Nonqualified Deferred Comp Plan provides for payment on the later of attainment of age 70 or separation from service following age 70 (installments).  Also provides for payment in the event of a "CIC followed within 12 months by a separation from service, irrespective of age (lump sum)."  

Based on that language, what happens with an individual who is under age 70 and has already separated from service at the time of a CIC?  There is not a separation from service  in the 12 months following the CIC, because the individual has already separated. I believe the intent was to pay out the benefits upon a CIC in this situation, but am uncertain whether the plan language supports that interpretation. 

Thoughts?

Hi folks

Our 1099 coordinator had asked me to confirm that an RMD was processed for a DB plan participant.  Turns out the participant elected a full PVAB distribution as a lump sum so that the DC method could be used.  The non-RMD went to his IRA.  The RMD check was paid directly to a charity.

Am I forgetting any issues with that?  The plan still does a code 7 for the RMD portion, right?

thanks.

-bri

Hoping to get some feedback on this situation -

we had a participant pass away a number of years ago - large balance - who named a trust as beneficiary.  It is a "see-through" trust so we have been spreading the payments over the two beneficiaries' (grandchildren) lifetimes.  One of the grandkids is now 40, and the trust says they can have whatever is left at age 40 (prior to that it was income only, and I think some percentage of the corpus at age 30 and 35 with the balance at age 40).  We have been making payments to the trust which then in turn pays the beneficiaries.

Do you think we can just start paying the bene directly?  The trust could otherwise effectively be dissolved and I'm pretty sure that would apply to the plan account as well, i.e. the grandchild effectively is the direct beneficiary now, but just checking.

We have a plan that was terminated in 2020, all money is out of the plan; broker tells us the account must stay open as dividends and interest will trickle in 2021.

Client does not want to file 5500 for 2021.  I don't see how unless maybe the plan account can be renamed to an individual account in the name of the company prior to 12/31, then the account is liquidated and the proceeds paid to TPA as a fee.

Suggestions?

It looks like I'm going to have to re-characterize all of my 2020 maximum Roth IRA contributions to Traditional IRA due to exceeding income limits. As soon as I do that, is it possible for me to take advantage of the Traditional IRA to Roth IRA backdoor conversion for 2020, for the maximum amount?

I have reviewed the regulations so many times I am afraid I am missing something. To me, it seems that there are 4 possible ways two companies can/should be combined (absent a MEP, PEP, etc.):

1) Controlled Group with Common Ownership

2) ASG as A-org (requires common ownership - albeit only a very small amount)

3) ASG as B-org (requires common ownership - albeit only a very small amount)

4) Management Group (does NOT require common ownership)

If my understanding is correct, then only #4 requires common ownership of any kind. With that said, I am pretty sure this hypothetical situation isn't allowed but I don't know why:

I am a TPA owner with 15 employees and a DC (401k/PS plan with 3% SHNE). I decide to open a new business that my best friend (not related) will own but not take a salary. I will move all the 15 employees to that company and they will perform the TPA services. That company will pay me a consulting fee. I will open a solo401k for my consulting company and get away with excluding all my employees from the plan. There is no common ownership and one company isn't doing management for the other. 

What am I missing? And is there a specific definition of what it means to provide management services?

Thanks in advance.

After a bit of Google research, I see that this is sometimes a requirement for highly compensated employees (HCEs) such as myself.  This is the same language in my employer's 401(k) summary plan description document.  As an HCE, I will have worked well over 1,000 hours and will be employed on December 31, 2020.

Does the short term deferral rule offer the flexibility to determine the year in which a 457(f) benefit is taxed? For example, if the benefit "vests" in April 2020, and is distributed to the participant on March 10, 2021, is the benefit taxed in 2020 or 2021?

client started a 401(k) in the same year and also excluded employees from a member of a controlled group.  VCP says basically for the first issue you just file the vcp and ask the IRS to allow the contributions to stay in the plan.  However you also have to  deal with the people you excluded and make a corrective contribution.  Would IRS want you to make a corrective contribution for the improperly excluded employees to a plan the employer shouldn't have had?  

Facts: A is a minority shareholder - 1% of a company B. A Runs a TPA/service provider and wants to provide services to Company B's retirement plan.  does this fall under the standard service provider exception?  

We're terminating a defined benefit plan, the checks are written to the rollover institutions, all sent prior to 12/31/20.

It is my understanding that the plan can not be closed and a 'final 5500" prepared until either IRAs have been established or the participant cashes a check and the 20% withholding has been paid.

So, 1099s can only be prepared for 2020 only if the plan funds were deposited into IRAs mor cashed their checks in 2020; if done January, 2021 has to be a 2021 1099R.

Correct???

Does Internal Revenue Code section 4980(d)(2)(C)(iv) ("Unallocated amounts at termination" of a replacement plan into which assets have been transferred) imply that if the amount of the transfer is not allocated by the end of the 7-year period referred to in 4980(d)(2)(C)(i) that it can continue to be allocated, until the termination of the replacement plan?

