Deposits late by deposit date, but they mailed checks a week previous.    Do we calculate from check date or date that it was deposited into the account? 

Did I miss the memo? 

I have a client who has for a few years been taking distributions from his single member plan.  He is older than 59-1/2 (70-1/2 this year as a matter of fact) so there is not premature distribution issue.  We pay the taxes on all distributions in excess of the 20% minimum (33%)... prepare the 1099-R and 945.  Uncle Sam sent him a penalty letter telling him that his tax payments are late!  That he is on a tax payment "schedule"? 

Ok.. how can he be on a "schedule" if he doesn't know when he will take a distribution?  And.. when he does take a payout he immediately pays the taxes... using the EFTPS  system. 

Like I said.. did I miss the memo? 

If any of you are familiar with the FT William document, I have a quick question, please.  I have a takeover plan that used the FT William document.  They are not providing me with an actual PPA restatement Adoption Agreement, but only a snap on amendment for the adoption agreement.  Did FT William provide an actual PPA restated adoption agreement and my client is just not finding it or did they truly only do snap on amendments to the EGTRRA Adoption Agreement?

Thanks

2017 year, client makes a lot of money.  He has a DB/DC Plan for his consulting income.  He is over 50.

In day job he defers $17,500.  

How do I determine if he can defer $500 or $6,500? 

Does he have to communicate with benefits department of day job to determine if any of $17,500 was treated as a catch up 401k contribution?

Thank you

My client is a 501(c)(3) organization eligible to maintain a 403(b) plan. Even though the plan provided for salary reduction contributions, they had never been implemented. There are a couple of other operational errors as well. The client has raised the following questions: (1) can the user fee be paid from plan assets? and (2) can the correction of QNECs equal to a default of 1.5% of compensation plus earnings be credited to the plan using plan assets? I am inclined to say no to both questions.

I've been retired for more than a decade, so my legal and technical skills are pretty rusty.  But suddenly, it seems, I have the need (opportunity?) to put them to use once again.

My spouse just retired after working beyond age 70 1/2 and has not been subject to RMDs until now.  The plan is to take a lump sum of $105,358 from employer's defined benefit plan.  The payment election form states that the RMD is $7,599, which is not eligible for rollover.  This represents the correct amount under under Section 1.401(a)(9)-6(d)(2) (the annuity method).  Using the 6(d)(1) (individual account method) the RMD would be $4,115.

The plan document does not state which method the plan will use (although there may be some ancillary document I have not seen).  If memory serves me right, the annuity method (which is almost always far less favorable for the participant) is very uncommon.  I am trying to determine if the plan sponsor has formally adopted this less favorable annuity method.  From a plan perspective, I can think of no reason why a plan sponsor would knowingly disadvantage a participant.  In the meantime, I have two questions.

1.  Section 1.401(a)(9)-6(d) is written in a way that suggests the individual account method may be the default if no method has been formally adopted.  I say this because subsection 1 says the RMD "is determined by treating the single sum distribution as a distribution from an individual account plan."  Subsection 2, on the other hand says the RMD "is permitted to be determined by expressing the employee's benefit as an annuity."  If no method has been formally elected by the plan sponsor, does the individual account method automatically apply?

2.  The responsibility for determining the RMD ultimately belongs to the payee, not the plan sponsor or the administrator.  So, if the administrator distributes the larger amount to the participant, could the participant rollover the excess of the annuity method over the individual account method as a 60 day rollover.  In other words, does the choice of methods ultimately belong to the participant who is the one responsible for satisfying 401(a)(9) in the end?

Thanks for sharing your thoughts!

Good Afternoon -

I should know this answer, but I'm unsure and was hoping I could get some thoughts from this board of experts.  401(k) plan has the language in it where divorce or legal separation does not revoke the beneficiary designation.  Participant completed beneficiary designation naming his spouse (at the time) as the primary beneficiary which I know is required unless waived.  Participant gets divorced a couple years back and plan never receives a QDRO.  Participant subsequently remarries and dies shortly thereafter.  There is no one-year marriage rule in the plan.  Participant never completes a new beneficiary form prior to his death naming his current spouse.  Who gets the money?  I can argue both sides which I'm going to blame on a long week.

Thank you!

I know this is true for 401(k) and 403(b) plans , but can someone let me know if there could be (2) plan providers for a church plan? And also: Are only conduit IRA's allowed into the plan?

Hi,

In 2017 I  created a solo401k for my c corp where I am the sole owner/operator. I then maxed out my solo 4o1k. I closed the corp at the end of 2017 and created a new corp, which is now a s -corp. Ascensus sent me a form that effectively rolled my plan over. It is the same plan with a new corp name and a new FEIN.

