Hi.  I need help understanding how the 415 limits work with multiple plans.  We are a local governmental entity.  We have a 457 plan and a 401a plan.  We have a participant that defers the max allowed to his 457 plan account ($19,500) and catch-up ($6,500).  I know that the catch-up is not taken into account with the 415 limit ($57,000).  Does that mean that the $57,000 limit is imposed on the 457 deferrals and any contributions he receives under the 401a plan?  In other words, he could receive up to $37,500 in employer contributions in the 401a plan, correct?

Thanks.

We have a former employer whose severance package includes payments over several years and health insurance. The employee has a HDHP and no other health insurance. Can they make HSA contributions through payroll deductions from their severance payments?

We are making all of the payroll tax withholding and basically treating the severance payments like wages except they are not for services rendered, so they are not eligible for our 401K plan.

Hello

Sponsor has an overfunded DB plan (active and accruing benefits). It is a family business only spouses (owners) and their children (all over age 21). It is a corporation (Sub-S).

Sponsor wants a deduction for 2019.

As DB is not a viable option for deduction and since no DC plan was input as of 12/31/19, the only option is SEP for 2019.

4 participants with a combined eligible salary of 500k where 25% deduction limit is 125k. As one participant is making 265k, limited to 56k which leaves 69k as additional deductible contribution.

The other salaries are

150k

75k

10k

Can they each get over 25% of their salaries on a pro-rata basis as long as the total does not exceed 69K? It can be done is a PS plan but not sure how SEP works here.

Thank you

When processing new loan requests for daily valued plans, I'm curious how others are determining the maximum amount available.  Assume a brand new loan, no previous loans.  If a participant requests a $5,000 loan with a $10,000 balance, but the account is valued at $9,750 at time of processing, do you process the original $5,000 request or adjust the 50% to the new balance?  The delay in processing may be due to receiving paper forms or else waiting for an employer signature or if there is missing information with an online request.

Per the ERISA Outline Book;

4.d. Difficulties experienced by daily valued plans. Daily valued plans can experience significant swings in the value of a participant’s vested account balance between the time the loan process commences and the time the loan is disbursed from the plan. As a practical matter, how should the plan apply the 50% loan limit (or any lesser limit under the plan) in this context? IRS Notice 82-22 does not provide any guidance here, primarily because in 1982, when that notice was issued, daily valued plans weren’t on the radar screen. IRS Notice 82-22 does say however that “a valuation of the participant’s interest within the last twelve months may be used, provided it is the last valuation available.” Reasonable administrative procedures should be established to ensure that the most recent daily valuation possible is used. For example, the value in effect when the loan obligation becomes fixed (i.e., necessary signatures and consents are obtained) should be a reasonable approach in the absence of more formal guidance from the IRS. In addition, the employer should consider addressing the issue in the loan policy. An approach used by some employers is to set the plan’s loan limit at less than the statutory maximum (e.g., 40% or 45%).

This isn't an issue with our balance forward plans.  We use prior valuation plus contributions minus withdrawals, no earnings adjustment.

If a client has both a defined benefit plan and a 401K plan.

Is the top heavy requirements satisfied by the DB plan if each plan participant annually accrues a benefit of 4% of compensation,

The 401k plan has the 3% non elective contribution, but the plan document says the defined benefit plan will satisfy the top heavy minimum?

I am just curious how others handle this.

I terminated years ago from a CPA firm.  I had some pre-tax and Roth money in their 401(k).  They used a well known and large platform for their plan.  I tried twice to get all of my money rolled over to my Roth IRA at E*Trade.   Both times it wasn't possible to do it online.  In fact the first time I was told by the person on the phone it isn't legal to roll pre-tax 401(k) money to a Roth IRA. 

I got forced out of the plan after being gone for 7 years this last December.  

The part that still bugs me the most is I got two distributions to Millennium Trust (MTC) and the large platform that had the 401(k) plan charged me the $90 distribution fee per check not for the single distribution event. 

Every place I have ever worked the distribution fee by event not per check.  So if you ask for a payment from a plan and one check goes to an IRA and one goes to you the fee is the same as if you asked for just one check to an IRA.  

But in the end between those fees and the MTC fees I lost around 10% of my money.  I paid those two $90 fees, paid two account set up at MTC and now two distribution fees to MTC to get my money to E*Trade.  To me MTC's fees are more justified they would always set up a pre-tax and Roth IRA on a force out like this and they really had to run two accounts at this point. 

It is the large platform that bugs me.  One because Roth 401(k) money has been around long enough that it seems like it ought to be easy to get an account with a mix of money sent to one place via an online election and two I just don't care for the per check fee.

So once again how often do you see a per check fee vs a per distribution event fee? 

Just because I am sure it will come up, there is no way to reduce refunds for losses in 2020, correct?  Our notices tell participants that there refunds are being increased for gains and I wouldn't blame them for asking if that should not reduce their refunds.  I just want to make sure I am correct when I say it is impossible.

Potential client is a non-profit and we want to set up a 403b plan instead.  Can they "terminate" their sliver of the PEO 401(k) plan to create a distributable event?

The Plan uses the safe harbor definition of hardship.  Participant submits receipts for repair of flooring to primary residence.  Does this qualify under repair of damage to primary residence for loss qualifies for casualty deduction?  There was no reference to a cause of damage, such as a fire, flood or storm.  I think this is actually a home improvement project.  If that is the case, would it still qualify since the IRS website says that under the Bipartisan Budget Act of 2018 a plan can permit hardship distributions for repair of the participant's primary residence, even though it would not qualify for as a casualty deduction (see "Changes Coming for 2019" https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributions).  Is that reference only provided to remove the need for the damage to be related to a federal disaster zone, or are rules being relax to even allow for home improvement projects on a person's primary residence?  Thanks in advance for any insights!

