We have a one person DB plan sponsor: FY is calendar.  PYE is 9/30/18.  He contributed for the 2017 plan year in Feb 2018 and filed his 2017 tax return without extension.  Then he made the 2018 deposit in September 2018 before the 2017/2018 PYE.  Since he deposited the money during the plan year it will be listed on the 2017 SB but he'll deduct it in 2018.  The 2017 PY max deduction doesn't cover the entire amount, but we have room in and time to amend the formula back to 10/1/2017 so it is deductible.  We are concerned with the deposits during being split between the 2 tax years.  I think that it is ok but would like another opinion. 

Company A was bought out by Company B on April 1, 2018. Company A funded 3% SH and NCPS. The previous owners would like to fund the contributions for their compensation with company A from Jan 1 -  March 31 along with the participants of company A's plan too of course.

According to Co A, the acquisition was neither a asset or stock sale ?. They said " The entities are LLCs, therefore, the way the merger worked is that Company A contributed all of its assets and liabilities to Company B, and in return it received an ownership interest in Company B".

1. Sounds like an asset sale to me but i may be wrong. Has anyone heard of this?

2.  Does the safe harbor profit sharing have to be funded pre merger (1/1/2018 -3/31/2018) for Company A’s Plan? Can a discretionary new comparability profit sharing be contributed pre merger (1/1/2018 – 3/31/2018)for  Company A’s Plan? 

3. Is it considered a short plan year, does the ER contribution get pro-rated. I feel like this depends on whether it was a stock or assets sale.

Below is one of Mr. Watson's Q&As, wherein he states that an option to acquire stock cannot break up a controlled group of companies, and provides an example to illustrate this.  Does anyone know where in the Code or the regulations it says that an option to acquire stock from the corporation - as opposed to an option to acquire stock from another shareholder - cannot break up a controlled group?

Hello, 

VSP (as well as other carriers) report on their Schedule As as if the contract is experienced-rated even though the contracts are confirmed non-experienced. This is causing a bit of confusion and frustration for the Plan Sponsors. Delta Dental use to conduct their Schedule As in this manner and have since reverted back to just reporting the premiums, commissions, etc for non-experience. By chance has VSP made any declaration on why they have switched their approach? Any insight would be greatly appreciated.

If we set up a profit sharing plan with CODA now, make the plan effective 1/1/18 but the 401(k) provisions effective 11/1/18, do we need to include in the ADP test an employee who terminated employment before 11/1/18?

Thanks.

I have a client for whom the original service agreement indicated all fees were to be paid by the employer.  The participant disclosure reflected so.  THEN, the employer changed the agreement with a portion paid by the employer and the remainder deducted from participant accounts.

The participant fee disclosure was not updated and has reflected paid by the employer for the last 4 years.  Quarterly statements are sent in which participants can see the amounts deducted attributable to fees. 

At this point, I have updated the disclosure to properly reflect a portion paid by the employer and the remainder deducted from participant accounts. 

What other action must be taken?

A small business client has a 401k Plan that has to pass the ADP test for 2018.  They are not Safe harbor.

As of 10/1 the 100%  owner  is selling the stock to  two previously  rank and file employees .  The plan has always passed the ADP test  in prior years because the owner only deferred 2 percent more than these employees did.  

So my question is this - as of the end of the year - who is considered an  HCE for the ADP test??.  Do the two new owners join the former owner in the HCE group?? - or does the previous owner  become part of the NHCE group for ADP testing?    There are 3 other eligible  NHCE"s who defer nothing.   Any way around this for the year of sale?  It looks like a possibility of the plan failing ADP.  There is no match to consider.

A plan made a profit sharing contribution to the 2017 calendar year plan that utilized incorrect compensation during nondiscrimination testing. Lets say this contribution was 50,000. When the nondiscrimination was corrected, the correct allocation should have been 10,000. So 40,000 was forfeited for use in future years.

The problem here was the tax deductible contribution threshold for 404 lowered to 40,000 from its original amount of 160,000.

Is there a way to avoid paying excise taxes on form 5330 for 10,000 of contributions that were over and above the 404 limit? 

I'm looking for confirmation on the new 2018 1099-R distribution code 'M' for reporting loan offsets from qualified retirement plans:

1. If a participant receives a cash distribution that includes a loan offset, we now issue two 1099Rs: one for the actual cash received that would reflect withholding on that portion (distribution code of 1 (assuming non-Roth, under age 55), and a second one to report the loan offset with any applicable tax w/h applicable on that portion (same assumptions, distribution code M1).  Prior to this new code coming out, we reported this scenario all on one 1099R.  Is my understanding correct? 
2. If the cash was from a Roth account and the outstanding loan balance was also from the Roth account,  we don't include code M since only 2 codes are allowed.  Roth loan offsets would continue to use codes B1 using the age example above.  Correct?
3. Do we have to go back and correct  2018 1099Rs on loan offsets processed prior to this new code coming out?  

Thanks!

I have a solo 401k plan that now has employees.  The solo plan has filed Form 5500-EZ for past several years.  Can I transition the tax return automatically to the 5500SF since they now have employees or do I have to do anything with the 5500-EZ?  Thank you.

Can an HRA base the reimbursement levels upon health insurance status? By that I mean, can it be $1,000 if you are enrolled in the health insurance as a single, $2,000 if as a 2-person, and, say, $3,000 if you have family coverage?

