I'm working on setting up a new combo plan for a one-person sole prop business.  Halfway through, I realize that there is no EIN for the sole prop business.  The sole prop rightly does not want to use their SSN on the plan documents, so I recommended that he get an EIN for his sole prop.

Then I get is an email from the CPA saying that they created an LLC (taxed as a sole prop) effective 12/1/24 and got an EIN for that, and that should be the plan sponsor.

I'm not sure this solves the problem.  Can I say that ALL the 2024 income is counted under the LLC?  I guess it will depend on what's on the Schedule C.  And can I even use the full 2024 limits if the LLC is the only sponsor of the plan (I get tripped up on the pro rating rules, even when following along the EOB)?  I thought of having the original sole prop also adopt the plan... but then I'm back to where I started with the sole prop not having an EIN so I have to use the SSN on the plan document (though not on the 5500-EZ, so maybe that's a little better).  All my projections are of course based on his full year expected compensation.

Is there a solution here?  Or is it not a problem at all?

Thanks.

 

I was divorced a year ago with a Qdro separate interest with annuity at fifty percent, My husband passed away at 65 before retiring. I am listed as surviving spouse but Plan Adm tell me that because i am already receiving annuity i am no longer considered surviving spouse. I never signed any consent form to give up my surviving spouse rights.

Plan currently has a retirement age of 55.   They allow installments if you are retirement age when you separate, otherwise lump sum.  Sponsor wants to change the retirement age to 60.  My question is, can that be done retroactively for all current participants?  or must it only be allowed for new monies deferred after the amended change?   It's not accelerating a payment and trying to track what and when someone is paid if they separate is going to be very cumbersome.  I appreciate any thoughts on this. 

Parent passed away and adult child passed away shortly thereafter.  We are still within the 9 month disclaimer period from parent's date of death.  The estate of the child wishes to disclaim IRA so it can pass other beneficiaries.  Custodian says this can't be done.    Are they correct or can the estate disclaim because we are still in the disclaimer period?   If possible to disclaim,  any citation or other guidance  to give the custodian would be appreciated.       

Does the employee need to make have an RMD processed.  Individual is 75 opened a Solo 401k in 2024 and made a prior year contribution for 2023.  The question is do they need to make RMD distribution for the 2023 year.  If so, how would it be calculated since the prior year balance is $0.00.

I'm considering taking over the administration of three plans that are part of a controlled group. 

All plans have the same plan year-end, none of the plans are safe harbor, and all use the current-year testing method.

Plan A - The profit sharing formula is integrated with Social Security, and they plan to allocate a $40,000 contribution.  There are 3 employees (all eligible) in total, 1 is an HCE, and 1 of the 2 NHCE's also works for Employer B.

Plan B - The profit sharing formula is cross-tested, with each participant in their own group, and they plan to allocate a $100,000 contribution.  There are 100 eligible employees, of which 21 are HCE's, and 79 are NHCE's (the 79 includes the 1 employee that also works for Employer A).

Plan C - no wages were paid by Employer C during the plan year in question, therefore there are no contributions.

How would these plans be tested:

• 410(b) test on the 401(k) Deferral component - should the plans be aggregated for this test, or should each plan run its own test?

• 410(b) test on the Non-Elective component - should the plans be aggregated for this test, or should each plan run its own test?
• 401(a) - should the plans be aggregated for this test, or should each plan run its own test?
• ADP test - should the plans be aggregated for this test, or should each plan run its own test?

I see a few issues here already, but before I go down a rabbit hole, I'd appreciate any input on how to move forward.

Thanks in advance.

I have a plan that was not designed in a manner that works well for the business.  Eligibility is immediate and 95% of employees are seasonal/part-time and in college.

Regarding automatic enrollment in 2025, can the sponsor use the employee's initial opt-out from when they were hired as an election to defer 0%?  Or does there need to be a formal (in writing) opt-out following the EACA notice that was distributed?

We have an S-Corp who is telling me that the owner is no longer going to be receiving a W2 and instead receiving K-1 income.  Is there a way to utilize the K-1 income for the salary?  Just trying to help the client.  I've read that K-1 can only be used if it's a partnership, but I wasn't sure if that was accurate or not.

