New client has come to us.  He is a self-employed author.  He would like to start a solo-k plan.  He received his business EIN on 8/28/2018.  We are setting up the plan for him.  Can we use a 1/1/18 start date or does it have to be 8/28/2018?    Has anyone encountered this issue before and what date did you use for the plan's effective date.

I heard discussion that the IRS might change determination of plan size based on participants WITH balances rather than all participants.  So a 401(k) plan with over 120 participants with less than 100 deferring would still be small.

Did this change go through?  We have a 401(k) in the restaurant industry so there are nearly 200 participants, but only about 40 have balances.

Are funds in the Plan's forfeiture account added into total plan assets when determining top heavy status?

For example, assume the Plan provides that forfeitures are used in the plan year following the plan year in which the funds were forfeited, and allows the Plan Administrator to use the funds for any permissible purpose (reduce fees, contributions, or reallocate).  A participant in 2018 terminates, takes a distribution and forfeits $1000 which is now in the forfeiture account as of 12/31/2018. 

Do we include that $1000 in the total plan assets when determining the top heavy ratio?

Thanks.

Currently working through an IRS audit on a calendar year plan, and the auditor mentioned that the 2017 profit sharing contribution was due next week.  Casually, I said, "Sure, if they want to deduct it for 2017, otherwise they have until the end of 2018."  He directed me to Publication 560, which says that the last date to make a contribution is the due date of the employer's return (including extensions) - link, see Table 1.

And now I see the 401(k) Fix-It Guide supports the same timing:
 

Quote

Timing of other contributions: 

Rules about the timing of matching contributions or other employer contributions are different from those for elective deferrals. The employer must meet the following rules to obtain a current tax deduction:

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• Employer contributions that aren't tied to elective deferrals must be made by the filing deadline of the employer’s tax return, including extensions.

What?  I'm looking for anything to refute this, but I'm coming up empty.  Is this real life?

A client recently changed payroll vendors.   The payroll vendor calculates their match and notifies the client of the funding amount.   During the client's recent audit, it was determined that the Compensation Limit was not capped at $170,000 when determining the match.   The payroll vendor said it was not something they track.   They indicated that the recordkeeper would catch that during the testing process.   So basically the payroll vendor knows that the match is incorrect, but does not feel it is their responsibility to monitor this.  

The recordkeeper  states that they assume that the match calculation is correct, unless they have been told differently.  They indicated they do not test for match accuracy.

I am curious what your thoughts are on this situation.   I always assumed that the party calculating the match would take into consideration the annual compensation limits.

Thanks!

Can a Money Purchase plan be merged into an ERISA 403(b) Plan.  Both plans are sponsored by same employer

Plan year is calendar year.  Quarterly entry dates.  Auto Escalation occurs on anniversary of entry dates.

Is the notice still required within 30-90 days before plan year?

Example: Jane enters the plan on October 1, 2018, makes no election, and employer automatically withholds 3%. On October 1, 2019, provided Jane makes no election, employer will automatically withhold 4%.

Result: Jane must receive the notice for the 2019 plan year between October 1, 2018 and December 1, 2018.

The Adoption Agreement allows the employer to elect escalation on anniversary of entry dates.  The basic plan document says the notice is provided 30-90 days prior to plan year.

This is an EACA, not a QACA.

This doesn't seem right.  

A 56 year old 401(k) plan participant terminated his employment in May after working with the company for over 30 years.   He was rehired in July to a position that is not an eligible class for participating in the plan so he is considered an inactive participant.    He did not request his distribution during the time he was gone, but of course now he wants it.     The plan does not allow in-service withdrawals and is silent on the subject of a rehired participant taking a distribution due to the prior separation of service.     I don't believe he is eligible for the distribution now.  Other than amending the document to allow for in-service, can anyone give me some guidance on this or a regulation?

Thanks for the help.

Participant was forced out of the plan with a balance of under $1000. Participant received the check which was made payable to him but did nothing with it for 90 days. He realized he missed the 60 day rollover window and would rather not claim the funds as income. 

I have never been asked this before - but can he purposefully let the check stale date then ask the record keeper to send a new check? Will that start the 60 window over again? I am guessing no, but thought I would ask the experts. The record keeper refuses to reissue a check to the IRA provider.

Thanks

A new company, established in July 2018 (calendar fiscal year) wants to set up a new 401k plan for 2018.  Assuming they are too late for a Safe Harbor plan for 2018 (since the company was established with more than 3 months left in the year (to qualify for the exception to the 3 month rule) and now won't meet the notice requirement for a 10/1 effective date), we are going with a traditional 401k plan, with safe harbor provisions effective for 2019.  

The employer doesn't want his part-time employees in the plan.  EVERYONE however, has the same July 2018 hire date, including the owner.  Has anyone used language in the plan document, stating something to the effect that everyone employed on July 1 2018, shall be eligible, providing that they are 21 years old and would "normally work 1,000 hours during the plan year"?  Do you think this will fly?  

(I've used the age only requirement condition before, but haven't used an hour requirement condition under the special participation date before.)

Thanks in advance!

I have a terribly persistent participant who is convinced that you cannot put criteria on obtaining a loan from your retirement plan.  Specifically, her plan requires hardship proof.  Does anyone have the IRS reg that states you can put these types of criteria on your loan program?

