Facts: A company filed their first (and only) Form 5500 return for their H&W plan in 2013. The BOY count that year was > 100, with the EOY count dipping below 100 participants. Thus, they stopped filing because they satisfied the small plan exemption. They also did not use the 4R code.

In 2018 the company was purchased by another company, and will now be  under that new company's H&W plan.

Question: Since that single Form 5500 was previously filed, should a final Form 5500 be filed to inform the DOL/IRS the plan no longer exists? There is a 5 year gap since they only had to file in 2013.

Your thoughts on this matter is much appreciated! Thank you.

We have a client whose business was taxed as a sole proprietor until 12/31/2017.  Effective 1/1/2018 he elected to become an S-Corp.  The owner was under the impression that he could defer like he was still self-employed, and then max-out after the year end.  He also assumed that his shareholder dividend could be used as compensation.  His 2018 W-2 wages were $0.

I’m not sure how he actually deferred throughout the year without compensation, I think he took what he considered draws and contributed them into the plan.

Now we have a plan where an owner with $0 W-2 wages thinks that he deferred $9,000.

How would this “deferral” be corrected?

·         Should it be returned to the owner as a 415 excess?  This would generate a 1099.  This was my original thought for correction, but how could someone get money returned when technically they didn’t have it to defer to begin with?

·         Should the money revert back into the company somehow, as an operational error (possibly failure to follow the terms of the plan, with no 1099 issued to the owner)?

As a side question, I thought an owner had to take reasonable compensation in an S-Corporation.

What are the thoughts on this scenario - a plan sponsor sends out a fee disclosure as they are switching to a fixed recordkeeping fee. After the notice is distributed its realized that the fee is actually going to be less than what's reflected on the notice. Can a revised notice be sent out with less than 30 days notice, given that its a benefit to participants?

For the past 20 years of ADP testing, when refunds are necessary, we provide the client with a form to give to the HCEs that explains the reason behind the refund, and a place for the HCE to make a withholding election.  The form offers them the choice of, 1)normal 10%, 2) a percentage or dollar amount over 10%, or 3) no withholding. 

The form also comes with a W-4P and option 3 includes instructions that if no withholding applies then the W-4P must be completed in addition to our form.

We then use this information to complete the recordkeeper's refund distribution form for the client.

We now have a recordkeeper that is insisting that for ANY withholding amount that is not 10%, they want a signed W-4P.  Additionally, if the participant wants, for example, 20% withholding, they want the participant to change the $ sign on line three to a % sign and indicate 10%, as that would be 10% additional to the normal 10%. Notwithstanding how confusing that would be for the participant.

They are insisting that the IRS requires W-4P not just to elect to be exempt, but for anything other than 10%.

I do not see anything in the instructions on the W-4P that requires the form to be used if a participant elects say 20% withholding, and do not see why our election form would not satisfy that purpose, especially since our form is much clearer in the instructions for the participant.

Do others require a W-4P in all situations? 

I do not mind changing our procedures if we are not doing it correctly, but just want to be certain first that we actually aren't doing it correctly.

Thanks!

Plan says that claims must be submitted within 45 days after end of plan year. But the provider doesn't even send bill until the end of February. Would you:

A. pay the otherwise allowable claim, as soon as possible but within 45 days of the participant's receipt of the bill

B. amend the plan (retroactively?) to provide a longer run out period

c. deny the claim, since not received  by the deadline

d. other?

P.S. - I should have put this in the original post, but FWIW, I believe the answer is "c" - as per 1.125-1(c)(5).

Let's say a participant is over 70 1/2 and took a full distribution as a rollover and let's say that his RMD was not processed by mistake. What would be the correction method for this mistake if the participant already deposited the check into the receiving IRA? Is amending the 1099-R to reflect that a portion of the distribution is an RMD and requesting the participant to take out the excess from the IRA the only method?

Thanks.

Trust is the beneficiary of an individual's 401(k) and Roth IRA.  Trust specifies distributions be made to decedent's children at age 25, 30 and 35, distributing 1/3 of their share at each age.  First distributions were made from the taxable account, which is now mostly distributed.  Remaining distribution to be made from the IRA account.  If a distribution is made from the IRA funds, can it be rolled over to an inherited IRA for the trust beneficiary?  What are the options?

