We have a plan that has a participant who died in 2019 after attaining age 70.5.  Had he survived, his first RMD would have been due by 4/1/2020.  His spouse is his sole beneficiary.  Section 1.401(a)(9)-3 allows her to delay commencing benefits until 2020, however she is electing a distribution now.  Does a distribution now trigger an RMD requirement for 2019?

A client with a VEBA had its exemption automatically revoked for failure to file 990s for three consecutive years. Seeking retroactive reinstatement of the exemption. According to Rev. Proc. 2014-11, the IRS will not assess failure to file penalties against the organization if IRS grants the organization's request for retroactive reinstatement. What if the IRS does not accept the argument raised in the reasonable cause statement, in which case reinstatement would not become effective until the date the reinstatement submission was mailed? Would the IRS assess failure to file penalties for the period between the revocation date and the mailing date of the reinstatement filing? Did anyone have this happen in a real-live situation with respect to a client where the IRS rejected the reasonable cause statement and assessed failure to file penalties for the period that the VEBA remained non-exempt?

Plan sponsor wants to provide a greater match formula for lower paid participants. For example:

1. 1. Tier 1 – if you make < $45,000 your match is 100% on 5%
   2. Tier 2 – if you make > $45,000 < $75,000 your match is 75% on 5%
   3. Tier 3 – if you make > $75,000 < $125,000 your match is 50% on 5%
   4. Tier 4 – if you are a HCE your match is 25% on 5%

Let's assume the match is based on plan year comp (not funded per pay period) so at the end of the year you know which category each participant is in. If the plan passes BRF for both current availability and effective availability, then is this acceptable (pending ACP testing)?

Is this type of match formula possible within the regulations? If so, we obviously need to make sure our document allows for it. Our document allows for us to write in tiers, but I am not sure that tier section means compensation bandwidths.

Thank you

We took over a plan that had brokerage accounts, each participant had an individual brokerage account for deferral and SHM contributions and there was a pooled account for PS contributions.  The participant loans were taken out of the participant's balance in the pooled ps account and the repayments were also made to the pooled account.  We have since transitioned the plan to the John Hancock recordkeeper platform.  Off calendar year plan end is 02/28.  It has been brought to our attention that 2 participants with loans terminated, one in 2017 and the other in 2018.  The deemed loans had not been removed from plan assets on the 5500 filings, should we amend prior year returns or report on the filing for 02/28/19 year end?  Since the 1099-R was never prepared for these terminated participants (one has not been paid out yet and the other has received a partial distribution and will receive the remainder of her balance in the next week.), how should we proceed regarding the non-issue of the 1099-R for the appropriate years?

Hello.  I need some guidance.  A few years ago (2016), I was hired to manage a company with a SIMPLE IRA. They'd been using the same financial advisor/group to manage the SIMPLE since it was established many years prior.  Since I knew nothing about this type of IRA, I did a bunch of research.  What I found was concerning, though I wasn't confident I fully understood the IRS guidelines.  I spoke with the advisor and he didn't seem able/willing to give me a straight answer, but never told me different when I told him I thought we were doing things incorrectly.  All seemed ok until this year.

We're setup with a 1 year, $5k, 3% match.  The company/advisor was not offering enrollment to all eligible employees - only those hitting the $5k threshold AND classified as fulltime.  The company was requiring a full calendar year of employment before being eligible and then allowing enrollment starting the following Jan 1 (I started March 2016 was told I wasn't eligible until Jan 2018 because I had to be employed for a full year first. Based on what I'd read it was my understanding that I was eligible to start Jan 1, 2017 - which I did).  The advisor was not distributing the annual notice/election information prior to the Nov 1 deadline.

Hopefully I was correct, as I made all of those changes noted above (length of service doesn't matter, just $5k earned in any one previous calendar year to be eligible for start date Jan 1, notices are given out prior to Nov 1 with a 60 day election period for Jan 1 plan start, parttime employees meeting the $5k are eligible, etc.).  I usually have the advisor come out in mid November to meet with each employee to go over their options, answer questions, etc. That gives them time to decide what they want to do, make the election/change and I can be ready for changes come Jan 1.  This year the advisor notified me he is switching all SIMPLE meetings to January.  Is that ok?  Obviously, he can meet with people in January, but don't I want them making their elections/changes during Nov/Dec?  Plus the fact that I then won't have elections/changes until after the start of Jan 1 could mean the initial 2020 contributions could be wrong and make more work for me.

