Last year, I had significant capital losses in a cash management account held at Merrill Lynch.  I used the $3,000 last year as a way to reduce my taxable income and I still have several thousands that I can roll into 2019 tax year.  My question is, can I use those losses to offset a conversion of funds from my traditional IRA to my roth IRA?  Assuming I transfer 10,000 dollars from my traditional IRA into my roth, and assuming I have a tax rate of 25%, that $2,500 would essentially be nullified by my $3,000 capital loss carryover?  Am I correct with this assumption or do the capital losses have to come from one of the ira accounts?

I had a forfeited unvested balance showing on my 401k statements, which resulted in my ex and I calculating different figures for our QDRO. The unvested balance was forfeited by a 5 year service break before filing the divorce petition.  The company kept the forfeited balance in my account for a few months before transferring it back to their account.

My position is that the forfeited unvested balance had no value to the marital estate prior to filing for divorce and should not be included in QDRO calculations. What is your opinion?

We are looking into taking over the third party administration of a plan that currently has a QACA that utilizes the 3% non-elective contribution safe harbor method that vests after two years of vesting service.  We are exploring changing the ADP safe harbor method to traditional 3% non-elective which is 100% vested immediately, but if the administrator is already successfully administering the QACA, I am thinking this may not be in their best interest?  I think my question is, "is the ability to administer the QACA properly the only difference between a two year difference in vesting requirement, or are there other considerations?"  A two year vesting schedule seems like a huge benefit for a small trade-off.  The end goal of the program design is to add nonsafe harbor non-elective contributions to the plan and potentially also adopt a DB plan, I want to use the QACA safe harbor contributions towards top-heavy and 401(a) testing if i can, and if it makes sense to continue to maintain the QACA.

If a retirement plan makes a loan to an unrelated operating business, and the interest is a fixed rate plus a percentage of the business profits, would that trigger UBTI?  Does it make a difference if the business is a corporation, partnership or LLC?

Thanks.

Doctor is W-2 employee and partial owner (somewhere between 10% and 15% ownership) for the first few months of 2019.  Quits, sells his stock, and starts a sole prop that is still in existence at the end of the year which appears to be throwing off around $300,000 for 2019 but won't be generating much in the future.  Accountant thinks it is a perfect fit for a defined benefit plan!  Let's assume that one course of action is to adopt a defined benefit plan that generates a deduction of $200,000 for 2019 and a minimum required contribution for 2020 through 2023 of zero [easily accomplished if sole prop throws off minimal income.

Come November 15th or so, Doctor is presented with an opportunity to purchase 100% of the stock of a medical practice where he can hang his hat.  Very little income from this entity for Doctor for the balance of 2019. Fly in the ointment? Stock is of a long-standing (more than 10 years) practice which employs 15 employees, each of which have been with the practice for a long time.

Two scenarios present themselves: a) DB plan signed sealed and delivered before November 15th resulting in reliance on 410(b)(6)(C) for the balance of 2019 and 2020 and generating a permanance busting termination on 12/31/2020 due to changed business circumstances. b) DB plan thought about long and hard but not documented until 12/15/2019 [long after stock purchase] meaning no reliance on 410(b)(6)(C) and qualified status of DB plan dependent on satisfying non-discrimination aggregating the sole prop and the 100% owned medical practice.

Too restrictive?

Does it get any less restrictive if a SEP-IRA with a contribution of $55,000 is substituted for the DB plan in (b), above?  Or does it get more restrictive because the SEP-IRA will no doubt involve a 5305 which requires aggregation?

Thanks 

A Plan handed out the NOIT 60 days prior to the proposed termination date. Assume they did not sign the plan termination amendment within that 60 days. But they do sign it within the 90 days. Can they distribute a revised NOIT with the new termination date, and still rely on the date the original NOIT was sent out? Or does the 60 day clock re-start on the day they hand out a revised NOIT with the new termination date?

