Participants in government 457(b) plans must sever employment before they can make withdrawals from their accounts.  

Q.:  Does the soon-to-be new law allow for in-service withdrawals upon attainment of age 59.5?

a one person defined benefit plan terminated 10/31/2017. the plan assets will be distributed during the 2018 plan year.  the participant who has more than 10 years of participation and average compensation in excess of 265,000 is at the 415 dollar limit (215,000/12 or 17,916.67).

the plans actuarial equivalence factors are 5% pre-retirement interest and 5% post-retirement interest and the 1994 GAR mortality table.

the maximum lump sum for the participant at the current date (age 65) is limited to the lessor of the pvab calculated using the plan's actuarial equivalence factors  or the 2018 applicable mortality table at 5.5%. 

the pvab using the plan rates is 2,535,730 (17,916.67*141.5291).  the pvab using the 2018 applicable mortality at 5.5% is 2,601,698 (17,916.67*145.2110). therefore the maximum lump sum is limited to 2,535,730.

although the plan terminated 10/31/2017, can an amendment be adopted in 2018 before the cashout date in order to change the plan's actuarial equivalence factors to a more current mortality table?  the goal is to increase the maximum lump sum to 2,601,698 and not have the plan's actuarial equivalence be the limiting factors.

One of the common mistakes resulting in erroneous IRS 2015 ESRP assertions is failure to properly report eligibility for 50-99 or 100+ transition relief on the 2015 Form 1094-C.

I know that box C in line 22 (Section 4980H Transition Relief) needed to be checked along with either code A or B entered in line 23 column (e).

What I'm questioning is whether the Yes or No box (MEC Offer Indicator) was supposed to be checked in line 23 column (a)?

Page 8 of the 2015 instructions could be interpreted either way, what are others doing?

Thanks

I'd thought I'd seen it all, but here's a new one: a company and its CEO have a provision in his employment contract that requires him to get a (sizable) contribution to the Company 401(k) plan for the current calendar year.

The company does not otherwise offer a match or profit sharing or QNEC contribution.  I'm waiting to receive the plan documentation to confirm, but I don't see how this could pass nondiscrimination testing. 

I'll probably have the company revise the employment agreement contract so that the specified amount can be paid another way - but not in the 401(k).  Just wanted to share. Have never seen an outside contract specify a 401(k) contribution before. 

Do you all generally agree that this is a terrible idea?

qualified plan adopted by plan sponsor in 1973 (now a 401(k)).  In 2017, separate (related) company set up, and joinder agreement signed to allow employees of new company to participate in the 1973 plan.  Can sponsorship of the existing plan be transferred to the new company?  The old company will not have employees beginning in 2018.  Owner wants to remove old company from sponsorship so plan is solely sponsored by new company. 

A participant leaves one adopting employer under a Multiple Employer Plan (MEP) for another adopting employer under the same MEP.

The participant has their 401k balance  transferred from the first group to the second group.

Assume that the employers are not a control group or an affiliated service group and that their only nexus is that they are a part of the MEP.

Question. Would the second group need to include this balance in their own top heavy ratio?

Any response would be appreciated.

A CPA firm went from being a PC to being an LLP during 2017.  One partner bought out the other partner and the partner who was bought out has retired.  The remaining partner received compensation that will be on a W2 for 2017 for him, but also had some income on a K1.  I thought I read somewhere that in this case only the W2 compensation is  used for testing, employer contribution calculations, etc., but now can't find anything on it.  Is that true?

Thanks!

I swear the other day when I went to congress.gov and searched the bill there was language in there about opening up hardships to other sources and eliminating the restrictions on 401k gains. I went back today, and nothing?

Did that get nixed??

Participant was fully paid out November 2016.  Received match in March of 2016 and Discretionary nonelective in Sept 2017.

Since it is less than $1,000, we need to force out.

Is anyone aware of a date this must be done by?

