Accountant asked for a consult on a client's 401(k). Prospect apparently did not review TPAs allocations of SHM and contributed an amount equal to the SHM plus an amount equal to employee deferrals as the SHM contribution.  Upon instruction from bookkeeper, the difference was allocated to the profit sharing portion of the plan.

His client discovered and hit the ceiling, insisted the money be returned to the company, although he was told by the fund holder the money could only be returned with their check to the Plan, or held in an unallocated account.

Client insisted on a check to the plan, which he endorsed as trustee and deposited into his business account, although he was advised of the ramifications of so doing.

Apparently the profit sharing doc called for a new comparability allocation, which was done.  The fund holder, upon instruction from TPA, reallocated the funds, but apparently improperly.

Accountant asking for advice on how to clean up.  I would think the under-age or coverage that was taken from each participant's account would be reallocated to the affected participants on W-2 for the year of correction, not the year the contribution was made?

I ain't doin' it.

Unlike a CRD which is an entirely new type of distributable event, it is my understanding that the CARES Act loan provisions must work in concert with existing loan procedures.

If accurate, and if the plan allows for residential loans to be paid back over a 15 year term, can a qualified individual who is in the middle of building a new home request a $100,000 loan with a 15 year term, assuming all $100,000 is being used to pay construction costs and assuming the plan is amended to allow the increased CARES Act loan limits?

The only mention that I think I see in the Act regarding 5 years is with respect to delaying payments, not with the actual term of the loan.

It seems this would be possible, but once again, I'm looking at a recordkeeper's new CRL form that specifically says the loan can only be for 5 years, so maybe I'm wrong.

Thanks for any clarification.

Does anyone know if the IRS will issue a PLR on the church plan status of a proposed retirement plan?  Sponsor would like to adopt a plan but wants to know what they are getting into. 

I know Rev. Proc. 2020-1 states will not issue a PLR on a "hypothetical situation or alternatives of a proposed transaction," but it's not 100% clear to me the proposed adoption of a plan falls into those categories.

Thoughts?

After a week of parsing through the analyses and commentaries, it appears that a general consensus has emerged that all of the CARES Act benefit provisions (RMD waiver, coronavirus -related distributions, loan maximum and loan repayment suspension) will be treated as optional. 

With regard to the RMD waiver, in 2009 the IRS even allowed companies to have participants choose whether to take the RMD.

Is that the conclusion you guys have reached?

My wife has been enrolled in her employers 401k for 5 years. She just realized they they have never deducted from her check nor made a contribution in that time. The 401k is active but her employer states it is not. We’ve come to learn her employer never gave her name to the payroll department of the 401k company. Is she still entitled to the match even though they never took money out of her paycheck. She’s enrolled in 4% deduction to get a 3.5% match. We are willing to deposit money to get the match

I am unclear when repayments must begin for a new COVID-19 related loan.  In other discussions:

Per EBECatty said, the Act says '"In the case of a qualified individual with an outstanding loan (on or after the date of the enactment of this ACT)" which SUGGESTS that this applies to even new loans (since they would be outstanding after 03/27/20).

• Is this specifically addressed, or just one person's interpretation?
• When writing a new loan, when do we make the first payment due -  Same as normal, 1 year later, or perhaps some other date (at participant's choosing?) up to a year later?

Since RMD's are suspended under the CARES Act, what does that mean for the 5498 reporting?  We've provided IRA owners forms 5498 in January showing RMD amounts in boxes 11, 12a & 12b.  However, we are not required to file 5498's with the IRS until 6/1/2020.  Should those amounts be zeroed out prior to submitting to the IRS since an RMD is no longer required (even if the taxpayer already received their RMD notice)?

If the plan allows for Corona Virus distributions.  Can they limit the distribution to be from only sources that are fully vested?

Thanks!

Client has a safe harbor non-elective 401(k) stand-alone, you'd think DOL would offer some sort of relief, like "due to CO?VID-19, employers can elect to stop SHNE contributions" without a 30 day notice (since a notice was not required for 2020 anyway; and all employees would know why.  Also, if the client stops the SHNE, thus required to ADP test from the beginning of the year though the date the contribution ceases, obviously the plan would fail ADP.  Isn't the purpose of the SH contribution to avoid any testing issues.

Now that most of the recordkeepers we work with have put together their strategy for handling CARES Act provisions, I'm wondering how other TPAs are handling situations in which the plan does not want to adopt the CARES Act provisions, but a participant would otherwise qualify for the tax relief on a distribution that is permitted under the plan?

And hopefully I'm just not thinking this through properly and it is not even a problem.

But I just heard from one of our recordkeeper partners that if the plan does not complete their "opt-in" form, we are not able to use their CRD distribution form. 

So let's say the plan allows for inservice distributions at age 59.5.  A participant, age 60, has work hours reduced and would be a qualified individual.  The participant requests an inservice distribution under the current plan terms.  If we can't use the recordkeeper's new CRD form, I'm assuming the distribution would be processed as a distribution eligible for rollover with 20% withholding. 

Also, for some of our clients we prepare the distribution package that includes the recordkeeper's election form.  If other TPAs are doing the same, are you now putting both a regular election form and a CRD form in the package with instructions for completing the proper form based on qualified status?  Or are you trying to determine the status before sending the forms?

Thanks very much.

I tried to use my HSA credit card and it was declined.  I logged into my HSA manager website only to see that >$5K had been transferred out of my account, reducing the balance to zero.  When I called them they said that it was a use it or lose it situation and they sent it back to my previous employer, company A.  I had worked for company A for a long time until April 2019 when my job was sold to company B and a new HSA was started.  I remember getting the option to transfer the old HSA to the new one but didn't see any point in that since I had a card for the original HSA and everything had always been fine.

