IRS permitted individuals to file 2016 tax returns without answering the ACA penalty question (so if you owed the penalty you didn't have to fess up and pay with your tax return).

Have they done any follow up with those taxpayers or does it appear nobody had to pay for 2016?

I know they keep saying the penalty is still in effect but wondering if enforcement has slacked off.

Hello,

Started a C corp recently and am looking to set up a Solo 401k plan as I have no employees so far.

Have the following questions:

(1) For employer profit share, do I need to have profits or can I make contribution, which is 25% of W2 wage, from reserves/capital etc.? I know the term is profit share but then it is 25% of employee compensation and not a % of profits. Hence the question.

(2) How soon after I pay myself do I have to transfer funds to Fidelity, both profit and employee contribution?

(3) What happens when I hire employees? I understand that I'll need to close this solo 401k account? what is the process? If i hire employees in the middle of the year, can I still make employee and employer contribution for part of the year?

Thanks for your assistance.

Annuity payments, by default begin on 1st day of month following the month of the annuitant's 85th birthday. Unless a change is requested 30 days prior to 1st annuity payment, annuitant will receive monthly payments for life 10 years certain. Owner may request a change of the method of payment  or extend the annuity date delaying any annuity payments. Is a Florida insurer required to provide prior notification to owner of his or her rights or is insurer only required to provide notification if contract requires or prospectus requires?

I have a situation involving a 2005 employment agreement that makes severance payments (to be paid in installments over 18 months) contingent upon a release of claims being signed no later than 45 days following delivery of the required release by the Company but without any other of the necessary release timing provisions in 2010-6 / 2010-80.  (A copy of the form of release required was provided as an exhibit to the employment agreement so I think an argument could be made that the executive was generally provided the required release as of termination; however, that form was not personalized.)

The individual has already been terminated so we do not appear to have the ability to correct the provisions without penalty per 2010-6.  A large portion of the severance (but not all) is exempt from Section 409A.  If we cannot find a basis for claiming the release timing provisions satisfactory and must pay an excise tax, can we exclude the severance amount exempt from 409A from the excise tax calculations or is there any concern that the entire severance benefits may potentially be subject to the excise taxes since the entire employment agreement / severance payments are not exempt.  Thanks  

Client has approx. 5000 employees.   There is very high turnover within the first 90 days of employment (about 40%).   The client permits date of hire enrollment so 401(k) sign up happens during completion of new hire paperwork.

QUESTION: Can automatic enrollment be added to the plan that such that participants become automatically enrolled first of the month after their 90th day of employment?   Therefore, anyone who's made it through the first 90 days and hasn't completed a 401(k) election would then be automatically enrolled.

Thanks!

We have a 457(b) Plan (tax-exempt, not governmental) where we want it so money in fixed-rate funds can be distributed 3 ways but money in mutual funds can be distributed in several additional ways.  Is this ok?

Has anyone experienced a recent DOL audit concerning Required Disclosures to defined benefit plan participants at time of termination, periodic statements to deferred vested participants who have not  yet reached NRA, and to participants once they reach NRA?  In addition to a copy of the SAR and SPD documents, what do they audit to determine if we have complied with actually mailing out the documents?   Apparently,  there has been a complaint that we have failed to provide periodic statements (SAR, SPD, and benefit statements) to deferred vested participants by a participant whose address has not change in the 15 year period since he left the company (no excuse for bad address).  The previous employee responsible for doing so worked here for over 25 years and basically documented nothing concerning the mailings.     Could you please clarify exactly what documents are to be mailed to deferred vested participants, when and how often in a defined benefit plan and how proof of mailing each category should be documented.   Thanks!

Small 401(k) plan intended to terminate plan and merge assets into a PEO plan a couple years ago.  Client never paid for final reporting (including 5500), or termination documents and did not respond to requests for information/payment.

Two years later client receives a letter from the IRS requesting filing of the 5500 for that plan year.

We can certainly do the final reporting and have started the process.  During a review of the transactions, we discovered that one of the participants (also an owner) is missing $509 in salary deferrals for that final year. 

So, there are document issues to fix, along with the missing deferrals.  Since all of the assets are no longer in the investment accounts for the plan, not sure how to fix this.  Use a bank account in the name of the plan, then deposit the deferrals + earnings and transfer to the PEO plan?

For the document, the intent was to terminate the plan in March 2015.  With the deferral correction that is needed, would the termination date need to be current?  Not sure how to proceed on this.

Unmarried participant elected to receive DB Plan benefits in this form, and named a beneficiary to receive any further payments after her death, but did not provide for the contingency that that beneficiary would die inside of 10 years.  Participant died inside of 10 years, then beneficiary died later also inside of 10 years.  Who should get the remaining payments?  Plan document does not come close to addressing this.   Assuming no contrary precedent in administering this plan, I think it should be payable to the beneficiary's estate.  Anyone disagree, and if so why?  

Let’s say I have a plan sponsor with 3 divisions and 250 employees.  At one time they had a DB plan for the entire company, but the plan was closed several years ago.  The plan now contains 52 active employees and is expected to drop below 50 at which point it will fail 401(a)(26).  The plan is a safe harbor 1% of pay/yos.  There are other HCEs outside the plan and the plan and the plan satisfies 410(b) using the average benefits test.  We don’t need to do 401(a)(4) rate groups because the plan is a safe harbor.  I think we are good so far.