I have a small company where the ex-spouse of the owner is still on the payroll.  I just want to make sure my thinking is clear as to if she would still be considered a Highly Compensated Employee due to attribution?

Thanks in advance!

Hello!

I am a newbie and just signed on a 401k Roth plan. I still don't understand the basic math behind my personal contributions.

a) my employers contribution will be always pre-tax [employers match]
b) my personal contribution is after tax when choosing ROTH

To make the calculations fairly simple, let's take an example with an annual gross income from 100k.
Personal Contribution: 6%
Employers Contribution: up to 6% with 100%

TRADITIONAL 401k - PRE TAX:
When calculating the Traditional, it seems pretty easy. 6% from 100k is $6k. The employer match is 100%, which is another 6k. The 6% is taken from the gross. That makes a total of 12k annual contribution from both parties. 12k will be tax deferred and also invested into the 401k Traditional Funds.

ROTH 401 - AFTER TAX:
The employers contribution will be handled like the Traditional 401k. It's pre-tax. That means, 6% from the gross of 100k, is 6k. That money will be tax deferred.

But how is the employee's contribution handled with the ROTH?
6% contribution.. is that 6% calculated also from the gross of 100k?
If that's the case... we would have also 6k that can be invested.. but somehow we have to pay taxes on those 6k before investing, right?

Otherwise it wouldn't be after tax?

So my questions is:

• How and when will the 6% for the 401k ROTH be taxed?
• How is this thing calculated?

100.000 * 6% = $6000 and from the $6000 I'll have to pay taxes?
 

Or is this all wrong.. and do I have to calculate my 6% Roth Contribution after tax... what means.. I can't use the 100k as gross income... instead.. I have to use the 100k for my gross income first, then... minus all the taxes... and then.. what's left over as my net pay... I'll have to multiply it by 6%????

I am totally lost on that... just would like to know how that works!

Thank you so much for any little help,
appreciate it!
 

The partners of Partnership A have created a new Partnership N - with 90%+ the same partners - to buy a business via asset sale.  Partnership A already has a plan for its business.  The purchased company had a plan, and in an effort to make the changeover as seamless as possible to the employees, the partners of Partnership N want to install an exact copy of that company's plan ASAP while they figure out how to proceed in the future now that they have doubled in size.

Does this meet the transition relief standards?  The plan for Partnership A isn't being amended, so if you look at it from there, it might... oh, and of course, this was all first mentioned to me a couple of days ago and is happening 1/1/18. :)

Thanks, and happy holidays!

A 401(k) Participant died in California, leaving behind few assets.  According to the plan, his benefit should be distributed to his estate.

However, in California, if a person dies with few assets, it is prohibitively expensive to open an estate.  Instead, "successors" of the decedent can sign an affidavit pursuant to CA Probate Code Sec. 13100 - 13116.  In the affidavit, the successor basically attests he/she is the "successor" of the decedent, has the best claim to the property, and is entitled to the property.

Our particular Participant has four sisters with equal rights to his property.  On sister has submitted an affidavit with the Plan, claiming 1/4 of his account balance.

Can we make a check out to this "beneficiary" by name?  It seems logical, but the plan says to distribute to the estate, so I don't want to violate the terms of the plan.  We've offered to make a check out to her as executor of the estate, but her attorney will not allow that.  What are our options?

Perhaps it's too much eggnog, but I can't seem to wrap my mind around this issue.

We have a client with 2 plans. One plan excludes union employees. The other covers only union employees. They are in a right to work state and have many employees who have chosen not to join the union. I believe the employees covered by the collective bargaining agreement, whether or not they choose to join the union,  belong in the union plan.

Is that sufficient to make them excludable in the non-union plan testing? Or must they actually be union members to be excludable?

My wife will reach age 70.5 in 2018.   If her initial RMD is deferred until 2019, is its basis the 12/31/17 account value or the 12/31/18 amount?  (She will be converting a portion to a Roth in 2018 so the 12/31/18 value will be less.)

