Good morning to all.  A client passed away last fall, and her sister popped up recently claiming to be the executrix of the estate and heir to all of the client's assets.  

We as the TPA do not keep beneficiary forms on file for any of our clients.   We inform them at the moment of engagement that they must be responsible for keeping up with the forms in their own offices in the employees' personnel files or something similar..

The sister of the deceased says she has not found a beneficiary form.  She says the deceased was divorced and that the ex-husband is deceased, and that they had no children. 

So far all she has provided to us is a death certificate for the deceased and a "Letters Testamentary" document with one sentence naming her as the personal representative of the estate of the deceased.  She is now pushing to have the deceased client's assets transferred to her.  The account balance of the client is held in an individually directed brokerage account with a well-known national brokerage house.

The plan document says that in the absence of a beneficiary form, the assets go first to the spouse, and if none, to the children, and if none, "such other heirs, or the executor or administrator of the estate, as the Plan Administrator shall select."  Bear in mind that the Plan Administrator was the client, who is dead.

1. To what extent are we as the TPA responsible for determining that the spouse is indeed an ex spouse, that he is indeed deceased, and that they had no children?  

2. Is more paperwork required that just this one liner naming this woman as the personal representative of the estate required to establish her as the executrix/personal representative?

3. Is this our problem or the brokerage house's problem that holds the funds?

4. Do we have to worry about being sued later if she lied to us and there is a current spouse/children?

5. Can the account be rolled directly to her without passing through the estate in this circumstance?

This is a first for us, so any experiences you can share/advice you can give will be greatly appreciated.

Thanks in advance.

What is a controlled group? and when a plan be considered a part of the controlled group? also can a plan which part of the control group Terminate?

Plan Sponsor of 403(b) is a tax exempt org.  They want to make very large employer non-elective contributions.  The question is not about the individual limits that apply to participants.  The question is "does the Sec 404 deductibility rule apply to a plan sponsor who does not have tax deductions?"

PS... the Sponsor is actually a non-electing church.  Would the answer be different than a 501(c)(3) org.?

Thanks!

PNJ

Basically a ridiculous academic question, although I suppose it might have some applicability in the future for some sort of required amendment that pertains to all plans.

In these days of mostly pre-approved DC plans, suppose there is a required amendment, let's say something like the DOL disability regs or whatever, that is adopted by the document sponsor on behalf of all clients. It requires an SMM.

Is an SMM legally required to list the Plan and Employer name? Clearly the SPD must do this as per the DOL regs, under 2520.102-3. But I'm not certain that this specific requirement pertains to the SMM, as this information isn't changing - I didn't find, on a mid-level look, where it is specifically stated. Didn't use the fine-toothed comb. If not legally required, it could facilitate a "generic" mailing to all clients.

At best, I think it is foolish not to include plan and employer information, but is it ever an option not to? Curious as to any opinions on this.

Background

A participant in a 403(b)(9) retirement plan has requested a distribution.

·    The participant is a US citizen

·    The participant lives in Peru.

·    The funds would be wired to a bank account in the US.

·    The retirement plan has his SSN on file sourced from both his enrollment app from years ago and his recent withdrawal request form.

Questions:

1. Because his SSN is on file and he indicated on the withdrawal form he is a US Citizen, is there any need for the plan to require receipt of a W-9?

2. If the participant was requesting the funds be delivered outside the US, would there be a need for the W-9?

TIA for your responses.

We have a participant that recently took a loan and is now going out on maternity leave.  Is there any special regulations regarding repayments while she is out or if no repayments are made does she default?

I have read, "a 403(b) plan that provides for employer contributions cannot be a non-ERISA 403(b) plan."

Can a church plan, which is an ERISA exempt and non-electing 403(b) plan, provide for employer contributions?

If so, how is it that the two statements conflict? Any helpful cites?

I have a client that recently converted s corp (solely owned ) to an partnership llc (store manager of 16 years).

This happened 1/18/2018. They had been contributing to a simple ira 3% match. Store manager (who has been taking a payroll check of $65,000/yr)  just told me that she is only taking draws, stopped getting a payroll check upon conversion 1/18/18. 

She is telling me that company tax preparer has no issue with her not taking a paycheck and that she needs to convert company plan to something that would allow her to make pretax contributions without having to take a paycheck (earned income)?  they have not hired someone else to fulfill the responsibilities in the operation.

Any ideas?  Can the partners make pretax contributions and company match 3% on draw?

Is there something I'm missing about her moving to partnership status.stopping the $65k/yr earned income via payroll and only receiving a draw of the exact $65k and not having an explanation of who is the workload? 

Thanks in advance for any guidance.

A plan made a profit sharing contribution and failed the compensation ratio test.  The allocation is comp/comp per the plan doc.  I believe I can still run a rate group using test using 415 compensation without having the cross test language in the plan document.  Am I correct on this?

Thanks

What would happen if the TPA and the recordkeeper both issue a 1099-R for the same distribution?

Please forgive this basic question, but I feel as if my brain has turned to mush ( I wish myself good luck making it until March 15th!!).

If an employee does not fully utilize the 401(k) catch up provisions, and defers a total of $22,500, then the 415 limit would be $55,000 plus $4,000 for a total of $59,000?

