Preface by saying the company is a small S Corp.  In recent years the evaluation of our company ESOP shares versus what the board sets as a price for all other shareholders has grown substantially different, with ESOP market value being now 20% less than what other shareholders value is.  Is this common within privately traded company’s with an ESOP.  

Hello Everyone, I have been informed that the Schedule C can be used for a large plan that is not under a trust if there are non-monetary funds/commissions to a broker of a $100 or more. I have always felt a Schedule C can only be  used for a funded/trust filing. What are your thoughts? Is there any official written instructions on this? Many thanks! 

401(k) Safe Harbor ( 3% Non Elective)

Compensation is defined as W-2 wages - the only exclusion are fringe Benefits.

Participant has GTL wages -

The auditors agree  GTL is subject to salary deferral however, their position is this is a fringe benefit and not included in the 3% safe harbor.

In addition participant received Short Term Disability benefits - paid by the employer and included in W-2 wages

Again the auditor agrees this payment is subject to salary deferral, however, it could be deemed a fringe benefit and therefore not included in the safe harbor calculation.

Thoughts from the group? Are these wages really deemed fringe benefits and not subject to the 3%?  

Problem will be solved for 2025  for GTL will change to 3401(a) compensation. 

Very strange situation.  Participant dies with no spouse.  He does have minor children.  The Plan document (FIS prototype) provides the order of payout.  Since no spouse, the payments will go to the children.  The Plan Trustee reached out to the parents of the deceased participant assuming that they would be the legal guardians.  The Parents will not respond to the Trustee.  At this point the Trustee wants to send the death benefit to the state's (Ohio) unclaimed funds.  We cautioned the Trustee that this was not the appropriate action to take.  The Trustee is totally fed up with the situation and is asking what he can do.

Does anyone know if there is an agency that can be contacted to obtain information on the legal guardian of the deceased Participant's children.  At least this would confirm who the Trustee needs to contact in order to pay out the death benefits. 

Any other suggestions would be greatly appreciated.

I've never had this come up.   Two related employers both with their own 401(k) plans, tested together.  Employee terminates with one and starts employment at the other.  She is asking about moving her money from one plan to the other or possibly taking a distribution.  I see no treason to move from one plan to the other because as soon as she does this, I can see her going back to work for the other company.  This brings up another question - if she is considered terminated from one sponsor and has less than $7,000 in that sponsor's plan I suppose she would need to take a distribution or be forced out.  Or does the $7,000 rule apply to both plans combined in a controlled group?  

Thank you.

S corp, State of CT, H&W, Husband is 100% Owner of the business, both H and W are receiving W-2.  The client wishes to decrease the benefit formula for 2024 (<1,000 hrs as of now).  Is 204(h) Notice required?  I do not believe so, am I wrong?

So there were no 401(k) (or other) contributions during the plan year.

ADP test is based on prior year NHCE ADP.

Since 2 x 0% = 0, no 401(k) is allowed for HCE in the next year.

I just haven't had that happen before, but I believe the options are as follows:

• HCE's over 50 are actually limited to the catchup amount, rather than 0's.
• Prior to end of the plan year switch to current year testing

Does anyone have Template Letter for a Notice of Adverse Interest to an Employees Company?

One of our participants overpaid a 401(k) loan. The company failed to stop withholding loan payments after the loan was repaid. He then took out another loan.

Is the only way to correct this mistake to send the check to the participant for the overpayment?

Thanks.

Hi, 

I'm looking for some information on Invoice reimbursement, generally the balance in the forfeiture can be used to pay invoice and re-allocate to participants or even make employer contribution.  Incase the Plan does not have invoice and they want to use the funds in the forfeiture to reimburse a pervious invoice that they paid I believe they can do it however  should this be within 1 year of the payment or can it be anything up to 5-6 years?

In reviewing the plan document I'm unable to find any information not sure if the plan document talks about this. 

Thanks 

Has anyone had this come up?