I don't believe I received any notice about this and I thought that this was my money and they had no right to do anything with it not directed by me.  I've put in a call to company A HR but who knows how long that will take these days and I wanted to try and understand as much as I can about what has happened before I talk to them.  My HSA management company that did the transfer just says I have no balance so they can't help me.  I said they can't just give my money to whoever they want but apparently they can.

I just retired and was counting on that money for medical expenses and still can't understand how they can just give it back to my employer.  If anyone has any ideas how to determine if they did something wrong or were withing their rights I'd appreciate hearing about that.

A single member plan participant would like to invest in Gold.  In an IRA the rule is that the gold must be held by a custodian.  Is that the same for qualified retirement plans?  Is this single member "solo" plan participant allowed to invest in say Canadian Maple Leafs and keep them in his safe deposit box?

Thanks

Are penalty-free COVID-19 related withdrawals allowed for DB plans?

Received this question from a CPA:

"An S Corporation filed their tax return by the 3/16/2020 deadline, and now has decided that they want to amend their tax return. The amendment would make an accrual and contribution to their retirement plan. I know they were supposed to put their tax return on extension for making this contribution, but I’m wondering just how bad it would be if they did this anyway? I think if the IRS did an audit and the payment wasn’t paid by the deadline including extensions, then they can disallow the deduction, so in that sense they will be rolling the dice with the IRS, but are there other issues, perhaps fiduciary liability issues, that I should make the client aware of?"

An executive left 501(c)(3) Org#1 and is now an employee for 501(c)(3) Org#2.  Both organizations have 457(b) plans and both allow transfers - into and out of the plans. This executive is not eligible to participate in the Org#2 457(b) plan.  Can he still transfer his 457(b) account from the Org#1 plan to the Org#2 plan?

The Org#2 457(b) plan document never mentions "participant" or "employee" in the transfer section.  It simply states states "...the Plan Administrator may accept a transfer of assets to the Plan..." and "A transfer shall only be permitted to the extent that it is permissible in accordance with Code section 457(e)(10) and Treas. Reg. section 1.457-10(b)."  I have read both and they mention "participant" but when mentioned they are referring to the transferring plan, not the receiving plan.

My take is that this transfer can occur and I use the analogy of a 401(k) rollover.  An employee does not have to be eligible to participate in a 401(k) plan to rollover money into the 401(k) plan so long as the receiving plan permits the rollover.  The 457(b) plan document for Org#2 doesn't provide a specific restriction so I'm inclined to tell them to accept the transfer.  I would appreciate other opinions whether you agree or disagree.

Two related companies (A and B) participate in a 401(k) plan that has a 3% SHNEC as well as an enhanced match (not more than 4% and not based on more than 6% of comp and meets the other requirements).      No ADP or ACP test is needed, correct?

Company B wants to withdraw from the match.   What testing is needed in the year following the change?   Q1: Presumably the match for Company A must be tested for 410(b).  Or is this just BRF?   

Q2  Presumably Company A now needs ACP testing, right?   Is Company B included with 0 match rates, or excluded because they are ineligible for the match?   I believe they would be included because they can defer, is that right?

Q3 If company B were moved to a separate plan and each plan passes 410(b) then Company B would not be in Company A's ACP test, correct?

Thanks for any help.

I have a client who has an EIN specifically for the plan.  We have had the plan for years and have had the EIN for years.  We have always used the EIN on the Form 5500 and the 1099-Rs.  Several years ago, the plan name changed.  We have continued using the same EIN and have never had any problems - except for this year.  The plan is terminating so I prepared 1099-R forms to reflect the distributions.  Taxes were withheld on the cash distributions and remitted using this EIN.  Now, when participants are e-filing their individual returns, the EIN errors out because the name of the plan does not correspond with the original name of the plan.  Has anyone ever had this problem?  I just need to amend/correct the name associated with the EIN.  I have searched the IRS website and cannot find how to do that.  Any ideas?

I have been searching for a forum such as this for several months.  I have read some of the threads which have been very helpful.

If I can please provide a short summary, than a list of questions.  Last Spring, I was terminated from a very successful ESOP company that is 100% employee owned.  I worked for the company for over 26 years and held the position of VP.  I was one of the 5 top share holders of the company.   I ran afoul of the company President and CFO when I questioned (when I was asked to sell back shares due to the top heavy rule) the low price of the ESOP shares that I would be paid a few years back and the same situation was to occur in 2019 also.   Some numbers to justify why I question the value:  The ESOP shares, approximately 40 participants, have a total book value of $10 million.  Recent five year sales for the company between $58 - $65 million and there are $10 million + in assets alone if liquidated.  Net profit 15% minimum prior to reinvestment and bonuses annually.

Any help with the following questions would be appreciated:

*  I received as statement indicating how many shares I owned and a dollar amount per share.  What can I do to find out how the shares are valued or have them checked by others?  What rights does an employee have?

* Is it standard / acceptable for the President and the CFO to run the company and the ESOP?  There is no board of directors.  Taking very high annual bonuses and controlling the ESOP seems to be a conflict of interest.

*There is a third party appraiser, but I'm sure they were asked to keep the value low.  

*There is more to the termination in regards to questioning the ESOP direction, are the ERISA employee rights for retaliation termination.  I did not ask a question that I did not feel was permissible per the plan document.

* Are there law firms that are knowledgeable to represent the employee in ESOP disputes.  

I am in an at will state and have met with an attorney, but I am finding out he has very little knowledge of ESOPs.  I'm ready to reach out to the DOL, but would like to educate myself as much as possible before that.  

Thanks for your help.

I have a new company with 111 participants at the beginning of the year.  Can they file as a small filer?

CARES Act says tax is ratable over three years. lets say he pays back the distribution in year 3. what happens to the tax paid?