An Employer has a pooled PSP that holds, among other assets, raw real estate as well as trust deeds.  She would like to amend the plan to a self-directed 401k with brokerage accounts, however, she would like to keep the RE and trust deeds - is there any way to do this without having any kind of pooled arrangement?  Could she allocate these assets in the brokerage account to all the participants like a stock, or possibly allocate them all to herself if the plan never adds any more of these types of investments going forward?  

Being paranoid here late at night.

Joe owns ABC corp 100%

One of the ABC employees is Joe's adult son, Harry in addition to many other employees.

Joe and Harry started a partnership (LLC) in 2023 50/50 - no employees.

LLC has nothing to do with ABC corp, no business transactions, no income exchange, no nothing.

Do they have controlled group issues as they want to set up a DB plan for the LLC?

DOL initiated audit of a 401k plan.  We have a resolution letter from the DOL.  The DOL calculated the lost earnings on the delinquent deposits and determined that the plan still needs to deposit $2,500 in unpaid contributions.  The delinquencies span several years. The employer (a non-profit) will make the deposits by the end of this week.

(1) The IRS hasn't knocked on the door yet.  Can the plan go through VCP?  The plan is not under IRS investigation but just completed the DOL investigation

(2) Can one VCP filing cover multiple years or do you have to file an application for each year?

(3) Failure to file 5330 - is this eligible for VCP?

(4) Late deposits - is this eligible for VCP?

(5) There is an option on Form 8950 to request a Pre-submission conference request.  Is this more trouble than it's worth?  Should a VCP application and proposed correction be submitted along with the fee and skip the conference? Could the IRS decline a conference and come after the client?

Thank you!

It has been previously asked here whether for a short plan year with a mid month distribution date(final distribution on plan termination) when the 5500 filing is due and the response has been 7  months after the close of the distribution month. Is it also true then that the deadline for a minimum required contribution would be 8.5 months after the close of the distribution month and not 8.5 months after the date of the final distribution? In other words ,could a schedule SB show a contribution 8.5 months after the close of the final distribution month?

I am writing to seek clarification regarding the enrollment restrictions for 401(a) retirement plans. My HR department at a NON-Profit has informed me that, according to IRS guidelines, I am only eligible to enroll in a 401(a) plan within the first 12 months of my employment. They have also indicated that I would not be able to enroll during any open enrollment periods thereafter due to these IRS restrictions.

I also was never told about the 401(a) company guidelines of enrollment as i never had to complete orientation which had the class where it would have been the only time your notified about this. as per my instructions of my manager (it not important you can do it later) that was 2 years ago still haven't. 

I am seeking your assistance to verify the accuracy of this information. Could you please confirm if there is an IRS guideline that restricts 401(a) plan enrollment to the first 12 months of employment? If such a guideline exists, could you kindly provide me with the specific reference or documentation that outlines this rule?

So if an employer with a 401(k) or 403(b) signs on with a PEP mid-year, I assume when the employer's plan is merged into the PEP, there is no required nondiscrimination testing for the period prior to the merger - in other words, the coverage/nondiscrimination testing is performed for for the entire year, and would be done by the PEP provider?

Hi All,

Thank you for all the insights and valuable knowledge always.

A DB Plan, owner only,  had the assets held in a checking account for about 15 years. It was a checking account in the name of the plan..ie John Inc. DB Plan, and the corporate EIN. The bank now sent a letter that they are converting the account from busniess account to a personal account and in a separate email the bank states that the EIN will be taken off the account and the owner's Social Security number will be used on the new account. Question: Can this be deemed a taxable distribution ( even though it was does against his will), and is it a problem to keep the new account as is with the Social Security number, if the account is still labeled Defined Benefit Plan?  Thank you.