A 401(k) participant is a non-owner, 75 years old, still employed by the plan sponsor.  They take a direct rollover distribution to an IRA in 2024 of their entire $150,000.  They are still working, so no RMD is taken.

They continue to contribute to the plan during 2024 and at the end of the year they have a $5,000 balance.  They terminate on 12/15/2024.  Now an RMD is needed by 4/1/2024.  

Assume the balance on 1/1/2023 was $150,000.  I believe the RMD needed at 75 would be $6097, which is more than what is now in the 401(k) account.

Is the participant required to take the remaining $5000 in the account, plus take an additional $1097 from the rollover IRA by 4/1/2025?

Thank you.

We have a client who terminated their DB Plan as of 12/31/22.  The owners were not maxed out and capable of contributing more, if they had the Funds.  They simply didn't anticipate the income to continue funding the Plan (it was just the husband & wife).

Things have now changed, and they are looking to start a new Plan to begin contributing once again.  Is there an issue with starting a new Plan for 2023?  I know in total they can't fund more than the maximum between the two Plans.  Someone else is telling them that they can't start a new Plan, so I wanted to check as I didn't see the issue as long as it's not over-funded for the lifetime between them.

Thanks in advance!

is anyone having issues with logging in today. We've tried resetting the password etc. and still no success. No one at my firm is able to log in. All are receiving an error for an invalid log in attempt even after resetting the password.

A participant reaches retirement age. She has never worked 1000 hours to earn any vesting credit, Would she then be 100% vested since she's reached retirement age?

Terminated participants were issued a 1099R this past January 2023 for a distribution that was never processed either by ER or IA. The funds are still in the Plan and will get distributed this year. How do you correct the 1099R issued. It was a ROLLOVER Distribution not a cashout. Do you simply complete a CORRECTED 1099R for 2023? Do you enter 0.00 for the taxable amount and not enter a code?  

I have a Safe Harbor Basic Match plan with only 401(k) and SHM contributions (calculated by payroll). The plan excludes commissions - and fails compensation ratio test (3.52%). I'm not sure how to handle it from here.

Thanks!

Must all fees be applied to each adopter in a PEP ?

One of the adopters in the PEP is the 3(38) for the PEP.  They do not want to charger their 3(38) fees for just their plan.

Are they allowed to do that ?  Would it take a supplemental service agreement ?

Thanks!

A nonprofit wants to use a PEO, a for profit company, for a division of its employees.  The PEO will be the employer of record for tax purposes and will be the employer who issues payroll and W-2s.  The nonprofit will direct the work of the employees, so they could be considered common law employees of the nonprofit in a co-employment arrangement.   The PEO has indicated that it can withhold 403(b) contributions from the employees' wages and forward them to the nonprofit's 403(b) plan provider.  Although the employees may be eligible to participate as common law employees, I don't see how the employees will have "compensation" which is defined as W-2 compensation as reported by the nonprofit. The PEO also can't be a participating employer because it is a for profit company.   Has anyone run into this before?  

We have a Plan that terminated in '23.  There have been some residuals that came in that we are going to allocate to the participants who were paid out as part of the termination.

There was a participant who terminated in '22 and had their distribution processed in early '23, prior to the Plan Termination.

Would they get their piece of the residuals or no, since they were paid out prior to the termination?  Just want to confirm.

Thanks!

This is in fact a purely academic question for the attorneys out there, not related to anything, but merely idle curiosity on my part, so please don't waste any time on it.

Suppose a client comes to you for a legal opinion - I don't have any specific subject in mind. Further suppose that in your best judgment, it is a coin flip - 50/50 either way. Do you say that you can't give an opinion? Or do you present both sides, with the potential advantages/disadvantages/consequences for either choice? Or is the answer to this question purely facts and circumstances, so there's no "general" method? I've often wondered about this, but such a situation has never come up - fortunately.

I'd love to hear any opinions, but again, please don't waste your valuable time if it isn't a quick and easy response. Thanks.