We submitted one last August.  As of today it is still not even assigned.   Anyone else seeing this?

A participant's RMD for 2018 from a 401(k) plan was calculated as $160,000.  He transfers $100,000 to a charity and takes a taxable distribution of $60,000.  We find out after-the-fact.  How do we fix this now? 

My initial thought is issue 1099-R for a taxable distribution of $160,000 to the participant but curious about other opinions.  Thanks.

Partner A owns 50% of Firm 1 and 100% of Firm 2.  Partner B owns 50% of Firm 1 and 100% of Firm 3.  Business is wealth management service and all 3 firms are S-Corps.  Firm 1 is support staff and expenses, while firms 2 and 3 are the respective partners.  Does this represent an Affiliated Service Group?  I note that the partners are both licensed.  Finally piece of the puzzle is that the one support staff working for Firm 1 is a leased employee, where the leasing firm provides a 401(k) plan with a 100% of 1st 4% Safe Harbor Match.  That Match is paid by Firm 1 (indirectly paid by Firms 1 & 2).  Is there a coverage issue if Firm 2 and Firm 3 have SEP's that only cover the respective partners?  If firm 2 replaced its SEP with 401(k) covering only Partner A would that cause a problem?

Someone would like to set up a SEP for their business for 2018 (by 4/15/19.)  It is 2 partners only and one partner wants to max out SEP but other one wants to put in less.  Is there a waiver form or something that can be done to have different contribution amounts since they are both partners and no non owner employees?  Thank you.

Hi,

My employer has a policy that the 401K contribution can be started only after 90 days. I joined on 8/27/2018 and I wanted to maximize my 2018 contribution so I setup 100% deduction in November in preparation of my eligibility starting December 2018 paycheck.

The payroll could not process this election since it got confused with 100% and could not accurately calculate taxes etc. After multiple back and forth with plan and the payroll, the issue finally got resolved only in mid Jan 2019.

Based on this IRS article, it looks like I may be eligible for the fix by the employer and should receive 50% of my missed deferral amount. Is that accurate understanding?

Thanks, Dhaval

Just received financial statements for a partnership with 2 partners. Based on the income of the company and the split to the partners, the plan fails ADP testing (no match), and both partners will need to receive substantial refunds for their 2018 contributions.

Question is are the refunds subject to the Form 5330 tax for failing to make the refunds before March 15.

I looked through the messages here and couldn't find any previous guidance. Any replies would be appreciated, thanks.

If a sole proprietor in 2018 (1) terminated a solo 401(k) by written resolution, (2) rolled the funds to an IRA and (3) filed a final 5500-EZ reflecting a zero "end-of-year" balance, is it possible to resurrect the 401(k).

I have seen other discussions about reversing (1) and (2) above, with the consensus being (I think) that reversal is doable by a new resolution and moving the funds back to the 401(k) account.  But what about filing an amended 5500-EZ reflecting the renewed status of the 401(k)--after a "final" 5500-EZ has been filed?

Any thoughts appreciated.

Husband and spouse own one company 50/50; their two sons own another company 50/50.  Technically the companies are related - both companies are in the same industry, but perform different functions within the industry.  Some employees work for both companies.

Both companies sponsor separate profit sharing plans. One of the sons in his company defers, so the plan was amended to SHNE.

The son is also an employee and participant in the other plan and no one in that plan defers.

Doesn't this plan have to be amended to a SHNE plan?

Background information: an employee become a participant 07/01/2018 and terminated 08/18/2018 with only 1 year of service for vesting purposes. This participant allocated employer contribution for the 2018 plan year, and the employer contribution was made in March 2019.

Question: Is this 0% vested and terminated participant should be in the 2018 participant count for form 5500-SF purposes?

5(b) Total number of participants at the end of the plan year

5(c) Number of participants with account balances

5(e) Number of participants that terminated employment during plan year with accrued benefits < 100% vested

Generally speaking, is 5(e) applicable to 401(k)/profit sharing plans?

A church has decided to sponsor a new 401(k) plan effective 01/01/2019. There are a few ministers receiving a housing allowance, which by my understanding is not included as compensation under 415(c)(3). So, it seems a minister who during 2018 received paid compensation (for Federal income tax purposes) equal to $115,000 plus an additional $40,000 in housing allowance, would not be considered an HCE for 2019. Am I understanding this correctly?

Ran across a very interesting question yesterday. Let me first say that the client will be directed to legal counsel, but in the meantime, I'm interested to see what opinions folks may have.

401(k) plan, participant "X" completed a beneficiary form years ago. Spouse as primary, Father as "contingent." Plan has normal language that a divorce revokes the spousal beneficiary designation.

X gets divorced. No QDRO directing that ex-spouse receive any benefits from the plan or must remain as beneficiary. X never completed a new beneficiary form.

Some years later, X dies. No spouse, no children. Plan, if there is no designated beneficiary, lists the parents of the deceased as 3rd in the hierarchy, after spouse and children.

X's parents are divorced. So here's the question.

Is a "contingent" beneficiary designation valid if the primary does NOT die? In other words, in this situation, is the Father the sole beneficiary, as a "contingent" beneficiary, or does the automatic revocation of the ex-spouse as beneficiary ALSO revoke the "contingent" status? If contingent status NOT revoked, Father is sole beneficiary. If contingent status revoked, then death benefit would be split between Father and Mother.

This may be a well-settled question in law, so maybe there is a standard answer?

Thanks for any opinions.