Thanks in advance!

Here is the situation:

* LLC sponsors 401(k) plan.

* S Corp owns 100% of LLC.

* S Corp is selling 100% of LLC's assets -- including the name of the LLC -- to three current individuals/employees as of 12/31/24.  The three employees will become equal owners/members of the LLC following the asset sale.

* The three individuals will assume sponsorship of the plan and continue to operate the LLC and the plan under the same names.

Have I thought this through correctly?

1. Documents need to be drafted, stating that the three individuals will operate the LLC under the same name and will assume sponsorship of the plan.

2. This transaction will constitute a continuation of the plan (i.e., no distributable event, crediting of service will be required, etc. as if this was a corporate stock sale).

3. The plan does not need to be restated and the plan will file a 5500 as a continuing plan.

4. No formal transfer agreement is needed . . . . Just documentation stating that the new buyers/owners of LLC will accept all assets/liabilities associated with the plan.

5. Am I missing something?  Do I need to obtain additional information and/or take any other action in connection with the transaction?

Any help/insight would be appreciated.  Thanks.

We got a question on a situation where this occurred. The employer wants to know if they can get a refund. Large plan 5500.

I've never even had a discussion with anyone who has seen this specific situation. 

First, in a situation where a form has been filed late, but not under DFVCP, I've seen a good deal of discussion where the recommendation is to file an amended form ASAP, checking the box that it is being filed under DFVCP, and filing ASAP under DFVCP. Folks appear to have had success with this, even if a CP283 has been sent. Agree/disagree? But now the question is whether that option is still available if the employer already paid the CP283 penalty? And if so, how does the employer go about requesting a refund? Sending what we used to call the "tear stained " letter? If so, I think they need to engage the services of someone with direct negotiating experience in such situations. 

Appreciate any thoughts. 

So, has anyone done a plan termination lately with TIAA where assets are in individual annuities? We haven't for quite some time, and there were, to say the least, difficulties.

When you are terminating a plan, the participant has to be given the option to get a distribution, or roll over the funds. But TIAA "requires" (or did require) the participants themselves to call TIAA if they wanted to surrender. And participants frequently won't bother to do this in a timely fashion. 

Do you know how they handle this now? And do you by any chance have the contact information for a person at TIAA who actually KNOWS something and is willing to discuss how a plqan termination can be handled in this situation so that a final 5500 can be filed?

Thanks in advance! 

We have a 403(b) Plan that is a multiple employer plan (MEP).

Under SECURE 2.0, new 403(b) Plans (established after 12/29/2022) are required to include auto-enrollment/auto-escalation.  Would this apply to new employers who join the MEP?  The MEP itself is not a new plan, but would a new employer who joins the MEP be considered to have started a new plan by joining the MEP?  Are there any exceptions or ways out of this new requirement? 

While different employers in the MEP do have some flexibility regarding the MEP, its much easier if the MEP is mostly uniform across all participating employers (so having auto-enrollment/escalation for some and not others makes it more complex to administer).

While we're at it, is there any way around the Long-Term Part-Term rules?  I don't think so, but figured I'd ask while I'm here.

EDIT:  According to Notice 2024-02 (https://www.irs.gov/pub/irs-drop/n-24-02.pdf), it looks like an employer joining a MEP after 12/29/2022 is treated as starting a new plan.  There is a possible exemption if the employer joining the MEP already had a pre-12/29/2022 plan and is treated as merging into the MEP, the employer can treat the MEP as a continuation of the older plan, rather than a new plan.  I think this answers my question -- whether you agree or disagree I appreciate your comments!

A 401k plan allows for voluntary employee contributions (i.e. after-tax) and the plan matches voluntary employee contributions.

Are there any regulations that would stop an employee from making voluntary employee contributions, receiving the match, then taking a withdrawal of the voluntary employee contributions the next day? Essentially a strategy of obtaining the match then getting their contribution back immediately. 

I understand the document would have to allow it and ACP testing needs to be passed, but is there a regulation that say's this cannot be done?

