Hello,

I have a gov't client that under withheld employee deductions for a 457 and 414h plan in 3 prior years.  The employee's retirement system received all the correct funds at the correct times but what was under withheld came from the agencies funds instead of the employee's deductions.  When the employee's payback the deductions to the agency, how is this handled for tax purposes?

thank you

I have an employer from a small company who didn't withhold any 401k deferral and match for a large bonus paid to employees. Employees missed out on a few thousand dollars in match, as well as deferral. 

Question: 

1. Can an employer go off a verbal consent to not withhold money from this pay? (Their deferral forms don't have an election for bonuses, thus all pay would include an ee's deferral election) 

Solution: 

1. A 50% QNEC for missed deferral (plus earnings), and a 100% QMAC based on missed deferral (plus earnings)? 

In a BenefitsLink discussion yesterday, neighbors asked which service others like to search for a participant with an inoperable address.

If a search result includes what the search suggests now is a likely current address (postal or email, or even both) for the individual, what does a plan administrator or its service provider do with that information?

(Assume an account not yet nearing a § 401(a)(9) required beginning date and not subject to a small-balance involuntary distribution.)

Whether the found address is postal or email, an administrator might be reluctant to send a written communication there, fearing that a person other than the participant might receive the communication. That would invade the participant’s privacy. And a shrewd person might see that the retirement plan lacks enough control about the participant’s identity to detect a false claim.

Could efforts to find an inoperable-address participant help an impostor steal the participant’s account?

Are there ways of communicating to the found address without revealing anything about the name or identity of the retirement plan? Or might the communication omit the participant's name? If so, would either such a communication, if it reaches the participant, be effective in getting a response from the participant?

What steps would a plan’s administrator use to guard against a theft of an inoperable-address participant’s account?

12/31/2024 plan and it  failed the ADP test. The test (current year) was split into excludables and non-excludables and the non-excludable test failed.  Client wants to go with the QNEC. Basic  question I know, but I have never had a client choose this route.   How do I calculate the $10,000 plus QNEC? Based on compensation for the plan year?  Also, does it go to all eligibles or just the people on the failed non-excudable test? 

TYIA! 

Is there a company that everyone uses to help locate terminated participants who we can't locate?  The company we used to use seems to no longer be operating, so we needed a new one.

Thanks in advance!

Admittedly, the more I read about the MAE and when a small business crosses over the 10 employee threshold, the confused I become. If a plan was adopted and effective 1/1/2023, but hires the 11th employee on 4/1/2025, is the effective date when the plan has to add MAE 1/1/2027?  

Hi

2019 5500-EZ was filed with less than 250k in assets -first year of the plan/filing but stopped filing in subsequent years and assets are still under 250k.

Was there a continuation requirement because initially it was filed?

Thanks

Before this plan came to us, there was a partial plan termination.

Many of the accounts were distributed, but not all.  Those that remained just were given accelerated vesting.

Do the accounts of participants involved in a partial plan term HAVE to be distributed?  Or can they stay in the plan?

We’re dealing with excess assets from a terminated traditional defined benefit (DB) plan that are being moved into a 401(k) profit sharing plan as part of a Qualified Replacement Plan (QRP).

Can the QRP funds be moved into a cash or money market account earning little or no interest while the rest of the plan's assets remain invested? This is a one-participant plan, not sure if that makes a difference.

The existing plan assets are invested in volatile securities, and the account owner is concerned that market swings in the suspense account could prevent us from using up all of the QRP funds within the required 7-year period. I couldn’t find anything indicating that QRP funds must be invested in the same way as the rest of the plan — does anyone know if that's a requirement?

Appreciate any insights!

Is this even possible? I didn't think the IRS did any Advisory letters for "pre-approved" plans that early. Have NOT seen the actual document or IRS letter to confirm what the audit firm is saying...

For an individual-account retirement plan with participant-directed investment that gets Ascensus’ recordkeeping services, the plan’s sponsor (which also is the plan’s administrator and trustee) is considering adding a Schwab Personal Choice brokerage window, restricted to mutual-funds-only.

Unlike other employee populations in which only a relatively few participants use a brokerage window, almost all participants would use the mutual-funds window.