We were TPA for a plan that transitioned from small (5500-SF) to large (5500) in 2012.  We completed all work for the 5500 and were just waiting for the audit, which was never done.  After repeated follow-ups, we eventually resigned.  Periodic checking of the EFAST website confirmed that nothing was ever filed on the plan after the 5500-SF for 2011 which we handled.

Apparently due to a personnel change, the sponsor has become aware of the missed filings and contacted us.  If we bring them into compliance, it would involve a DFVC filing for 2012-2017 (6 years).  My question is, does the sponsor have to get 6 separate audits - one for each year - or can he get one comprehensive audit covering the entire 6 year period?

And if he can get one comprehensive audit, how does this work on EFAST?  Do we attach the same audit reports to each year's filing, or is there some way to override the missing audit and submit it only with the final 2017 report?

I’ve got a potential new client who owns a carpentry business. He and all of his employees are collectively bargained, and participate in a Union Money Purchase Plan (they also get collectively-bargained health coverage).

If the owner were not collectively bargained, I’d feel comfortable saying that he could set up a new DB plan just for himself, since all of his employees are collectively bargained and therefore excludable from N-D testing. What’s not clear to me is whether he can set up a new plan just for himself, given that he himself is collectively bargained.

For reference, here is the general rule from 1.410(b)-6 (highlight is my own):

(1)General rule. A collectively bargained employee is an excludable employee with respect to a plan that benefits solely noncollectively bargained employees. If a plan (within the meaning of § 1.410(b)-7(b)) benefits both collectively bargained employees and noncollectively bargained employees for a plan year, § 1.410(b)-7(c)(4) provides that the portion of the plan that benefits the collectively bargained employees is treated as a separate plan from the portion of the plan that benefits the noncollectively bargained employees. Thus, a collectively bargained employee is always an excludable employee with respect to the mandatorily disaggregated portion of any plan that benefits noncollectively bargained employees.

Any insights are welcome.

I have a 406(b)(2) transaction (payment of plan expenses out of the wrong plan).  Instructions for filing the VFCP indicate that you can be exempt from the excise tax if you fall under the PTE 2002-51, which we don't (2002-51 says exemption applies for payment of settlor expenses; our expenses are administrative non-settlor expenses).  We will file the 5500 Schedule G.  Do we need to file the 5330 and are we subject to excise tax under 4975? 4975 does not list a provision parallel to 406(b)(2) as a prohibited transaction subject to the excise tax.  

Is it possible to file the VFCP and report the transaction on the 5500 but not be subject to the excise tax and not have to file the 5330?  Note instructions for the 5330 under prohibited transactions do not list the transaction listed under 406(b)(2).

Any help appreciated.  Thanks.  

Client owns 100% of a construction business (company A) which currently has a 401(k) Plan.  The client just purchased a 50% interest in another construction business (company B).  The companies work together in both referring work and the completion of jobs but are not exclusive and provide services separately. 

The owner of company A would like to have company B join his plan.  I can't see this falling under an ASG or a controlled group.  Is there any issue with company B becoming an adopting employer of company A's Plan?

Thanks  for your input!

Non profit #1 sets up non profit #2 and runs payroll for them. #1 lets a #2-ee into #1's plan. I see provisions in EPCRs regarding how to fix letting employees in early, but this doesn't seem to fit that. She seems ineligible to me, though she's on the payroll...

Any thoughts? 

We are setting up an early retirement window in our pension (DB) plan -- retire within a specified time an you get two additional years credited service and two additional years age.

Our actuaries are wondering if it would make sense to add a statement in the early retirement window amendment that the early retirement window enhancements are subject to meeting non discrimination testing requirements. By doing this, they think it gets out of paying the benefits out of the plan if the discrimination test is failed or by giving non HCE’s additional benefits in the plan to allow discrimination testing to be met.

This seems unnecessary to me -- wouldn't both of those things be options if we fail nondiscrimination testing anyway?  Why do we need to include it in the amendment?

I have a CPA who is telling me he wants a "sophisticated" plan design option for a doctor who is an employee of a practice and also has his own business on the side with self-employment income.  The side business has a net loss, so I told him there is no income to take a deduction on for the SEP, therefore no way to fund a SEP.  The CPA thinks he can use some of the doctor's W2 income to fund a SEP contribution (?)  This is not permissible, right?  I am just questioning it because the person asking about this is a CPA so...

Plan excludes Taxable fringe benefits and bonus from Comp.  Problem is, I don't have them segregated from the client.  Client has a straight 5% profit sharing contribution. I can probably get away with rate group testing using the total comp, but can I try and pass the 414s testing, by dividing eligible comp by total comp (including taxable fringe?).

My denominator is a safe harbor 415 definition of  comp so I suppose so.  Agree?

Good evening

My wife is 55 and is resigning from the State of Maryland after 34 years of service.  She has excepted a job with a contractor for the State of Maryland that pays her much more and she will be doing what she love doing DLP Analyst investigator. How long can she leave her 457 Retirement plan with the State of Maryland instead of taking the distribution or transferring it to another qualified employer Plan. It is rumored that her contractor position will become a permanent State Gov position and she then will return back to Government service with same 457 Deferred Compensation Plan. Thanks in advance