415(c)(7) says that an employer can make a contribution above the 415 limit (100% of pay or $57,000) as long as it does not exceed $10,000 more than said limit.  This special election can be made each year, but the total overall amount used under 415(c)(7) cannot exceed $40,000.

Questions:

1) This is not written into the church plan document that we use and the document provider indicates that it is simply an employer election. It seems to me as though it should be referenced in the document.  Do you all agree that it is simply an administrative election to exceed the document specified 415 election for a given year?

2) Is the $40,000 cap on this limit based upon the participant's entire time working in the religious order, as opposed to just with the church sponsoring the plan?  Seems very difficult (impossible) to track if it is a limit applying to all years in the religious order.

Thanks!

We have a potential client coming to us for help closing their solo 401(k) Plan. He filed a Form 5500SF in 2010 and then an EZ in 2011. Assets never rose above $20k and no further Form 5500s were filed since. It was my understanding that one a Form 5500SF was filed, they would need to file one every year afterwards even with assets under $250k. Therefore we would need to go back and file the missed returns and corrections. I contacted a colleague who differed in opinion that they could switch between Form 5500SF and EZ and would not be required to file if under $250k which would change things in closing his Plan.

If a 401(k) plan has no service requirement and does not exclude part time employees, will the vesting service criteria change to 500 hours for those employees that work more than 500 but less than 1000 hours for the plan year once the SECURE Act provision goes into effect in 2024?

Company A is purchased by Company B.  Company A's 401(k) plan is merged into Company B's existing 401(k) plan mid plan year (both calendar year plans).

After the merger a final 5500 is filed for Company A's plan showing the transfer of assets to Company B's plan.

Is a final SAR also required for Company A's plan, or does the fact that Company A's plan is continuing on as part of Company B's plan mean that no SAR is required?

Thanks very much.

Hi

Revisiting the life insurance issues in combo plans. This time not a floor-offset.

DB or CB plan combined with a DC plan.

All HCE's are at maximum benefit under DB/CB and rank&file minimum to pass 401(a)(26).

DC plan, in addition to the deferrals+3% non-elective SH has PS allocations, say minimum 4.5% to pass gateway (SH+PS=7.5% of compensation).

Agent wants insurance in the DB/CB only. is this not a BRF issue?

If additional insurance is provided under the DC plan, the rank&file is forced to pay from their portion of contributions as their benefit is primarily provided under the DC plan.

What am I not seeing clearly here and if there is a way to pass BRF, how is it accomplished?

Thank you for you thought/comments.

Florida Swampland Realtors is a sole proprietorship, no common-law employees. The owner and sole employee, I. M. Cheating, defers maximum based on a salary draw for 2020. After end of year, taxes get done, and it turns out he has zero earned income - actually a big loss. So there's a 415 excess, plus earnings,  to be refunded. Refunded in February of 2021. 1099-R is issued with the amount being shown as taxable, right? In other words, no way to use a special code to report this as non-taxable? A CPA is questioning this, and I want to make sure I'm not cracked. Thanks. 

If I received half of my ex husband’s  pension at the time of our divorce (2006), I am not entitled to anything more once he retires next year, right? There is a QDRO listed in his benefits from our divorce. 

I'm winding down and as clients retire or move on, I'm wondering about record retention.  I've got filing cabinets worth of old 5500s, Plan Documents, valuations, trust accountings, etc.  All my paper has either been provided to me, or generated by me and sent to the clients.  

So, the questions are, how long do I have to keep this stuff?  Does anyone charge for "Record Retention?".  Do you offer to send the client all  your files?  

Shredder's looking hungry. ?

I'm nto talking about the data, but the definition of the DER itself.  I have an access program that builds my takeover transaction data file for import. We have to manually create the DER itself one column at a time.  I was wondering if there was a way to import the DER definition into DER set-up somehow.

I don;t think there is but thought I would ask...

Unclear from DFVC FAQ: when paying DFVC fee electronically online, is there a requirement to also submit pdf's of the applicable 5500's electronically, mail in paper forms, or no such requirement?

Also, no response from hotline so asking the question here.

Does anyone know where I can find an EGTRRA advisory/opinion letter for a DATAIR VOLUME SUBMITTER CASH OR DEFERRED PROFIT SHARING PLAN 06-070.  We don't use Datair and I tried calling them with no answer.

