How is 5 years of participation figured if a plan restricts in-service distribution to age 59 1/2 and 5 years of participation?

What little information I could find seems to indicate using elapsed time, 60 months.  Is it permissible to count 5 years for someone with a 7-1-15 entry date as 2015, 2016, 2017, 2018 and 2019 to consider this 5 years of participation?  The plan document says 5 years, not 60 months participation.

Partnership has a calanedar year plan  putting deferrals for 2018, for partners in on July 1st.  How do you think the IRS would view this on an audit?

If an ESOP adopts an amendment and switches from forfeitures only after a 5 year Break in Service to forfeitures effective immediately if a participant takes a cash distribution, how do you treat prior terminated employees? It seems you can’t forfeit their shares until the 5 year BIS even if they earlier took a distribution. 

Attorney X had a one-participant profit sharing plan at Fidelity for his one person law firm until he established a partnership with attorney Z on Jan 1 2018.  The merged company adopted the plan (as successor employer) of the attorney Z (who is our client) as he already had a cross-tested 401k with a number of employees (all of whom were employed by new partnership).

Anyway, attorney X , unaware as to how all this worked, made a $15,000 contribution in May of 2019 to his OLD plan, despite the fact that he had no income from his prior sole proprietorship in 2018 or 2019.  A contribution for the new partnership for 2018 is still being determined.  Attorney X wants to fix his mistake before rolling over old plan assets to new plan - but I'm not sure what kind of mistake or error this should be classified as in order to determine the proper correction method.  Any help greatly appreciated???

Thanks

A 501(c)(3) Employer maintains a 403(b) annuity with employee contributions only as well as a profit sharing plan with a fixed formula of 3% of compensation.

Apparently the two plans were never coordinated and one has recently learned of the other.

As far as 5500s, since the 403(b) contains only employee contributions, no 5500s have been filed; 5500s have been filed for the profit sharing plan each year of its existence.

We do not handle any 501(c)(3) organization plans, but something seems a bit "off" here, and think it should be corrected, but how???

Hi to All,

We just got a phone call from HR lady of our client to say that a certain participant who has a participant loan is in the process of dying of pancreatic cancer and has been out on medical leave for the last 6 months.  He's not really expected to ever come back to work, but she hasn't really officially declared him to be terminated, either.

The participant took out a participant loan on 12/18/2018 in the amount of $11,650.00.  He made two bi-weekly payments of $119.40 on  01/14/2019  and  01/22/2019.  He went out on medical leave at that point and has not made any more payments.  This quarter ending June 30 is his cure period and so far he hasn't made a payment.

HR lady wants to know what his options are.  Can he make some little tiny payment like $100 and get another cure period running July 1 to September 30th?  Could he do that twice and thereby keep his loan from going into default in 2019?  I think she's asking if he can just keep this thing running until he actually passes away and then it becomes someone else's issue at that point.  All the situations I have seen so far were "all or nothing" - the person was either making payments, or stopped.  I don't know what happens when someone pays a little something but not enough to bring a loan up to date.  Of course I know that the loan is supposed to be paid within 5 years of the loan initiation date, but does it get re-amortized each quarter, with higher payments, such that it would still be paid off theoretically within the original 5 year period?  Is that even permissible?

He could, of course, just let it default and pay the taxes on the deemed distribution at the end of 2019 if he's still alive and has the money to pay them.

Any of your thoughts and experiences will be appreciated.  Thanks in advance!

401(k) plan has designated Roth accounts. Participant receives a QUALIFIED distribution - over 59-1/2, over 5 years.

Reported as a 7 B on 1099-R. IRS is saying it should be a code "Q." When you look at the 1099 codes, "Q" specifically states that it is for a Roth IRA. There is no letter code for a qualified distribution from a designated Roth account.

Are we wrong? I can find nothing to indicate that this should have been reported as a code "Q."

Thanks.

A doctor, who recently passes, adopted a 412(e)(3) Plan in 2014, funded the first year, but not the three years following, as such he froze the plan in 2018.  Note: we urged him to freeze the plan, in 2016 when he didn't fund the 2015 benefits.  He didn't want to, he stated he wanted to fund the plan, after three years of not funding, he finally allowed us to freeze the plan in 2018.  After that he was ill and could no longer fund the plan.  We were going to terminate our services if we could convince him to fund the plan, but he since passed away on May 30, 2019.

The brother of the deceased owner, is trying to keep the business open and ownership transferred to his name, but he refuses to fund the plan.

Has anyone dealt with a plan that is not covered by PBGC, not fully funded and the sole owner/trustee has passed? 

Can we force the business to fund the plan?

Can we go to his estate get the plan funded?

Can we just pay out the NHCEs with the funded assets?

Any help would be greatly appreciated.

Thank you.

If an alternate payee is also a participant in the 401(k) plan that is subject to a QDRO (i.e. the divorcing couple work for the same employer and both participate in the same plan), must the plan create a separate account for the alt payee, or may the plan transfer her QDRO award into her existing account under the plan?

Thanks for any insight on this issue.

Code 3b - Use this code if the plan covered self-employed individuals in the return year.  Does this mean if someone was a Schedule C or K1 employee (not w2) in the Plan?  Thank you.

