Hello, I have an executive who is being encouraged by his advisor to allow for in-service withdrawal before age 59.5 so that he can roll his balance into an IRA.  Is that allowable?  I believe if the plan were amended to allow such a thing, the IRS still regulates that a participant would only be able to withdrawal vested company contributed - pre-tax employee deferrals would have to remain in the plan.  Am I correct about that?  

Here's the situation. I'm a fee-only financial advisor who has a few small business owners, mostly individuals, as clients. These clients would benefit greatly from opening Solo 401(k)'s.  They want to max out the contribution limit, with the 25% profit sharing, and would like the ability to make after-tax contributions. The custodian I use has a Basic Document but it does not allow after-tax contributions. The custodian said to open a trust and create the plan document myself.

Yes I'm a CFP® and EA, and I'm smart enough to know I have no business creating plan documents myself. I see a business opportunity to provide the after-tax options to clients, but cannot do it myself. Can anyone recommend a TPA that can work with an advisor to provide a Solo 401(k) in a cost effective manner? That seems to be the problem. We've attempted to work with a few TPA's but the cost to this just to add the after-tax option, made the client say the heck with this we'll just use the custodians simple basic plan document and forget the after-tax option. Even if you explain the long-term tax benefits, they usually shy away. Again, I see the need for a niche here, but need help.

How did all you folks in the coastal sections make out? Is everything ok?

Say you have the following scenario:

Plan sponsor is being acquired mid-year and terminates its 401(k) plan, say, November 1. For administrative/payroll reasons, employees of the acquired company will not participate in the buyer's 401(k) plan until January 1. Plan has a safe harbor matching contribution. The plan sponsor wants to make the participants whole for missed matching contributions during the two-month gap, but profit-sharing allocation provisions would not allow a PS contribution targeting only people who deferred.

If the plan sponsor paid the participants a bonus (outside the plan) in the amount of matching contribution they would have received for the rest of the year at their deferral rate in effect on the date of plan termination, does this violate the contingent benefit rule?

It arguably does because the cash bonus is contingent on the employee having had a deferral election in place at plan termination.

What if the bonus is paid after the plan is already terminated? No one has any further deferral right or election, so it's hard to make something "contingent on" an election that no longer exists. 

If it does violate the contingent benefit rule, what would be a correction?

Appreciate any thoughts. 

Client has both a 401(k) and a PS plan.  401(k) previously had SH match to NHCEs only.  We are amending to no SH, with provision that SH NEC will be paid to another plan - the sponsor's PS plan.

Q:  Does the PS adoption agreement have to state somewhere that it will receive SH NEC contributions to cover the 401(k), or is it all okay just as long as all 401(k) eligible participants receive at least 3% in the PS?

(we can't seem to find any provision in the PS adoption agreement)

DB Plan has 2 yr eligibility & DC Plan has 1 yr eligibility.

EE enters the DC Plan 7/1/2018.  He has not entered the DB Plan.

Key EE has no DC Plan account addition for 2018.

Is this employee required to get Gateway (or any contribution)?

If Key EE had made a 401k contribution, EE would be required to get DC TH.  Would any additional contribution (i.e. Gateway or 5% TH) to this new DC Participant be required?  

Thank you

We have had several clients receive rejection notices related to our Forms 2848 recently.  All were related to DFVC filings.  The notice stated the plan number was not included.  However, the plan number was listed on the Form 2848 in the top right hand corner in the applicable box as well in the table on line 3.  Has anyone else been receiving these?  Are they being sent in error?  Thank you!

Company A based overseas, has wholly owned subsidiary in US with a plan.  Several employees from parent will be working for the US company.

1) Do they HAVE to recognize service with the parent company?

2) if yes, do we even have to do an amendment?

3)  Is the same controlled group testing done for foreign companies (in case this parent owns some or all of other companies not based in the US)?  If not, I guess we would list the companies for which service would be credited.

A sponsor is required to fund a safe harbor match for 2018. They changed their formula from basic to 200% of 5% in 2018, however they only funded the basic amount.

They are now saying that they can't afford to fund the SH match for the difference between the basic and the updated formula.

What would be the consequences for not funding the full amount which was included in their safe harbor notices?

Company A and Company B are part of a controlled group that sponsor a safe harbor profit sharing plan. Both companies are sold midyear to unrelated. Assume acquiring entities do not own any other companies. Can Company B create their own plan midyear AFTER the transaction? I know transition rules provide some relief for mergers, but I am having trouble finding guidance on when a controlled group of employers becomes unrelated midyear. the safe harbor provisions makes me lean towards that this has to be a MEP until years' end. Thoughts?

Background: I have a relatively young doctor who has one older >1000 hours employee, another older <1000 hours employee, and two younger <1000 hours employees.  Already has max 401(k) elsewhere (no CG, ASG or 415 aggregation concerns), so looking at doing PS only and getting $56k max. Including all and cross-testing doesn't work well because only one of the two younger employees are substantially younger than the owner.  The one >1000 hours employee is fairly low paid, so an integrated formula at the lowest threshold, excluding the <1000 hours people, works very well. HOWEVER - and hold onto your hats because how many times have you seen this with a doctor - he wants to include everyone. In that scenario, whether integrated or cross-tested, the contribution rate required for employees is substantial, not an issue with one low paid employee but a different story including everyone.

