I am only familiar with Form 945 being used to reconcile taxes withheld and paid from retirement plans during the year.  Is there another purpose for this form that an employer may need it for outside of retirement plan taxes?

A client received a rather odd call from the IRS ( I was not on the calls but I believe the phone number is legit and it was the IRS).  They are telling her that she has not filed form 945 for years 2020-2023 and that even if no taxes are reported on it, it is still due and that if not filed, a $2,500 penalty will be incurred for each year.  Even odder, they are saying there is no letter or correspondence that they can send.

The plan utilizes a national retirement plan distribution service which accepts the 401k distribution, remits the taxes electronically, issues the 1099-Rs and also files a 945.  But the 945 is filed under the service providers name and EIN, which is submits along with presumably hundreds of other non-related clients.  The IRS caller was made aware of that and insisted that they need a separate 945 for my client, using their name and their EIN.  

Has anybody come across this before?  Any thoughts?

Thank you

Ignoring the fact that some of these ostensibly non-ERISA deferral only plans don't really qualify as non-ERISA...

Let's assume they qualify. Mandatory auto-enrollment in 2025 shouldn't apply, correct? 

As not being a 401k person, have a question for the gurus out there.

First year of the plan. HCE's will be limited to 5% and prior year testing.

HCE salary is 100k so max 5% is 5k

HCE is over 50, can they do additional 7.5k of catch-up and still pass ADP?

Thanks

Have a client with seasonal layoffs this time of year.  A participant wants to request a loan but is currently on lay off.  Since the loan policy requires repayments be made through payroll deduction, is the Sponsor ok with denying this loan until the participant returns to work?  With the nature of this business, the client should address this is in the plan loan policy but at this time has the stock loan policy from the Plan Doc, which does not specifically address this situation.  

A participant in a 401(k) is taking RMDs.  The participant would like to start using her RMD for a Qualified Charitable Donation, so she sets up a direct rollover of the 401(k) account to a new IRA so a portion of her 2025 RMD can be a QCD.  (The 2024 RMD was taken before the rollover was processed.)

The recordkeeper will only process rollovers as paper checks.  The distribution was processed from the 401(k) but the recordkeeper said it is likely that the participant will not receive the check until after the end of the year.

If that happens, the 401(k) will have a $0 balance on December 31, 2024 and so will the IRA.  Is the date of the check from the 401(k) distribution sufficient to use that balance as the 12/31/2024 balance for the new IRA so the 2025 RMD can be processed from the IRA?

Thank you.

Participant elected 10% pre-tax for all of 23'. Issue with payroll caused this person to defer 10% Roth instead.  Correcting this sounds messy (new w-2, moving buckets of money, etc.)  My idea is to tell the sponsor to shore them up via payroll with the extra taxes they had to pay. They then get tax free growth for essentially "free".  What else am I missing besides the fact that they couldn't defer paying taxes until later in life?

For reporting delinquent contributions, do they get included in successive years only until the late contributions have been deposited (recovery date), or do they keep getting reported until a VFCP is submitted?

401K Plan permits In-Service withdrawals beginning age 59-1/2; partials of at least $1000. 

Participant is past Normal Retirement Age, actively employed, and has a Participant Loan with a substantial balance; let's say it is $40,000.

Business has been flat this year and making the loan payments is increasingly more difficult. Last payment was end of November 2024. Next due is end of December (monthly payroll). There is a strong chance no wages will be paid for December.

Participant would like the Loan Balance "distributed" this year, as the tax implications would be minimal due to extremely low income, per the CPA. There is hope that things will improve next year but not certain how quickly it may turn around or to what extent if any it will turn around.

If the December 2024 loan payment is not satisfied, a default would occur and the correction period would run to 3/31/2025 per Loan Program.

Can the Participant request in essence a (permitted) partial withdrawal equal to the Loan Balance, or in other words request a Loan Offset and no additional cash distribution at this time (i.e. in service)? And if yes, then Form 1099-R would be Code 7 but not Code M (since not termination of service or plan, not QPLO), zero taxes withheld?

Thank you.

Does EBSA or IRS do something we as employee-benefit practitioners need (that would be delayed by a U.S. government shutdown)? Or does our work not depend on the executive agencies?

(We likely care as citizens, many might care about friends and neighbors who could be without paychecks for a while, and some might care as investors.)

In the law of U.S. government shutdowns, some executive agency functions are treated as essential, allowing a government employee to keep working; but nonessential functions don’t get that tolerance. For example, about 70% of Treasury employees are not permitted to work. In some agencies, it’s around 95% of employees. Further, many executives play “out of position”, taking on emergency functions and unusual activities.

A shutdown precludes work on writing rules, regulations, and other guidance; issuing ERISA advisory opinions or IRS letter rulings and other written determinations; almost all legal advice (except as needed for EBSA or IRS to preserve the U.S. government’s rights and other property); and customer service.

But have the guidance-writing functions become so sparse that we no longer depend on them?

Hoping someone can provide me a quick sanity check.

Plan uses regular NRA definition of later of age 65 or fifth anniversary of plan participation. 

Participant becomes eligible for the plan on 1/1/23, when they are age 63. They quit on 1/1/24, when they are 64, and are 20% vested. Unvested balances are forfeited after five breaks in service. They do not take a distribution. On 1/1/28, when they are age 68 and have four breaks in service, they reach their fifth anniversary of plan participation. 

Are they fully vested? In other words, does reaching NRA after termination restore the pending forfeitures?