Thanks!

We have a plan that was supposed to exclude the HCEs from the matching contribution.  The original plandocument didn’t have the option.  The new plan document does, but the box wasn’t checked.  The plan was promoted as no contribution to HCEs in all the meetings and materials.  We are giving it to them for 2018, but don’t want to for2019.  Can we retroactively exclude the HCEs for 2019 effective back to 1/1/2019?

It appears from my research that a safe harbor 401(k) plan that uses the 3% nonelective contribution on plan compensation that does not satisfy the "safe harbor" definition of compensation and fails the 414s compensation test is a problem.

It appears the method of correction is to base the 3% safe harbor contribution on a "safe harbor" definition of compensation which may or may not need an amendment depending on how the plan is written.

I am wondering if there are any alternatives other than having the employer deposit additional contributions.  For example, can one run the ADP Test on the basis of a "safe harbor" defn of compensation?

To illustrate, a plan defines compensation to exclude bonuses and OT pay. a participant earns $70,000 of total compensation of which $20,000 is excluded as OT pay.  The participant defers 5% of pay, or $2,500 (i.e. $50,000 x 5%).  The company deposits a 3% safe harbor amount of $1,500 (i.e. $50,000 x 3%).  At year end, it is determined the plan defn of compensation fails to satisfy 414s.  Must the employer deposit an additional $600 (i.e. $20,000 excluded pay x 3%) or can they first run the ADP Test on the basis of full compensation.  Is it possible for the employer to first run the ADP Test on basis of using the total wage (i.e. the participant defers 3.57%, calculated as $2,500/$70,000) to see if the ADP Test is satisfied?  If it is possible to run the ADP Test and it fails, may the plan be remedied by having the affected HCEs receive a refund of the excess deferrals on this basis?

Is the stipend compensation included in plan compensation?

401(k) plan - employees are paid regular hourly wages, plus a stipend for meals, lodging, etc. when traveling. The sponsor specializes in providing services to other areas so the stipend makes up a large portion of the company payroll. I believe these are also sometimes called per diem payments. (not to be confused with per diem employees). 

The plan document defines plan compensation as W-2 Wages without any exclusions (so fringe benefit is not marked as being specifically excluded). 

"Wages within the meaning of Code §3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statements under Code §6041(d), 6051(a)(3), and 6052, determined without regard to any rules under Code §301(a) that limit the remuneration included in wages based on the nature of location of the employment or the services performed."

It's clear that the stipend in NOT a reimbursement, as it is based on the government rates, and not actual expenses. It's also clear that the stipend is not taxable income and doesn't appear on the W-2. But plenty of things don't appear on the W-2 (FSA elections for example) but are still included as comp. 

I don't have familiarity with this type of compensation. Thoughts? Other Benefit link threads that have covered this? 

I understand that the determination date for top heavy is the last day of the first plan year (for a  new plan year).  If the plan is top heavy as of 12/31/18, the employer doesn't have to make a minimum contribution until the 2019 plan year, right?

Sponsor acquired through a stock purchase a company that had a 401(k). some participants have variable annuities as investments in the plan. the new fiduciary wants to know what his options are as he doesn't want to have a legal duty to monitor the annuities. my thought is restrict new money investments and wait for the surrender charges to burn off and then force the participants to liquidate.  

are there any other alternatives for example like maybe quarantining the annuities in another plan and just writing a memo that says you didnt chose them have no expertise etc.  

If a sponsor over deposits the Match for a HCE, do you count the total deposited in the ACP test or would you forfeit first? 

i.e.  Match is 50% on 6%.  The match should have been 8,250.  Client deposited 10k.  Would you test 10k or 8,250 in the ACP test?

Just want to make sure I'm not missing something. Had an inquiry from an employer who sponsors a cafeteria plan where the employer (C-corp) has 3 owner/employees only - ALL are Key. No NHC employees.

I assume this has no possibility of passing testing, as I'm not aware of any provision similar to qualified plans where coverage/nondiscrimination is automatically passed if there are no NHC employees. So they would automatically fail the 25% key employee concentration test.

