Company A (a LLC 1065) is owned by  Owner 1& 2 from January 1 through August 31 of 2018.  They have one other employee. Company B is owned by  Owner 1 and two other unrelated people from January 1 through August 31. They have 20 employees.  As of September  1,   Owner 2 buys shares in Company B. 

At September 1, the ownership of both companies is as follows:  

Company A:  Owner 1 - 49%  Owner 2 - 51%  

Company B:  Owner 1 - 51%  Owner 2 - 40%  Other unrelated owners- 9%

So as of  September 1 - they are a controlled group - correct?  Ok  if so, the other question  Company A has is  " Can they make a SEP contribution for the period Jan 1 through August 31 - just for their employees of Company A? "

Any feedback, documentation,  cites, etc would be greatly welcomed.  Thanks!

Has anyone else had a problem with the IRS issuing letters stating that an IRA rollover is taxable income?

Five different participants rolled traditional IRA money into their 401(k) plans (4 separate plans, all different employers) in 2016. the 1099-Rs appear to have been issued correctly, showing a code G since they were all direct transfers, and zero taxable amount. 

These five individuals all received letters in the last few months stating the amounts rolled over were taxable and listed the amount of tax and interest due. In at least one instance the letter even mentioned that the 1099 had a code G on it. 

I'm not sure, but I think the common denominator may be that none of these individuals reported the rollover on their personal tax returns. Rather than reporting the rollover with zero listed as taxable, I think it was left off the return completely. I can't confirm for all of them, but for at least one this is the case. 

I do know the IRS sends out letters if things are reported to them by employers / financial institutions / etc and don't match up with what some reports on their personal return. But ultimately, the amounts aren't taxable, so saying the rollover IS taxable seems ridiculous.

We see our clients do a lot of rollovers, usually without a blip from the IRS, so to have several this year with inquiries feels like a lot, but maybe it is typical for the IRS. 

We have a nonaccount balance plan (i.e. a defined benefit plan) that is a top-hat plan.  Under the Plan, a participant is to receive a set amount per month for life, with a 50% survivor benefit to his spouse for her life.

It appears we can take FICA into account from the offset, since the amount is readily ascertainable under Code Section 3121(v)(2).  I get how that works for the set amount to the employee for life -- we just base FICA on the present value of is benefit.  But how do we deal with the survivor benefit?  Is the present value of that amount also taken into account for FICA purposes on the employee's tax filings?  If so, how does the wife report the payments in the years they are paid?

Thank you!

Looking for thoughts as to how the constructive industry exemption would apply in the context of a corporate transaction.  Specifically, seller is selling the assets of one of its entities to an unrelated buyer.  Buyer would be acquiring those assets and some of the employees and operating a similar but not same business in the same jurisdiction.  Seller won't be operating in that industry/area anymore.  Would the construction industry exemption preclude the application of withdrawal liability in this instance?

I have a sole proprietor, income reported on Schedule C, with 2 employees.  Contributions are basic safe harbor match and discretionary PS.  Owner puts in max deferral and wants to reach his 415 limit. I know he has enough compensation to contribute the max, but it's the determination of plan compensation and breakdown between match and PS that I can't figure. I have looked at a couple of the posted EI spreadsheets and they all seem to call for input of a set percentage for ER contribution.  I don't have that, instead I need to hit 415 limit.  Is this something I can run in Relius or where can I find a spreadsheet that can do this?

Company A sponsors a 401(k) safe harbor plan with about 80 participants.

Company A is going to acquire Co. B in an asset acquisition.  Co. B has about 40 employees.

Company A only requires a 60 day wait for participation.

We are trying to avoid the audit requirement for 2019.  Can Co. A adopt another new 401(k) plan by October cover the acquired employees?  If the new plan can be adopted is there an issue with amending the current safe harbor plan to exclude these employees that would be covered under the new plan?

My inclination is that we can't do what we are hoping, but still thought it worth checking.

Thank you.

