Hello,

In a recent audit, we discovered some errors that my employer made to participant accounts. Basically, some accounts were overfunded. The overfunded amounts are between $10-$1300) so we need to recoup those funds. Aside from informing the employee of the error, are we required to obtain their authorization to pull the funds from their account due to an employer’s mistake?

I have a plan where 3 or 4  people were over-funded for profit sharing due to max comp issues, and severance being used.  But of course they closed their account.

I read 4 articles on SECURE 2.0 provisions and each was less clear than the last.  None of them have nuts and bolts examples about what should be done. 

Do I have to ask for the money back?  I can't tell.

Does the Employer have to deposit the overpayment to the plan's forfeiture account?  This would make no difference as the forfeitures are used to offset contributions anyway, but for the same reason it seems like a ridiculous requirement.

The articles all seem to go back a forth between distributions of vested money before they were eligible for a distribution, and paymetns of funds they were never  entitled to, which is what I have here.

Doctor A, age 45, has her own corporation, Corp A.

Corp A is a participating employer in the ABC 401(k) PSP, sponsored by Group G.

Doctor A decides to move out of state and leave Group G, and her corporation signs a new contract with Group H, which has no affiliation with Group G.

Corp A signs a "Withdrawal as Participating Employer" document to cease participation in the ABC 401(k) PSP.

Group H sponsors the DEF 401(k) PSP. Corp A receives no further revenue from Group G; all of its revenue is now from Group H.

What options does Doctor A have with respect to her ABC 401(k) PSP account, which includes salary deferrals as well as 2 other money types?

Can she establish a rollover IRA? Or is the only option to become a participating employer in the DEF 401(k) PSP, and establish an account registered as such?

We administer a 2 participant traditional defined benefit plan. A 100% shareholder and an employee. The plan has been in place for 10 years and has a calendar year end.

3 months ago the one employee / participant quit to move across the county. She was paid her 100% vested benefit. 

Today the 100% shareholder called and mentioned that she wants to retire next month and terminate the plan.

Question: If the plan is terminated this month and distributed to the 100% shareholder by October there may be a small amount of excess assets that can be absorbed by the 100% shareholder. Must the terminated employee who was distributed fully three months ago be entitled to any of the excess assets?

Thanks!

I am looking for some insight into a QSLOB issue. My client has two business entities that are commonly controlled. One entity conducts the business operations ("Entity 1"). The other entity ("Entity 2") provides administrative support (e.g., payroll, HR, etc.) for both entities. Ideally, my client would like to offer a 401(k) plan for the employees of Entity 2. However, due to the demographics of Entity 1 and Entity 2's employees, and due to the fact they are commonly controlled, offering a 401(k) plan to only the employees of Entity 2 would likely result in coverage testing issues.

My initial thought was to have Entity 2 make an election to be a QSLOB. My question relates to the 50 employee requirement. Specifically, Treas. Reg. §1.414(r)-4(b) requires those 50 employers to "not provide services to any other separate line of business of the employer for the testing year." Am I correct in saying that, if Entity 2 made a QSLOB election, that Entity 1 would be treated as a "other separate line of business", even if Entity 1 does not make a separate QSLOB election for itself?

If the question prompts any alternative solutions that would allow Entity 2 to sponsor a 401(k) plan, I would be interested in hearing them. Thank you in advance for your time.

Quite a few years ago I sat audit for an EZ filer.  Although we had always advised him to value his real estate investments at Fair Market Value each year, it did not take our advice.  Consequently, the very eager IRS agent sanctioned him $15,000 (after negotiating from $25,000) for failure to do so and for carrying the real estate at cost year after year.  No harm to anyone, no issue with RMD's, but she wanted to get him for something, or so it seemed at that time.  I remember her coming into the office on September 30, picking up the check for $15,000 before she went on furlough the next day.  Obviously, a very unpleasant situation and I posted on this Forum about it at the time.  Fast forward to today.  I have a new EZ client who has real estate in the plan and has never been told by his prior TPA about this requirement.  So I went looking for it in the IRS 5500 instructions.  And what do you know?  The blurb about "fair market value" is included in the 5500SF instructions with a reference to ERISA section 3(26).  But it is NOT in the instructions for the EZ form!  Is it possible that EZ filers are not subject to this rule since those plans are not subject to ERISA??????

Employer is winding down, and let go off an employee prior to termination of the plan.  Employer wants to re-hire the former employee on a P/T or TEMP basis.  The former e/e is a pension plan participant, is now a retiree and began monthly pension payments in July. If rehired and plan was in effect, benefit would be suspended.  Can the employer re-hire this ex-employee without impacting his monthly pension payments, now that the plan is terminated?

Hi

A terminated DB plan participant has 6K coming to him.

Current plan states 5k for immediate pay out.

Under the law, one can increase the limit to 7K without an amendment so if this is true, can pay the participant without the spousal consent.

This would be done after the participant terminated.

What am I missing here? Something smells.

If a plan already allows in-plan Roth rollovers from all sources, what would be the benefit (or downside) of adding the new Secure Act option to allow Employer contributions as Roth?  It seems like the outcome in either case is exactly the same.  Am I missing something?  thanks!

recently took over a non-safe harbor 401(k).

Both ADP and ACP tests for the last several years have failed.

Is there a specific time frame to correct?

Here is a new one. I have done many many PBGC terminations but never such a mess and screw up.

PBGC termination with 20 participants. 10 chose rollover into the existing 401k plan and 10 wanted lump sum.

Advisor was provided all necessary information to proceed with the distributions and the deadlines.