So a partnership and an LLC are testing for coverage.  The partnership has a huge profit.  As long as the crosstested formula passes coverage, can the owners choose to deduct their own contributions form the partnership or the LLC?  The partnership has no other employees; all employees are part of the LLC.  I can't find anything on this....Need some input.

This question is related to a 401(k) Plan with many partners and rank and file employees and not to a Solo SEP or 401(k) with 1 partner.

For the 2018 Plan Year:  After i calculated a maximum Contribution (employee deferrals, Safe Harbor 3% NEC, and Employer Profit Sharing for a partner as $55,000, their accountant is telling me that the partners maximum Contribution should be limited to 20% of their reduced K-1 income, which comes to approximately $50,000.

I have found information about the maximum contribution for self employees individuals to be limited to  20% of their reduced K-1 income, but does this apply to 401(k) Plans? and not just to SOLO SEP'S and 401(k)'s with 1 employee (the partner)

Any guidance is greatly appreciated

Alex

A partnership with 3  related partners normally funded their contribution separate from another business owned by them with several other people.  Until 2018 they were not controlled group.  This year, the same 3 people (family members) own both companies.   So the question is not If they have to pass coverage as a controlled group of employees/participants, but whether the Owners can fund their $55,000 max contribution through either plan?   or do they have to fund  it through the 2nd company with all of the employees/participants?   It's confusing and I've never run into that before where they wanted to fund it to manipulate profit in one company.  Help!

It's actually 2 questions!

1) If a plan defines a year of service for eligibility as 1,000 hours, would you HAVE to look back at hours history to determine the otherwise excludable employees (to see if any never met 1,000 hours).  Or could you just use hire date (and birth) for administrative ease/sponsor does not provide hours?  Especially for new takeovers, it's tough for sponsors (especially large ones in certain industries) to provide hours history for a long period of time.  I'd just assume a part time employee who has been at a company for 20 years met 1,000 hours once.  I think it's common practice to make certain assumptions but can't find any language anywhere.

2) If a plan uses elapsed time for eligibility, could they not use the 1,000 hours to determine if they ever met a year of service for otherwise excludable classification?  I think the regs just reference year of service, which would then come down to how the plan defines it.

Thanks!

I have a small Defined Benefit Plan that is terminating due to the sale of the Sponsor's dental practice.  The Plan is underfunded so the owner will be signing a waiver for the unfunded portion of his benefit.  So far no problem.  A substantial contribution was deposited in 2019 to make up some of the unfunded shortfall.  The amount deposited was well within the Plan's maximum deductible limit.  However, when the accountant completed the 2018 preliminary returns the Net Schedule Income for 2018 is about $17,000 less than the deposited amount.  The accountant is going to take a deduction for only the portion up to the Net Schedule C amount, not the full amount of the deposit.

According to the accountant there will be no Schedule C Income after 2018 so the excess $17,000 cannot be deducted in a later year.  My understanding is that the Sponsor will owe a 10% penalty for the non deductible contribution for the 2019 Plan Year (the year of the deposit).  How is the excess contribution paid out of the Plan? 

Pardon my senior moment, but we recently took over a new comparability profit sharing plan (no 401K option) with a 1,000 hour/last day contribution req't.

Two participants terminated in 2017 with >500 hrs, but <1,000.  The previous TPA had given these two participants a contribution for 2017.

Is this correct?

Is it an industry trend for pension plan auditors to go nuclear and penalize a plan sponsor with all kinds of Notes for seemingly minor data discrepancies such as one participant's date of birth off by a year out of 400 total participants, or a gender being incorrect on 3 participants?

Hi to all,

I am researching the elements that went into a top heavy test for a client for calendar 2018.

Two doctors, A and B, owned Happy Feet PA up until 08/12/2018, and maintained the Happy Feet PA 401(k) Plan.  They sold their practice in an asset sale to Better Feet, P.A. owned entirely by Dr. C.  Doctors A and B continue to be employed by Better Feet for the remainder of 2018.  Better Feet took over as the plan sponsor on the sale date, the plan was re-named Better Feet, P.A. 401(k) Plan, and Dr. C became the Trustee of the plan.

Because Better Feet already had a SIMPLE plan in 2018 for the Better Feet employees, with the advice of a local ERISA attorney, we amended and restated the Happy Feet plan such that only the former employees of the Happy Feet PA were eligible to participate in the Better Feet, P.A. 401(k) plan for the remainder of 2018.  At 01/01/2019, all of the employees of Better Feet, whether they used to be employed by Happy Feet or not, became eligible to participate in the plan and the SIMPLE plan was terminated.

So now, as to the Top Heavy test for 2018:  I am understanding what I read to say that because Dr. A and Dr. B were owners of the (previous)  plan sponsor "at any time during the relevant plan year" (2018), they are Key employees for purposes of the 2018 test.  We had initially hoped that perhaps they could somehow be considered non-Key because by the end of the year, they were not owners, the plan sponsor had changed, their company had been completely bought out by the new owner, etc.  

The reason it matters:  Running the Top Heavy test for 2018 with Drs. A and B as the Key employees results in the plan being Top Heavy for 2019.  This puts Dr. C in the unhappy position of now sponsoring a plan that is considered to be Top Heavy for 2019 even though he had nothing to do with it getting to be Top Heavy.  He and his own employees were not even eligible to participate in 2018.  That may be irrelevant.  This just may be a risk he was assumed to be taking when he agreed to sponsor and continue the Happy Feet 401(k) Plan when he bought out Happy Feet PA.

Am I missing anything that would change the test results?

Thank you as always.

Can a money purchase plan that has merged into a PS plan be allowed as part of an in-service withdrawal?