Medical office has safe harbor match plan (no profit sharing funding).  Plan excludes HCEs from the Safe harbor match as there are a number of high-paid para-professionals.  Plan is not top heavy at this point.  But when it does become top heavy, certainly the non-key HCEs will need to receive 3% (since the key owners are deferring the max.)  And I assume ONLY the non-key HCEs who are excluded from the safe harbor match need to get the top heavy contribution (whether they deferred or not).  The top heavy would certainly not have to go to all non-key.

Comments?

Thanks

Unless there is a compelling reason, whenever we take over a 401(k) plan we at least discuss the topic of removing installment or annuity distribution options because they are not protected benefits and I like things easy.  In this latest plan document I'm taking over from, the language suggests that the "ad hoc" distributions it allows are a protected benefit.  This one, I'm less sure about.

First of all, I'm presuming (since I can't get a copy of the basic plan doc, only the adoption agreement) that by "ad hoc" distributions, they mean amounts allowed to be taken out by a terminated participant in any amount at any time.

Any thoughts as to if this might actually be protected somehow?  Thanks.

If an employee goes on leave and is receiving third party payments such as third party sick pay or short term disability, can his/her 401k loan repayments still be suspended for up to a year under the unpaid leave exception? The employee is not receiving any payments from the employer - the third party sick pay is not paid directly by the employer but still shows up on the W2 from the employer. Since the employer is not actually paying the money (it's paid on their behalf) and cannot withhold from the payments, does this count as unpaid leave?

The sponsor of a governmental 457(b) plan would like to reduce the number of investment vendors/providers from 5 to 3.  They would like to stop all new contributions going to 2 of the vendors, but allow participants to keep any existing assets invested with these 2 vendors.  Is there anything preventing them from taking this approach? 

One of our current plans is asking about the possibility of adding a Cash Balance to their existing Safe Harbor 401(k)/Profit Sharing Plan.  They are a medical practice with 115 participants.   10 Doctors and 105 non highly's.  They currently have a SH Match with a Profit Sharing in place to maximize the Doctors allocation. 

They are wondering if it would be possible to add in a Cash Balance plan for the Doctors as they wish to put away a higher annual contribution.    I do not have much experience with CB plans so i am wondering if this is possible?  And if so how many of the NHCE's would need to be included in the CB?  

Also of note, they may be merging with a group of 4-5 other medical practices a couple of years down the road possibly becoming a controlled group.  The other practices have plans in place however I don't know if any of them are CB plans.  I know that they all have 401k plans in place but i don't know if any of them have CB plans as well.  What type of issues if any could arise in this situation?

Participant was a non-owner, born 5/6/47, still working when he died on 1/27/18.  ERISA outline books seem to treat the situation as death before the RBD.

Participant had no prior distributions; especially no annuities, so still a death before RBD.  ERISA books and plan document requires either the 5-yr. rule or life expectancy rule be satisfied.  

The two beneficiaries are non-spouses.  One is electing to take their half in a distribution.  The other leaving theirs in the plan.  The ERISA book examples do not address multiple beneficiaries electing both options.  Only mention of multiple beneficiaries is if they both take the life expectancy, the oldest beneficiary age in the year following participant's death is used to determine the life expectancy.

I looked at the Q&A reg. 1.401(a)(9)-3 Death before RBD:  employee dying before the RBD, thus before distributions are treated as having begun under 401(a)(9), distribution of the entire interest must be made in accordance with one of the methods listed in 401(a)(9)(B)(ii): the 5-year rule or the life expectancy rule.  I am unsure if the language of one method means multiple beneficiaries may take only one option or the other.

PLEASE HELP... And, if my analysis seems wrong at any stage, please correct me.

Employer has SIMPLE IRA with the 3% match. The 3 owners have maxed out their contributions in July. The match is made each pay period. The question is should the 3 owners continue getting the 3% match even though their contributions have maxed out? I realize that the match is made on the whole year's compensation but what if their own contributions ended up being less than 3% when their total year's compensation is used.

Should the employer wait to true-up at year-end? Or is it like a 401k plan where if the match is made each payroll period, it stops when the contribution stops and no true up is needed.

Client's plan uses W-2 definition of compensation and permits separate deferral election on bonuses.  Match is 100% of deferrals up to 3% of compensation and is payroll based; no year end true up.

