A client mentioned they were considering including the new 60-63 catch-up provision.  I was under the assumption that if a plan included the regular catch-up provision the new higher amount was automatically available.  Is it even possible to have a plan that allows for regular catch-up deferrals but not the new 60-53 catch-up amount?  Will this be in an amendment or is it just effective via IRS regulation automatically?

Thank you,

Tom

A client maintains a defined benefit plan and has requested help in complying with RMD rules.

If a plan participant cannot be located or fails to cooperate in completing and returning a distribution form, can the plan's administrator commence paying distributions in a default form based on file information as to marital status and date of birth?

What can be done to correct the default RMD form if the date of birth and/or marital status turn out to be inaccurate after distributions commence?

If the plan does not have marital status information about a participant to whom RMDs are payable, can the plan presume that the participant is married or single and commence RMDs based on a presumed marital status?

I am creating a form to send to clients to give to all their 100%-vested participants, to elect their 2024 ER contributions be made as Roth.

I understand that a 2025 1099-R will be produced for each participant who wishes to have their 2024 ER contributions go in as Roth money type, since the "allocation" and/or "deposit" is being made in 2025 for 2024's ER contributions.

Here's my operations question:  Am I right to say that the 2024 ER contributions that are elected to be Roth (per person) will be shown that way on the 2024 reports? 

I know that seems like a dumb question, and maybe the better question is:  How long does each participant have to complete their Form saying they want their 2024 ER contributions as Roth?? 

When should we be sending these Forms to our clients for the year we're closing out?  As we all know, there can be a lot of back and forth before an employer makes a final decision on their ER contributions.  Handing a participant a form today might send the signal that they 'will definitely' be receiving a Discretionary Match and/or Profit Sharing etc., when the decision isn't made until March 14th or even Sept 14!

Thoughts?  I'd love to hear how others are operating.  

Are the new start-up plan tax credits only available to employers with less than 50 employees?  I have a restaurant group that wants to start a new plan.  With the new auto-enrollment rules, I would envision them having more than 50 initially.  They have a few hundred with W-2s each year, but only about 40 that are full-time and interested in participating.  They will have to be safe-harbor to pass testing.  Thanks for your insight!  

Hello.  Participant signed up to defer (403(b) Plan) in June 2022.  Her choice was never implemented. This was discovered during the 2023 plan audit (large plan). Participant never noticed. She is going to start deferring this month.  Client never noticed either.  I am working on the correction now, but the auditor says the amount of her missed deferrals has to go on Schedule H line 4a.  I'm not convinced as the they were never withheld by the employer for contribution to the plan so not technically late.  Thoughts? 

TYIA!

RMD's used to be simple.....

I have a participant who i just found out passed away 12/2023.  He was over 80 years old.  He has a surviving spouse who is the beneficiary.

He never took an RMD as he was still employed and not an owner.

Client is saying that they do not have to take an RMD.   Since he wasn't required to take an RMD prior to death, can the 10-year payout be used?

I'm thinking she should have taken the 2023 and 2024 RMD.

I appreciate any help.

Thanks!

For a US tax return or tax payment due today, one may take an extra day, to January 10.

That includes “any federal income, payroll[,] or excise tax deposit due on Jan. 9, 2025, including those required to be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS).”

https://www.irs.gov/newsroom/irs-for-carter-remembrance-taxpayers-have-extra-day-to-file-pay-returns-payments-due-jan-9-are-now-due-jan-10

I'm a member of a labor union. As part of my benefits package (which is not my "wages" per say, but it's a dollar amount that is voted on at contract time by the membership), a contribution is made to an HCRA account.
While you're an active member, you're given access to a small percentage (20%) of your yearly contribution to purchase non-prescription drugs and certain otc medical related items. The rest of the contribution goes into the account, and is essentially innaccessible until retirement, when you're supposedly allowed to spend it on any medical costs, including co-pays, insurance premiums, and prescriptions.
The contribution for most members is between $5k and $6k a year (which I'm hearing is a lot for an HCRA, especially when there is already a robust health insurance plan), leaving many members with $130k to $180k in their accounts as they get nearer to retirement. As part of the terms of the plan, if the member dies before retirement, their spouse is only entitled to a small portion of that money, along with 18 months of assistance to help cover insurance, and the plan itself absorbs the balance of the money.  Retired members that pass away can leave the remainder of the money to their spouse, however once the spouse passes away the funds get absorbed back to the plan, and from what I've heard from new retirees it's actually kind of hard to spend the money, with many claims being denied.
Does this sound like an illegal plan? Or maybe just unethical? It seems like the cards are stacked entirely in the plan's favor and it's a large risk with potentially little reward. How would the membership get out of this without forfeiting the money? Or am I being ridiculous and it's a good deal. This plan was never voted in, but was forced on the membership through administrators.

As of January 6, 2025, the plan sponsor’s forfeiture account has a balance of $35,000, which includes $25,000 from 2023 and $10,000 from 2024.

1. Is there a deadline for the use of forfeitures?

2. Is the deadline the same for both the 2023 and 2024 balances, or does each year have a separate deadline?

3. If there is a deadline as per IRS regulations, please clarify and provide the relevant regulations.

4. If the forfeitures from 2023 are not used during the 2024 plan year and remain unused at the end of 2025, would this violate any IRS regulations or compliance requirements?

If participant terminated in 2024, but did not receive distribution until 2025 (beginning of year)

Do you file a 1099r for 2024 or 2025?

My plan has failed the ADP test, resulting in a refund. The HCE receiving the refund has both pre-tax (deferral) and Roth contributions.

Is the refund amount discretionary for the employee to choose between pre-tax deferral and Roth contributions, or is there a specific sequential order for deducting it (e.g., first from pre-tax deferrals and then from Roth)?