In an effort to avoid freezing the plan (they just feel obligated to provide the promised benefit), they are contemplating bringing in additional participants.  They are thinking about adding a cash balance benefit for the salaried employees.   This would add another 40 people to the plan.   Although this would now include all of the HCEs, it would cover enough of the NHCEs and would still satisfy 410(b) using the average benefits test.  My thought is to structure the cash balance formula in such a way that it would satisfy the cash balance safe harbor.

If I have 2 safe harbor formulas inside the same plan, can I continue to avoid the 401(a)(4) rate group testing?  In other words, can I disaggregate the plans and claim they are both safe harbors, even though they are inside the same plan?  I know I also need to think about rights & features, but I want to get through the testing issues first.  Would each component plan need to satisfy 410(b) on its own in order to call them both safe harbors under (a)(4)?

We have an employer who wants to freeze their current 457(b) plan and start a new 457(b) plan.  The employer also wants to allow participants to roll their account balances from the current 457(b) plan into the new one.  The employer is tax exempt (not governmental) and the plan-to-plan transfer rules in 1.457-10(5) require that "the participant has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan."  (Interestingly enough, there are specific rules for plan-to-plan transfers in a government 457(b) plan within the same employer).

This would seem to ruin our client's plans.  Is there any other way to get money from the current 457(b) plan into the new 457(b) plan?  

I have a plan that had a large prior year asset lost. It is a beginning  of the year valuation. Actuarial assets<.6*FT. Does this imply in the absence of additional contributions before 10/1 to achieve a 60% FTAP that there is no normal cost for the plan year due to the 436 accrual restriction? I think so but don't do that many boy vals.

Just when you figured out how to navigate the old website, there is a new design, effective today, https://www.irs.gov/

We just set up a plan for a real estate agency, covering staff.  Now the owner asks if we can include 1099 agents.  My initial reaction was no, but then I thought "why not" if we just add them as participating employers.  We'd create our own little MEP.  Testing is separate for each employer.  Not a problem (?) if some sign on and some don't, right?  Am I missing anything obvious that makes this not work?

Company X has a 401k plan.  Partners in X have frequently caused the company to make profit sharing contributions.  With new comparability, the company can make varying profit sharing contributions for different participants as long as the testing passes.  Right after a year ends, a partner leaves the company.  The former partner is claiming that he has a right to have what was a projection of profit sharing contributions prepared and circulated before he left the company.

The plan document speaks of the company giving itself as the plan administrator a written notice, designating the allocation.  That's not yet happened.

Do you know of case law, IRS or Dept of Labor rulings that suggest when a company has acted to the point that its profit sharing discretion is exercised and the company is then obligated to make a profit sharing contribution? 

IRS has brought to our attention that two 1099Rs were filed for an individual.  They both contained the same data ($21,000 distribution).  It was a cash distribution and the individual reported both amounts as income from both 1099Rs, so he reported more than he should have.  Two Form 945s were filed as well, both showing $4,200 paid in taxes.  The IRS is looking for the other $4,200 since they only received $4,200 and were expecting $8,400 (based on both 945s).

How would you go about fixing this on the 1099Rs?  They would have to file a corrected form, but what figure would be used?  If we show "$0.00", since there were two forms, could that be interpreted as he had no distribution at all for the year?  Is there a fix or would it be best to try to work with the IRS via reply to their correspondence?  Same with 945?   

Thanks

So far, it seems there are two kinds of claims that an individual-account (defined-contribution) retirement plan's fiduciary breached its responsibility in selecting a plan's "menu" of investment alternatives for participant-directed investment.

One kind asserts self-dealing.  For example, plaintiffs asserted that ABB made suboptimal investment selections because this resulted in Fidelity's willingness to lower its fee for services used for purposes other than the retirement plan.

And the "proprietary"-funds cases assert that a fiduciary of a retirement plan for employees of a business that's in the business of serving as an investment manager selected "house-brand" funds because the manager had a compensation interest or business interest in the retirement plan's use of those funds for which the manager gets a fee or cares about whether the manager and its employees are seen to "eat their own cooking".

Another kind asserts that the plan could have bought essentially the same investment at a lower expense.

Has anyone seen a lawsuit that alleged a fiduciary selected an investment alternatives that was weak on its investment merits without either kind of claim described above?

I have a controlled group of two plans. Plan A has deferral and profit sharing and plan B is deferral and match.   They have always passed combined 410b testing including the participants from the other plan.       They use top paid group so HCE's vary from year to year.   Some years there are none in Plan B and some years there are two or three.    Some years the ADP test fails separately, but combined with the two plans, it will pass.     

If Plan B would go to a safe harbor match,  how does that affect Plan A and the ADP testing.   Is it even allowed? 

I have a client who has 401k plan and realized in 2017 plan year that they missed deferrals for a participant in 2015 and 2016 plan year. Now they have calculated missed deferrals and match amount along with earnings.

Question is:

1. Can this QNEC amount be included in ADP\ACP test?

2. If yes for above, can 2015 and 2016 QNCE amounts be included in 2017 ADP\ACP tests or only can be included in their respective plan year testing. In this case as they have already completed 2015 and 2016 testing thus these amounts are not included in any testing year, is it ok or IRS has some guideline for the same. 

Prior year tested plan failed ADP and corrective refunds to HCEs were issued timely.  It was then discovered during form 5500 financial audit processes that the employer neglected to apply deferral elections to year end bonus.  Employer will make 50% QNEC (plus earnings) to those affected for missed deferrals.  Some of those affected are HCEs.  Can I rerun the ADP test excluding altogether the HCEs whose elections were not properly implemented?  I still get failing results - with refund amounts less than those actually issued.