457(f) plan provides for substantial risk of forfeiture solely on the condition that the participant perform substantial services for the employer through the initial or extended vesting date. In addition, the plan permits participant and employer to agree to an extension of the substantial risk of forfeiture in accordance with the requirements of the proposed 457(f) regs.  More than 90 days before the initial vesting date of January 1, 2020, the parties in fact agree to a materially greater benefit that will vest on January 1, 2022.

It would seem that the proposed regs would permit the participant and the employer to once agree to extend the risk of forfeiture in the same fashion provided they enter into the agreement at least 90 days prior to the January 1, 2022 vesting date. Yet, there is no explicit statement to that effect and all of the examples provided only deal with the first extension.

Any limitations on (or traps inherent in) doing a second extension?

Hoping for some advice.  We just took on a client earlier this year with a DB plan that had been in place for a while.  We outsource the actuarial work to several actuaries.  The actuary who previously worked on this plan has subsequently passed away this year.  In looking for another actuary to take over the case, we are finding the previous work is difficult for the takeover actuary to figure out and they are declining to take on the work.  I believe the issue relates to a freezing or capping of benefits that occurred several years ago.  Unsure how to proceed.

1. Loan procedure has the standard cure period...... last day of the calendar quarter following the calendar quarter ......

2. Loan procedure states loan will become payable in the full on termination of employment

3. Employee has  an outstanding loan and terminated 7/10/2019.

Question:

Does the loan become due and  payable (taxable since the employee can not pay it back) as of the termination date.  Or does the plan sponsor have to wait until the end of the cure period (12/31/2019) to default the note?

thanks

An interesting question came up yesterday in a discussion with some other folks who are in the TPA arena.

Suppose you have a TPA whose engagement letter specifies that Revenue Sharing paid to the TPA by the investment firm will offset TPA billings to the Plan Sponsor. At some point, due to asset growth, the Revenue Sharing paid to the TPA starts to exceed the amounts charged, so is basically placed in a holding account with the TPA. The Plan Sponsor is fully informed of this, and as a fiduciary is still happy with this investment arrangement. The amounts accumulating in the holding account start to become substantial, and the TPA is uncomfortable with this, and wants to change things to (a) get rid of the accumulated amount, and (b) prevent it from accumulating in the future.

The gist of the discussion was that the TPA should issue a new engagement letter, so that the TPA would keep all future Revenue sharing fees, even if in excess of what would normally be charged. And the holding account will be used to offset fees charged in the future until it is depleted entirely, which will take, apparently, about 4 years. Plan Sponsor is apparently fine with this.

A couple of questions were kicked around, however, which were interesting, and I'm soliciting opinions.

1. Is there really any reason why a new engagement letter couldn't simply say that the TPA will keep the accumulated revenue sharing immediately, as long as the Plan Fiduciary doesn't have a problem with it? In other words, does it have to be allocated over the next (x) number of years until depleted?

2. What happens if the client leaves? Wouldn't this money go to the TPA anyway, as it certainly isn't a Plan asset, or anything "belonging" to the Plan Sponsor?

Seems to me that the solution proposed, while certainly reasonable, is more cumbersome than necessary? Anyone ever encountered a similar situation?

I cut and pasted the new Required Minimum Distribution Life Expectancies from the Proposed Regulations into two Excel tables:  Single Life and Joint Life. 

Seems my Excel skills are better than my html today, so the file is embedded in my website: http://www.peregrinepensions.com

At the very bottom of the page, find and click the period (.) right after my email address.  It should ask if you want to download the file.  Go ahead.  It's safe.

I have a plan that has auto enroll.  They are going to add auto escalate at 1% per year up to 6%.  My understanding is that a participant can elect/agree with the auto escalate but elect a cap/maximum of less than the 6% maximum.  Example, Nancy New is auto enrolled at the 2% but completes the enrollment form indicating she wishes the auto increase to stop at 4%.  Is this possible?  We have a bit of an internal debate within the office on this.

Thanks!

I have a 401k Profit Sharing plan with more generous eligibility than the statutory requirement.  The plan is top-heavy.