I admit, I don't know SIMPLE IRAs.  However, I don't really feel confident that our financial guy does either.  If my gut is right, I'm ready to find someone else to help us with this.  I realize SIMPLEs are somewhat flexible just because the rules/penalties are pretty loose, but if there are rules, I wan to follow them!  I really appreciate anyone's feedback (even if you tell me that I am the one that's wrong here). Thanks!

Erika

Hello , Thanks to all for your time & knowledge in advance ...

25 year Employee of company that started an ESOP in 2007 ,  I was terminated in 2011  60 pct Vested 

Company took out 10 year 32m loan for the ESOP...Loan paid back in 2018  [11 years ]& I am expecting paperwork for first

distribution any day, distribution according to administrator will be over 5 years . 

My understanding from pamphlet from NCEO is that since I was made to wait more than 6 years for my distribution ,

I am now entitled by general rules to get a one time full sum Distribution.  Is this correct ? Where would I find the code ? 

More than 200k involved & prefer to have lump sum ...over 60 years old and on SSDI now .

Pamphlet I purchased was the Participants Guide to ESOP Distributions ...Administrator & I do not speak .

Again thanks for any direction and info I can get . 

Cross Tested Plan, 3% SH non, Top Heavy, Semi Entry at 4/1 and 10/1

I have an employee with a legitimate participating compensation of 163.01.  Participant was eligible 4/1 and terminated 4/5.

Employee is entitled to 3% safe harbor and then a 2% profit sharing for the year. 

So the Gateway 414(s) compensation would show 163.01 with a 401a allocation of 8.15.  So I need to check to make sure the employee is receiving at least 3% compensation on full year comp for top heavy status.  Employee need 516.80 additional funds to receive top heavy minimum.  Full year comp was 17,498.33.

So here is the rub and the question.  The benefit percentage of the employee in question would be like 300% plus based on the 524.95 401(a) total and compensation of 163.01.  Would you leave it this way?  Or do something different?  

On this plan, there are generally 2 to 3 employees that come in mid year and need a top heavy minimum.  Where everyone else would show a benefit percentage of 5%, the 2 or 3 might show as 5.8%.  Gateway then passes, and then I go to the next steps of making sure the other test pass. 

I just haven't seen a legit participating comp scenario skew the percentage this wildly.

Thanks

We have a PS plan with pooled accounts and several terminated participants with small balances (under $200).  We will be sending to PenChecks for check processing and the fee they charge is $35 per participant.  The sponsor would like to pay the charges from the plan's forfeitures.  Is this a legitimate plan expense?

Anyone know?

Hi to All,

This question is about what to report on the 5500 or 5500-SF as a client's bond coverage, depending upon the date one chooses.

I can find plenty of references that say that a bond coverage amount for purchasing purposes should be determined near the beginning of the year and should be based on the greatest amount of funds handled in the previous year.  What I can't find is a reference stating that the bond amount reported on the 5500 should be the amount in force.......as of when?  The first day of the plan year?  The last day of the plan year?

The reason it came up is that a plan had no bond in its first year of operations, calendar 2017.  The employer purchased an adequate bond on 02/01/2018, and renewed that bond on 02/01/2019.  The plan is subject to having an independent audit due to having over 100 participants.  The employer bought a Colonial Surety retroactive bond for the minimum amount possible ($10,000) to cover 2017.  Colonial will not sell a retroactive bond without having the subsequent years as well, so the employer paid for a total of 4 individual one year periods of coverage that run 11/01/2016-10/31/2017, 11/01/2017-10/31/2018, 11/30/2018-10/31/2019, and 11/01/2019-10/31/2020.  

The auditor is advising the client that he needs to decide whether or not to purchase more coverage for 2018 because of the one month, January 2018, for which he (now) has a $10,000 bond.  He actually needed a $150,000 bond on exactly 01/01/2018 and he bought one, from a different company, on 02/01/2018, but the auditor's position is that this is still not sufficient.  The auditor says that one might just let it go and not worry about it, were it nor for the fact that the plan is filing late which already draws attention to itself and reporting an inadequate bond amount would be just one more red flag.