I just want to be sure that I should not be using the limit of $61,000.  I feel no since if a participant over age 50 does not defer at all is limited to $55,000, but feel the need to check.

Thank you to all those to whom this is second nature!!!

We have a client who makes a ton of money - well over $1,000,000 each year.  He wants to put in more than the DC limit of $56,000.  He is an S Corp with a W-2.  I know very little about how DB plans work.  Could he possibly put an additional $225,000 into a DB plan.  What about a cash balance plan?  Would love some guidance on this.  Thanks!

We have a client that withheld deferrals on severance pay over the past several years.  The participants have all taken distributions from the plan and most rolled their funds to another qualified plan or IRA.  We are currently working on a VCP submission for the client for all other plan issues.  For this issue, I believe the correct method is to issue two corrected Form 1099-Rs for the year of the distribution: 1 for the ineligible deferral amount and 1 for the updated distribution amount eligible for rollover; and notify the participant of the issue and that the funds were not eligible for rollover. 

Any thoughts on other corrective methods to pose to the IRS since we are going through VCP anyway?  Suggest the participant will be taxed on the distribution anyway when the funds are distributed from the plan/IRA, so avoid double taxation and not issue the corrected 1099-R that may not prompt a "tax-free" distribution from the rollover IRA/qualified plan??

Any suggestions/insight with personal experience on this particular issue would be greatly appreciated!

We have client who missed paying an RMD for 2018 (seems to have been legitimate error since person normally handling this was out for illness).  Participant will take RMD now - my questions:

1. Form 5329 reports missed RMD.  This goes with his 1040?  If taxes already filed, does he amend 1040?  He will attach letter of explanation; does he pay 50% penalty with 5329 or not?
2. If 2018 RMD taken now (Jan, 2019), do we prepare 1099-R for 2018 or 2019?
3. Anything else I am missing?  Does the sponsor have to report this?

one of the terminating plan has a MPP and a profits sharing plan.  They want to terminate the MPP plan and participants have been given an option to move the balance into the profit sharing plan, however this option is only for Active participants and not Terminated participants, can terminated participants also rollover the balance into the profit sharing plan? will it become a successor plan? will they be able to terminate the MPP plan?

I have an owner who turned 70 1/2 in 2018 and also got a divorce in 2018.  The QDRO was not received in our office until 2019.  The QDRO has the division date for the accounts on 3/31/2018.  The alternate payee will be receiving 100% of the participants account balance.  The participant took his RMD for 2018 by December 31, 2018.  Does he need to take a 2019 RMD or his account balance zero on 12/31/2018 because the alternate payee is receiving 100% of his account balance?  The Alternate payee is not 70 1/2.

My thinking is that his account balance is zero and therefore he does not need to take and RMD in 2019.

Working through this - getting there, but still some basic questions.

For purposes of Cafeteria plan Contributions and Benefits (C&B) testing, let's say you have a plan that includes several types of benefits, one of them being health insurance. While the plan was amended to allow for owners to elect pre-tax salary deductions for health insurance, NONE of them have elected to do so.

So it appears that there are three potential tests. First, the "safe harbor for health plans" test under 1.125-7. It appears that this automatically passes, as no HC is paying premiums through the plan. Correct? And the fact that there are other benefits (FSA, dental, vision, whatever) doesn't affect this?

Second - the "availability standard" test. Since the plan has no "employer contributions" and all benefits are available on a nondiscriminatory basis, this passes. Question - does this often fail? Seems like most plan designs would typically pass with no trouble, but I have little experience in this, so I'm curious.

Third - the "utilization standard" - this is just mathematical testing, and will require salary data, etc...

Thanks in advance, and any observations are most welcome!

P.S. When there are HSA "catch-up" contributions, are these included in the testing? In the qualified plan arena, catch-up deferrals are excluded for 415, etc., but I don't know that there is any such dispensation in the 125 world?

OK, I am having one of those moments where I think I am going crazy.  I didn't know where to post this, so I selected this board. 

Section 1 taxes "taxable income."  Section 63 defines "taxable income" by reference to gross income in Section 61 minus deductions.  I know the deductions for AGI are not taxable, but I can't find that connection in the IRC.  Where does the definition of AGI in Section 62 fit into all this?  I know it is an above-the-line deduction, and I know this is very simple on the 1040, but where is the missing-link code section?  

Eligible charitable organization signed (without reading or counsel) a "good faith" 403b plan document in 2009 as mandated by IRS.

2009 document erroneously provided immediate eligibility for the ER match despite the plan having been operated since 1992 using a permissible 1 year eligibility requirement.

ER discovered the error when they recently received the vendor's preapproved 403b document which is to be retroactively effective to 2010.

Since the 2009 document was only to be an interim "best efforts" stopgap measure, can they simply correct the error retroactively in the new preapproved document or do they have an operational error that has to go through VCP?

Lots of interest in plans under the new Association Health Plan guidance, but some groups do not meet same line of business requirement under VEBA regulations.  Any thoughts or ideas on any way to receive favorable tax treatment and avoid K-1 when do not meet VEBA requirements?