I have a self-employed client with a Defined Benefit Plan that has been contributing the minimum required amount for the past several years. In the past 3 years, those contributions have not been deducted, since there were no self-employment earnings in those years, (business actual experienced losses). It is expected that 2019 will also be a loss and that the business will no longer exist since the client has retired. I am aware that the contributions avoid the penalty tax under IRC § 4972 due to the special rule under IRC § 4972(c)(4). However, I cannot find anything that addresses how these non-deducted contributions are treated when they are distributed. Distributions, (MRDs) have been made as required by IRC § 401(a)(9) and they were fully taxed on the presumption that the contributions would eventually be deducted .Since there is no expectation of future self-employment earnings it would seem that there is a tax basis recovery of cost (investment in the contract) that should be considered on future distributions. The plan will likely terminate, to eliminate future non-deducted contributions.  Upon termination and after payment of the MRDs the plan would distribute lump sums, which would be directly transferred to IRAs. If the accumulated non-deducted contributions were treated like employee after-tax voluntary contributions then they would be excluded from the rollover and refunded to the participant, which would be the best possible outcome. Assuming  that these are nondeductible contributions for all purposes except IRC § 4972, then it seems that they are not eligible for rollover treatment. One fact that I have left out is that the client’s wife is the only other plan participant receiving a minimum benefit that was fully funded before the plan was improved to generate contributions for the self-employed participant. Has anyone had a similar situation; and how was the tax reporting done on the final lump sum distribution?

A participant took a loan from the plan and the payment was supposed to be withheld from their payroll.  The payment was not.  Besides getting the deduction going so that the loan is paid back, what is the remedy for the lost time... missing payments?  

Mom is 94 (reasonable health) but still needs my time more than what this job would ever permit.

Plus now I will be get to Mass daily, without worrying about the time constraints and work load this job requires, a big plus for me. And time to bake more cookies and stuff to giveaway. My favorite being the springerle.

Have yet to find anyone to turn down one of those.

My deepest appreciation for those to have helped me learn along the way, my apologies to those I may have inadvertently offended by any comments I may have made. In the cartoon Futurama, the character Fry made the comment "You remember Star Trek, 79 episodes, maybe 30 good ones". I figure that might be about how many really good and worthwhile comments I posted.

Dave Baker is going to be glad because he won't have to listed to complaints about the bad jokes, humorless songs and awful puns I occasionally posted.

My favorite takeaways after all these years:

I know a few have said I'm a bit crazy for giving away stuff for free, but has been a big highlight for me. Hopefully the few Relius reports I have posted have proved useful and a time saver to some, along with the excel file for projecting the new limits. Someone else can worry about updating that every year. Ha. Over the years it has been kind of neat to see postings on the internet about projected limits. And I had the nicest comment years ago from FT William about the SSA report to pull the data from Relius into their system.

The best advice I can provide, something I have always tried to keep in mind with my dealing with others:

God has a benefit plan that is out of this world, so store up for yourselves treasures in heaven, not the things here on earth.

A pension plan covers Bill and Jill. Bill owns the business, Jill is a secretary.  The plan was set up in 2010 using a unit benefit accrual of 10% x High3 x Service ( including all past service). The plan is amended  as follows in 2017: the new formula is 20% x High3 x Service ( including all past service). We can't explain why this change was made ( takeover case this year), but question whether  the 133% rule was violated.

 In fact the amendment has no practical affect since the benefits are already at the 415 lints based on original formula! But my question is whether a retroactive change in the accrual rate for all current employees for all years could affect the safe harbor.  I don't see any violation since the change applies to all years of service. Checking the available vals there are no terminated employees since plan started.

Any thoughts anyone?

How long after I repay my 401k loan in full do I have to wait to apply for a new loan

If a quarterly participant statement reflects all fees and expenses deducted from a plan does that meet the annual 404a participant disclosure requirements? 

Does anyone know what is required to be submitted for the summary documentation for VFCP filings?  I know my client meets the requirements to file summary documentation, but not sure what constitutes summary documentation.  Does it have to be authorized by the plan's recordkeeper to reflect that the contributions were deposited and the amounts, or is a report of the contributions deposited to the recordkeeper sufficient?

Company A buys 80% of Company B, effective 10/1/2019; Company B's owner retains 20% ownership of B.

Both companies sponsor calendar year 401(k) plans, but B's employer contribution is not as generous as A.

After Company A buys 80% of B, they become a controlled group.

