Hi

If the employer is refusing to make the 3% non-elective safe harbor, what is the penalty or other issues?

Tx

Does the tax relief provided in TX-2024-13 for taxpayers in various counties in Texas apply to the PCORI Fee?  The relief gives taxpayers until November 1, 2024 to file and make tax payments.  The relief includes Excise Tax Returns normally due on April 30, July 31...  I don't see the PCORI mentioned specifically and can't find any guidance or opinion on the matter but it seems like the position could be taken that for taxpayers in the specific Texas counties have until Nov 1, 2024 to file and make the 7/31/24 payment.  Looking for other thoughts or even specific guidance on this question.

IRS announces tax relief for taxpayers impacted by severe storms, straight-line winds, tornadoes and flooding in Texas | Internal Revenue Service

Let's focus on the ownership tests only - It is my understanding that for a person to be considered an HCE the ownership level is at 5%, and for a person to be considered a key employee the threshold is at "more than 5%".  So, if for a two-person partnership, setting up the ownership level at 5.01% and 94.99% avoids both the non-discrim and top-heavy tests.  Am I correct?

I think I know the answer to this, but just want to make sure I'm not missing something. Section III.G of Notice 2008-113 states that, in short, an "insider" is a director or officer of the service recipient or owns more than 10% of the service recipient as determined under the Securities Exchange Act of 1934. Additionally, for purposes of the Notice, it is determined "without regard to whether the service recipient has any class of equity securities registered under § 12 of such Act."

Seems pretty straightforward to me that this last provision is meant to cover as insiders those who aren't in publicly traded companies (and therefore making certain corrections under the Notice unavailable due to an insider being involved). I'm working with a nongovernmental tax exempt entity on a failure to make a timely payment under a 457(f) plan in 2023 to a C-Suite executive.  The executive is an officer and therefore certainly looks like an insider even though the entity could not under any circumstances have registered securities, and in fact has no ownership at all.

Any way to get around the idea that this executive is an insider for purposes of Notice 2008-113?

Our group needs to get clarification on:  Can the 3% safe harbor non elective contribution be used to help pass the cross-tested analysis.

Some say it can be used to help pass only the rate group

Some say that the safe harbor match can be used to pass the testing

Some say that the 3% can't be used to help pass the testing requirements.

are we all wrong?  Is some part above correct?

Based on your experience and your recent observations, what percentage of retirement plans use a balance-forward method to allocate participants’ individual accounts?

My client, a federal contractor, received a demand letter for pension withdrawal liability when their 7-year federal contract expired. The entity that won the new contract continued employing the exact same people doing the exact same job, making the exact same pension contributions.

If this were a sales transaction, the successor liability question would be clear, but this wasn't a sale. This was a contact ending and being picked up by the next employing entity. I would argue there hasn't been a withdrawal at all since these same employees continue to participate in the pension plan, just under a new employer's EIN. 

Is my client seriously on the hook for this charge that will probably bankrupt them?

In the past we mailed our forms in several batches of say 50 each, with "return receipt requested" whereby the IRS signs a card and returns.  We've never had a problem but I'm rethinking this for the 2023 forms.

Do you recommend sending them overnight delivery for example?  I'm tempted to send the forms in twice - the old way and also overnight delivery to make sure they are received.  Getting them twice should not be an issue I wouldn't think.   We have fewer this year - maybe 75 total but I want zero risk that 75 plans would be considered filed late because of no Form 5558. Would be a nightmare!

Thank you for any ideas. Heck I'd hand delivery them to the IRS at the federal building if I thought I could.

Tom

I have a client with a small cash balance plan (about 10 participants). The owner/trustee wants to invest in gold bullion. Is this allowed? If so, any specific % limit, or just the "reasonable man" standard? And where would the gold need to be stored?

Hello - I have a client with a deferral-only 401k plan.  Per the plan document, HCEs are excluded from participating.  On Question #14, would this be considered a "designed-based safe harbor method", "current-year ADP test", or "N/A"? 

The plan is designed to automatically pass ADP testing, but my notes from a CPE class indicate "design-based safe harbor method" is used for real safe-harbor (match and nonelective)  plans and not for a plan that is designed via the plan document to pass the ADP test.  

Thank you for your thoughts.

