Has anyone else had their Form 5500 extensions denied?  We have had two clients contact us this week regarding the extension letters they just received from the IRS that said their extension was denied.  One client that had two plans had one plan extension approved and the other plan extension denied.

I have never seen this happen before.

My understanding is a more than 5% owner of a business who is still actively working has to take a minimum distribution each year. Does it make sense to contribute to their retirement plan? If they have an IRA, can they aggregate the 401k balance and IRA balance, taking the RMD out of their IRA?

Thoughts?

Company owned 51% by Participant A and 49% by Participant B.

December 28, 2018, Participant A sells shares to Participant B, who is now the 100% owner.

Participant A compensation in 2017 was $108,000.

For the 12/31/2018 Plan Year, both A and B are HCE's.

Is Participant A considered a Key Employee or a Former Key Employee, since there is no ownership as of 12/31/2018.

Thank you!

My understanding is a more than 5% owner of a business who is still actively working has to take a minimum distribution each year. Does it make sense to contribute to their retirement plan? If they have an IRA, can they aggregate the 401k balance and IRA balance, taking the RMD out of their IRA?

Thoughts?

If plan allows for Loans, can an employee who is on active duty (and has been 3 years) take a loan?  Plan does allow for distribution for deemed severance of employment, but client wants to give loan option to employee if allowed.

Thanks.

Good morning-- I hope someone can help with this -- Larry Starr maybe?    We have a plan who does not fund their discretionary match until 2 years past  the plan year end (12/31) Ex: the match for 12/31/16 was funded on 6/5/2018.     The auditor is saying that earnings should be calculated on the late matching contributions.  I cannot find anything on this other than making the ER contribution prior to the filing deadline of the employer’s income tax return, including extensions, if they want to take a tax  deduction, which they didn't.  Has anyone heard of this, or can anyone site a regulation?

Thanks!

Owner only pension plan. NRA is 75 (65+5). MRD will be taken as an annual single sum payment equal to 12 x prior year monthly accrued benefit in December each year. With an EOY valuation, the actuarial equivalent of the MRD must reduce the accrued benefit used to compute FT under 430(d)-1(c)(1). Didn't use cliff vesting. Is there another way to do the MRD without a funding impact?

This question concerns the timing of a Roth amendment. We are financial advisor for a plan that uses a TPA. A recent restatement of the plan adds the provision to defer on a Roth basis. The restatement has not yet been adopted, but the TPA is telling the sponsor that participants can defer on a Roth basis now because the effective date of the restatement is 1/1/19. Somehow it doesn't seem quite right that they are able to do this before the amendment is executed. Sanity check?

We are looking at an employer who terminated a plan earlier this year and recently paid everyone out.  He wanted to start a new one but he's got to wait at least 12 months.

But he also owns 2 subsidiary companies.  If either or both of the subsidiaries were not participating in the original 401k plan, could they start a plan up immediately, even though the owner of the main company and the 2 subsidiaries had sponsored the original plan?

Thanks for any replies.

Participant has existing accounts in 401k plan and wants to convert part of the pre-tax accounts to in-house Roth, accepting tax consequences.

They get sloppy and check the box to convert all of their account. Trustee has completed the transfer in the past few weeks.

Participant realizes their error and wants to reverse the transaction.  Trustee wants an opinion on what is allowed and what is taxable.

Simple answer would be that it was already done, no looking back. But can the Trustee allow the correction and restore part of plan accounts back?

This one goes into the category....just doesn't seem correct.

2 plans:

Plan A:  Age 21, no service requirement: Excludes all EEs except Pharmacists and Managers

Plan B:  Age 21, 1 YOS no exclusions

Both plans are safe harbor.

After 1 YOS, the pharmacist/managers move over to plan B (at least in payrolls eyes). 

I am not sure of several things.  1) what provisions makes the Pharmacists and   manager "no longer" eligible for Plan A.  I believe there are still eligible 2) What about coverage? Can the plans be aggregated for coverage purposes? If so, are they still safe harbor since less than 1 YOS ee except Pharmacists and mangers are not eligible.  How do I count those non manager/pharmacist ees in combined coverage?

I think that the manager/pharmacists are still eligible for Plan A and therefore they will not pass coverage..  It just seems a bit fishy to me.

The NRA is 62. For funding assumed the two partners will actually retire at 64. If the plan is underfunded based on 62, however, based on 64 it is not underfunded (plan does not give increases  past NRA). Since the partners are legally entitled to their benefits at 62, and the assets are not sufficient to cover this, would this plan qualify for the Underfunded frozen PBGC Plan exception to 401(a)(26)? Thank you.

I represent a large defined benefit master trust which has been advised by its tax adviser that it may need to file a Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) because it owns over 10% of a foreign investment that qualifies as a CFC.  This form is supposed to be filed with an income tax return (or, if applicable, partnership or exempt organization (Form 990) return).  The trust is not otherwise required to file a Form 990 because it has no income to report.  Does anyone have experience with a trust taking the position that a Form 5471 is not required under these circumstances because there is no required tax return?  Or is the trust required to now file a Form 990 (reporting no income) so it has a tax return to which the Form 5471 can be attached?