Thanks

I've got a plan that is currently using the 3% safe harbor NEC, and they want to add a small match as well.  This is a plan that historically gives bad data late, so I'm trying to think of ways to deal with the 3/15 ACP deadline.  I was thinking that if I added it with prior year testing, then all I really need to do is get HCE data by Feb or so and then I can do the ACP test by 3/15 and deal with the rest of the census data as we get it.

I don't do a lot of prior year testing, so I'm not sure if that would work.  If it's added for 2025, what NHCE ACP rate do I use for the 2025 testing?

Thanks.

Has anyone here explored outsourcing 401(k) administration work or considered setting up a back-office team to handle the workload? I’d love to hear about your experiences, challenges, or any best practices you've come across.

For those still exploring options or facing hurdles, I’d be happy to exchange ideas and discuss potential solutions. Please send me private message.

Thank you!

I've got a pre-enactment MEP (established years ago).  New Company G started up in 2024, wants to join the MEP effective 1/1/25.  They have 15 employees.  It seems like we get to use the 3-year grace period here for G and they don't have to start automatic enrollment until sometime in 2027 (or 1/1/28?).  Am I interpreting this correctly?  Or at least reasonably?  Putting aside the wisdom of doing it from the start for the moment...

In 2023 the DOL revised the methodology for counting participants for the small plan audit waiver so that only account balances must be counted. Does anyone know if there has been guidance as to whether that new "small plan" definition would extend to the safe harbor for remitting elective deferrals?

Guy works April to November every year.  Turned 73 this year.  Since he is not employed on 12/31 does he have to take an RMD?  Do service spanning rules apply here?

Hello. We have a nonqualified deferred compensation plan for our HCEs. I’m a bit confused as to how we determine eligibility as I feel that it somewhat conflicts with eligibility for our regular 401(k) plan that HCEs are not eligible for. Our qualified 401(k) plan excludes HCEs based on the IRS’ definition of an HCE (not a 5% owner and did not earn greater than 150k in 2023 (for the 2024 plan year)). Our adoption agreement clearly states that HCEs are excluded from the plan. 

My question- How does this work for new VPs or executives that we hire in 2024? Are they eligible for the regular 401(k) plan since they do not meet the HCE definition yet? Or are they eligible for the nonqualified plan? The eligibility for the nonqual plan is for ‘a select group of management or HCE as defined by the employer.’ Our 401(k) administrator is telling me that these new hire VPs and execs should be eligible for the regular 401(k) and should be given the opportunity to elect since they do not yet meet the definition of an HCE. I do agree with this statement since the only employees excluded from the regular 401(k) plan are HCEs in our plan document. We did not elect the top paid group election for our non discrimination testing either.

So where I’m confused is that our administrator for the nonqualified plan on the other hand is telling me that new hires who come in and are in the top 20% of employees current compensation would be eligible for the nonqual plan. But he also says that eligibility is ultimately determined by the company. I understand that these VPs may be eligible in their first year, but may no longer be the following year if we are basing it off of their income in the previous year or ownership and they are determined to be an HCE.

I don’t want to be out of compliance in regards to our regular 401(k) and want to make sure we are offering the plan to non-excluded team members even if they are VPs and above. So based on the info I provided, would they be eligible for the traditional 401(k) plan (until it is determined they are an HCE) or the non-qual plan? I’m getting two different responses, from both administrators so any input would be appreciated!

During divorce participant was supposed to roll over a portion of retirement into the ex-spouse's designated account.  The participant filled out a QDRO from the third-party administrator for a 457 (b) non-government account.  The participant did not let the ex-spouse or the court know that this was a non-qualified account.  The court processed the QDRO only to later find out that the funds could not be rolled over into the ex-spouse's designated account.  The court then ordered another QDRO to return the money to the participant's account.  The employer then refused to return the funds to the participant because the ex-spouse was not a high-earning employee of the company or any employee of the company.  The third party should not have approved the original QDRO to begin with because the participant was not transparent with the order of the court stating the funds need to be rolled over into a designated account.  Should the court rescind the original order for the funds to be placed back into the participant's account? To complicate things, the participant terminated employment shortly after the funds were placed in a parallel account, not the ex-spouse's designated account, her IRA.