I am aware all plan sponsors approach loans uniquely. My question relates to a participants reallocation of principal/ interest from the loan. Will a participants biweekly payroll deduction for the loan, automatically be allocated back into the same (TDF) on an amortized level across the 5 year period of the loan? Both principal and Interest?
Clarity to form 5500, plan sponsor Interest Rate withholding of loans? Confusing. Thank you. Patrick 

Has anyone caught wind of when the IRS might release an updated EPCRS aside from the absolute last day they are charged with releasing it from SECURE 2.0? Asking for a friend.

A client has a profit sharing plan with pooled investments. Just one brokerage account and all participants share in earnings / losses of the pool on the plan anniversary date.

We believe 404(a)(5) disclosures do not need to be provided to participants because they cannot direct investments.

We believe it would be the same with 408(b)(2). Participants can pay administration fees from plan assets for participant loans. For example, participants who want loans need to pay us $75 for loan processing. However, we have never gotten close to collecting $1,000 annually from loan fees. However, this last year they paid our annual administration fee from the plan and it was more than $1,000. Would this mean we now need to provide 408(b)(2) disclosures to the plan sponsor this year because of the administration fees paid from the plan? Again, it is not a directed account plan.

Thanks.

We have two companies, A and B.  A is the parent, but has no employees.  B is the subsidiary that actually has employees.  In the interest of time, we'd like to have A adopt a 401(k) plan that would cover B's employees, rather than having B sign a separate participation agreement.  Does anyone have any authority as to whether this works?

This is a first for me.  I'm looking at a PEP with a 12/31 PYE, but the document for one participating employer has a 6/30 PYE.

Looks like the plan joined the PEP in October of 2023, so the PEP will be testing and reporting using the 12/31 PYE, but this plan is really a 6/30 PYE.

I think its obvious that the document needs an amendment to align with the PEPs 12/31 PYE, but how would you address the 12/31 PEP testing and reporting, as well as the 6/30 PYE in the participating plan document?

Probably an easy question....

Single member 401(k) plan participant dies suddenly (2023).  A 2023 RMD was issued.
Participant's wife is the sole beneficiary.  All plan assets are rolled out of the plan in April 2024.  

For 2024 the deceased participant does not need to take an RMD... right?
BUT, if the spouse is RMD age, she needed to take an RMD...  again, right?

Not clear, I know you can't have a plan w/o a sponsor, but does this also apply to partnership plan?  Isn't sponsoring a retirement plan an organizational operation even if partnership dissolves?

Partnership filed final return in  2019, plan till has money that has not as yet been allocated , all other funds have been rolled over, Investment broker has not provided any physical account statements, client does not seem to be on top of this

Investment broker moved companies, has not cared enough to check whether any accounts are still with the old firm.

Filing Form 5500 underDFVC in the meantime; keeping fingers crossed no DOL letters.

Is there some sort of penalty for not distriubting assets upon plan termination?  Should the termination resolution be rescinded?

Can anyone recommend a (paid) service for tracking down lost participants? Thanks in advance.

Internal Revenue Code of 1986 (26 U.S.C.) § 401(a)(9)(C)(v) provides:

“(I) In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73.

(II) In the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75.”

This morning’s notice of a final rule to interpret § 401(a)(9) reserves how to interpret that ambiguity, and refers to this morning’s notice of proposed rulemaking. Footnote 7 on page 58891, page 58911 (publishing to-be-codified 26 C.F.R. § 1.401(a)(9)–2(b)(2)(v) [Reserved]).

In that notice, the Treasury department proposes to set the applicable age for someone born in 1959 as 73. But the notice explains no reason for Treasury’s choice of 73, rather than 75.

BenefitsLink neighbors, if it were your job in the Treasury department to choose 73 or 75 (or something else) and to write a reasoning that explains your choice as the best interpretation of the statute, would you choose:

73?

75?

74?

And, most important, why?

If you could ground your choice on a canon of statutory construction, which would you use?

And if not some legal-sounding reasoning, what explanation could you give that still respects the idea that the Treasury department must seek to give effect to Congress’s intent?

FYI, the IRS posted Public Inspection Documents from Internal Revenue Service for final regs and proposed regs.  Final regs are effective 60 days after they are posted in the Federal Register, and there is a comment period for the proposed regs that is open for 60 days after posting.

For your summer reading enjoyment, the final regs document has 260 pages, while the sequel in the proposed regs is a mere 36 pages.

Enjoy!