Good Morning to All!

I have been asked to post the following question to the group:

I have a situation where a participant's lump sum is being limited by the 415(b) limit. I.e. 5.5% and 2020 mortality LS factor with their high 3 compensation. This is limiting the lump sum as the plan is fairly rich (1.6% FAE 5 of 10) and the participant has 45 years of service (no cap, very generous). It's unfortunate, as the participant is not a high earner (approx 45k FAE) and it feels like the limit is impacting a participant it was not intended to target. I am wondering if there is any exceptions (other than ME, collectively bargained, church/gov't plans) that might allow this participant to receive their full LS?

One item I cannot find clear direction on, the plan was contributory long ago and the value of the participants contributions with interest is higher than the amount that the lump sum is being limited. (Their 415 max LS plus ee contributions is greater than the unrestricted LS). I would think that the 415 limits were intended to apply to the employer portion only?

Additionally, the plan offers split benefits (LA and LS) in 10% increments. I also thought perhaps they could take 10% as an annuity to reduce the LS below the limit, but the 90% LS the Administrator is showing is 90% of the restricted (415 limited) lump sum. Is there anything I'm not thinking of "creatively" on this? Is the participant truly just out of luck on their total benefit (if desire is to take as LS)?

Sorry for the ramble, thanks in advance!

Situation is as follows:

1.Three solo PAs(A,B,&C) that equally own another PA(D) that does billing and clerical work for all three PAs. No common ownership among A,B&C. A has a 401(k) plan;B and C do not. D has one NHCE  employee. If the NHCE of D is a full time ee he/she will need to be covered under A's Plan as it would seem to be an ASG. Are either of the following acceptable to avoid covering the NHCE in A's plan. i)Put the NHCE on B's payroll and just have A pay B for clerical work, ii)have the NHCE part time on A's payroll and part time on B's payroll so that A does not have to make employer contributions for the NHCE provided the NHCE works less than 1,000 hours for A.

Any thoughts or possible solutions are appreciated.

I have a client that has had a 401(k) Plan and has been taking RMD for several years. He terminated the plan in early 2019 and rolled his account into an IRA.  Question: In the year of termination, was he required to take an RMD from both the terminating plan and his IRA?  In other words, must he take two RMD's in 2019?

Eligibility 3 consecutive months

Assume Hired 2/15/2013  works only 400 hours a year.

Came into plan 7/1/2013

Terminated     8/1/2019

Rehired 2/1/2010

Never had 501 hours so they are all breaks in service.  Doc says we can exclude if employee had 5 or more consecutive breaks in service.  Does that include the years he was working too?

never put any money in the plan

Thanks

Client is moving from the short form 5500 to the long form based on the number of participants. In your experience is that switch more likely to trigger an audit? There are some other issues that require some expensive clean up. TIA

Can a charitable donation be made directly from an inherited IRA of a  non-spouse beneficiary?

Is the 2% S-Corp. owner health insurance considered a fringe for purposes of 414(s) exclusions?

Thanks for any guidance.

If the 401k plan year is July 31, 2018 to July 31, 2019, do you use the 2018 or 2019 5500 form?  

Thank you.

For single employer plans, we currently have a "standard" approach to determine the expected return on assets for asset smoothing and actual ROA used for rolling FSCB/PFB forward. This approach involves an assumption that annuity cashflows generally happen at the middle of year, and expenses are paid at the end of the year. We have a couple of plans that we received as part of an acquisition several years ago that reflect actual cashflow timing to the day. We would like to move them to our "standard" approach to be able to take advantage of processes and tools we have built. Any change would be very minor. Looking for opinions or guidance on whether adjusting the assumed cashflow timing in these calculations amount to a change in funding method. I haven't been able to find anything in Gray Books, regs, revenue notices, etc. that gets to this level of minutia which makes me think we should be fine to make the change without having to file with the IRS for approval.

401k PS plan with a pooled profit sharing account.  The plan terminated and all distributions were made during 2019.  Form 1099-R was issued for all distributions including the 2 participants who did not cash their distribution checks from the pooled account.  We are unable to contact these 2 participants after many attempts over the last year.  Their balances were $139 and $87 and Form 1099-R was issued indicating a cash distribution.  Since the plan is terminated, would you forfeit the accounts, escheat to the state, auto rollover?  Does anyone have a procedure that they follow regarding situations like this?

