New Jersey established more that a half century ago a Supplemental Annuity Collective (SACT).  During this period SACT has offered two plans:  A 403(b) arrangement for qualified employees and an after-tax arrangement for all employees, including qualifiers for the pre-tax 403(b).  The investment menu is the same for each plan.

Q.:  A retiree has contributed to the after-tax plan for 35 years and wants to effectuate a rollover of his entire balance to a Roth IRA----is this a permissible transaction.

Seems like a simple question/answer but I'm not finding the citation I want to back it.

For purposes of this question, let's ignore proper loan limitations. So, you have a 50,000 account balance, and you take a 50,000 loan. Now you want to rollover 50,000 from your IRA to the plan to repay the loan. All money is pre-tax.

Problem with this is you just got 50,000 without ever paying tax on it, nor will you, since the loan is now repaid.

Must be post-Super Bowl/Monday fog, but I'm not finding the correct citation. Any bright ideas?

I was curious as to what 6 digit IRS Business Activity Code non-producing TPA firms are using. I have seen both 541219 and 541990.

Thanks.

Imagine a profit-sharing plan that allows § 401(k) elective deferrals, and allows a matching contribution.

A participant shares in a year’s matching contribution only if the participant is the Company’s employee on the last day of the year.

The plan narrowly defines the Company by naming only one organization, and ignoring its dozens of affiliates.  (The volume-submitter document states a “member” of a “controlled group” or an “affiliated service group” does not participate unless it adopts the plan with the plan sponsor’s approval.)

A worker who was the named Company’s employee for the first three quarter-years of 2017 became, on October 1, an employee of a non-U.S. organization that is the Company’s 100% wholly-owned subsidiary.  This worker is a citizen only of the USA.

Under a surface reading of the plan’s document, it seems this worker is not entitled to share in the matching contribution for the year ended December 31, 2017.

But is there something I should look for in the 128 pages that might support treating an employee of the subsidiary as an employee of the Company?

And if there isn’t, is it feasible now to amend the plan (without unraveling any tax-qualified treatment) to allow the transferred employee to share in 2017’s matching contribution?

Hi all. A new client has a 1 participant MP Plan since 1999 but has treated it like a PS Plan.  The MP Plan Adoption Agreement is marked 25% of pay, but he has always varied contributions and skipped years sometimes making no contribution.  He self-administered and thought he was doing things correctly.  There's a signed PS Plan Adoption Agreement in his filed but it's marked "not used" which I know matters not.  I think whoever was advising him screwed up and got things backwards.

He has never had any employees.

Then I discovered a section of the Adoption Agreement  which says:

Benefit Adjustments(Optional)

_X_ Notwithstanding the above, $0.00 is the minimum contribution for any

Participant. (If Forfeitures are reallocated, any such reallocation shall be in addition to this amount.)

____Notwithstanding the above,$________ is the maximum allocation (including the allocation of any Forfeitures) for any Participant.

Any ideas on what should be done now?  Or if anything should be done about the past?

Thanks,

RayJ

An employee was a nonresident alien receiving non-US source income for a few years.  He comes to the United States, and is no longer a statutory exclusion for plan purposes.

Does his service during the period prior to his change from a statutory exclusion to an eligible employee class count toward determining his plan entry date and determining his vesting service?

Thanks!

I have a client that wants to excluded commission only sales people from benefiting.  The plan passes coverage as some of these sales guys are HCE's.   The plan also passes the average benefits tests and the rate group tests.  The only test that is failing is the gateway test.   My question is do we need to benefit the lower income sales people at 5% to meet our gateway requirements?

This is the 72(t)(2)(A)(v) exception. Any reason this wouldn't apply to a loan offset distribution (not a prior deemed distribution) upon termination of employment? I don't see any basis for saying this wouldn't apply, but we have a State tax department giving someone a hard time, so I thought I'd see if I'm missing something...

Thanks.

I am working with a plan that defines plan compensation as 3401(a) compensation. The plan covers a couple of Puerto Rican residents/participants. Their compensation is reported to Hacienda. Does this compensation constitute 3401(a) compensation? We're trying to do some clean-up and want to determine if we have an issue on the U.S. side.

Thanks to any who can help!

Dog

We have an engineering client who operates a SARSEP -- a type of plan with which I am not very familiar.  The SARSEP requires a new employee to satisfy the 3/5 rule for eligibility.  This is not attractive new prospective employees with years of experience.  Two questions:

1) Can an employer amend the SARSEP to allow earlier eligibility and, if so, do the eligibility requirements have to be the same for all non-excludible employees?