Agree, or am I missing something?

I'm not sure if this is complicated or not, just that I have not run across this before.  Individual A has a solo 401k plan for himself.  No other employees of his business.  Now he is going to go work for a small employer as their employee.  This new employer does not have any retirement plan.

Would the new company be able to "take over" as the plan sponsor of the solo 401k plan, allowing their employees to become participants as well as allowing Individual A to stay in the plan?  I don't see why not, but, it just seems odd.  This is not a merger situation since the company has no plan to begin with.

Thanks

Facts:

Employer has a 6/30 fiscal year and would like to install a SH 401k for the coming 6/30/2019 Fiscal Year end. In order to be a Safe Harbor plan for this year, it must be in place no later than 3/31.

For 2018 the employer provided a SIMPLE plan.  The 2018 employer contributions are to be deducted on the 6/30/2019 fiscal year return (as is required by SIMPLE plan rules of deduction -- cal year ending within the fiscal year provided contributed by due date of Fed return (incl exts)).

Questions:

Is this employer permitted to establish a new Safe Harbor 401k Plan (incl PS provisions) for its FY ending 6/30/2019 with a Plan Effective Date of 7/1/2018, thus full dollar limitations? Or, must it delay the effective date to 1/1/2019 since it had a SIMPLE thru 12/31/2018 (pro-rated limitations)? 

Thank you

I was asked to review a single participant DB plan for a 68 year old.  He has $4,500,000 in the plan.

He was planning to retire so a transfer to a PS Plan doesn't really help, even if he works till he drops.

After you tell him to get his benefit out of the plan and put his wife on payroll for as much compensation as the CPA will allow, what can you do?

Company has three owners, A (the father), and B & C (the sons).  Um, had three owners, as A passed away in 2017 (while in RMD status, but I don't think that matters here).  With advice from their financial adviser, B&C chose to keep their portion of their father's money in the plan, so we created beneficiary accounts for them in the plan alongside their regular accounts.

How should we be treating these beneficiary accounts for the purposes of top heavy calculations?  I'd think we count them in both numerator and denominator for 2018, but what about beyond?

Scenario: SIMPLE IRA went "bad" (disqualified) several years ago due to failure to offer the SIMPLE to the employees of a related company.

Cost to make corrective contributions under EPCableRS for the employees of the related company would be exorbitantly expensive so the only viable option is to treat the contributions as not having been made to a "qualified" SIMPLE IRA.

There's no official guidance on how to handle this so our thought is:

1. For the year's still open under the statute of limitations have the employer amend the W-2s to add the deferrals and the match to Box 1 wages and the match to Box 3&5 SS and Medicare wages. There should be no income tax impact to the employer but will owe SS & Medicare tax on the match amounts (employer will also pay employee share)..

2. At the participant level treat additional income amounts as contributions to a traditional IRA. Depending on the employees situation the contributions may be deductible, non-deductible or excess. Employer will cover the costs associated with amending the employees individual tax returns and paying additional taxes but due to the small amounts involved it's believed that the vast majority will be deductible so the net tax impact to the employees will be negligible.

Anything we're missing?

A client just supplied me with their 2018 W-2's showing total employee deferrals of $22,000. When I balanced the assets of the plan from their brokerage statements, the total deferrals amounted to$20,000. I thought that the missing $2,000 was simply a contribution in transit that would show up early in January, 2019. Unfortunately, only $1,000 showed up in January leaving the plan $1,000 short. When I questioned the office manager, she indicated that the November contribution of $1,000 was never deposited and wants to know if she should deposit this amount now. As I see it, there are a few issues:

1) employee deferrals are cash items. Therefore, the remaining $1,000, yet to be deposited, cannot be considered employee deferrals for 2018.

2) If 1) above is true, then the individual W-2's reflect excessive deferrals amounts and need to be re-done. Conceivably, if individual 2018 personal tax returns have been already filed, they may need to be re-filed.  

3) Since the $1,000 has been in a corporate account rather than the 401(k) since November, could this be a prohibited transaction?

4) If the adjustments for most (there are only about 6 in the plan) would be relatively small, if there anything that can be legally done to make this mess just go away?