Employer A sponsors safe harbor plan. Employer B sponsors non-safe harbor plan. B purchases 100% of the stock of A, mid-year. Wants to merge plans more or less immediately. Since 1.401(k)-5 dealing with mergers, etc., is "reserved" there's no solid guidance on this subject. Given that, do you think it is permissible, since plan A uses the "maybe not" notice, to do the merger if the 30-day advance eliminating the Safe Harbor notice is used? Is it permissible to use less than 30 days (I can't really find any support for this, but maybe I'm missing something. Of course, the purchasing employer, in its merger documents and its plan, would have to address all the coverage, nondiscrimination, protected benefits issues, etc.

Both plans are calendar year.

We are the TPA for plan A, and naturally, we weren't told about this in advance, nor did the purchase and sale agreement address ANY employee benefit plan issues. Classic...

Appreciate any thoughts.

edited typo...

And yet another edit - apparently all employees of A have already been moved to B - no further pay from A will be made. And B's plan was already amended to allow immediate eligibility for A's former employees. So a 30 day advance notice ain't possible. It doesn't seem reasonable that in such a merger/acquisition situation that A's safe harbor would be blown and ADP testing required, but again, no firm guidance...

Since this world of non-discrimination testing is so gray, I have a good one for you.  

I work for a large physician group.  The majority of our workforce are HCEs.  We have one health plan with no class distinctions listed in the plan document.  All physicians and employees are eligible for the same plan with the same eligibility rules.  Here is the contribution structure for non-physicians and the CEO:  EE-100%, EE+SP-$400, EE+CH-$250, FAM-$550.  Now this is only for the Employees.  For physicians we pay 100% of all plans including dependents.  Is this plan considered discriminatory?  We have passed 125 testing as we are not required to report the premiums paid if the ER pays 100%.  Now if the physician works less than FT hours, we do charge them for that portion of the ERs cost of their benefits so in a way we are not treating them the same.

In my past life we recommended another physician group to gross up salaries for the physicians so that we show that we are treating everyone the same.  What is your recommendation?  We have never done 105(h) testing and not sure if we need to do so.

Appreciate it!

Jennifer Hagen

I have a client that maintains a Top Hat Plan for certain employees.  They have a Participant that separated from service in January of this year.  The client has no distribution election form on file and the Participant has no recollection of ever being given one.  The Plan is not clear on how distributions are to be made in default of an election.  Here are the provisions on Distributions:

"A.  Provided that the Participant's services with the Employer and all other related employers of the Employer (as determined under section 414 of the IRC) terminates for any reason (other than death), distribution of the amount credited to the Participant's account under this Plan shall commence to, or with respect to, the Participant upon termination of services or at such date elected by the Participant at the time the Participant began participation in the Plan.  Payments shall be made in the number of installments initially elected by the Participant.  Once commenced, the number of installments shall not be changed or accelerated, except by the application of Section VII (Participant election to Modify the Timing of Benefit Payment).  Payments shall be made at such time and in such form as provided in distribution forms provided by the Employer.

     (i)    Participant may elect a distribution of the amount credited to the Participant's account under this Plan in the following form:
        {A) annual installments.
         (B)    single sum
         (C)    annual installment/single sum combination
          (D)    transfer in-kind

B.  Distributions will commence 60 days after severance from employment.  If a Participant should die before distribution of the full amount of the account described in this Plan has been made to the Participant, any remaining amounts shall be distributed to the Participant's beneficiary by the method designated by the Participant on distribution forms provided by the Company at the time the Participant selected the number of distribution installments. The Participant may designate a payment of a lump sum or the continued payment of the Participant's elected number installments to the beneficiary if distribution has begun. If distribution has not begun before death of the Participant, payment to the beneficiary shall be made in a lump sum or not more than five installments. If a Participant has not designated a beneficiary, or if no designated beneficiary is living on the date of distribution, the amount credited to the account shall be distributed to the Participant's estate in a lump sum distribution as soon as administratively feasible following the Participant's death.  The Participant may change the designation of beneficiary in writing delivered to the Company before termination of services to the Company."

