Question on SEP IRA - Self employed individual has had a SEP for several years, no employees to begin with.  Eventually hires an employee but fails to make contributions for them for the first two years they were eligible - 2016 and 2017 but made contributions for himself at 20% of his net SE income.  So, we know that the employees contributions plus earnings need to be put into the plan ASAP.   They will be deposited by the end of the month.  My question is can the make up contributions be deducted on the 2019 or 2020 business returns?  If no other contributions are made for the 2019 return other than what is being contributed to fix the error can we apply an amount equal to 25% of the employees 2019 wage as a deductible 2019 contribution and apply the balance of the correction contribution as a deductible 2020 contribution when we file for 2020?  Does the entire deduction get lost?  Does it apply as a 2019 contribution and an excise tax place on the excess for 2019 for any amount over the 25% limit, or if not 2019 then the same situation for 2020 if the whole thing becomes a 2020 contribution?  Any guidance would be greatly appreciated!

Are people using the special extension box now for this COVID 19 extension on (for example)  a 6/30/19 plan year end?

And are you just typing in COVID-19 or coronavirus or what?  HAve they told us what to write?

When I am eligible for diversification, can I choose a percentage rate lower than the maximum 25%? When using the formula (EOY shares + previously diversified shares) x % - previously diversified shares, differing percentages from year to year give a negative result. Say I want to diversify 15% in the first year of the five year period. The result is 255 shares if my starting balance is 1700 shares. In year 2, I receive an additional 100 shares so my share balance is now 1545 shares (1700 - 255 + 100). If I want to diversify 6% in year two, the result when using the above formula is -147 shares. Am I missing something?

A CPA asked me to review a client's ADP testing.  They left one TPA for another TPA in 2018.  The plan passed testing in the past because it used the "Top Paid Group" election.  The new TPA omitted the "Top Paid Group" election in the plan document starting in 2018 and elected to use prior testing year's results.  For 2018, the plan passed since it was using 2017 testing results.  March of this year, the TPA refunded ALL deferrals for 2019 stating the plan failed ADP testing and the client did not know the checks were being issued.  The checks were just issued and sent out.  There was no discussion regarding QNEC or anything else.  This might be a stretch - but under EPCRS (Rev. Proc. 2019-19), Section 6.02, is it possible to change the method that was used to correct the testing for 2019?  Stating the principal to keep money in the plan?  We'd ask for all the refunded money returned and the client would put in the $2,759.71 QNEC to the one NHCE who did not defer based on testing not using the "Top Paid Group" election.  That would be $69,000 put back in to restore the accounts and the HCEs keeping their tax savings.  We are definitely changing the Plan to have safe harbor in 2020 & 2021 forward.  No one ever explained Safe Harbor to them - they are interested.

Looking for your superior knowledge.  Client, Comp A, has sponsored a safe harbor 401k (w/Basic SH Match) since 1999.  Owners of Comp A purchased another business, Comp B, back in 2010, and never let us, the TPA, know.  Comp B has sponsored a traditional 401k (w/ 50% of 5% discretionary match) since 2003.  Comp A and Comp B are a Controlled Group.  Plans DO NOT pass 410b independently on their own so I need to test them together.  What recommendations do you have for me to fix the situation?  I appreciate your excellent insight.

I was associated with a 100% ESOP company that was sold for 200% of its recent third party evaluation. Is that premium a red-flag that the third party evaluation was unrealistically low? I ask as I was a 30-year employee that retire just a moment too soon and missed the buyout price. Should i look deeper into the whole process or just accept it as horrible timing? Were are talking serious money here.

A Plan provides for a Plan-Year-based discretionary match with a year-end true up.  There are no allocation conditions on the match.  The sponsor is currently not making a discretionary matching contribution.  Can the Plan be amended prospectively, but during the current plan year, to a per-payroll match with no true up?  Or does this violate the anti-cutback rule?

For example: it is now April 2020.  The sponsor is interested in beginning a per-payroll discretionary match in June 2020, with no year-end true up.  Can we amend the match from plan year to per payroll, effective June 1, 2020?  Or does this constitute a cutback because employees will not receive a match on deferrals made earlier in the year?

Thank you in advance for any insight!

I've got a participant who is confident that they will be brought back from furlough in "three of four months" and wants to start making repayments when they come back.  It sounds like they will be at reduced pay: enough to make the weekly loan repayment, but not enough to 'double up' and catch-up on the missed ones, at least not right away.  Can the CARES suspension period be used for less than a year?  So we'd add a few months of interest accrual and reamortize from the date he came back, but it's not the "1 year" as CARES 2202(B)(2) says.  It seems reasonable...

Good afternoon,

I appreciate your time, as I typed quite a bit.

