A beneficiary of an IRA has been taking distributions for many many years. For 2019, the divisor (subtracting 1 for each year) is 1. The IRA balance at 12/31/18 was $50,000, and currently has a value of $60,000.

MRD for 2019 appears to be $50,000. But what of the remaining balance?

Never have seen the divisor get to 1. Any thoughts would be appreciated.

The model Rabbi Trust from the IRS seems to limit TRustees to the following.

"a bank trust department or other party that may be granted corporate trustee powers under state law,"

Does this preclude an individual from service as the Trustee of a Rabbi Trust? I would not think so, but I note that they use the terms "granted CORPORATE trustee powers..."

Also, Do people agree that an individual cannot serve as the Trustee of his own accounts because in so doing he would have constructive receipt of the funds?

We have a case where the client had a db plan for many years, which became very overfunded. A new db plan was created, with the idea of a carve out or offset between the plans. Plan A  covers 2 participants and provides a benefit of 6% x service accrual and plan B provides a benefit of 8% x participation. In Year 1& 2, the benefit accrued in plan A is fully offset by the Plan B accrual, and the question is how to satisfy 401(a)(26) for plan A for these years. From what I have studied, 401(a)(26) might not be satisfied until both plans can be aggregated for (a)(26). 

We have a defined benefit plan, covering only a Key employee, and then  in 2016, 3 other employees joined the plan and accrued at least a 0.5% accrual. The plan was frozen 12/31/2016.  No other employees.  The question I am dealing with whether I am satisfying 401(a)(26) for this frozen plan since 2016 as there are no accruals as the plan is a hard freeze. Since there are 6 "participants",  am I satisfying 401(a)(26) since 2016? I find the reg hard to follow for db plan subject to a hard freeze.

I know of the 30-days rule for providing notices.

But what if someone decides in December to start a SH 401(k) plan?  Can they not do it?  What if it's the first week or two of the month?  Wouldn't that be like an "as soon as administratively feasible" situation?

Curious to see thoughts on this - client is switching recordkeepers, and has a guaranteed fund with a market value adjustment option for termination. Client wants all assets to come over... the guaranteed fund contract states:

"Unless the Company (listed as the guaranteed fund provider) receives payment of any applicable market value adjustment from the Group Contractholder (listed in the document as plan sponsor) prior to the Distribution Date, Company will remit to the Group Contractholder or its designee the lesser of the Guaranteed Fund Value or Guaranteed Fund Value adjusted pursuant to the Market Value Adjustment Factor."

The recordkeeper has given the sponsor the option to wire the amount of the MVA prior to the distribution of assets, so that no plan assets will be adjusted. Would this be considered a contribution, even if no assets are moving into the plan and no assets are being adjusted from the plan?

Let's look forward to 2020. Suppose corporation X and Corporation Y are a controlled group, each owned 100% by Winnie the Pooh. Corporation A is the Plan sponsor, and Corporation B is signed on as a Participating Employer.

Winnie decides to sell Corporation A to Tigger on 6/30/2020. Tigger has no interest in maintaining a plan, because he's bouncy and fun, and 401(k)'s are not. So Corporation A's plan will be terminated effective 6/30/2020.

Winnie, however, wants to maintain the Corporation B plan (it invests primarily in honey pots, which Winnie deems Socially Responsible Investing), so will spinoff the Corporation B portion of the Plan.

Because this is a 401(b)(6)(C) transaction, the Corporation A Plan should qualify as a Safe Harbor Plan through 6/30/2020, the termination date. Corporation B adopts a new plan document with identical provisions for the initial short Plan Year of 7/1/2020 to 12/31/2020, and the Spinoff assets are transferred to the new Plan - for the Corporation B employees, this is not a distributable event, and 100% vesting is not required. This Plan should also qualify as a Safe Harbor for the 2020 short Plan Year.

Am I missing anything here? Whenever something seems relatively straightforward in these situations, it makes me nervous.

Hope you all have a great Thanksgiving holiday - drive carefully, and hopefully the weather won't interfere with your travel plans!!

P.S. - just for the heck of it, suppose this transaction takes place on, say, 11/30/2020 - can corporation B still have a Safe Harbor plan for the 1-month plan year? I'd argue that they can, since the spinoff plan, although a "new" plan document, is considered to be a continuation of the prior plan. Since the provisions will be identical, seems reasonable. But on this subject, what about the 5500 forms - do you show it as a "new" plan 001? I lean toward that, as otherwise, seems like it will confuse the DOL system if you don't show it as a new plan. Also, would you set up your new document as a "new" plan, or an amendment/restatement of the existing plan? I lean toward amendment/restatement, even though for 5500 forms, I lean toward "new" plan.

A small non-PBGC traditional defined benefit plan terminated 3 1/2 years ago without applying for a DL. I know, all assets need to be distributed within one year. However, they did have significant problems with one private investment in the plan. All is recovered now and they are ready to distribute.

Question: Can they make a deductible contribution now (so very late in the game) to make plan whole? Otherwise the owner employee will need to take a reduction in his benefit.

Thanks.

Here is the fact pattern: Husband is 100% owner of S-Corp A, Husband & Wife are 50/50 owners of S-Corp B, Wife is 50% owner of LLC C, the remaining 50% is owned by an unrelated 3rd party. They do have minor children together. 