Hello, This just came across my screen. My employer would like to give an employee a travel allowance in lieu of them needing to submit mileage reimbursement forms monthly. I know this is taxable, but would it be considered supplemental wages? If so, it will be separated from their normal wages, so would this be best to do at the Supplemental rate? Would this need to be coded for the W-2's? 

Thank you, John

Client is in the process of terminating his CB.

As far as election forms, I assume the options must be enumerated in similar detail to a straight DB, ie can't just give the lump sum option and spousal waiver (as in a DC).

We know that the 3% Safe Harbor Annual Notice has been eliminated with the SECURE Act. However we received information from VOYA (attached - page 3) that says it is still required to give participants a notice if they are a new hire. I haven't read this anywhere else in regards to the SECURE Act. I would assume that only the SPD would need to be distributed?

0310_001.pdf

This really is a question for Relius, but perhaps some of you have dealt with it already. 

Suppose you have a midpoint EBAR (for HCE's) of 8.740. So any EBAR's within 5% above or below this midpoint are considered to have an EBAR of 8.740. This gives you a range of 9.177 to 8.303.

In the Relius testing, it uses the LOW of 8.303 for the EBAR in the testing. So a HCE with an unbanded EBAR of 9.1, for example, is in the testing at 8.303. Is this correct? I thought that the testing would have to use use the midpoint of 8.740.

We have a SHNE 401(k) plan, 2 shareholders, 10 employees.  The clients is on extension every year and they contribute in September for the previous year.

The accounts are investment only with a major carrier.  The carrier has returned the elective deferrals of the shareholders telling them they have over-contributed for the year.

It has been my understanding that, as long as there is an election by the participant prior to the end of year, he has the ability to make the deferral contribution for the previous year.  Of course, this could be incorrect.

Does anyone have a cite??

I agree that if the health insurance benefit for a >2% S-corp shareholder is included in W-2 Box 1, it is included in plan compensation (we use W-2 definition) and 415 comp.  But I've got an accountant (several, actually) who doesn't get that information to be added in - he claims that his way, it ends up deductible to the employee, not the S-corp, so he doesn't bother adding it to the W-2.  Plus, it means he doesn't have to chase it down while preparing W-2s.  I'm not an accountant, so I don't know how OK that is, but what I do know is that there are some participants whose "compensation" is significantly affected by this, and are now receiving a few thousand less in profit sharing.

Is there a leg for us to stand on as TPA to add that amount in, even though it's not on the W-2?  Or do we just tell the plan sponsors to get more diligent CPAs?  Thanks.

A governmental hospital claims dual status in sponsoring a 403(b) plan.  They now wish to offer a tax exempt 457(b) top hat plan.  I am not sure they can.  Treasury Regulation Section 1.457-1(m) states "Tax-exempt entity.  Tax-exempt entity includes any organization exempt from tax under subtitle A of the Internal Revenue Code, except that a governmental unit (including an international governmental organization) is not a tax-exempt entity."  Although the hospital's administration of a 403(b) plan is due to their dual status , I believe the aforementioned regulation prevents them from offering a tax-exempt 457(b) top hat plan.

What do you think?

I am not sure how 401(k) plans works, so hoping for any guidance. Apologies if question is basic.

Several companies are in the same brother sister controlled group. None has ever had a 401(k) plan. One of the companies wants to set up a 401(k) plan that would cover just its employees. Can that company do that or must the plan allow participation by employees of other brother-sister companies?  

Also, assuming that the company can set up a 401(k) plan to cover just its employees, would discrimination testing be done on just that company's employees or must it include employees from all the other brother-sister companies? 

Thanks. 

Monday brain cramp. Suppose you have a DC plan utilizing cross testing. The rate groups either pass the ratio test, or the plan passes the ABT test. Fast forward a year, and it is discovered that census data was incorrect, and a participant or participants were improperly excluded. So the employer has to do make-up contributions, matches, whatever.

Do you have to go back and re-run the nondiscrimination testing taking into account the corrections? I don't think you do, but I'm not putting my finger on the guidance to back that up.

Thanks.