That led to another question, one of general procedure.  We typically report on the 5500 the amount of coverage in force as of the end of the plan year, even though the amount is determined based on assets as of the first of the plan year.  During the year, our clients will increase their bond coverages if we have advised them to do so based on the prior year's annual report.  For example:  A client has a $20,000 bond for all of 2018.  We produce the annual report for 2018 sometime between 01/07/2019 and 09/14/2019.  At that time, we advise the client that based on their assets at the end of 2018, they need to increase the coverage in 2019 from $20,000 to $30,000.  The client dutifully complies and by 12/31/2019, the client has a $30,000 bond.  When it's time to prepare the 2019 5500-SF, do we report $20,000 as the bond amount because that's what they had on 01/01/2019, or do we report $30,000, because that's what they had by 12/31/2019?  Every place I have worked so far, we would report the $30,000 figure.

So the questions are:

1. Does this client really need to go to the extra expense to increase the Colonial 2018 bond for that one month (January) that they were out of compliance and 

2. When doing the 2018 5500, do we report the amount of coverage they actually had as of 01/01/2018 ($10,000) or the amount of coverage they had in force as of 12/31/2018 ($160,000)?

Thank you as always for your ideas.

I was entitled to half of my ex's 401K and IRA's, including a REIT. The REIT was moved into my account pursuant to a QDRO, along with another REIT. I learned in August that one of the REIT's disappeared from my account and is now in my ex's account. The financial advisor has been allegedly working to move it back into my name where it belongs, but it has taken months and has not gotten anywhere, along with no explanation on how this happened in the first place. I am ready to file a complaint with the appropriate agency to move this along. Any thoughts on how this happened or how I can resolve it?

Is it correct that if a participant takes a plan loan from their pre-tax 401k deferral account that they are essentially double taxed when they make the payments back on an after tax basis.  Taxed once when the deferral is made and then taxed again when they take a distribution from the plan?

I'm trying to figure out how it would be a good idea to take a plan loan if the taxation on the money is detrimental to the employee?

Discovered Solo K excluding nonowners had statutory employees during 2018.   We are now past October 15th 11(g) amendment deadline.   Does latest EPCRS Rev Proc regarding self correcting retroactive discretionary amendments help us without having to go through VCP?

Parent Company 1 owns 100% of Company A which has a standard 401k plan with no match or SH at platform X (200 employees). Parent Company 1 purchases 100% of Company B which has its own 401k plan with a match and safe-harbor at platform Z (with 20 employees). I understand there is a period of transitional relief. In what circumstances could each plan operate individually on their own platforms without any combined testing or BRF issues? Is there something about "separate lines of business"?

I have an issue that just arose, I was notified by my previous employer plan sponsor that I was overpaid when I left my 401k.  I was overpaid roughly $6000 due to an error by the plan administrator back in 2016.  I have since rolled those funds into my own personal IRA and now Vanguard is requesting I give those funds back.  I dont feel that I am obligated to return those funds as I was not the one who made the mistake and in most lines of work you are held accountable for mistakes and not allowed to pass them off to someone else.  Additionally I dont feel I should have to pull those funds from my IRA which would be an early distribution (additional tax consequence) and I would then need to amend my tax return from 2016 which is time and resources spent when that would not be necessary had this error not occurred.  I am curious if anyone has insight into what my rights and options are?  I can obviously not respond but dont want to have a law suit on my hands and dont want to have this issue come up in 20 years when they claim some crazy thing like I now owe them $50,000 because of inflation and interest.

I have a non spouse beneficiary.  did not start taking payments so he is on the 5 year clock to have the monies out.  No response and cannot verify a good address

since it has to be out of the plan in 5 years, can it be forced to an IRA?  or, can it be forced to the state unclaimed funds?

cannot find any real guidance on this situation

We administer a 401K that allows for employee after tax contriiubtions.

The client over-shot 415 by $18K.  Since voluntary, will remove from the plan, but be taxed on the earnings.

In the past, we have used the VFCP calculator to calculate interest from the date of payment to the plan through the date the funds are removed from the plan.

Is this still allowed; or if not, what is the generally accepted method?

What are the 415 limits for 2020?

I have a client that wants to allow participants to consolidate loans (take two loans and make them into one).  I don't see my plan document/loan policy software addressing this.  Does anyone have any guidance as to the language to put in to allow it?