Hello all, 

This is a rather complex one. 

Suppose an employee has a separation agreement that entitles him to 50% of his annual salary in a lump sum. Employee is also entitled to equity in the company (25% is vested upfront, and 75% with accelerated vesting upon termination for any reason). 

The parties agree that, in lieu of receiving the lump sum severance payment and other benefits, the company will repurchase 75% of the stock held by employee at a predetermined price, on a pre-determined future date (after the 1 year capital gains date). 

1) Upon signing the separation agreement now, would the employee be in 'constructive receipt' of the cash from the repurchased stock, or would receipt only occur when the cash hits his account? This matters for the 1 year capital gains treatment, which occurs 2 months after the separation agreement will be signed. 

2) Also, would cash from the repurchase of employee's stock be taxable as capital gains or ordinary income? This transaction would be arranged as a stock transfer agreement, but the purchase price would be set in the separation agreement, and is binding upon the employer. 

Many thanks for your help!

Short plan year 2020.  Plan terminated 6/30/20.  ER wants to do PS.  Has last day/500 hr rule.

Does that 500 hr threshold get prorated to 250?

A 401(k) plan provides safe harbor match of 100% up to 6% deferred and permits employee after-tax contributions.  In performing the ACP test can I (a) include all match and after-tax, or (b) match over 4% and after-tax.

I am really looking for cites from the statutes or guidance for option (a) above, which I have not been able to find.  TIA!

Plan doc excludes rollovers when determining the cashout balance.

Participant has $550 PS (100% vested) and $45,000 Rollover.

Because R/O is excluded, this participant is a candidate to be cashed out.

Does the trustee just cash out the entire account and withhold $9,100?

Or do they roll over the balance to an IRA?  (The plan's threshold for IRA rollovers is $1,000)

Safe Harbor matching plan - standard matching formula - plan definition of compensation EXCLUDES bonuses. Now they want to amend to include bonuses in compensation for the 2020 plan year.

From IRS Notice 2016-16, under the 'prohibited changes" section:

4. A mid-year change (i) to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contributions, or (ii) to permit discretionary matching contributions. However, this prohibition does not apply if, at least 3 months prior to the end of the plan year, the change is adopted and the updated safe harbor notice and election opportunity are provided, and if the change is made retroactively effective for the entire plan year (which may require a plan that provides for periodic matching contributions as described in §§ 1.401(k)-3(c)(4) and (5)(ii) and/or 1.401(m)-3(d)(4) to be amended to provide for matching contributions based on the entire plan year).

Now, here's the twist. They are making this change because 2 HCE's already received bonuses early in the year. They may or may not pay bonuses to everyone else at the end of the year. At the time this amendment is made, it seems it would be discriminatory on its face, but, if they pay bonuses at the end of the year to the NHC employees, then subject to compensation testing, it could pass.

Edit - of course, after thinking about it a bit, I now realize that it isn't a matter of compensation testing - if bonuses are INCLUDED, then there isn't any compensation testing for 414(s). I am concerned, however, that a mid-year amendment changing the definition of compensation when it benefits only HCE's in this situation is a nondiscrimination issue. Thoughts?

A number of new hires do not have an assigned social security number due to social security offices in the area being closed. What is the normal method to set up a retirement account in a qualified 401k plan for these employees? I assume they are resident aliens. What is the recommended procedure for a recordkeeper and payroll department?

Thanks!

Plan has a three consecutive month eligibility. Dual entry

New Employee worked from 2/14--4/22, then got paid through 5/6.  Came back to work full time 8/8.   He did not work due to Covid reduction in business -so I think furlough and he was still employed.  He met his three months of service so would have come in 7/1, but was not working.  Since no actual severance from employment, then he met the service requirements and would participate when he came back to work. 

If someone only worked a month,  would you also treat the same way?

Client is told from prior TPA that while they deduct pretax as a % of gross, they withhold Roth  based on Box 1 W2 (or at the least,  Gross - pretax 401k).

Per Document - definition of wages = wages, tips and other forms of compensation (W2 box 1)

Is this common?   Any thoughts or concerns I can advise on? 

Is there anything that prevents a plan sponsor from Lowering the age requirement to age 14?  I know max is 21.  He wants to let his kid participate...not sure he'd work 1000 hours but I guess if he changes it to NO eligibility  requirements -....as long as every employee is treated the same - can he do this?