It is believed that S-Corp B & LLC C are considered an Affiliated Service Group, S-Corp A is not an ASG with any business. Based on that, S-Corp A & S-Corp B are a controlled group and S-Corp B and LLC C are a controlled group, correct?

We are trying to determine if husband can establish an Individual 401(k) for S-Corp A without the need to perform coverage testing from LLC C.

Any help would be appreciated.

Plan has 3% SH and a discretionary match.

Can they exclude "junior executives" from the match?  Most of these will probably be NHCE.  Coverage is not an issue.

I was doing a little digging on a cafeteria plan issue and I came upon this paragraph:

While cafeteria plans have much in common with their qualified retirement plan counterparts...there are significant differences. For example, failure to correct an administrative error in a qualified retirement plan could result in taxation of all future (otherwise deferred) benefits as well as a loss of exemption for trust earnings.... Cafeteria plans, on the other hand, by their very nature restart each year i.e., an administrative error should not affect prospective exclusions once correction is made.

This is kind of a head-scratcher from my qualified plan perspective, where an error is an error until it's fixed. Does anyone have a cite for this restarting notion?

Controlled group.  Two different plans.  Must be tested together due to coverage.

Plan 1:  Discretionary match:  100% up to 4%

Plan 2:  Discretionary match:  0.00%

Do I have to test this for coverage? 

BRF?  will zero discretionary match fail one or both current/effective availability?

A 401k plan has decided to terminate on 1/1/2020, the company is closing.  There are only 3 participants, one is terminated.  The terminated participant submitted distribution paperwork on 10/31/2019 to move his account to an IRA, but the 401k provider froze the plan as soon as they were notified of a plan termination.  The other two participants are also submitting paper work to roll their money out (one is a part owner).  Does the 401k provider have the right to freeze the plan ?  When can the participants expect to roll their money over, after 1/1/2020.

Plan started in 2018.  Only the owners deferred.

Obviously:  ADP failed.  

Refunds done.

Obviously:  Plan is TH for '18 & '19.  Owners stopped deferring for 2019.  Not sure if any were made, but let's call it zero.

Question:  Is there any way around the $40,000 Top Heavy contribution that is due for 2018 given this fact pattern?  (No TH for 2019, as no deferrals for keys)

[I thought, aggressively, we could have  had the refunds as 12/31/18 liabilities and accrued it back and thus have EOY '18 palace of zero.  But one key was over 50, and some of his deferrals were considered catch-up and stayed in the plan....) ]

Background:

Our office was engaged to review prior administration for a 3 year period (2016, 2017 & 2018).  After proper determination of highly compensated employees, it has been found excess contributions were overstated by a significant amount to one highly compensated employee for 2 of the 3 years.  (overstated by $13k 2017 and $10k 2018)

I have not found any specific guidance on the correction for the improper distribution of excess contributions.  Has anyone had this type of correction?

Can a US citizen working in the UK as a sole trade (their version on sole proprietor) set up a 401k or SEP based on his UK income?

Per the US/UK totalization agreement, the income is not subject to Social Security, but is reported on Sch.C  of his 1040.

I know we only use wages that are subject to social security but this is an odd situation.

A participant died in 2016 without a beneficiary designation on file. As a result, her son is the beneficiary on her $4,600 account. He doesn't want the money. Even if I had his SSN and address, he probably wouldn't cash the check. Also an RMD will be required for 2020. The plan sponsor hasn't been much help, but I did learn that she has a brother. 

What options are available to distribute the funds?

Reviewing the fund lineup of a retirement plan.  One of the funds is a CIT with an expense ratio of 25 bps.  100% of the CIT is invested in a single Vanguard Fund with an expense ratio of 8 bps.  Why would someone create a CIT to only hold one mutual fund and then increase the fees of the fund?

Some help is greatly appreciated: I am considering an individual 401(k) plan that I believes has a profit sharing component to it. I am getting really frustrated and am wondering if I am getting my chain yanked.

Company 1 is saying they have a "QRP". They say is it not a Solo-K, but everything they talk about screams "401(k)". They tell me that a Solo-K does not fall under ERISA (which I agree with based on everything I have read), but their QRP does. They say it has judgement protection from creditors and falls under ERISA.  My questions:

1) How can any plan with only one participant (the owner...me) fall under ERISA and receive protection from creditors? I thought ERISA was intended to protect participants in employer plans?? If it does fall under ERISA, is it because the plan has profit sharing as well?

2) While clear with their marketing, what would/could make a "QRP" of Solo-K fall under ERISA and have asset protection?

3) An obvious question...my understanding that a plan that falls under ERISA would file an annual report to the DOL? Would I have an exemption to this requirement?

Any assistance is appreciated. To me it is the difference between spending $3,000 on this "QRP" vs a much lower fee for a Solo-K. Again, the promoters are saying it is NOT a 401(k)...but I am a big believer that is it looks, smells and acts like a 401(k)...it is a 401(k).

Thanks for any and all responses, in advance. 

We took over a plan from another TPA who had done a PPA restatement effective 2015.  The restatement was COMPLETELY wrong (some of the terms didn't even make sense).  All valuations from 2015 on have been done consistently as I expect the prior TPA intended, but not in compliance with the restated documents.

At this point, what is the best way to proceed?  We need documents that agree with the valuations.  Is there a good way for us to correct this situation or do we have to use one of the EPCRS programs?