If someone elects 10% deferral from regular paycheck but 0% deferral from separate bonus check is any match calculated with respect to the bonus amount?

Example: $10,000 salary check with 12% deferral and $1,000 bonus check with 0% deferral.  Deferral is $1,200.  Is match based on compensation of $10,000 ($300) or $11,000 ($330)?  Is the answer different depending on whether bonus check is paid on same day as salary check or on a different day? 

Thanks in advance.

I am divorced and our QMCSO requires my ex/children's father to provide health insurance.  He does, through his wife-she carries our children (her stepchildren) on her employer's health plan.  Her employer's health plan is self-insured/self-funded.

My ex is a federal employee.  Public Law 106-394 requires him to either enroll the children under his FEHB coverage or provide documentation that he has other health coverage for the children, which he does through his wife (the children's stepmother). The children are not enrolled in FEHB or any other plan-the stepmother's plan is their only health insurance coverage.

I would like to be listed as an alternate payee for benefits for my kids on her employer policy.  Does ERISA give me that right? I think it does but stepmother's employer says it doesn't because the kids are not her dependents and QMCSO doesn't require her to carry the children on the plan.

Thanks for your help with this.

I have a plan that had a missed deferral opportunity for a rehire and made the correction and lost earnings. On the Sch H of the 5500, it does not seem as I should put it as a late deposit b/c it was not withheld and then not submitted. But just wondering how others are reporting. Thanks in advance.

The division of child support wants essentially the participant's entire account for back child support, and there is not enough left in his account to gross up to account for the 10% voluntary withholding that applies under 3405(b). Under 3405(b), 10% is the default (because this is not rollover eligible) but the participant is permitted by that statute to elect anywhere from 0% to 100% withholding. This does not do much to help the division of child support get the exact amount that they want. 

It seems that this only works if a QDRO may also order the participant to elect no withholding on this distribution so that the plan may pay the full amount "net" of (0%) withholding. 

But I cannot find any guidance or even examples of this being ordered. I figure it must be possible or else child support QDROs have a sort of intractable issue. Has anyone ever encountered this or seen any guidance on whether a QDRO can order a taxpayer to elect not to withhold taxes?

We have three senior executives that are part-time and don't work enough hours to be eligible for the GHP. Two are actually on Medicare. We would like to somehow help pay for the health insurance or medigap coverage they have obtained elsewhere. We realize that direct reimbursement creates an employer payment plan that runs afoul of the ACA. Any ideas? It is my understanding we could increase their taxable wages to help them pay for these individual insurance policies and/or medigap coverage, but that we can't require that the funds be used for that purpose. However, we would want to determine the amount of the increase by doing some research on how much this alternative insurance is costing and base the compensation adjustment on our findings. Would that pass muster?

A 457(b) governmental plan operates under an AXA plan document.  There is an unusual provision in the AXA base plan document.  

“Mandatory Employee Contributions. Notwithstanding section 4.09(a) above, if the Employer has elected Mandatory Employee Contributions in the Adoption Agreement, such contributions shall automatically be deducted from the Employee’s Compensation at the rate or dollar amount indicated in the Adoption Agreement and shall be treated as an after-tax Employee Contribution. If so indicated such Mandatory Contribution shall be to the Plan and be treated as a contribution that satisfies section 3121(b)(7)(F) of the Code. It is the Employer’s responsibility to determine whether this Plan will meet the requirements to be a social security replacement plan.”

 I have no problem with the Mandatory Employee Contributions, but 457(b) plans cannot accept after-tax contributions, with the exception of Roth contributions.  This plan does permit Roth contributions, but the aforementioned provision is very explicit in its reference to after-tax, not Roth contributions.

 What do you think?

An employer currently charges its employees 25% of the health premiums, and pays the other 75%.  Going forward, the employer wants to charge any new incoming employees 50% for health premiums, but have the existing employees continue paying the 25%.  That would result in the existing employees getting 75% of premiums as employer contribution, while new employees would only be getting 50%.  

Is this permissible?  Or is it discrimination?