The owner in a 1-life profit sharing plan took an inservice distribution and rolled it over directly into his IRA; no taxes were withheld.  He is under age 59.5 and hasn't yet attained NRA, and the Ft William document that the plan has allows for such distributions.  The Form 1099-R, however, shows that code 1 (early distribution) should not be used with code G (direct rollover), or vice versa.  I recall that such distributions aren't allowed before age 59.5 from pension plans, but this is a psp.  Was this an impermissible rollover?

For Profit Sharing contributions, a plan has an allocation condition of 1000 hours and employment on last day of the plan year, unless "Participant retires during the plan year". What does "retires during the plan year" mean in this case? My interpretation is that the employee must reach Normal Retirement Age (NRA) before terminating service. Would you agree or is there a more subjective interpretation of retirement? I looked at the plan document and it does not specify what retirement means in this circumstance.

Thanks!

Participant received a distribution in December, client has until the 15th day of the following month to pay the withholding.

Accountant paid the withholding electronically on January 8, 2021.

For which year would 945 be due?  I'm attempting to think ahead of a possible problem with IRS.

A one-participant DB plan terminated in December 2020.  Participant received full distribution on 12/22/20, amount in excess of 2 million.  Read the instructions for Form 945 and Publication 15.  Pub 15 refers to filing for Form 941.  If we use that, and the lookback period was zero, is the client a semiweekly filer?  Or does the next day filer rule apply?

If a plan distributed assets to a participant that wasn't 100% vested in a situation that wasn't a distributable event, is anyone on the hook for paying back the plan? They way I'm reading EPCRS, it seems that if the employee was still employed when it happened, no corrective contribution would need to be made to the plan. What if 6 months later this employee terminated? Would that trigger a repayment of the forfeited amounts if the employee never paid the plan back?

Former employee attained NRA 65 a few years ago. She never received any distributions maybe*. She was a participant in a DB plan and 401k plan. Plan sponsor says they paid a monthly benefit once she reached age 65 based on 50% joint and survivor. But checks were never cashed and they assumed she was dead. She is now asking for a lump sum payment as she insists she asked for this to be paid at NRA when she terminated employment several years previously. What is she entitled to now?

* Employer is a large insurance company that obviously has vast experience administering qualified plans, including their own. Employer insists she was contacted by mail but never responded. So it’s possible some fault for all this lies with the former employee. Nevertheless she should be entitled to something, yes? She has communicated she would accept the lump sums determined as of her NRA without additional earnings. But I’m not sure plan administrator can unilaterally approve that. 

So what does she get? Can she contact DOL to expedite resolving this?

Hello, Company A acquired Company B in a stock sale effective 1/1/2020. Company B has a 401(k) plan that merged into Company A's plan 1/1/2021. 

Company B's former recordkeeper is asking Company A to complete some questions in regards to upcoming non-discrimination testing, as the new owner. One question they are asking for the 2020 plan year is 'Does your Company (B) have any related employers?'
Since Company B was newly purchased by Company A in 2020, is it now a related employer?

Company A and Company B constitute a brother-sister controlled group. Co. A sponsors a calendar-year end 401(k) plan, which Co. B has adopted. 

In June 2019, a business transaction occurs and Co. A and B are no longer a control group, but there remains shared level of ownership (just not enough to be considered a single employer plan). Employees of Co. A are "shifted" to Co. B; thus, in 2019 some employees begin to have account balances attributable to Co. A and Co. B. 

As this is a takeover plan, I don't have ALL the details for 2019 (such as the Top Heavy Test results as of 12/31/19). I do know the plan was not top heavy as of 12/31/2018.

I am working on the 12/31/2020 compliance testing and Form 5500. I am trying to back into the 12/31/19 top heavy account balances to determine if a top heavy minimum contribution is required. I know for a Multiple Employer Plan, Top Heavy, ADP,/ACP, coverage is calculated separately for each employer. I don't know how the testing was run in 2019, but my main concern is whether a 2020 TH minimum is required.

For participants who were employed by Co. A and B in 2019, how do I treat their account balances for Top Heavy determination? Initially, I intended to split out the accounts such that each affected participant has two accounts - one from Co A and one from Co B. as of June 2019 (and pro-rate earnings after June 2019). But, then I started thinking, since they were controlled for part of the year, can I split out the accounts as of 1/1/2020 for top heavy testing? I don't believe there is any formal guidance from IRS on this issue - its just any "reasonable" approach. 

Thoughts/opinions? Thank you!

My employer's plan is terminating and I'm taking a small cash distribution and rolling over the rest to an IRA.   My employer will NOT take federal withholding taxes from the cash portion.    Isn't this required when taking a distribution?   is there any repercussion for not taking the withholding?  I guess I could up my deduction each pay to make up for it so I don't owe it all at the end of the year.    