Can A and B continue to maintain separate 401(k) plans with different ER contributions?

Do they have to be tested together or can they be tested separately?

If they have to be tested together, when must that begin?

Thanks for any help!

So hey, anyone see this new addition of a Paperwork Reduction Act notice to the DOL's model Summary Annual Report?

Not sure how half a page of unrelated text reduces paperwork.  Also.....is there a deadline where this becomes mandatory?  It's enough of a slog to get an SAR to fit on one page after it's been generated by our software.

I feel like deleting it until something more obvious and official dictates it has to , has to, be in there.

What say the rest of ya?

Thanks!

--bri

I think the long week is getting to me because I keep questioning whether I'm looking at this correctly.  Any input greatly appreciated

• Plan has pooled/trustee directed investments
• Participant loans are allowed
• loans are NOT treated as a segregated investment

Im looking at the mechanics of the loan itself rather than fiduciary issues, but there is some disagreement in my office and this is one of those days where I would gladly take a coffee-IV.

The way Im looking at it, it is still a participant loan secured by the participant's balance. The loan interest is credited to the plan trust as a whole rather than back to the participant account.  

• Bud Weiser has a $100,000 account balance and borrows $50,000.
• for 2018, Mr Weiser has repaid $10,000, $1,000 of which was interest.
• Before Mr Weisers account is credited for 2018 earnings, his 12/31/2018 balance is still $100,000, $59,000 in pooled investments and $41,000 as a participant loan.
• The $1,000 Mr. Weiser paid as loan interest is added to the plan trust gain/loss to be allocated among pro rata for all participant ending balances
• Mr Weiser's share of the pro rata investment earnings is limited to the $59,000 that is part of the pooled investments

The opposing view is that the trust made the $50,000 to the participant as an investment, and it did not actually come from the participants account balance.  

• The 12/31/2018 balance for Mr. Weiser is $100,000 before it is adjusted for earnings
• The loan should be tracked separately from Mr. Weiser's account balance in the plan

Am I crazy, or is the opposing view describing an extension of credit (secured by plan participant assets?) as a plan investment rather than a participant loan?

Thanks

J

Participant is older than 70.5 and still working. The plan only allows withdrawals with an RMD, so if they take a withdrawal this year they will also take an RMD. If they take a withdrawal + RMD this year, and continue working next year but don't take any withdrawals next year, will an RMD be required next year? are the RMDs permanently triggered? thanks.

 I have gotten loans in the past and not had any problems but last week I tried to get a loan to try to pay off credit card debt and the 401(k) company says hardship only and clearly in my addendum it says there is no restrictions on my policy  no hardships can they do that? 

Can an employer sponsor a 401(k) and a SEP at the same time?

Only 3 employees plus owner (who gets no compensation except health insurance reported on K-1 as guaranteed payments).

One employee long-term, other two employees less than 3 years service.

Owner wants to reward long-term employee but doesn't want to create big taxable income for him, so considering doing a SEP contribution.  Long-term employee would meet 3-of-5 years eligibility but other two employees would not for the current year.

Thanks.

Anyone offer 3(16) services as a TPA?  What details can you provide with regard to experiences?  Thank you.

I have a QDRO that pays a specific dollar amount plus gain/loss through distribution date. Can the participant specify the fund he wants the alternate payee to be paid from or does it have to be pro-rated across all funds in his account?

An alternate payee is ready to take her QDRO distribution out of Nationwide.  Part of the money she received from her ex spouse is Roth money.  There is no prohibition on her rolling the entire Roth balance out, correct?  She's either rolling everything to an IRA or to another 401k plan.

I work on a mid-sized DB plan that generally doesn't pay lump sums, but has opened up a lump sum window until the end of the year. One terminated participant, who would like to take the lump sum, was born on 7/1/1960. Therefore, he will complete 59 1/2 years on 12/31/2019. If his distribution is not processed until 12/31/2019, can he avoid the early withdrawal penalty?

Thanks for any responses!

My employer is closing our 401k Safe Harbor account 8/31/2019.  As of yet they have given no written notice of this and also indicated they would not be required to make the 3% contribution for the year.   Is this correct ?

J

I am trying to find a table that would come close to a rate for a very very old governmental plan (that was using an insurance company annuity rate of about $130 F/$112 M age 65 - interest would be 6.5%

Any legal issues with an employer policy that pays employees full pay when they take intermittent FML, but no pay for employees taking continuous FML?