2) Is there any sort of industry standard for eligibility under a SARSEP?

Thank you!

I'm hoping has input on what would happen procedurally here.

Employer distributes W-2s to employees on time. Employees file their individual tax returns, accurately reflecting information on W-2 provided to them, with no problems. (Several hundred employees; not just one or two.) Several years later, IRS sends penalty notice to employer saying SSA/IRS have no W-2s on file for the tax year. Employer insists they were submitted to SSA. Payroll tax reporting was filed and withholding was remitted to IRS during the year in question.

My question is this: When the employees file their personal returns showing W-2 wages, but the IRS has no record of that W-2, would that alone generate a letter/error indicating that the IRS's information doesn't match what the employee reported?

Hi

I have a client who is located in Rhode Island, they are subject to the mandatory State Disability Insurance (SDI).

My question: Is SDI included in Box 5 ( Medicare wages and tips) of the W-2  or is it excluded from the amount. The RI-SDI is separately listed  on the Form W-2 in Box 14, leaving me with this question when calculating Gross Compensation for the 401(k) Plan.

Any help is appreciated.

-Silver

Employer sent employee’s last 2017 Simple IRA contribution to financial institution but it was never received. The book keeper realized it (2 months later), but was told by the financial institution that they could not accept the employee’s payment for 2017 any longer. The book keeper called the IRS but could not find anyone to answer how to fix this issue. The IRS Simple IRA fix it guide states to “Make corrective contributions for each employee equal to the missed earnings for the period the deposits were late.” However, if the missed payment is sent in, it will be applied to the following year. How will this affect the employee? His W2 states the full amount of his contribution, but the financial institution will not include the late payment for 2017. Instead, they said it will be applied to 2018. Are they correct? How should this issue be corrected? Thank you in advance for your reply. 

I have a participant that terminated employment in 2015.     The employer allowed him to make personal payments on his 401k loan.    The last payment he made was in January 2017 and according to the recordkeeper's amortization schedule that payment paid the loan up to April 2018.     Now he wants to make another payment.    Can he still do that since it's been over a year?   I thought there had to be at least a quarterly payment.  

Is there any issue with unfreezing a plan and soon thereafter (maybe a month) terminating the plan?

Thanks for any responses!

TCJA changed Code Section 165(h) of the law that defined a casualty loss. That same section of the code is referenced in the safe harbor hardship rules. Under the new language, expenses for repair of damage due to a participant's principal residence would not be available for hardship unless included under a federally declared disaster area.

Are folks modifying their safe harbor hardship procedures to restrict casualty hardship to comply with this?

Hello All,

At a TPA firm I worked at previously we had an excel spreadsheet and checklist that we used and were so helpful when completing testing. The spreadsheet ensured that you knew what your compensation totals (415, ADP, Gross, Pre-entry, etc.) and deferrals/catch-up totals should be in the beginning. As well as, the checklist made sure all testing items were addressed before having it reviewed. Unfortunately, when I left that company, I didn't keep any copies and the place I work at now, doesn't have such beneficial tools. Does anyone have any that they are willing to share?

Thanks bunches in advance!!

Rehire and no records to tell if they had a vested account balance.

A company was bought years ago and their plan merged with our plan.  We got good records for 2013.  But nothing prior.

If he had a vested account balance, he is immediately eligible on rehire.

What would you do in these circumstances?

Facts:  Sole proprietor (SP) uses cash basis accounting and calendar year tax year.  2017 Compensation (i.e., Schedule C net income minus deductible SE tax) is $100,000.  2017 Minimum Required DB contribution is $150,000.  2017 DB contribution deadline is 9-15-2018. 

Timeline:

4-10-2018      SP makes DB contribution of $80,000.

4-15-2018      SP files 2017 tax return claiming $80,000 DB contribution.

6-1-2018        SP makes DB contribution of $70,000, which he’ll deduct on 2018 return.

Question:

Can the $70,000 DB contribution on 6-1-2018 be deducted on his 2018 tax return (assuming he has at least $70,000 of Compensation in 2018), but be used to satisfy his 2017 Minimum Required Contribution?

Thank you in advance for your input.

A have a couple of questions related to PEOs that I hoping to get assistance on:

1.  Can the owner of a company and all of his employees be considered a common law employee of the PEO organization that is then a leased employee of the company?

2.  Can the company adopt its own retirement plan?  If so, are there any issues with this?  I assume it would depend on whether the PEO organization currently sponsors a retirement plan and what the agreement between that company and the PEO currently states, correct?

Thank you!