The  instructions to Form 5500-EZ make it pretty clear that IRS considers a plan wherein the husband AND wife together own 100%. 

What about  attribution - wouldn't the spouse of the oner be included as an owner?

The daughter of an owner if she is a stockholder?

Just wondering.

A federal credit union wants to offer its executives a non-qualified plan.  As a tax-exempt employer, they had inquired about creating a 457(b) plan.  After an initial discussion regarding the deferral limits applicable to 457(b) plans, they wanted to explore either 457(f) or 409A.  During my research, I have come across discussions regarding the  issue of how FCU's should be classified (PLR 200430013 and IRS Notice 2005-58) and that effect on what type of NQ plan they can sponsor.  It  is not clear to me as to whether or not this issue has been resolved, particularly if the plan is just now being created. Can a FCU create and sponsor a new plan under 457(b)? 457(f)? 409A? If so, is there a good reference source for guidance on the best options available?      

I was just notified on Friday, that a client is changing their fiscal and plan year end from 9/30 to 12/31, effective 12/31/2019.     It's too late to prepare a 12/31/2019 5500, so do I  prepare a 9/30/2020 val and 5500 and then do a short plan year of 10/1/2020 to 12/31/2020?     Can I still amend the plan retroactively for a 12/31 fiscal and plan year end effective 12/31/2020? 

Thanks for your help

Husband & wife own 100% of business that sponsors a DB plan. They are the only employees, the only participants, and the plan's trustees. Husband wants to buy an investment property (a building housing a fast food restaurant, but I don't think that's relevant) 50/50 with the plan as tenants in common. I believe this is a PT. Does anyone disagree? 

When a participant has a small voer-deposit, and there have been gains, in lieu of calculating the applicable gains can we just withdraw the principal?

I looked it up in the EOB so I think the answer is no, but the terminology is throwing me a little because I'm referring to a "corrective distribution" just an overdeposit.  I assume there is no distinction, but asking anyway because we do spend a lot of time making sure we take as much money as possible from an NHCE which seems silly.  

6.j.(1) Losses. If the Earnings are negative, a corrective contribution or allocation does not have to reflect a net loss incurred under a defined contribution plan. See section 6.02(4)(a) of the EPCRS Procedure. Note that this exception to reflecting a loss applies only to a corrective contribution or allocation. A corrective distribution is required to reflect net losses.6.j.(1) Losses. If the Earnings are negative, a corrective contribution or allocation does not have to reflect a net loss incurred under a defined contribution plan. See section 6.02(4)(a) of the EPCRS Procedure. Note that this exception to reflecting a loss applies only to a corrective contribution or allocation. A corrective distribution is required to reflect net losses.

We prepared a loan document for a client in December, 2019, at that time, prime rate +2%, and loan issued at 5.75%.

With the COVID suspension and re-amortization, would the interest rate need to be the same?

Since the new re-amortization can not go beyond the original term of the loan, and this participant only made 3 loan payments prior to suspension, the new loan amount plus accrued interest from date of suspension through 12/31/20 at the same 5.75%, yields a higher monthly payment than the existing amortization schedule.

That does not make sense.

I just posted a very similar question in the 401K section of this forum.  As a matter of fact, I basically just copied the initial scenario description from there, but there are some differences in the questions I have.  Hoping someone can help me determine if I have a controlled group issue between multiple businesses my wife and I fully or partially own.  Businesses and ownership is as follows:

1. My wife owns 100% of a S-corporation that does not offer health insurance to her employees since most employees have coverage through their spouse.  We feel it would be redundant to provide additional coverage and instead utilize the funds she would be spending on health insurance to provide additional bonuses and extra paid vacation time to the employees.  This business and health plan have been active for many years.
2. I am a sole-proprietor and have taken a self-employed health insurance deduction for several years.  We have been purchasing our insurance directly through the exchange.
3. I have an associate that also operates his own sole-proprietorship.  That is his only business that I'm aware he owns and he is now on Medicare but I think his wife is still covered via a plan through the state (retired teacher).
4. I am forming an S-corporation with the associate and we each will own 50% to start.  The s-corp was formed to pay joint administrative and office expenses and will have one employee.  We will still operate our own sole-props and will only reimburse the S-corp for our pro-rata share of expenses.  The associate and I will not be employees of the s-corp, but will be officers and directors.  I would like to offer health insurance to the employee, but also want to look at options to obtain health insurance for myself and family through the s-corp.