I'm in the process of setting up a traditional IRA with a Financial adviser I unfortunately found through my credit union. The fees associated with the account, or for him are 0.8000%. Is this rate about right? the amount accidentally rolled over was $14000

This whole ordeal has been a nightmare for me but I'm slowly but surely learning more about finances so I dont make another mistake in the future

Back story, I'll try to be swift. I had an esop for 7 years from a previous employer, I wanted to rollover $45,000 and keep $14,000. I knew 20% was going to be held from the $14,000.

Well the documents sent to my employer were incorrectly filled out by my financial adviser. And I signed it so I was slow too. I was sent a huge check I didnt want, and the bank was sent $14000. $9000 was sent to the irs for federal and nothing can be done about that. I may get it back next year but doubt.

Lastly I still have this check I havent decided what to do with, my financial adviser has been trying to get that too I just want other options.

I have received a referral client from a CPA friend of mine.  Client had not filed Forms 5500 for several years.  When the CPA became involved he prepared and filed 5 years worth of Forms 5500 but not through the Delinquent Filer Program.  Client has now received notices from IRS wanting lots of money.  And it appears that this is probably not the first time the client has been delinquent (many years ago).

Has anyone been successful with "after the fact" going through the delinquent filer program?  Or does anyone have any suggestions?

Thanks in advance.

Hello, 

I am a TPA looking to outsource our current DB/CB Plans to an Actuary.  About 20  Plans.  Having alot of issues with current company we work with.  Thank you.

Greetings - Plan Sponsor (and plan name) was changed effective 1/1/2019 via a plan amendment. 

We need to file a 5558 extension for the 5500, for plan year ending 12/31/10. We have changed who the plan sponsor is since the last 5500, so I am not sure if the old or the new plan sponsor should file the extension. While Form 5500 has a place to provide for a chance in plan name, Form 5558 does not

My gut tells me to file Form 5558 under the current (new) Plan Sponsor and check the box under #1 that this is the first Form 5500 for the plan listed above. 

As an aside, would the new plan sponsor also need to file Form 8822-B to Report Change in Identity of Responsible Party?

Seems like a simple issue, but one that I can see the IRS having an issue with. 

Thank you!

My client is setting up a safe harbor 401(k) plan with a SH matching contribution and wants to implement dual eligibility, that is, allow participants to defer immediately into the plan but require one year of service in order to receive the match? Is there any concern in having dual eligibility?”    How would you test these dual eligibility groups each year?  What complications would you see in implementing a plan like this?

401(k) plan has SHNE plus profit sharing. General test. I year eligibility

New entrant leaves after 3 months of participation. Profit sharing is 0% vested under 6 year vesting schedule.

Does the profit sharing piece have to be vested to count in the general test?

This is related to QDRO- I need to know understand what the “date of valuation for distribution to the Alternate Payee” means.  Is it the date funds are deposited to the Alternate Payee account?  Also, I would like to know what would be the time frame between the date of segregation and the date of valuation for distribution to the Alternate Payee.

Let's say a participant has $80,000 in their 401k. He also has a $40,000 loan. The participant is terminated due to COVID and would like to take a full distribution. He's under 59 1/2. Since the limit for COVID distribution is $100,000, how would you process this request? The participant chose to have no taxes withheld on the COVID distribution and my understanding is that Code "2" is used for COVID distributions if the participant is under 59 1/2.

So, I'm thinking we process the request as follows:

The loan Offset of $40,000 is processed under Code 2.

$60,000 of the distribution amount is processed under Code 2 (with no Federal Tax withholding)

The remaining $20,000 of the distribution amount is processed under Code 1 (with Federal Tax withholding) because the $100,000 limit has been reached.

Would you agree?

If the employer chose to stop their discretionary match mid year, would the compensation for determining ACP testing also only be for the period of time the match occurred during the year or is full Plan Year compensation always used?  

I seem to be having the hardest time being able to confirm this.  

Is it okay for one employees deferral to be processed outside of regular payroll (appx. a week after everyone else's)? This was an HCE who decided to max out their deferrals at the beginning of 2020 for the 2019 plan year.

Since I have virtually no information to go on, this question may not make any sense. A governmental employer who has a "deferred compensation" plan - I'm guessing a 457(b)??? is apparently either changing or terminating the plan, whatever the plan is. We got a call out of the blue asking how they notify the IRS that the TIN will be "inactive."

I don't work with governmental 457 plans, or any other governmental "deferred compensation" plans for that matter, if there are such things.

Does anyone have any idea if there is a required notification to the IRS of such a TIN becoming inactive? I believe if a corporation terminates/dissolves there is a notification process involving the corporate EIN, but that's a different matter.

Thanks in advance, if you know anything about this.

A controlled group is made up of two entities and one of the entities would like to revoke Safe Harbor mid year. 

All the HCEs are in the entity that is revoking Safe Harbor.

How would the 2020 Coverage Test be performed for the 401(m) portion?  Are all the NHCEs considered as benefitting due to the Safe Harbor for the partial year?

Any feedback is appreciated!