Appreciate any thoughts on how payments should be made, whether this is a provision of the Plan that could be amended to provide for an explicit default payment method, and whether there are any issues with delaying commencement of payments after the required 60 days (although, still in same taxable year so maybe not as big of an issue).
 

Hello all,

As my username clearly states, I am a sanctioned man through penalties on interest-bearing accounts. I have never had an employer hear my situation and then reject my waiver of rights to participate in a 401k, thus marking me ineligible, and life continues...until now. My current employer is fighting me every step of the way. This new company has auto-enrollment AND yearly escalations. Considering I am fined $15k for every individual contribution and $1,500 on every $0.01 of interest earned, for life, I will never be participating. The auto-escalation then sits like an anvil over my head. The DOL has written my employer urging them to accept my waiver and have the administrator draw up a one-off that applies to me, make me ineligible, and that's that. Again, they refuse, citing, "We CAN force you to do this. Therefore, we ARE forcing you to do this." They also COULD accept my waiver, but I digress. What recourse do I have here? Does anyone have any advice?

 Many thanks!

I am employed by a New York company (since the early 1990s) where I had initially been in their defined benefit pension plan (aka traditional pension). In the early 2000s we were told about the option to switch to a cash balance pension plan or stay with the defined benefit plan. I vaguely remember a website we were instructed to visit in the 2000s where we were to make some type of choice regarding staying/leaving the defined contribution pension for the cash balance pension. I don't have any recollection of what choices there were to make, what the website looked like, or even what would happen if I did not go online and just ignored making any choice.

Fast-forward 30 years and the 3rd-party website our company uses to manage/display retirement benefits shows I'm in a cash balance plan. But, here's the thing... I'm almost positive that I did not accept being changed to the cash balance plan (as I remembered my colleagues' advice to stay in the defined contribution plan) and so I'm considering pressing HR/Retirement departments at our organization for actual proof/documentation/signatures/etc. for this change I supposedly authorized.

NOTE: I understand that I should have paid more attention over the last couple of decades to my retirement plans, but as a young employee back then I just "set it and forget it". Now that retirement is in sight I'm trying to understand what income will be available to me. Also, I'm of the belief that it's entirely possible I did accept switching plans and just didn't remember doing so (but I still would like proof).

What types of documentation does my employer by law have to provide to show I gave permission to switch plans?

Is there a statue of limitations with my challenge?

I am working with a client regarding an inheritance from a 401K plan that has some unusual moving parts. The client is the personal representative of his uncle's estate. The facts of the situation are as follows:

• Uncle dies in 2021 and has 401k assets at their employer with no stated beneficiary
• Wife of uncle (aunt) does nothing with the assets
• Aunt dies in 2024 and personal representative discovers Uncle's 401k assets at employer. 
• Uncle has a will that specifies that retirement assets upon his death will end up in a trust. Trust has named, identifiable beneficiaries.

Probate proceedings started on the Uncle because they were never done in 2021 with the court ordering the 401k assets to be paid to the trust. The PR wishes to go down the road of seeing if the situation would qualify for see-through treatment rather than the distribution being taxable to the trust and subsequent beneficiaries. Since the 401k company was not notified by October of the year following the Uncle's death, I believe this automatically disqualifies the assets (amongst other issues). 

Although I've prepared 100's of 5500's in the past, that was when we used paper. I don't know how to complete a 5500 so my client can file on EFast.

I've subbed out 5500's to a CPA firm for years, but this new client does not want his 401(k) and PS Plans information shared outside of my office. I realize 5500s are public record anyway, but I want to honor the client's wishes. 

Where do I prepare his 5500's for him?

Thank you, and have a great day. 

Hi. We are acquiring multiple companies. They each have their own H&W benefits. If the employees of the target companies don't join our health plan immediately (but stay on their own health plans), how long can that transition period last? How does that impact nondiscrimination testing? In other words, does the length of the transition period matter when it comes to how the testing is performed?