I have a client who established a pre-enactment MEP 401k plan. During 2024;, an employer, who is a member of a controlled group which includes the sponsoring employer, adopted the MEP 401k plan. Would this employer be considered as adopting a grandfathered plan since it would not be considered a "new employer" if a member of the controlled group?

I received a QDRO that was filed by the court with judge's signature. The QDRO assigns $140,000 to the alternate payee as of Sep-19-2024, adjusted for investment gains and losses through the date funds are segregated.

The problem is the participant's account balance as of the assignment date was only $125,000. Can we assume the QDRO's intent was to assign 100% of the participant's account balance as of the assignment date?

And there has been a single $1,500 deposit for the participant since the assignment date, which is not subject to the QDRO and will remain in the participants' account +/- any gain or loss.

What happens with the accounts in a SIMPLE IRA when it ends? Does each participant then just have their own IRA that they maintain indefinitely? I believe they can roll over that IRA to a qualified plan but not until 2 years after the SIMPLE IRA ended.

Also, is there a standard form that needs to be presented to participants of a SEP IRA before the SEP IRA ends? Is there anything else the plan sponsor needs to execute. For example, when we terminate a qualified plan, an amendment needs to be executed before hand and if it is a pension plan then participants need to receive 204(h) notices before hand.

Thanks.

In PBGC's answer to 2004 Blue Book Q&A 2 item b, PBGC stated that a 1.411(a)-4(b)(6) forfeiture would not affect the inclusion of the participant in the flat rate premium count, but that it would result in the exclusion of the participant's benefit from the variable rate premium -- the reason being that IRS staff advised the PBGC that the benefit would be disregarded for current liability, and current liability was used for the variable rate premium.  I understand this logic extends to the current environment where the relevant liabilities are (based on) target liability.  Regarding the exclusion of these benefits from current liability and target liability, is anyone aware of where the IRS has actually opined on this or even mentioned it, other than the PBGC's statement in 2004 Blue Book Q&A 2?  If they haven't opined, relying on the PBGC's statement might be aggressive.  In this case, my follow-up question would be whether it might be objectionable to the IRS if I established a probability assumption for the reappearance of the participant (and consequent benefit reinstatement) -- where such probability might be very low if the participant was old, long gone, etc. (as it would reflect my expectations).

A very large PEO that files as a DFE - GIA does not provide the SAR to those who are participating. The participating employers are concerned of being out of compliance for the Plan participants. Has anyone had a remedy such creating their own SAR even though they did not prepare the 5500 or have the Schedule As from the carriers? Has anyone heard of any consequences for the participating employers? Many thanks for your assistance. 

Congress seems unlikely this week to legislate anything for retirement plans.

In the 1,547 pages of what might become this week’s appropriations, here’s what so far I see:

555 pages with provisions that affect health care or health plans: division E—the “Health Improvements, Extenders, and Reauthorizations Act”.

That includes additions to, and amendments of, the Employee Retirement Income Security Act of 1974.

Those include new and amended text in ERISA § 408(b)(2), some of which might affect how that prohibited-transaction exemption applies regarding retirement plans.

Only eight amendments of the Internal Revenue Code, none of which refers to a retirement plan (unless a retirement plan engages a pharmacy benefit manager).

An amendment of the Defense Production Act of 1950 would prohibit, and impose penalties on, a covered national security transaction in a prohibited technology.

https://docs.house.gov/billsthisweek/20241216/CR.pdf

The next government-shutdown threat would be March 14, 2025.

My client has a 2-person 401(k) with non-qualifying assets.  The plan covers the business owner and his girlfriend.  We have been filing Form 5500SF.  They are not legally married but are "legally domestic partners".  Not sure what that means.  For years now we've been advising him to obtain the very expensive bonding needed to qualify for the audit waiver.  It's time again to pay the premium again and he is questioning the need for the bonding based on his domestic partnership status.  Any comments, experience or thoughts to share?

Hi, 

I am working on a profit sharing projection for a safe harbor match plan with prevailing wage (ugh).  The eligibility for sources other than PW is 21/1 YOS/semi-annual.  There are 4 employees receiving PW - one is HCE (another ugh) and one never met YOS.  I was able to disaggregate those not meeting the YOS so the OEE that has PW doesn't need to receive the gateway.  

The employer gave specific $ amount for several participants and I backed into the HCE $$ by giving them 3x so it passes gateway.  Not all NHCEs (6 don't) receive a PS - it's SH Match and this passes.  

My question is related to the those in the main test - if the document states that PW offset PS, SHM and Match - I am struggling to get ASC to run how I think it should be run.  If I click on PW to include in gateway, then it uses PW eligibility and includes ALL employees and is saying it fails gateway because those 6 participants are not receiving a PS. My understanding (and I could very well be wrong), I thought PW would offset PS and would be counted in ABPT but NOT in ABT.  The lowest NHCE was 2.65%, so I gave HCES 7.95%.  However, the HCE that has PW only shows .21% on the gateway test because most of his ER is coming from PW - the rest is PW.  

I messaged ASC to see if there is a work around but figured I'd check with you gurus as well.  

If a client has a qualified plan (whether it be 401(k) plan or not) and they exclude a majority of their employees by class does this plan still satisfy the CalSavers requirement?

If a plan terminates late in a calendar year and there is overfunding and the goal is to transfer 25% to a QRP and revert the balance to the employer, must everything occur in the same taxable year? Can the transfer and/or the reversion be spread across 2024 and 2025? Could the required 25% be spread across two years?..would this create two seven year clocks? Could the reversion be spread across the two years? A little simpler, can the transfer happen entirely in 2024 and the reversion entirely in 2025?