What is the tax reporting on an excess pre-tax deferral that happened in a 401(k) for calendar year and plan year 2019, but was distributed in April of 2020 from a rollover IRA account? 

Plan trustee sends a corrected 2019 1099-R in April 2020 with the lower/corrected amount. For example, $40,000, but excess was $10,000, so the corrected 1099-R shows $30,000 on the corrected 2019 1099-R. The IRA custodian reports a 2020 1099-R with a code 1, so the funds are subject to an early distribution penalty as participant is under 59.5?

Any help to explain how the plan should have reported and participants should have handled with 2019/2020 ind taxes is much appreciated.

I used to have a chart that listed a bunch or retirement plans and which could be had in the same year and which couldn't

Anyone have anything like that?  I've been looking through everything I have and cannot seen to locate it.

We have a NQDC plan and the Plan Sponsor wants to terminate it since no employees are funding to it any further. There is one participant remaining with contributions invested in an annuity. Participant doesn't want to take a distribution so there is no request to accelerate pay out. Can the plan be terminated with an account balance remaining in the plan, or must the assets be distributed upon plan termination? If so, would the suggestion be just to freeze the plan rather than terminate it?
 

I'm seeking to convert a Traditional IRA to Roth IRA (backdoor Roth).  All of the contributions to the Traditional IRA were non-deductible due to income limits EXCEPT that it includes a loan offset rollover contribution (401k loan taken out, laid off, did a loan-offset rollover for the loan amount into the IRA).

Is the loan offset rollover amount "deductible" or "nondeductible" for conversion purposes?  Trying to calculate the pro-rata taxable amount since the account now includes investment gains that would be taxable, but don't know how to classify that loan offset contribution. 

Thank you for any thoughts you have.

Hi

Client asked for a loan from the DB plan last December. Sent the paperwork with all instructions.

Client signed the form but did not get the spousal consent nor the spousal consent was notarized.

Client took the loan out from the DB plan in December.

What is the corrective method for this, if any?

Thank you

Hi

Dealing with an overfunded defined benefit plan (DBP). Plan covers only the owner and spouse and not covered by PBGC.

Client asked me if he can pay the following fees from plans assets:

1. He has an independent contractor (IC) working for him on a personal level (family related matters) however sometimes helps gathering annual data for the DBP. The IC is always paid from personal funds. Client wants to know if the fees related to the time spent on the plan related issues can be paid from the plan. 

2. The client's CPA for the sponsor also does help with plan related issues and client wants to know if time spent on plan related issues can be paid from the plan's assets to the CPA directly from the plan.

3. Client, as the trustee, wants to get paid from plan assets for his services to the plan as investment advisor. Per my research, possibly not doable but I may have missed something here.

I am sure there are some questions I am asking/thinking of.

Your comments are appreciated.

Thank you

We have a participant in a 401k plan who is 74 years of age and was terminated in 2020. He will be subject to the RMD in 2021 and he wants to rollover the entire balance to an IRA. He also has a Loan Balance, which will have to be offset. Can the offset be used to satisfy the RMD requirement?

Thanks!

Some publications indicate that the DCFSA limit of $5,000 for 2021 needs to be adjusted for any rollover amounts from 2020 (i.e., if P rolls over $2,000 from 2020 DCFSA, their 2021 DCFSA election cannot exceed $3,000). Does anyone agree with this? Thanks in advance.

Can we set focus to first unread rather than top of topic?

Non-governmental 457(b) plan permits make-up contributions within the 3 years prior to Normal Retirement Age (age 65).

Participant is age 64 as of 12/31/2020 and his prior year contributions have been as follows:

For 2020, the last year in which the participant is eligible for make-up contributions, is his max make-up contribution $2,000 (the sum of the unused limits)? Or, is it $11,500, the sum of unused limits from 2013 - 2016? 

Basically, do I reduce the $11,500 each year in which he made make-up contributions? I think so, but just looking for confirmation.

This is kind of an off-shoot of another question I had earlier...

For the many plans that have a YOS requirement (or some other hours... but mainly YOS, I suspect), there might be an issue where employees who were otherwise expected to be working enough hours to meet eligibility had their hours reduced due to COVID (layoffs, etc.) and now didn't meet that threshold in whatever eligibility computation period you're looking at that covers 2020.  These people just... don't become eligible yet, right?  Nowhere in any of the regulations or relief was there anything like they get additional credit for some number of hours for purposes of X, Y, and Z including retirement plan eligibility, was there?

Not that I'm expecting that people who were out of work for months to be putting retirement savings at the forefront of their financial decisions, but this also likely affects eligibility for safe harbor and other employer contributions, so they're going to be a year behind (in the best-case scenario) for those contributions.

Hi.  Physician practice is wholly - owned by Doctor.  The Practice pays for the premium cost for employee-only coverage.  If an employee wants to elect family coverage, the employee must pay for the additional cost.  The Doctor, however, has family coverage; and the Practice pays for entire cost of his family coverage.