In IRS 417(c) - QPSA - Spousal Benefit it is stated:

"A qualified plan, like a defined benefit plan, money purchase plan or target benefit plan, must provide a QPSA to all married participants unless the participant and spouse consent in writing to waive the QPSA."

"it must give a participant a QPSA notice during the period beginning when he or she is age 32 and ending with the close of the plan year before the participant is age 35,or within one year from when an employee becomes a plan participant if he or she is hired after age 35."

Is this practically true that as practitioners we must provide the QPSA notice for all affected participants of all the DB/Money Purchase/Target Benefit Plans that we administer within the applicable QPSA election period as stated in the code?

Does it mean the surviving spouse will receive a lump sum instead of annuity if a participant/spouse consented to waive QPSA in writing and the two were married more than 1 year when the annuitant/the participant died before retirement?

The 403(b) regulations require 403(b) plan sponsors to provide an effective opportunity to eligible employees to make 403(b) deferrals to the plan.

According to 1.403(b)-5(b)(2), this requirement is satisfied by providing a notice to the employees at least once a year that tells the employees that the 403(b) plan is available, and also tells them how to make or change the amount of their 403(b) deferral election.

1. What does this annual universal availability notice referenced in the regulations look like? Is there a published or sample form?

2. If there isn't a published or sample form, what other types of notices and documents satisfy the annual universal availability notice requirement?

3. When is the annual universal availability notice distributed? Does it have to be no later than 12 months after the last notice, or literally no less than once per plan year? (For example, is a notice provided in January 2018 followed by a notice provided in July 2019 okay?)

4. Are all eligible employees supposed to get the annual universal availability notice every year, regardless of whether they are actively deferring to the plan or have previously declined to defer?  If yes, what if they're currently in the midst of a deferral suspension following a pre-7/1/2019 hardship distribution? Or, what if they've just exited a deferral suspension due to a pre-7/1/2019 hardship?

5. Do plan sponsors need to get employees's signatures or otherwise record the date that they sent the notices to eligible employees and the date the eligible employees received the notices in order to document that they have satisfied the universal availability requirement?

An employer that is fully owned by one individual sponsors a qualified plan in which several employees participate.  This individual has also set up a separate shell LLC (in which she also has 100% ownership) that does not perform any business transactions, and for which no business tax returns are ever filed.   She does not receive any income from the shell company, and it does not have any other employees. 

I'm trying to determine whether I should indicate that the plan sponsor is a member of a controlled group on the 5500-SF.  Is just signing a document establishing the shell company the only thing needed for it to be considered a controlled group member?  Or would it also need to first have an EIN issued?  

Plan document included an auto-enrollment feature of 2% starting 7/1/2018, no matching contributions. Employer never implemented the auto-enrollment feature. Now the employer intends to terminate the auto-enrollment feature effective 7/1/2019. Under EPCRS, the Employer can fix the errors under the special safe harbor correction method (no QNEC required, but correct deferrals must begin). Are the "correct deferrals" the amount that is in effect at the time of correction (now 0% because the ACA was eliminated), or 2% (because that's the deferral that would have been in effect at time of correction if the error had not occurred)? 

Facts:

A Safe Harbor 401k PSP currently permits all participants including terminated participants with vested account balances to take participant loans, with repayment via cashiers check (actives via payroll withholding).  In the course of permitting such loans, they have come to realize the difficulties in collecting payments and the resources used to follow-up, and, as a result want to modify the Plan's loan provision to permit loans only to Active Partipants and Parties in Interest going forward. 

Question:

Will an Amendment eliminating loan availability to terminated participants violate a BRF provision? Are they a protected BRF? Any existing loans will continue repayment as per there current terms. And as I said above, loans will continue to be available to Actives and PII. Or must the Amendment include a provision stating vested account balances as of the Amendment date must be protected and available for loan purposes even if termination occurs at some later date?

Thank you.

Does anyone know if the IRS is actually assessing late filing or failure to file penalties on an ALE if the ALE 1) timely responds to the Letter 5699 indicating they will file within 90 days, and 2) files 1095-Cs and 1094-C within the 90 days?  

I know they may assess penalties in this situation, but am trying to find out if they are actually doing so if the employer comes into compliance.  Has anyone seen this?  

Lets say a plan has 10 employees, and all employees have enough service to basically enter a plan on day one if a plan were to begin. If an elective deferral only plan was established effective 1/1/2018 but elective deferrals were not effective until 10/1/2018 would my beginning participant count for 5500 purposes include 10 employees or 0 employees since elective deferrals weren't effective till 10/1?

Is age 65 or 62 to be used when cross-testing a DB/DC plan?

If the DB Plan doc. states NRD "The later of age 65 or the fifth anniversary of Plan participation, or if earlier, the later of age 62 or the 10th anniversary of Plan participation"

The DC plan doc. states NRA means the "Later of age 65 or 5th anniversary of the date the participant commenced participation in the plan

Just want to make sure I have this right.  Have a Top Heavy Plan but the only contributions made during '18 was Employee Deferrals (Key Employees all maxed out).  Is a 3% Top Heavy required or is it not since they didn't receive any Employer Contributions?

Thanks in advance!

Does a plan need to be terminated since there is no longer a business and the solo owner is retired