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.  

For all of you and your families and friends, wishing you all a Happy Holiday Season - drive carefully, and enjoy!

Hi folks,

I've been reading these boards for a while, but this is my first post.

Client has a DB plan (professional 100% owner and one other employee, not subject to PBGC).

The owner reached age 70.5 in 2016 and received his first RMD in 2017 slightly before the required beginning date of April 1.  The payment was a year's worth of accrued benefit (normal DB RMD paid annually).  Per 1.401(a)(9)-6, A-1(c)(1),  if the plan was ongoing, his next annual distribution should be made around that same date in 2018.

However, he terminated the plan in 2017 and is an electing a lump sum at plan termination.  Since it is the year of termination, I believe he can take his 2017 RMD via the account balance method using his lump sum as the balance.  His employee only recently received her distribution materials and may not have made her payment election before the end of 2017, so we don't know the cost to the plan for her benefit yet (could be her calculated lump sum or an annuity contract purchase at an as-yet unknown price).  Barring a large gain in plan assets at the last minute, the plan will not have enough assets to pay the owner's full lump sum, so he will forego some of it to the extent necessary.  He does not want to make an additional contribution to allow the plan to pay his full amount.  Therefore, we likely will not be able to calculate his RMD before the end of 2017 since the "account balance" is not yet known.

Question: Does the fact that we are using the account balance method for the 2017 RMD shift the payment due date to the end of 2017, or would it still be considered timely if he takes it by March of 2018 (one year after the first annual RMD was paid)?  We're aware that the RMD should be excluded from any rollover to an IRA.

403b Plan moves from an insurance company to a mutual fund company.

There is a ton of money in the non-elective source.  Is there any way I can preserve at least the existing money for hardship distributions?

Filed a very basic VCP on a SIMPLE-IRA plan in June. Received an acknowledgement letter in mid-AUGUST. Called twice recently to check status. In spite of the IRS voice mail promising a call-back within 2-3 business days, it took 7 business days, but at least they did call. I didn't speak to the person - they left me a voice mail, but it has NOT YET BEEN ASSIGNED TO A REVIEWER. It will be "at least several weeks" before it is even assigned.

Just an fyi to prepare yourself to hurry up and wait...

Taking over a plan that I see offers installment payments.  In an effort to simplify, I recommend that they remove that option... and then find that one of the owners started taking an installment series in 2017.

So... does that mean I can't actually remove the provision from the plan?

A plan participant was able to write a check to his plan account on his own.  Not deferral, not through payroll, etc.

The plan does not allow for post tax contributions.  How to correct?

Hi, everyone. I have an issue, and I hope you all can help. It is long and complicated, but I appreciate any clarification to help us get this resolved. In 2014, my husband requested a 401K loan from his company. It was approved, and repayment terms were set. We got the money and payments were held every paycheck until January of this year. During this time, my husband's job title and pay changed often, so we never really paid attention to the changes in pay. After the first of the year, I did notice his loan balance wasn't decreasing, so I attempted to contact his benefits person through email and phone various times with no response. In July, we received an envelope with several letters from MassMutual (who has 401K and loan) stating the checks they sent us were never cashed. I had no checks and no clue what this was about. My husband called and was informed his loan was in default and all checks mailed to them from his company had been returned. Upon further investigation, he previous benefits lady had allowed the loan to default but continued to mail the payments to MassMutual, who then returned every payment back to the employer. This went on for over a year, and we never heard a single thing about it from either party. Between the two, they have "found" about 12 checks (out of approx. 26) and reissued them to us. MM told my husband they knew it wasn't his fault and would work with us to reinstate repayment. This was 2 months ago. Yesterday, I received a letter stating the loan was basically refinanced, and for a lovely payment of $900 a month for 2 years, it would be paid. It also said we could default, get a 1099-R and basically call it done. First, $900 is ridiculous and absolutely not a possibility. Second, I distinctly remember getting a 1099-R and paying taxes on the loan amount back in 2014. I verified this with my records, and we paid taxes on the full amount on 2014 taxes. I know we hold some responsibility. I know he was young and dumb to do this to begin with. However, I need HELP!!!!  If it was in fact a loan, should we have even gotten the 1099-R? Since we did, can we change it to a early withdrawal and get what money was paid back to the "loan" refunded? Do I need to contact a lawyer, and if so, what specialty?

Can I please just have everyone agree with this statement so that I can link to it to show the non-believers in my office?

The restriction on the number of allocation rates in a cross-tested plan was specifically dictated by LRM #94 and was solely applicable to get a prototype document approved during the EGTRRA cycle.  This has been removed for the PPA cycle.  And nothing in the 401(a)(4) regulations themselves even make mention of this, thus meaning PPA documents are not limited to the number of groups or rates available, nor are plans operating under them expected to comply with such a restriction when running 401(a)(4) tests.

Thanks

--bri

Company sponsors an unfunded severance plan subject to ERISA. They impose a 120-day limit on filing claims. (120 days is calculated from date employee receives notice that he/she won't receive benefit or notice of the amt of his/her benefits.) 

DOL regulations don't specifically address this, but they do say that the claims procedures can't inhibit or hamper the filing of claims.  (The example they give for this is that you can't charge a fee for processing claims.)

Has anyone thought about whether imposing a time limit on filing claims is reasonable?

Thanks!