Questions: I know I can include in the Plan and essentially carve out from testing the <1000 hours people as otherwise excludable employees, but can I have the integrated formula for the >1000 hours people and something else, TH minimum or greater, for the <1000 hours people? If the only way to do (or mimic) this is individual rate groups and testing on contributions with permitted disparity, must I use the SSWB? I assume I cannot arbitrarily pick something lower even if allowed formulaic if designed that way, but wanted to confirm. 

Any other thoughts are appreciated.

I've talked myself in circles about this so I'm hoping for some guidance.  I'll throw out some rough numbers to hopefully help.  2017 Schedule C of $250,000 after 1/2 SE tax is taken out, owner only DB plan.

Assuming that no contribution is made, there is a minimum required contribution of $50,000 for 2017.  

They make a contribution of $60,000 on 10/12/2018 (late). The 5500 was filed 10/10/2018 showing an unpaid min of $50,000.

If I take the $60,000 out of comp, the new min required is only $30,000.

Do I refile the 2017 5500 and SB showing an unpaid min of $30,000?

When do I show the $60,000 contribution, the revised 2017 5500 and SB or on 2018 5500 and SB?

I feel like I have more questions, but I don't remember them right now.

Is it possible to find out if a plan has ever filed with the PBGC?

I am thinking the Plan Sponsor would have to call the PBGC and identify himself - thus begging the question, "why do you ask?"

Dealing with about the worst situation I have ever seen a Plan Sponsor in.

Thanks for any ideas on this. 

The employer sponsors 2 retirement plans - one is a regular 401k and the other is a 457 Plan for which has no 5500 filing requirement - when filing the 5558 to extend the 12/31/2018 filing due 7/31/2019, the 401k was intended to be extended but the 457's plan name and number were used by mistake - is fixing this as simple as sending correspondence to the IRS in advance of them sending any late filing notice to bring the issue to their attention?    On the IRS website, it addresses getting a late filing notice and at that point realizing incorrect incorrect info was entered on the 5558 and just responding to that late notice indicating your error... I'm figuring, it's always best to get in front of the issue as soon as we know about it and not wait for a late notice from IRS...    and when / if we do get a late notice, being able to point to correspondence that brings the issue to their attention... anyone's thoughts would be greatly appreciated

This was originally discussed in October, 2018 when the participant could be said to be at fault for not getting in their application on a timely basis before the window closed.

Now, it's the plan sponsor and/or the vendors administering the window that are at fault.

A sponsor has a calendar year plan and is working hard to take advantage of the interest arbitrage to take GAAP/IFRS gains for lump sums before December 31.

We anticipate that due to the tight time frame remaining in 2019 the trustee will not be able to cut checks in time for payments to be made by 12/31- anytime the week after is more likely due to the plan sponsors inability to verify some vital data before it's processed by the actuary, etc.  W.e are roughly talking about 100 people out of 1,000.

With 417e interest rates dropping, a strict application of the governing 417e rules will result in payments that could be significantly higher for these 100, resulting in a PR problem.

Can anyone rationalize the continued use of the 2018 interest rate basis for January 2020 payments?

HI ~ Looking for some guidance- amount on line 3b of 5300 for penalty?

I have a client with late deferrals for 1 participants from 2018.  The amount is small and we are not filing through VFCP.  I have calculated the lost earning using the participants rate of return.  I am completing the 5330.  Line 3b is a 100% tax on the failure to correct.  If I'm reading this correctly, if the prohibited transaction is not corrected within the taxable period, an amount equal to 100% of the 'amount involved' is imposed.  If my lost earnings are $50.  My excise tax is $7.50.  Since it was not corrected until 2019 the penalty is $50.  Total due with 5330 $57.50 .

Thanks!

A fire district governmental 457(b) plan operates under the SunGuard plan document.  The plan defines NRA as age 65.  Employer wishes to change to age 50 and 20 years of service.  Also, for police/fire personnel, NRA will be age 50.

Couple of concerns.  First plan document only establishes an age for NRA.  Second, and most important, new NRA may impact participants in a negative way considering the new age and service requirements.

What do you think?

When Withdrawal Liability Receivable is due and should be recognized/recorded in accounting?  There are some cases that employers are reluctant to start paying their withdrawal liabilities when assessment has been completed and they are notified with a payment plan schedule. Should it be recorded as Receivable in anyway or should it be waited until the employer accept it and start payments?

Thank you.

Because deferred deductions were taken out with FICA already considered so that when we pay distributions we only take Fed W/H. What about when the participant has passed? 

We have a plan that allows for two loans. A participant was mistakenly allowed a third loan. The loan policy specifically states that loan re negotiations are not allowed. Assume the participant cannot pay the third loan back  in full nor do they want to default and claim on taxes. Are their any other options available? Can we still merge two loans together since it is for a correction despite the loan policy? Could we amend the loan policy to allow loan renegotiation? then amend again "to go back" say a month or two later? VCP?