Question 2: When a dividend is declared in December and not paid until January, it does not appear in the year end account valuation.  Must it be included when calculating the basis for RMD?

Thanks,

Michael

Accountant is 50% partner in a LLC

A client of the LLC hires the accountant personally separately from the LLC's work to oversee work related to possible sale of the company. Client pays the accountant separately for this work.

Can the accountant have a pension plan separately from the partnership based on this revenue?

The 14568 Schedule H has this question:

"At least one affected participant is either an owner-employee (see IRC Section 401(c)(3)) or, if the plan sponsor is a corporation, a 10 percent owner of such corporation"

The person in question is NOT a 10% owner (it is a corporation).  They are MARRIED to a 10% owner.  This question makes no mention of attribution, so I am comfortable checking "no" there is no such person involved in the failure.  I looked in 2016-51 and this question is not addressed from what I can see (see 6.09(2)).  I think they would have said "including attribution under 318" if that was what they meant.

Thoughts appreciated!

Payroll employee fraudulently paid herself additional compensation in the form of bonuses, PTO payouts, etc. She was terminated recently for cause, the police were involved and the case is currently in court.

This has apparently been going on for 4 years and employee deferrals and employer matching contributions were made to the 401(k) plan on the stolen amounts.   I have never run into this.

1) Can the plan sponsor make corrections to recoup the fraudulent contributions?  (We know they cannot get repayment of the entire stolen amount from her 401(k), but are asking only with respect to the contributions made in error based on the stolen amounts.)

2) Participant just requested a distribution of her entire 401(k). (Ha!) Can employer delay her distribution until this is straightened out? They are still looking at payroll records, etc to determine the scope of the theft. I believe the prosecutor has asked the judge to freeze her account, but I am not certain if that would be preempted by ERISA?

Any thoughts would be appreciated. I have searched the forum for "Embezzle," "Embezzlement," "Theft" etc., but there are no prior discussions on point. :-)

Thanks!

I am a TPA that received a request from a Financial Advisor asking if participant could get a 30 year principal residence loan (allowed in plan) under the following circumstances:

Divorce situation - spouse doesn't want a QDRO, but he needs the money to pay his (ex?)spouse.

Can't afford to keep his home unless he receives a loan or hardship distribution

Hardships use the Safe Harbor criteria so states 'Costs directly related to the purchase of a principal residence for the Employee (excluding mortgage payments)'.

The loan policy states that the loan can be for 30 years if proceeds are used to acquire a dwelling unit which within a reasonable time will be used as your principal residence. 

He already lives in the house, so I don't think he can do the 30 year loan as he is not acquiring the residence.  So it appears that the maximum loan could be only 5 years.

I don't see a way for him to do either a 30 year loan or a hardship distribution.  Is that an accurate interpretation based upon this information?

Looks like the spouse's lawyer is smarter is getting her the money without a QDRO so she doesn't have to pay taxes on it, but that's outside of my hands.

I've asked for more information to see if there are any other options, such as distribution from Rollover source and/or in-service at age 59.5.  But the Financial Advisor may have already looked into these options.

Thank you in advance for any thoughts/options. 

A participant took a cash  distribution from their 401(k) plan mid year 2017.  The participant accounts are held in individual brokerage accounts, and even though the broker has been working with 401(k) accounts for years, they did not withhold the 20% tax.  They did not consult with us, and paid the entire vested balance to the participant.  The withholding is almost 10,000.  We are supposed to do a 1099R for this.  Who is responsible for paying the tax that was not withheld?  The participant has already spent the cash and part of the distribution represented an unpaid loan to boot.   Should we do the 1099R showing NO withholding or  with the correct 20% amount, and tell the brokerage firm  they owe the tax to the employer?  I need suggestions, etc on who pays the taxes - or if the participant is just liable for them based on their total tax liability for 2017.