For example, in an owner-and-spouse-only scenario, if you need more than 7 years to allocate due to the 415(c) limitations, you could continue this for additional years as necessary as long as the plan is open and there is participant compensation to allocate it against?

If a plan funds the match on a per payroll period, but the "computation/determination" period is annual per document,  we calculated a "true up" calculation.  The clients now owes additional 2019 SH Match.  What happens if this amount is not funded by 12/31/2020?  I can only find reference to it must be funded, but no real answer as to what if not funded.

I'm looking at a PYE 9/30 401k/PS plan, and for the first time, the deferrals for the owner (who is 50+) are substantially lower then they have been in the past:

10/1/19 - 12/31/19: $2,200
1/1/20 - 9/30/20: $16,800
10/1/20 - 12/31/20: not received from client yet

He wants to max his profit sharing for the 9/30/20 PYE in his cross-tested plan.

What is his DC allocation limit for the plan year?  I know, without that last bit of information there's no exact answer yet, but this is why I hate off-calendar 401k plans.  Does he have to actually have deferrals over $19,500 in calendar 2020 to take advantage of the catch-up provision?  Meaning if he deferred $4,000 in the last quarter of 2020 for a total of $20,800, would his limit be $58,300?

Thanks, and happy holidays!

The plan sponsor for a law firm 401k plan is set up as an LLC taxed as a partnership - equally owned (1/3) by three different Affiliated/Participating employers all taxed as an S-corp. The LLC employees a few non-owners, and each of the 3 S-corp partners are 100% owners of his or her respective firm. 

Since the three affiliated, participating employers (S-Corps) pay their owners W-2 compensation, the W-2 compensations are eligible for deferrals and contributions for the plan. For Pre-tax deferral contributions, payroll deductions are withheld for the owners (W-2 comp) and funded by the individual S-corp. It's a Safe Harbor match plan with a Plan Year/annual determination period for the match. 

Since the pre-tax deferral contribution will be deducted via payroll and funded from the owners' individual S-corp, does the corresponding Safe Harbor match need to also be funded from the individual S-corp. - or does the match need to be funded by the LLC taxed as a partnership?

Hi

Participant was paid out (force out) her balance a few weeks ago (terminated in 2018 - never provided the completed distribution election forms). The balance was less than $500 and had 100% vested safe harbor and 50% vested profit sharing portions. 50% of the forfeited profit sharing account was transferred to "forfeiture account".

Plan's limit is $1000 for involuntary payout.

Now sponsor decided to terminate the plan, effective 12/31/2020. Resolution states, "the accounts of the participants will be 100% as of the plan termination date". It is signed today.

Language from the document "in event of termination of the plan, the account balance of each affected participant will be nonforfeitable"

Do I need to go back and vest the participant 100%?

Thank you

The employer withheld deferrals for a small handful of participants and failed to deposit them in 2019 when the employer had a Simple IRA for it's employees. The Simple IRA was terminated at the end of 2019. The employer began sponsoring a 401(k) plan in late 2020. The employer discovered the deferrals withheld for the Simple IRA were never deposited and wishes to correct the error.

What is the proper correction for deferrals withheld under a plan that has since been terminated? Can the deferrals withheld under the Simple IRA and their associated lost earnings be deposited to the 401(k) the employer now sponsors?

Sorry if this is a simple one. I searched a bit through questions and didn't find a similar problem addressed.

An Association MEP exists of businesses that operate stores of a certain retailer. These stores sell products. One of its participating employers is in a controlled group with a business that cleans pools as a service but is not a member of the retail association that sponsors the MEP and couldn't be a member based on the association bylaws.

Would the fact that a controlled group exists and the plan document automatically pulls in related group members allow this pool cleaning business to participate in the MEP that it otherwise wouldn't be eligible to participate in? Is anything violated by allowing this?

Controlled group with 4 companies.  Only 3 of them adopted the plan, but all four companies are participating.

Can we do a retroactive amendment having the missing company adopt the plan back to 2013?

Hi --

I am looking for advice and/or information.  Here is the situation.  Former employee requests 401K rollover on 12/4/19.  On 12/31/19, funds are erroneously applied to their account.  On 1/16/20 owner of the company approves rollover (signing section 11 of the rollover forms).  All funds (including those erroneously applied) are transferred.  Third-party administration company review discovers the overfunding.  Former employer/company sends notice to former address but former employee does not receive.  Former employer/company hires debt collector to obtain the overfunded amount.

Questions:

1. Does the signed approval to rollover the funds by the owner mean that all the funds (including those erroneously overfunded) are essentially now the former employees?

2. If not, don't these funds need to be transferred back through rollover and not provided to a third-party debt collector through a cash payment?

3. What happens if the funds have lost their value in the stock market since they were incorrectly transferred?

4. Should the former employee have to pay interest to the debt collector on these funds?

Any advice for the former employee?  Because yes, that is me.