The employer pays Ascensus’ fees for all still-employed participants, and likewise would pay Ascensus’ incremental fees for pulling the brokerage accounts into the recordkeeping.

The counts of participants, all of whom have a plan account balance, are such that the plan every year will require an independent qualified public accountant’s audit of the plan’s financial statements. An Ascensus-aligned trust company is the plan trustee’s custodian.

The plan does not use Ascensus or a TPA to test coverage, nondiscrimination, or top-heavy measures.

BenefitsLink neighbors, what difficulties should I advise this plan sponsor to consider in its decision-making about whether to add the brokerage window?
 

We have a two member LLC husband, wife.  She does not share in the profits.  We keep getting different answers on what they can as members contribute to the company 401K.  Best I can come up with is the wife would be limited to her guaranteed payments and her elective deferral and the husband would have his elective deferrals and limited by his compensation which is should be the profit.  So for him it would be up to 76500.   Any assistance with this would be appreciated.   Thanks!

Actuaries, for situations in which you must integrate or at least align your work with others’ work—or doing your work depends on information from another professional’s work—what can other professionals do to help, or at least not interfere with, your work?

My law school courses for LLM and MST students include lessons on how professionals of all stripes should be respectful of another’s profession, and should do one’s own work in ways that support another professional’s work. I hope to fill out an explanation of how lawyers, accountants, and other professionals can work in ways that help an actuary do her work.

This can be about an actuary’s work for health, disability, and other welfare benefit plans; pension and other retirement plans; or pricing any kind of insurance.

What could someone else do to make your work as an actuary a little easier?

And for a BenefitsLink neighbor who is not an actuary, what work steps improve your working relationship with an actuary?

I have a prospective client who asked me to review their plan.  The QACA match formula is 200% up to 5% of pay.  Current TPA (bundled provider) is not capping.  Everyone is getting 200% of deferrals.  One person is receiving a 10% match.   How would you fix this since the match exceeds 6%?   And they aren't complying with the plan doc?   

Hi,

As per 1.436-1(d)(4) a plan that was frozen plan prior to 9/1/2005 is not subject to the AFTAP Restrictions including that it can pay lump sums. If the AFTAP calculations are above 100%, however, there were no actual AFTAP certifications done, is there any basis for the SB to show the AFTAP as being above 100% and it will be based on the signing of the SB (since there are no AFTAP restrictions) or must the SB show the AFTAP as 60% ?

As why file with 60% and possibly draw attention of the electronic system, if there are really no AFTAP restrictions for this plan anyway?

Thank you

I have a client that has not yet adopted the self-certification for Hardship Distributions.  I have a situation where it doesn't distinctly fall under a Hardship per the IRS Safe Harbors, but it's obvious there is a financial need.

The participant needs to move to a new rental with their parents, who are terminally ill.

So it's not the purchase of a primary residence and it's not for the medical bills, but they are moving/renting in order to get treatment and care for them.

Is this a situation where we can still approve the Hardship?

I have never run into this situation where the business has a June FYE and the plan has a calendar PYE.  Is this common? Allowed?   A nightmare to administer?

Thoughts? recommendations? 

Thanks

We have an employee who has moved from a full-time position to a part-time position mid year.  Under the ACA, do we have to keep this employee on our benefits for the remainder of the stability period?  Or, can we terminate benefits because the employee is no longer in an eligible class?

• Sole-Prop, owner-only client comes in with a 401(k) Plan with a value of $70,000 as of 12/31/2023
• They also have a pre-existing SEP valued at $190,000 as of 12/31/2023.  Went "dormant," and 401(k) was adopted in a later year.
• 5500-EZ was not filed for 2023

If the SEP was established as a formal plan for the business at some prior date and was never formally terminated but simply went dormant, should the value be included in the asset total for determining the $250,000 threshold?  5500-EZ Instructions say the threshold determination includes "all other one-participant plans maintained by the employer."  

I realize we treat a SEP as no longer being "maintained" when it is no longer receiving contributions, but I'm concerned about the implications in a 5500-EZ situation . . . not that anybody would know there was a SEP because there has never been a formal filing, BUT . . . I am curious!

We are taking over for the 2024 plan year.  The concern is, should we also have the client file a 2023 Form 5500-EZ for the 401(k) under the Penalty Relief Program . . . ?