I hired Ascensus to create the boilerplate solo401k plan and they do very little administrative work. They felt that  I did not have to send the IRS a 5500ez stating that the 401k was terminated. But now I am starting to get nervous that they are wrong. I believe I have until July to figure this out. Can anyone help me out here?

I have a plan with 5,000 plus EEs in it.  The previous admin put it into Relius years ago, then took it out and did everything manually for the past few years.  I have been working for months getting it back into Relius.  Plan eligibility is 21/1 M.O.S./monthly entry dates. 

When I run the ADP test, Relius is not agreeing with my excludable EEs and I wonder if it's because the complete history is not in Relius.  Relius is excluding 300 plus people I think should be on the test. For example, one person has a date of hire of 5/15/2016. Date of term is 8/7/2017.  Did not work 1000 hours in 2016 or 2017.  Is that why Relius is excluding them?

But then, I have someone who hired on 5/16/2016, and worked 930 hours in 2016 and 1,000 plus 2017 and term'd  after July  2017 it's excluding them as well. 

Third example, someone hired on 5/16/2016 and worked 1000 hours in 2016 and 2017 and term'd after July 2017 and they are excluded.

I might be getting confused with this because it's such a huge plan. Not sure if I should just go with what Relius is spitting out or change 300 people to be on the test ...

Thanks!! 

To all that it applies. I am so graciously thankful for my mom. She may be in her 90s, but I have been so blessed, and so lucky I can still take care of her at home. well worth the time and effort.

God has been so good to me!

Quick question.

Is the choice to disaggregate otherwise excludable employees or to test nondiscrimination using full year compensation vs compensation earned upon entering the plan a settler function? Since these choices are not choices to select in the adoption agreement but rather granted for use in the basic plan document.

We recently had a discussion about when it is logical to suggest a cash balance plan instead of a traditional DB for a 1 person plan.  I presented two, off the top of my head, reasons why I thought it not in the client's best interests to go the cash balance route: the fact that cash balance plans have been individually designed plans (and hence both more expensive to maintain and providing less protection, on audit, than a volume submitter plan) and the fact that in the event of death the strong recommendation of document providers is to either submit a 5310 or (eventually) amend and restate under a volume submitter plan.  In any event, both of my objections will soon evaporate when CB Volume Submitter plans become available.

But I got to thinking and there are other reasons.  One of the arguments put forward in favor of the CB plan is that the client understands the CB plan better because, in general, the contribution equals or is close to the defined CB allocation.  In technical terms, each year's contribution consists largely of target normal cost and there is precious little based on the funding target.  But that pattern is notoriously unforgiving.  In fact, a traditional formula allows the consultant to design a funding pattern for the first few years of a plan that is based on the cushion under 404.  This subsequently allows for tremendous flexibility in funding in later years, which means no worries of minimum funding violations, while at the same time allowing for substantial maximum deductible contributions.  Can this pattern come to be in a CB plan?  Of course it can (although it is much more difficult to do so if the client has been told that focusing on the current year's formula means something).  But it obliterates the argument that the CB plan is more understandable because the annual contribution is closely related to the target normal cost.

As Larry so accurately pointed out, while a client might understand some of the concepts that impact a plan, unless the client is a pension professional, it falls on us to actually understand those concepts and to implement them in a way that allows the client to meet their goals, both short term and long term.

Another concept might help to explain my attraction to the traditional plan: the CB plan essentially overlays the CB requirements over the traditional plan's ruleset.  Stated another way, all the rules of the traditional plan (with the exception of 417(e) and a faster vesting schedule that has no impact on one person plans) remain in effect when the plan is a CB plan (415 limits, minimum funding, 404 funding, restrictions on distributions if the plan is not adequately funded, accrual rules under 411, etc.).  On the other hand, none of the CB rules are in effect when the plan is a traditional DB plan.  So, why would you want to worry about 2 sets of rules when you don't have to?

Here is an example.  When CB plans were in their infancy, the IRS allowed interest crediting rates that were eventually determined impermissible.  The IRS gave us leeway on how to transition from what ended up being described as impermissible rates to the newly defined permissible rates.  Why subject a plan sponsor to that kind of issue if you don't have to?     Think it can't happen again?  Yes, it can.  Of course, that same thing can happen to any plan design, but it is much less likely to come up with a traditional design than a cash balance design.  Again: the plan is subject to two rulesets (traditional AND CB) when it just doesn't need to be.

And yet, there is more.  A cash balance plan has to do additional work to convert hypothetical account balances to J&S annuity values when preparing relative value disclosures.  Those J&S annuity values, when based on traditional formulas, either automatically pop out (if they are expressed in the normal form) or are dead simple to convert. 