Does this create an issue?

Thanks.

Wondering what others think...the general instructions for the 1099-R forms indicate a mailing address for us in NYS as:

"Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301"  (same as last year)

However I see on the actual 1096 "red" copy a filing address as follows:

"Internal Revenue Service, Austin Submission Processing Center, P.O. Box 149213, Austin TX 78741"

I'm assuming that the forms will get there either way, but would like to advise my clients accordingly for proper filing.

Thoughts?

If the ACP test fails and the match has not yet been deposited since it is calculated on an annual basis, do gains need to be included in the amount that is refunded?

Would like to hear opinions on the following question: 

Plan's eligibility provision requires one year of service, vesting is 5-year cliff and Plan's normal retirement age is later of age 65 or the fifth anniversary of plan participation. NRD is the first of the month on or after NRA. 

Participant is hired at age 65, hits the one year of participation requirement at 66 (in the following year). He attains 5 years of vesting service in the year he hits age 70 so he became fully vested a few months before he hit his NRD (since he won't hit 5 years of participation until the beginning of the next plan year when he hits age 71).  He then continues to work beyond NRD -  working full time until he retires at a late retirement date, age 73.     (Plan provides for suspension of benefits in cases of delayed retirement, but this may not be relevant here since the participant's NRD falls later than 4/1 after the end of the calendar year he attains 70 1/2). 

When the participant eventually terminates (at age 73), is the actuarial increase starting date: 

(a) 4/1 after the end of the calendar year he attained age 70 1/2?

 or

(b) NRD (i.e., the first day of the plan year in which the fifth anniversary of his participation occurred)?  

I think I know the answer to this but was hoping to hear if that is correct:

Participant enrolls in a 401k plan in 2016 and names his wife as beneficiary and son as contingent beneficiary.  Lump Sum only distribution, no J&S.
The wife passes away and then, the participant passes away on 2020.

The participant had remarried (not sure when) before he passed away in 2020.

A new beneficiary form was not completed.

Is the son still the beneficiary since he was named as the contingent beneficiary on the beneficiary form that is on file?  Or is it the new spouse, even though there is no beneficiary form stating her as the beneficiary?

I think the new spouse is the beneficiary.  Any comments are appreciated.

Client is participating in a solo 401(k) and would like to terminate it.  If they have already funded the account during 2021, are those EE/ER contributions valid, or does the account need to remain open for the entire fiscal year in order to qualify them?

Edit to explain title: they wanted to convert the plan to a broader 401(k) but haven't been able to find a good option for this, so they are exploring whether they can just close out the solo plan and restart in 2022 with a different plan provider. I'm sure there's options to help them solve that part of it, but as we do so, they have asked about the impact of closing in a year that they have funded it.
 

We still have a lot of plans that prefer to have allocation conditions hard-coded in the plan (probably so that the SPD shows them).  For plans with an hours threshold, there are going to be a bunch of participants who normally cleared the bar that don't for 2020 because they were temporarily laid off, or were furloughed, or whatever for part of 2020 and didn't work enough hours to meet the plan threshold in 2020.

Do these plans/participants have any options (other than the plan sponsor giving them what they would have given them as a contribution outside the plan as a bonus)?  Possibly a one-year-only amendment that says that for 2020 only, the hours of service required for a contribution is lowered to X hours?

This is just speculation at this point (for me, at least), but I can see that it might cause coverage issues (in which case, we can start bringing participants back based on highest hours first, but only until 410b is passing and then no further).

I have an employee that had an excess contribution in 2020. We will be assisting in getting the amount refunded by Fidelity using their Return of Excess Contribution form. It is my understanding that the employee will receive the amount directly from Fidelity and a 1099-R will be issued by Fidelity. My question is are we required to correct the employee's 2020 W2? This is a new role for me and I am a one person show. I appreciate any guidance.

Question: In a Defined Contribution Plan, can the transferred Defined Benefit surplus assets being released for 2020 Plan Year (received into it on account of prior DB termination), be allocated in addition to the employer's contribution equal to the 25% of eligible pay or must the 25% deduction limitation be reduced by the amount of DB surplus being allocated?

Example:

DB Surplus Suspense Account must release at least $35,000 for 2020

Total Eligible Payroll $500,000 therefore 25% Deduction Limitation is $125,000. There are multiple participants. It is understood the maximum any one participant may receive in annual additions is $57,000 (+ catch-up if any).

Can the Employer contribute and deduct the full $125,000? This would mean a total of $160,000 ($35,000 DB surplus released plus $125,000 employer contribution) will be allocated for 2020. OR, must the employer's contribution and deduction be reduced to $90,000 (the $125,000 deduction limit reduced by the $35,000 DB surplus to be released and allocated this year)?

Thank you.