I am unclear on how the new RMD rules apply to someone caught in the transition:

Ex 1:  DOB 10/27/48 (turned 70 1/2 in 2019, turns 72 in 2020):

• If participant in DB plan would have had first RMD due for 2019, but chose to delay until 04/01/20.  Now since she hasn't yet started benefits yet, is 2020 now her first RMD (which could be delayed until 04/01/21), or does she still have to start by 04/01/19?

Ex 2:  DOB 04/01/49 (turned 70 1/2 in 2019, turns 72 in 2021):

• If participant already took 2019 RMD, does she still have to take RMD for 2020 or does she skip that and pick up again for 2021?
• If participant hasn't yet taken 2019 RMD (delayed until 04/01/20), does she still take it or wait until 2021?  And if taken again the question does she also take for 2020 or skip that. 

A self-employed individual over age 50 has net Schedule C profit of $22,000 and sponsors a 401(k).  No other employees and he has no wages or other business income.   He and his spouse have lots of other taxable income such that they would like to maximize  his 401(k) contribution/deduction.

His SE tax deduction is $1,554.   Is his maximum 401(k) deferral:

1.  $22,000
2.  $22,000 - $1,554 = $20,446
3.  Other?

Plan compensation definition in this plan includes the deferral.

Thanks. 

It's my understanding that a plan that fails ADP/ACP testing using the prior-year testing method cannot allocate QNECs as a corrective measure, but is there any way around this? Can an SCP amendment be done to retroactively change the testing method to current-year so that the plan sponsor can do a QNEC?

Assuming that the plan sponsor has authorized SECURE Act qualified birth or adoption distributions under the plan, may a terminated employee who maintains an account balance in a plan receive a qualified birth or adoption distribution? I think Yes - - I could not find anything in the statutory text (or the Joint Committee on Taxation Report) that limits qualified birth or adoption distributions to active employees. But wanted to see if others read feel different.

Facts:

- SH plan.

- HCE had deferrals deducted and never deposited to the plan.

- It's march of the following plan year and the deposit has still not been made.

Is this just a matter of funding with missed earnings or would greater compliance measures need to be taken?

I have a corporation with two 50% owners.  On the census, one owner is listed with $27,000 in compensation and 0 hours worked.  When questioned, thinking there was an error in the hours listed, I was told that this is a year-end bonus for the owner, reported on a W-2 issued by the employer, and 0 hours worked is correct.  The owner is not terminated and this is not any sort of severance pay.    In prior years this owner has worked 1,000 hours and has satisfied the plan's eligibility requirements.  The 50% owner with 0 hours deferred $6,000 into the plan from his bonus.  I do not know if he can defer on wages with 0 hours worked.

The adoption agreement counts "Hours of Service" on the basis of actual hours for which an Employee is paid or entitled to payment.  Compensation definition is 3401(a) - W-2 Compensation subject to income tax withholding at the source, with all pre-tax contributions included.  There are no exclusions from compensation.

I could not find anything similar to this situation in the ERISA Outline book, ERISAPedia, or research on this forum.  Thank you.

Here are the simple facts:

-> Dental Practice is sold - asset sale - all employees stay at their positions

-> New owners take over the plan to keep a status quo ... so the employees can continue to defer and receive the SH match

The new owners adopted a new plan which is a mirror of the existing plan.  All employees are given credit for their service with previous company.  

They want to merge the old plan with the new plan.

Q - Do we need to, are we required to give the participants the option to take their money? Take a distribution? (or of course roll their accounts to the new plan)

Thanks

Is there any restriction on transferring assets from a non-ERISA 403b plan of an employer to the newly established 403(b) plan of that same employer?  Assume of course that both plans permit such transfers. 

Am I making this up is this a technical term?  I though if you were IBM with 10,000 people, if you excluded 2 people out of your test you were still ok becauyse there was a recognition that you were never going to have perfect data, and essentially close enough was ok.

I don;t think I made the term up.  Anyone have a definition?

I was married for 25 years.  When we got divorced my ex warn me not to go after any of his finances or he would come after me.  When I went to the court date the judge saw I wasn't asking for anything and said "Oh no honey, I don't agree with this so I am leaving it open in case you change your mind".  My ex worked for 30 years for the same company and does have a pension.  While my ex was on vacation he had a massive heart attack and died in August 2018.  My ex never paid attention to important paperwork so when he died my 3 kids had to go to probate court to get ownership of his 2 homes.  I decided to get an attorney to go after the pension, so she has amend my divorce from 2005 requesting his 401k and pension, she also did a death QDRO.  I go to court on March 16th of 2020.  Is there anything any of you can recommend I ask the judge for?  My ex was 60 years old when he died and had not retired.  Thank you for any advice you can give me.

I have a two S Corporations (employee-shareholder) and I have three unrelated employees.

My wife has a sole proprietorship (schedule C).

We have kids under 21, so we are part of a "controlled group."

One of my S Corporations (the one with employees) has a safe-harbor 401(k) with 3% employer contribution (regardless of elective deferrals).

I want to make sure I'm doing this right . . . . my salary from the first S Corporation is $60,000 and is $20,000 for the second S Corporation . . . . my employer contributions is 3% x (60,000 + 20,000) and my employee contribution is $19,500.

My wife has self-employment income from her sole proprietorship of $50,000. She is able to be a plan participant under the "controlled group" rules and her employee contribution is $19,500 and her employer contribution is 3% x $50,000.

The Safe Harbor 401(k) I have set up include profit sharing as well. If we decide to do a 10% profit sharing one year, I would have an additional $8,000 (10% x ($60,000 plus $20,000)) and my wife would have have an additional $5,000 ($50,000 x 10%). 

Does that all sound correct?