I'm pretty sure that this missive won't change anybody's opinion about the type of plan that's best for a one person plan.  But for me it is simple. If a traditional plan can be designed to meet the needs of a client then suggesting a CB plan unnecessarily subjects the client to rules that they wouldn't normally have to worry about and, at some level, exposes them to additional costs.

Only if there are offsetting advantages would it make sense to advocate for a CB plan.

I have a startup 401k effective 1/1/2018.  Def and safe harbor nonelective with an effective date of 6/1.  Definition of compensation is participation comp.  Does the safe harbor nonelective get calculated on compensation from 6/1 or full year for participants with an entry date of 1/1?

Are people applying the new rules regarding casualty losses that it has to be in a declared disaster area?

It seems bazaar and likely to be corrected soon.  In the meantim if someone's house burns down, are people telling that participant they are not eligible for a hardship? (assuming the fire was started by lightning strike in a regular storm).

Is it permissible to spin-off a portion of a safe harbor 401k plan to an identical safe harbor 401k plan for a calendar plan year after January 1st of the current year with an effective date of January 1st to avoid a plan audit for the 2018 plan year? Safe harbor mid-year amendment issues?

I have a situation where Husband owns 100% of one business and Wife owns 100% of an unrelated business.  Husband's business maintains a 401(k) plan for it's employees.

Wife is an employee of Husband's business.  They have a pre-nuptial agreement regarding the ownership of their own businesses, so there are no "direct" ownership issues.

We have told them the two businesses are related because they do not qualify for the exception under IRC 1563(e) because the Wife is an employee of Husband's company.  She is also a participant in the 401(k) plan her Husband's company maintains...probably the reason she's an employee in the first plan, but that is besides the point.  They have come back an said the conditions under 1563(e)(5)(B) are satisfied even though the Wife IS and employee of Husband's business since she "does not participate in the management" of the Husband's business.  Their interpretation is that the "and" underlined below means both conditions must be satisfied (employee and participate in management) for the condition to be considered not met.

1563(e)(5)(B) 

The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year;

I do not see anything in the Code or Regulations that clarifies this point.  I have always interpreted this section to mean that if a spouse is an employee or director, the spousal attribution exception does not apply.  I would read the part about not participating in the management as a separate condition.  None of the articles I can find on the subject address the "management" language in 1563(e)(5)(B).

Seems contrary to the general intent of the rules around spousal attribution to say the spouse can be an employee and participate in the plan, but the spousal attribution rules can be ignored as long as the sponsor is willing to say the spouse doesn't participate in the management of the sponsor.

Anyone have thoughts on this?  Authority for either position? 

A participant owns 50% of the company and recently retired. The participant wants to take a full distribution.  Per the most recent annual report, the account balance is about 44% of the total plan assets.  I'm concerned that a full distribution from the pooled account might affect the rest of the participants’ account balances negatively. Any concerns or issues with allowing the distribution? Thanks in advance. 

Can an employer require employees to take a certain election through a 125 plan?  If it's a requirement, then isn't it not an election anymore?  The employer with the union and the CBA can create the cafeteria menu, but can they force an employee through the cafeteria line?

If the CBA states: " fringe benefit 1, fringe benefit 2, and fringe benefit 3 are the responsibility of the employee through the 125 plan".  Employer states, there will be a mandatory wage deduction for benefit 1,  because the union has "elected" option A on your behalf without any express authorization, doesn't this violate the principle of 125 plan choice?

Thank you in advance for your thoughts.

Are student trainees (18mos visas) and interns (12 mos visas) working in the US under a J-1 Visa (who are subject to Fed and State taxes but generally exempt from Medicare, Social Security and FUTA taxes; limited as to the work they can perform) considered "employees" for purposes of service credits and eligibility in a retirement plan?  As I understand it, the J-1 Visa opportunities are temporary and are permitted with the understanding the training will then be taken back and applied in their home nation, intended to be a cultural experience.

Client hired a J-1 Visa Student Intern/Trainee in May 2015. While "interning/training" with the Client, she applied for political asylum and was given a Employment Authorization Card late 2015/early 2016. She was then hired by the Client effective 2/6/2016. Each year she renews the Employment Authorization Card, continues working for the Client.

QUESTION, is her Date of Hire for Eligibility determination (and service crediting purposes for Vesting) May 2015 (date started interning/training under J-1 Visa) or Feb 2016 (bc now has Employment Authorization Card the Client was able to offer and she accepted Position as an employee)?

For what it is worth, 2016 and 2017 tax returns were filed as Resident Alien; 2015 was filed by her scholarship program and she does not know the basis of the filing.

Thank you!