Are there any IRS rules governing the sequential order for processing such refunds?

I am not necessarily looking for specific advice but I was wondering if anyone has had this or something similar occur.

Employer was assessed a penalty of $40K under the ACA's shared responsibility provisions (the details don't matter).  At no time did the employer send the IRS any amounts with respect to this assessment.

Employer worked with counsel (me) to abate the penalty, which the IRS agreed to do.  

A few months later, the IRS sent Employer a check for $40K plus interest.  Employer wrote back and said that the check was sent in error and requested IRS guidance on how to handle it.

No response from the IRS.

A few months later, the IRS sent another check in the same amount to the Employer.  The employer responded similarly to what it did before.

A few months later, the IRS sent yet another check in the same amount.  Employer called the IRS and the representative told the Employer to send the checks back.  Employer did so, along with a brief explanation.

All was good until this past November, when the IRS sent a note saying that it was still working on the matter and would respond in 60 days.  Last week the IRS sent another check, this time in the amount of $50K or so, reflecting additional interest.

That is all.

I can't believe that I can't find a previous topic on this...

Pooled 401k plan in a brokerage account.  Participant L (who does not defer) takes out a loan... and the office manager who doesn't know any better codes it as pre-tax deferrals.  It's a 9/30/24 PYE and the loan was taken in August 2024, so we just discovered it 4+ months in.

To the plan, this is a non-issue, right?  L owed $200 per paycheck, and that is what was deposited.  The only 'allocation' is when we do the recordkeeping, so if we say those are loan repayments, then they are credited as loan repayments.  Or do those not count as loan repayments, but rather deferrals... that weren't asked for?

And what about L's W-2?  It correctly shows pre-tax deferrals, because that is what happened.

Any advice appreciated, thanks.

Is this correct:

If a business has all HCE employees (each earing well in excess of the HCE compensation limit... in fact in excess of the 401(a)(17) limit), when it comes to allocating a PS NEC contributoin, can the allocation be discriminitory?  Can the owner of the business max out himself and contribute zilch to everyone else? Even pick and choose who might get a NEC contribution?   Seems to be passing the tests when I run them all.  

I've never had this kind of a situation.  If all good, I'm pleasantly surprised (and so will the business owner be).

Thanks

Being a one-person TPA firm, I don't get vacations or any time off where I can completely unplug. I have been doing DC plans for 30 years and have been on my own for over 22 years and haven't had a true vacation since going out on my own. Now that I am approaching retirement age (5 years to go), I would like to be able to take some much needed time off (after tax season, of course).  So I am looking to sell my business in 2025. (My book is very clean.) A few years ago, I also starting doing consulting for another TPA firm... helping them with their 401k plans. (Glutton for punishment, I know!) I told that TPA firm that I am looking to sell my book of business and they are very interested in buying it and want me to come work for them (remotely) for as long as I would like, or I am willing to. 

I have researched and researched selling a service business and the multipliers are all over the place... from 1x annual to 5x annual. They use the same software that I do, so the switch should be pretty seamless as far as that goes. And having no employees, there are no salaries for them to acquire... other than mine... and very little (if any) added expense, I would think. Has anyone recently purchased a one-person TPA firm such as mine? Or sold one? I was wondering what price to expect the offer to reasonably be and any details (such as how long did the seller work for the buyer after the sale, what period of time (if any) did the buyer spread the payment over, any customer retention provision, etc.). 

Of course I would have an attorney review the contract, but any assistance or insight you can give me would be greatly appreciated.

Thanks!

Hello,

I discovered that I had not filed the 5500 for a single person 401k plan for 2022 and 2023. There was a miscommunication between me and my CPA and I though he had handled it.

As soon as I discovered this, i promptly filed the information returns.  Then I get a letter from the IRS that I owe the maximum of $150k in penalties.  Any suggestions for approaching this with the government?  Many thanks. 

I have a shared QDRO where the form of payment for the AP is whatever is chosen by the ptp. Doing the math, if I apply the calculation for the marital portion (50% of the marital portion calculated using a coverture fraction) first and then apply the J&S factor for the chosen form of payment to the two pieces I come up with different figures than if I apply the J&S factor to the whole benefit and THEN apply the marital portion calculation. Which method is correct?

A participant who was already receiving RMDs died in 2024.  He has 3 children as equal beneficiaries (no spouse).  We are getting ready to roll their 1/3 interests (about $1.8 million each) to their IRAs.

As they are Non-Eligible Designated Beneficiaries, I am reading that they are subject to the 10-year rule AND still must take an annual RMD distribution based their (or the decedent's) life expectancy.  They will want to take the minimum RMD and so I assume they would choose their life expectancy, each one being different based on their DOB.  Does this sound right? 

We would then direct the balance to be rolled to their IRAs.  Not that it matters to us as they are out of the plan at that point but would the 10-year rule continue with the IRA, meaning 9-years are remaining under the 10-year rule?

I will research further but thank you for comments. 

Tom 

Can someone please point me in the direction on where I can get a basic idea of how to calculate the 415(b) limit for a Cash Balance Benefit?  I just want to have an understanding of it.

Thanks in advance!

I have a client with 2 owners and 2 employees. Under the 40% rule, I can provide meaningful benefits to the 2 owners only.

Can I set up a cash balance plan with 2 owners only?

Adoption Agreement says that we cannot exclude anyone in favor of HCEs. So, the only other way around is to offer eligibility to everyone but give $0 benefits to the 2 non-owner employees. Is this how it is normally done? It appears counterintuitive that you tell them they are eligible to become participants in the plan but with $0 benefits. Also, how does it affect other administrative compliance requirements such as SPDs, SARs, etc.?

Thanks!