Looking for guidance to convert 412e3 plan into Cash balance plan. Am a single owner S-corp 44 years with 2 years into 412(e)3 plan with Whole life and Annuities.

Life insurance was not required personally and seems foolish now to got sold into policy by the CPA. (should have been a red flag that CPA is the sales agent). I was not even mentioned about the CB plan option that looks more attractive with conservative investment strategies and flexibility compared to 412e3.

Can the 412e3 converted into Cash balance plan instead of Termination? Any references for good companies with this kind of experience will be appreciated.

Goal is to fund the pension plan in 10-12 years instead of stretching for 20 years.

Hi.  We have a few participants that are receiving installment distributions (monthly) from their 457(b) accounts.  Typically the monthly distribution occurs on the 15th of the month.  Due to an administrative issue, the distribution still has not occurred for September.  At what point is the distribution deemed late?  And what type of correction is required?

Thanks.

New plan - effective date 01/01/2018

4 employees - Dr. & his spouse & 2 non-related staff members

Allows for EE deferrals, Profit Sharing & SHNE.

SHNE limited to only NHCE's

EE deferral and SHNE component of plan set up with special effective date of 10/01/2018

4 employee all became eligible 07/01/2018 

Compensation is based on full year pay - not date of entry

Only contributions into the plan will be two $18,500 contributions made by the doctor and his spouse and the 3% safe harbor to the two staff members (neither of the two staff members deferred)

When calculating the 3% safe harbor non-elective for the 2018 plan year is the SHNE contribution based on just compensation from 10-01-2018 to 12-31-2018 due to the SH being effective 10/01/2018?  Or should it be on the full year compensation 01/01/2018 to 12/31/2018?  Plan will be top-heavy for 2018 based on the two HCE's deferral but it is a consists solely of plan. 

I just received and interesting question from a client whose Plan EXCLUDES bonuses from the definition of Plan Compensation:

"Participant has a $30K/year guaranteed hours bonus to his base salary.  Owner uses the term ‘bonus’, but the spirit of the hours bonus is really to incentivize attorneys to meet a set goal of hours.  Since participant's amount is guaranteed for this year (and next), is it fair to say that this should simply be classified as regular salary?"

What does everyone think?

Hello.

We have a prospective client that is looking to pull out of a MEP and start their own plan effective October 1, 2019.  Current MEP provisions include a safe harbor non-elective contribution.  New document to include a safe harbor non-elective.

1.  Does the client lose safe harbor status by pulling out of the MEP before the MEP plan year ends?  I think so.  What are your thoughts?  The new plan being established is also a safe harbor plan.  Does that make any difference?  Do the ER contributions made in the MEP and the contributions made to the new plan need to be tested together?  New plan has a new comp allocation formula.  Still waiting for prior MEP Participating Employer agreement to determine prior ER contributions and allocation conditions.

2. In the above example, what if the client is pulling out of the MEP (safe harbor provisions)  because it has been purchased by an other entity, Employer A.  And Employer A is setting up a new plan effective 10/1/19 , which is not safe harbor?  I believe that safe harbor provisions are preserved due to business transaction.  what are your thoughts?

I have a deep in the weeds question with a narrow application that I wonder if anyone has come across:

Background

The Code has a concept of a "statutory employee," which  makes an otherwise non-common law employee an employee for employment tax (but not for income tax) purposes.  These employees receive a W-2 with box 13 checked.  A common type of statutory employees are full-time life insurance salespersons. The Code also provides that a full-time life insurance salesperson is treated as an "employee" for purposes of participating in a qualified retirement plan and for Code Sections 104, 105, 106, 125, and certain other sections (which generally provide that an employer can provide welfare benefits on a tax-favored basis).

ERISA generally subjects welfare plans that cover employees of two or more unrelated employers to state insurance law (among other things) because the plan is a MEWA.  If an entity provides benefits to independent contractors, for example, it risks creating a MEWA.

Question

Can a life insurance company offer welfare benefits to its full-time life insurance salespersons (i.e., ones who are statutory employees) without creating a MEWA?

While the Code provides for favorable tax treatment on providing these benefits, it does not appear as if ERISA will permit this type of arrangement without invoking the dreaded MEWA rules because these salespersons are not common law employees.  (The Code is not ERISA and ERISA is not the Code.)   At least, I have not found any DOL guidance that addresses this issue.

Has anyone come across this admittedly obscure situation?

Thanks

If there is a plan sponsor who wants to switch from a Closed MEP to their own plan after 10/1, and they currently have safe harbor status with the Closed MEP, can they maintain that safe harbor status with the new spinoff plan?  I have been researching and see mixed opinions, but nothing definite.