Thanks for any thoughts.

I’ve been impressed with the guidance on this site, so I'm sharing my story.

My wife signed a letter of intent for her job as a family medicine doctor a decade ago, which specifically stated the benefit of a retirement plan as part of her employment package. After ten years without receiving any retirement benefits, she was promised part ownership of her medical practice. We were ecstatic. We both signed agreements under the assurance that this was risk-free and would benefit us from the eventual sale of the practice. She was verbally promised frequent dividends to pay down her ownership loan.

However, we later discovered that the medical practice was only profitable because it failed to repay federal COVID loans, and the company had actually been incurring debt. We have received no dividends. Now, my wife is part owner of a massive debt, nearly more than the equity of our home. If she leaves her job, we lose everything—our home, our two young children’s college funds. Staying has resulted in the realities of mismanagement: significant pay cuts, additional responsibilities, and denied earned paid time off to offset company debt. Her salary, along with another owner's, has been cut by 20%, while two new doctors, just out of residency, have been hired at double her salary.

She is increasingly burdened with more tasks because she cannot resign under the threat of having to pay off the debt, while work conditions worsen. Between the empty promise of retirement benefits and the reduced salary, her ownership loan accrues interest without any of the promised dividends or reliable salary to pay it down. Our family is getting deeper and deeper in debt with absolutely nothing to show for it. It seems we have been conned into supporting something her boss owns, and possibly their lifestyle, from which we derive no tangible benefit. I cannot fathom that we owe $200K+ on something we cannot touch, experience, or benefit from.

I was frugal in my early years, planning for our children’s college fund and early retirement as an engineer, but all of this fiscally responsible planning is being wiped out due to her current employer's mismanagement. What can we do? We fear bankruptcy and worse. Any guidance is greatly appreciated.

Thank you!

-Desperate in Denver

Hi

Plan terminated 12/31/2023 with force out at $1,000 (i/o $5,000). No SECURE amendment was made to increase to $7,000.

I was not an issue as the participant with 1.5k balance was eager to get the monies but now not returning the distribution paperwork.

Can the plan be amended now to increase the force out to 5k so that this participant can get paid the lump sum?

Thanks

Being new to the DC 401k industry, what educational material would you all recommend for me to read and or certifications? Any suggestions would be helpful. I'm going through the QKA material from ASPPA -thanks 

Hi. We currently offer simple IRA to employees. Offered to 5 employees in 2022, all (30) in 2023. However, only 3 took it - most didn’t even realize we have this plan.

we are looking to terminate simple ira and start safe harbor 401k with profit sharing. We will be offering to all employees. Would we be eligible to receive secure 2.0 act tax credits?

can we say these plans are “not substantially same” and hence claim tax credit?

thanks 

Our company was acquired earlier this year.  New company has a 401k plan design that stops employees from contributing once they hit the $345,000 compensation limit (even if they are below the 23,000 contribution limit). While not common, I believe this is permissible.

The new company defines Eligible Wages as "base pay, annual bonus, sales bonuses, overtime and shift differentials and merit payments, as applicable."

Old company was acquired in March of this year and 401k deferrals continued through the close date in March.  From March - June, employees were paid on old payroll system and not eligible to contribute to either 401k plan.

Starting in July, employees are being paid on new company payroll and are eligible for new company 401k.  The problem - several employees are not able to contribute to the new 401k because they are showing as hitting the $345,000 compensation limit?

Not sure how or why earnings that occurred under the old 401k plan and earnings that weren't eligible for any 401k contribution at all, are being considered towards the compensation limit under the new 401k plan....I think this might be an error by the new company.  The old 401k plan is being shut down (not merging or being acquired by the new company/plan), and will have its own independent testing and 5500.

Under these circumstances, is it proper to have earnings from previous payroll be considered as compensation under the new 401k plan?  Anyone experience something similar?

Thanks if advance.