I would like to start a new 401k plan with immediate eligibility and exclude Keys.  I would transfer the Deferral Component of the existing plan to that plan.  The new plan will not be top heavy.

With the existing plan, I want to amend out salary deferrals and have it be a stand alone profit sharing plan with two year eligibility.  Keys will be eligible to participate in this plan.  I'll have a cash balance plan paired with this that has keys in it as well.

Any issues?  Successor plan rules?

A financial company that shall remained unnamed has recently notified it's plan sponsors that it is changing how it handles uncashed distribution checks. Any checks uncashed after 365 days will have the money moved to an IRA. 

When we asked for clarification the response was that nothing from the tax reporting on the original distribution would be changed. Depending on the type of original distribution, the deposit into the IRA would either be considered a contribution, or a rollover. It would be up to the participant to make sure it was reflected correctly on their tax return, including amending prior returns if necessary. 

I can think of a whole host of ideas why this is a bad idea, and was wondering what other people think. 

The financial company is not making any distinction between under $5,000 force out distributions, affirmatively elected distributions, rollovers, cash outs to participants, Roth money, non Roth money etc. What if the amount exceeds the person's IRA contribution limit? 

I have not seen other companies handle uncashed checks this particular way before. But maybe there are others who do it the same way? 

Am I in the minority in thinking there are several other similar - but much better - ways to handle this? 

401(k) Plan  I don't do this enough and am second guessing myself

A. excludes Safe Harbor Exclusions,  fringe benefits, expenses, deferred compensation and welfare benefits.

B.  Also excludes bonuses.

C.  Employees covered under 125 plan and get paid cash if they don't select benefits. 

1.  For the compensation test to I take Item A. from gross compensation for the denominator or just use total gross? 

2.  For the numerator do I use the denominator -B?

3.  Also if It doesn't pass and the match is just 15% of the deferral, I assume that the only consequence is using a 415 compensation for testing purposes. 

is there a rule for matching contribution adjustments at the end of the year?  Meaning if a client is off by 2 cents so they still have to deposit this amount? Thank you.

1.  Does a client have to set up a retirement plan (with 5500 filing) when starting Prevailing Wage Job?

2.  Is there anyway around this?

3.  Can a Simple 401k Plan have Prevailing Wage?  I dont think so but trying to think out of the box instead of setting up a plan with Prevailing Wage requiring 5500.

They are trying to avoid admin cost of a Prevailing Wage Plan.

Thank you.

A summary plan description's ERISA-rights notice states: “ In such a case, the court may require the Plan administrator to provide the [documents requested] and pay you up to $110 a day until . . . .’’

Has the amount referred to been adjusted?

If so, is it $112 or some other amount?

Client has a deferred compensation plan with employee elective deferrals and employer nonelective contributions that they are looking to terminate for various reasons, but they also want to adopt a new long-term incentive plan that would be aggregated with the employer nonelective contributions under the plan aggregation rules in 1.409A-1(c)(2).  Can they terminate and liquidate the employee elective deferral portion without terminating and liquidating the employer nonelective contribution portion? 

If these were two separate plans they could clearly terminate just the one, I'm just not sure that would work since they are in one plan document.  Thoughts??

New client has outstanding loans with missed payments. Some loans have not been paid on at all going back a year.

I was going to give the following options to the client for correcting. Please let me know if there are any issues with these:

1. Catch up loans for all missed payments including interest and start loan payments on next payroll.

2. Re-amortize loans, with new start date but same end date as original loan so it is still paid off within 5 years of the loan origin. If this is allowed, the interest rate of the original plan was higher than the current so I would re-amortize using the current (lower) interest rate.

3. Have participants take out a second loan for the missed payments, and contribute the money back to the plan and start both loans on next payroll. (assuming the plan allows for 2 loans and the second loan does not exceed the limit based on their balance or $50k)

4. Have 59.5 employees take in-service distribution (trued up for taxes) for missed loan payments, and contribute the money back to the plan.

Note: none of these loans are for HCEs.