Despite my constant reminders and follow ups:

Not only the advisor did not do the distributions timely, the advisor, in order to avoid any 1099 responsibility, sent all the monies to the 401k plan without even discussing with me.

Once the monies were transferred to the 401k plan and allocated to the participants accounts as rollover, in return, they were allowed to withdraw as lump sum from the 401k plan. Some of the participants who elected lump sum, decided to leave the monies in the 401k plan.

How can this be corrected?

Thanks

I've got the EOB in front of me (both hardcopy AND online) and this still makes no sense.

I took over a plan that says eligibility is no age, 6 months with 500 hours (reverts to YOS if not satisfied), entry date is January 1 following satisfaction.   What?*

EOB says that there is a way to design the plan so that this is OK, and it discusses using more-lenient-than-statutory requirements, which is what I've got.  But the example shows someone hired in the first half of the year with 6 month eligibility - that's the easy situation!  So if I'm hired in June 2024, I'm eligible 1/1/25, and if I'm hired in July 2024, I'm eligible 1/1/26.  People hired in the second half of the year are getting the shaft, right?

What am I missing here?  Why does this look so shady?  And, more importantly, is this plan OK as is (the prior TPA has done other questionable things, so I'm not taking anything they produced as good unless I can prove it)?  Is there something that explains is differently that I can check out?

Thanks.

* I love that, 30 years in, I still find things I've never seen before.  Yeah, "love"...

Hi Folks,

My client is using Relius (I'm not) and they are telling me they can't override the Schedule SB calculation of box 10b. Any Relius users out there? Can you tell me if this is realistic?

Thanks for reading

I've got a tax/accounting question regarding how to handle dividend payments.  The company made a compensation contribution as well as paid a dividend on preferred shares. (The ESOP holds all of the preferred stock.)  These two payments were then returned to the company as payment for the ESOP loan principle.  These two payments paid off the remaining  ESOP loan balance. The issue has to do with the fact that there were not enough shares available to be released for the "make whole" principle.  There were approximately 54,000 shares available to be released but 71,000 were needed for the dividend to abide by the make whole rule.  How would this payment be accounted for?  How much  of the payment would be tax deductible?

Employer erroneously withheld (and made) Roth deferral elections for a few years.  Participant did not realize but question is what is the correction?  No Code (402(g), 415, etc.) violation but if the amounts are distributed, would the entire balance be taxable or just the earnings?  Assume not subject to 10% excise tax on early withdrawals as it would be a corrective distribution.  Better approach would seem to be to have the participant make an election going forward but interested in any other thoughts from those who have seen this before.      

Hi. We are in the process of terminating our 401k plan. We have several participants with really small balances (many are under $1.00). Is there a de minimis amount ($1.00, $5.00, etc.) under which it is permissible to move those really small balances into forfeitures instead of forcing the participant to take action? Or are we required to send all of these small balances to IRAs? I thought that there was a rule where if the cost or burden to the plan sponsor exceeded the account balance, then the government allowed such a forfeiture. Thanks for any thoughts. 

In the situation where you have a control group that use one plan.... It seams to reason that each company pays the contribution required for it's own employees... right?  I'm talking a straight forward 3% SHNEC.

Can Company-A pay Company-B's 3% SHNEC?  (curious with this question)

Just need confirmation, thanks

I have a small 401(k)/SH Match plan with two K-1 partners.  One is a general partner (GP) and doesn't contribute to the plan, and the other is a limited partner (LP) who does contribute to the plan.  They have a handful of W-2 employees as well.  The SH Match is a year-end calculation.  I finally received the 2023 K-1 (Form 1065) from the accountant for the LP (which is already final and filed) and am trying to calculate his eligible plan compensation.  On the K-1, Line 14 equals guaranteed payments (line 4a), and according to the accountant the guaranteed payments were for services provided to the partnership, so all would be considered subject to SE tax.  The K-1's are final as I mentioned, and they plan on claiming the deduction for the 2023 SH Match contributions in 2024. So, I have a few questions.  First, even if they would be deducting the 2023 SH match in 2023, given that the LP would never share in any gains/losses because their only taxable income is from Gtd Pymts, would we need to deduct their "share" of the W-2 employees' SH match from their Line 14 number before calculating their eligible plan compensation?  Does your answer change since they are not deducting until 2024?  And also, would we need to do the circular calculation for their share of the SH match for the same reason (only Gtd Pymts)?  Maybe I'm overthinking all of this, but I couldn't find any info that speaks directly to this situation.  Thanks for any help!

Feel free to point me to a different group if this isn't the right place for this...

I work for an organization where we implemented a policy to increase the employer contribution to people's 401K the longer they are at the org.  We're trying to change our 401K to our PEO's 401K, and they said they can't implement this policy BUT they can do "a cross-tested PS formula.  This wouldn’t exactly be a tiered option based on years of service, and the gateway minimums for a cross-tested PS formula would still apply.  This is the closest option available."

I have no idea what this means, or how I can use it for longevity.  All my googling implies that cross-tested plans *may* have to do with people's ages, but also may not??  I can't find a simple definition of what this is, and how one can use it (and can I use it for our longevity policy)?

Assume a contribution was made to a DB plan in excess of the 404(o) limit in December 2023. The contribution was made prior to the end of they plan year so it cannot be attributed to the 2024 plan year. The plan now has a nondeductible contribution in the plan. After electing the 4972(c)(7) exemption from excise tax on the nondeductible contribution, the contribution will be able to be deducted in the following year.

My question is, does the nondeductible contribution get reported on the 2023 5500 or on the 2024 5500?

Thank you for any help.