Former employee returned standard distribution election form (CCH):

Rollover to "IRA"

Name of IRA:  "xxx xxxx Corp" 

We have always instructed trustee to make checks payable to : "xxx Corp IRA FBO former participant"

Any thoughts on if writing the check to just a Corp. is ok? Does it leave the plan with any liability as to the tax exempt status of the distribution?

Participant is subject to the Roth catch-up mandate in 2026.  He has an old Roth IRA that is not part of the 401k plan.  Participants direct their own brokerage accounts. He is asking if he  rolls the Roth IRA to the Plan, will this enable him to deposit the Roth catch-up into the Roth rollover account.  He is trying to avoid setting up another brokerage account just for the Roth catch-up.  Is there anything else he should be concerned about in this scenario?

Owner must start taking RMD in 2026. 

He has Roth Assets of 500,000 12/31/25

Pre-Tax assets of 500,000 12/31/25

A current life insurance policy is also in the account.  The "cash value" as of 12/31/25 per the policy statement is 120,000.  The life policy will remain active with premiums being paid.

is the RMD calculated on 500,000 or 620,000?

it seems to read on the IRS website that the life policy would not be included in an RMD calculation unless it is the year that the life policy is being distributed.  But I am not sure if I am reading that correctly.  I have found conflicting information elsewhere.

Any insight would be appreciated. 

Plan sponsor wanted a plan that provided a 1% match to HCEs and a higher match to NHCEs.  The match is calculated each pay period with the plan sponsor setting the match in with their payroll service provider at the beginning of the year.  This provision is obviously problematic as employees might move from HCE back to NHCE and vice versa and from an HRA standpoint is not very employee-friendly.  I should add they have many well paid employees who however over and under the HCE threshold each year and are not owners.

So for 2025 we see a couple HCEs who received more match than they should have.  The match is discretionary but rigid and so the notice goes out.  Seems we would transfer the excess match along with earnings from the participant's account to the plan's unallocated cash account.  So there would e no distribution to the participant nor 1099-R.

Thank you,

Tom

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During 2020, did a proposal and never heard from the prospect and thought went away somewhere else.

Just got an email from the CPA stating that, the prospect has been making contributions and taking deductions with no actuary and paperwork. No 5500 forms were filed but that is the easy part.

They are now asking me to fix this.

Is this something that can be self-corrected starting with 2020 plan year?

Any thoughts/comments appreciated.

Husband/wife DB plan 404 limited in 2024 so set up a Profit Sharing plan where they maximized at 25% of pay.

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Our firm pretty much exclusively has done small / micro plans (90% of our plans are <1M in assets and under 30 participants). As we grow, I know large plans are likely something we'll have to deal with eventually. We have one plan that's getting close enough to the threshold for requiring a large plan audit that we know we need to start thinking about that in the next few years. With our plan demographic, we've never once actually had a large plan audit. 

What kind of things should we expect? Does the auditing firm just ask us for a bunch of reports, and if so, what kind of information is generally requested? In the case that anything out of place is found, how much leeway is there in terms of them talking to us about correcting it vs reporting failures on an audit? I'd hate for a large plan audit to be the way we find out we're operating something wrong & cause problems for a client. Any guidance as we start to move into plans that may require audits?

IRS issued Notice CP1348 assessing penalties regarding a profit sharing plan due to distributions being made to terminated participants without federal tax withholding payments being submitted nor the Form 945 being filed.  The Notice was addressed to the plan and stated that the plan's TIN should be written on the penalty payment.  The employer paid the penalties, which were over $10,000, from the plan - AI says this is a prohibited transaction - do  you agree?  The plan has a pooled arrangement, so if the penalties are a valid plan expense, each participant would be dinged an average of about $300, which could become as issue.     

Hi

A bit confused due to intensive number crunching and brain is fried so need to double check the following and also the client may not be listening to me.

Client turned 73 in 2025, so RMD is due 4/1/2026. Already 100% vested

Q Part 1

12/31/2025 AB is 1,000/month and AE at 4/1/2026 is 1,090/month (making up the numbers)

Starting 4/1/2026, monthly would get 1,090/month till 12/31/2026 (9 payments).

Now they want to take the full amount on 4/1/2026 i.e. 9,810 (9*1090)

Any problem with this?

Q Part 2

Come 1/1/2027, the RMD continues to be 1,090/month till 4/1/2027 but does not take any monthly as he wants to take a lump sum.

Say 12/31/2026 AB is now 2,200/month and next payment cycle is 4/1/2027 and the AE at 4/1/2027 is 1,300/month.

So starting 4/1/2027, RMD is 1,300/month+1,090/month

Clients says I want to take out all in one lump sum on 4/1/2027 i.e. 1,090*12 + 1,300*9

And future years continue with the same cycle.

What am I calculating/thinking wrong?

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Hi,

Thank you as always for all the insights. 

Can a Hard Frozen DB Plan, (that is owner only), take into account salaries that were taken during the current frozen years. Not to increase the benefits of course, as the plan is hard frozen. Rather, to increase the salary average. 

The owner is past retirement age and is receiving each year an actuarial increase on his A/B, since he is not taking benefits yet (although plan allows for in service distributions after NRA).  

However, the AB cannot be increased beyond 100% of average compensation. Therefore, if the salary average is allowed to be increased based on current salaries (even though plan is frozen), then the annual increase on the AB  can keep going up until the new higher salary average. Thank you

Can W-2 Compensation ever include Section 125 pre tax medical/cafeteria contributions?

If I understand correctly, Sec125 Comp is exempt from Fed/FICA taxes so is not reported at all in Box 1, 3, 5.

However, a plan doc I'm looking at says in the definition of Total Comp that Total Comp = W-2 Comp, which includes elective deferrals and Sec 125 pretax contributions.

Mid day confusion here.

Employer establishes a church plan and doesn’t elect ERISA.  Pastor is paid $100,000 a year; with a 10 percent employer contribution to a 403(b) plan.  Pastor is expected to be paid this amount for each of five years.  In year one, past says, don’t pay me $100,000 in year 2; pay me $90,000; and the rest as an employer contribution so as to total $110,000; In a similar manner, in year 3 pay me $80,000 and year 4 $70,000 with the remaining amounts in employer contribution so as to total $110,000.

What, if anything, is wrong with this design?  

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