Considering the above, my questions are:

1. First, are there any issues with me taking the self-employed health insurance deduction through my sole-prop even though my wife doesn't offer any health insurance to her employees?  While I believe I may technically be in a controlled group with my wife's business I am hoping that it doesn't impact my ability to take the SE health insurance deduction for our privately purchased insurance.
2. Second, for health insurance benefit purposes, would the new s-corp being formed be considered a controlled group with my sole-prop and/or my wife's s-corp?  I'm thinking this isn't the case since I am not an 80%+ owner of the new corp.  Assuming it's not the case I am under the impression that there should not be any issues providing health insurance benefits to the employee even though my wife doesn't offer health insurance to her employees.
3. Finally, if we are OK so far, would I be able to acquire health insurance for myself and my family by nature of being an officer of the s-corp without impacting my wife's business?  In a perfect scenario we will obtain a small group policy through the s-corp that covers employees and officers.  My partner would be exempted as he is on Medicare - though possibly he would be eligible to cover his wife through the group policy until she becomes eligible for Medicare.  In any case, I believe this all hinges on the new corporation not being in a controlled group.  IF it is part of a controlled group including my business and my wife's business I am hoping we can just reimburse the employee for individually obtained insurance through the health exchange and I can continue to purchase my own insurance and write if off via the SE health insurance deduction through my sole-prop.

Any help or insight on the above would be very appreciated.  Just trying to cover my bases so we don't get a nasty surprise down the road...

Thank-you!

Matt

Hoping someone can help me determine if I have a controlled group issue between multiple businesses my wife and I fully or partially own.  Businesses and ownership is as follows:

1. My wife owns 100% of a S-corporation that sponsors a 401K plan with safe harbor provisions in place.  This business and plan have been active for many years.
2. I am a sole-proprietor and have been funding an Solo(K) for several years - but my total annual contributions have always been below the employee-only contribution limit.
3. I have an associate that also operates his own sole-proprietorship.  That is his only business that I'm aware he owns and I'm not certain what he's been doing in terms of retirement plans.
4. I am forming an S-corporation with the associate and each will own 50% to start.  The s-corp will pay joint administrative and office expenses and will have one employee.  We will still own and operate our own sole-props and will only reimburse the S-corp for our pro-rata share of expenses.  My associate and I will not be employees of the s-corp, but will be officers and directors.  We would like to offer a retirement plan to the employee - but ideally a SIMPLE or SEP plan.

Considering the above, my questions are:

1. Is my sole-prop technically a controlled group with my wife's corporation?  Although I think answer to that question is probably yes, I am hoping that I'm OK since I have not been contributing over what the maximum of would have been allowed had I been a participant in her safe harbor plan.  However, going forward should I integrate my plan into her plan or am I OK keeping it separate?  FWIW, I am utilizing a brokerage account for my plan while there is no brokerage account option in her plan so I hope I can continue to operate in that same manner.  Also, if I am a controlled group I assume I cannot (or at least should not) try to operate a different type of retirement plan such as a SEP for my sole-prop?
2. Will the newly formed s-corporation be considered a controlled group with my sole-prop?  And taking it a step further, if that is the case would it technically be a controlled group under my wife's corporation as well (assuming my sole-prop is a controlled group under her s-corporation)?  If those are both YES I assume I would have to offer the employee coverage under the same 401K plan and likely change my Solo(K) to a regular 401K.  However, I am hoping that this isn't the case since I only own 50% of the new corporation.  As mentioned above, we would like cover the employee via a SIMPLE or SEP plan.
3. Will the new s-corporation and my partners sole-prop be considered a controlled group?  If that is the case I would think that he could participate in the 401K plan if he desired.  However, he probably should not operate a different retirement plan for himself.  Once again, I am thinking that because he only owns 50% of the corporation that he is not in a controlled group.

So, my hope is that the only controlled group in the above is my sole-prop and my wife's s-corp and that I will be OK since I would have been operating within the parameters of her plan had I been participating in it.  However, any insight into any of the above would be greatly appreciated.

Thank-you!

Matt

I own a small RIA firm in Michigan.  The majority of our assets under management are in 401(k) and 401(k)/Cash Balance combo plans.  Similar plan provisions, model portfolios, and fund lineups.  We also have an accounting/tax division with large overlap of our retirement plan clients.  I've explored the MEP/PEP structure a few times over the past few years.  Theoretically, it should be a great solution for a book of business like ours, however, I can't seem to make the fees or operations in a MEP/PEP structure materially better than our current set-up.  I'm thinking of trying to buy a small TPA and Record Keeper that would mainly serve clients within the RIA.  My hope would be that I could reduce price and streamline operations since so many of our plan are similar, and pass these savings along to clients reducing administrative fees.  Has anyone ever done anything like this, or know of any small firms that might be a good target for acquisition?   

It appears to me that if a participant was receiving RMD in 2019, (ex. 70 1/2 factor 27.4)

The participant was not required to have a RMD, but for 2021 the factor to calculate RMD for

2021  is 25.6?

Is this correct? Or is there a new table for calculation purposes?

Please provide the uniform lifetime table for RMD commencing 2021