Good morning to all,

A client, which happens to be an Indian reservation, has a commercial entity that sponsors an ERISA covered 401(k) plan.  That commercial entity has no HCEs.  The employer decides that overall for 2017, it will contribute 5% as a profit sharing contribution for the year. Per the plan document, profit sharing is totally discretionary and is supposed to be allocated on a salary ratio basis.  However, each division within the company is responsible for being a profit center and one division says it doesn't have the resources to make any contributions for 2017.  This means that about 2/3 of the employees get a 5% of pay contribution and 1/3 of the employees get nothing.

Again, there are no HCEs.  Top Heavy status is not an issue.  Passing 410(b) coverage testing is not an issue.  

Does anyone see any problem with this?  Is it permissible for the 1/3 to get nothing in profit sharing for the year?

Your thoughts and suggestions are always appreciated!  Thank you.

Just looking to confirm if a company currently is making contributions to a SIMPLE IRA they are precluded from setting up a Cash Balance Plan for 2018?  We would need to terminate the SIMPLE by Nov 2nd and set up a new plan effective 2019?

We are setting up a money purchase plan for 2018 that will not have actual allocations made to the plan prior to 12/31/2018. The actuary is suggesting that a nominal amount be contributed to the plan prior to 12/31/2018 to establish the trust.

Is this a thing? Can someone point me to the regulation or guidance on why this would need to be done? Does it apply to all plans or is it special to plans subject to minimum funding requirements?

Thanks in advance

I have a 403(b) Plan with a TPA which charges 3% of the loan balance annually as their loan fee.  I have never heard of a loan fee based upon loan amount.  On its face, this appears unreasonable.  However, I wanted to ask the group if they had seen loan fees set up in this way.  I am more used to seeing a set fee for loan initiation (around $100-$150) and an annual maintenance fee (around $25).  Any feedback would be appreciated. 

What does line 14C on a k-1 refer to?

I am working to find basic information on rules regarding seasonal employees.  I have read various IRS material and realize this is a complicated subject that will have to be handled by the employee benefits firm, but I was wondering if anyone could tell me if I am on the right track.  The business currently has a plan that is open to employees, but only three employees participate, and of those three at least one is highly compensated.  The business has many seasonal employees.  The concern is that the plan in not in compliance.  They are considering a safe harbor plan.

From what I read, there are no specific rules about seasonal workers.  A plan can impose attainment age of 21 and completion of 12 months of service (considered 1,000 hours of work).  Participation may be conditioned on two years of service, if each participate has a vested right.   Is there any general information on the rules regarding having only three employees participate when there a hundred seasonal workers (assume more than 1,000 hours)?  Thanks for any general information to help me clarify.

I took out a 401(k) loan in December 2015 and have been making semi-monthly loan payments through payroll deduction ever since.  My boss, whose responsibility it is to upload a report to our plan administrator that shows all employee contributions and loan payments), received the reports on a timely basis (I know this because I do payroll and I provide him with the reports myself) but failed to upload the reports in a timely manner.  Some of the reports were uploaded as much as two months after the payroll date.  As a result, my loan was called into default and declared a distribution.  I somehow missed the 1099 that was issued at the end of 2017 (I never open my statements and I assume I tossed it thinking it was just another statement) and I did not become aware of the default until I recently logged on to change some of the investment options on my plan balance.  

I have made two of the partners at my firm aware of this and I need to determine exactly what the financial ramifications will be for me (the amount shown on the 1099 is $12,810.69, although the balance is less than that since I have continued to make my scheduled payments).  The firm will have to make me whole, and I believe they will, but I need to know just exactly what this is going to cost me.  I also need to know what my firm is facing in terms of penalties because there are at least three other outstanding loans that were probably also defaulted, not to mention the 401(k) contributions that were not posted to accounts in a timely manner.  Employees will have lost out on interest since their contributions were not credited for as long as two months after they should have been.  

I am trying to arm myself with as much information as I can.  Can anyone offer insight?  Many thanks.

A non-US citizen lived and worked in the US and participated in her company's 401(k) Plan.  She has since moved back to her home country, but left a small 401(k) balance behind.  I would think that she can avoid paying US tax (and early withdrawal penalty) by rolling the funds into an IRA and keeping the money there, at least until she turns 59 1/2.  I'm looking for some IRS guidance, but didn't see anything about non-citizens after skimming through Pub 590.  Can someone point me in the right direction?

Our 100% ESOP S Corp has a SAR’s program for senior leadership and board members that creates a huge amount of synthetic equity. In fact synthetic equity is now almost 30 % of all outstanding shares of stock. At the end of this year this program will pay out almost 4 million dollars to these select shareholders.This is a company that only makes 5 million net income on average annually.  

It appears they are staying just within 409(p) testing , but they just merged the 401k with the ESOP to help with this ratio testing. I’m afraid they are going to get even more bold in coming years in creating more synthetic equity. Employees now need to contribute to 401k to get matching ESOP shares. I’m concerned that Managment and board may be acting unethically and hurting value of average employees retirement benefits.

There is also some self dealing going on with leases and sales of builiding owned by board member to the company. Same three board members and CEO appear to be the main beneficiary of all this. Any recommendations about what to do next would be appreciated.