SH)

The plan is also combined with a DB plan so testing together. Let's say the gateway minimum is 7.5%.

Top heavy only in the DC plan (5%) and also required last day rule.

Assuming that the terminated employees were not excluded in the DB (and not accruing any benefits), do they need to get any profit sharing as gateway? 

If they are excluded within the DB plan categorically, I do not believe they need to get any PS allocation, correct?

Anything else I missed?

Thank you

A new plan is effective 1/1.....However, the plan sponsors did not get it all set up until later.  Deferrals started 10/1.   Do they have to  pro-rate either the deferral limit or catch-up.  I don't th ink so , but have seen conflicting opinions.  What about compensation?   I am thinking they use just 10/1 through 12/31?  actual compensation? 

I get that when a plan terminates unless a loan is paid back prior to distribution it is offset.  Can the participant pay back the loan after distribution?  For instance, deposit the outstanding loan balance into their IRA within 60 days?

Thanks

Under the old rules (pre-Secure Act), if you wanted to start a brand new SH plan the plan would have to be in effect for three months in the initial year. I assume this rule is still valid for safe harbor match plans but what about Safe Harbor nonelective 401(k) plans? Can you now adopt a safe harbor nonelective plan in December of its first year with the new changes of the secure act? Or does the 401(k) arrangement still need to be in effect for 3 months for either type? I just want to know if the ability to retroactively amend the plan to be safe harbor up to 30 days before the end of the plan year (and even after the year is over if 4% contribution is used) under the secure act applies for the first (initial) plan year? 

If I start today to learn compliance for 401(k) plans or for that matter all the DC Plans. What are the basics that i need to take care of at first to gets the fundamental right?

Is it unlawful for a severance pay formula with a 12 month look back to reduce the months worked by FMLA leave time taken by an employee? If all leave time is not included in the severance formula?

This is a long way off for us, but when the time comes to see a TPA business, how are terminated plans/clients or plans that moved on to another TPA typically handled?  For example, we have clients that have been gone for 3, 5 even 10 years.  If we were to sell the TPA business, who maintains responsibility for any out-of-the-blue questions or follow ups on those old clients, the new TPA or the one that is selling?  I assume that gets worked into the sales agreement, but in general, does the new TPA take that on?

Thanks

I HAVE A CLIENT WHO'S A SELF EMPLOYED ATTORNEY, SCHEDULE C FILER, AGE 65, AVERAGE ANNUAL COMP OF $700,000 (NET SCHEDULE C). SHE MAXES OUT HER DC EVERY YEAR AND WANTS TO CONTINUE DOING THAT.  STARTING THIS YEAR, HOW MUCH CAN SHE PUT INTO A DB ON TOP OF THE DC? iF ANY.

tHANK YOU.

I have not had a noncalendar RMD for DB/CB for many many years so a bit rusty (if a DC, based on 1.401(a)(9)-5, Q&A, based the latest val within the calendar year prior to he distribution due)

Cash balance plan, effective 7/1/2019 with 6/30/2020 year end.

Vesting is 100%  after 3 years and no service prior to 7/1/2019.

Participant who is already over age 71, will be 100% vested at the end of 6/30/2022.

When is the first RMD due, 4/1/2023? What benefit do I have to use?

For example

AB at 6/30/2021 is $1,000/month (0% vested)

AB at 6/30/2022 is $2,000/month (100% vested)

RMD at 12/31/2022 is?

RMD at 4/1/2023 is?

Thank you

As I understand the CARES Act rules re coronavirus-related distributions (CRDs), a distribution that otherwise qualifies for treatment as a CRD can “attain” that status either by (1) the employer designating it as such or (2) the participant treating it as such on his tax return. So, my questions are:

1. How does the employer designate a distribution as a CRD?

2. Can the employer designate a distribution as a CRD without amending the plan, for example where the employer intends that only distributions on employment termination will be designated as CRDs?

3. If an employer does not designate an otherwise qualified distribution as a CRD, does the employer have to withhold 20% even if the participant treats it as such on his tax return?

Thanks.

Hi. An employee just notified us that he forgot to include a dependent child on his dental coverage when electing the plan during open enrollment in November 2019 (the child was selected to be covered under the medical and vision plans). We are wondering if there would be any administrative type reason to allow the child to be covered, retroactive to 1/1/2020 or if doing so would violate Section 125/ERISA rules? There has been no qualified life event or status change to permit a mid-year enrollment. This is purely an issue where the employee just realized their mistake 7 months into the plan year.

Thanks!

Is the DOL accepting electronic type signatures on the form 5500, such as an Adobe signature?  Or are hand signatures the only signature method?

Thanks.

I hope someone can verify that I understand this correctly.  401(k) plan has 100%-4% enhanced safe harbor match.  They added a discretionary match of 100%-15% for NHCE only in 2019.  Since the discretionary match exceeds 4%, ACP testing applies.  If I test all of the matching contributions together the ACP test fails - a lot of NHCE still didn't participate even with the extra generous match.  However, I believe 1.401(m)-2(a)(5)(iv) allows us to exclude employees who are only receiving the 100%-4% enhanced safe harbor match from the ACP testing.  Since that group to be excluded includes all of the HCE, the ACP testing automatically passes.

Is that correct?  In other words, as long as the HCE are excluded from the discretionary match, ACP is going to be automatically satisfied regardless of the discretionary match formula being used for the NHCE.

If a plan is terminating and the termination is not related to the COVID virus will those who take a cash lump sum be subject to the 10% early dist excise tax?  I would think they are subject to the tax because the payout was not instigated as a COVID distribution.

AND... should we offer a COVID distribution option anyway?