austin3515

My question is, why are you looking at the timing that closely anyway? IF we reviewed every deposit for every client for timeliness we would need a dedicated team just for that! We ask our clients to tell us if there were any late deposits in our annual request for information (after explaining the rules). Sure if a client forgot to send in an entire payroll, we're calling it late, etc. But we're definitely not reviewing every deposit for timelines... And I have a feeling clients would go a little bonkers if we were "micro managing" in this way. But hey that's just me. It's one of the reasons I have avoided 3(16). Can't take that postion if you're a 3(16). Late is late and YOUR the Administrator now so its your responsiblity.

I'm sure it depends on the recordkeeper. They went to great great great expense to automate their systems to send out their fee disclosure. So that type of arrangement probably does not lend itself to a different notice. But Principal for example mails notices all at the same time of year, and we can upload whatever notice we want to be included in the package. The question is, can they suppress their fee disclosure and send just the notices that you upload? It's possible. Again its going to be recordkeeper by recordkeeper. Some recordkeepers only write the notice and its the sponsors responsibility to send it out. 20 recordkeepers, 20 unique answers to this question.

Well they are more similar than dissimilar. I mean their both ERISA covered retirement plans. I realize the answer is different. What is amazing is the lack of guidance. One little 2 pager would do it. I know, I know, careful what you wish for because odds are you won't like the guidance. But still try convincing a social services non-profit with a tight budget to spend $1,000 for 2 hours of an attorneys time on a plan that has been used in "several" years.

I'm just guessing this will not be much consolation to my client because they will likely view their role as involving keeping the organization itself out of harms way. somehow I surmise plaintiffs attorneys will have a hard time parsing the difference between the old CFO and the Organization itself. After all the ORganization had a duty to monitor... Well I mean this is the issue isn't it? It shouldn't be over your incredibly capable head 😁. You don't have to have a law degree to know that a 401k plan with a bum investment contract with surrender charges and "all-in" over 2% will cause fiduciary liability. If we dont know, and we are the experts in this industry, how in the world are our clients supposed to know?

Thank you it is a challenge at times to keep it straight but my plan in question IS an ERISA Plan (hence the fiduciary concerns).

🤣🤣

Well, if this is the case, then there are no pre-1/1/09 contracts that I have ever heard of. For what it is worth, I don't see how this could possibly be the case, since participants are only eligible for distributions once they are terminated. The employer would seem like a necessary component to that determination...

"But the current fiduciaries wouldn't be liable if the plan was just invested in bad investments, because they would have no power to change that." Is this formally written anywhere by the DOL, etc?

If their match pattern is already known, we do Rigid (i.e., pay-period math, 50% of 6%). Sole downside is giving up optional true-up, but hey if the "optional true-up" was necessary we can just choose annual calc period instead. The benefit here is no notice. I hate notices! If they never use the match, we use the Flexible so we don't rope ourselves in. I also never want to include a cap on deferrals in the SPD that gets handed out because someone might get the wrong idea if it will never be used. Anyway, that's where we've settled!

I'm being told that NOL's do NOT reduce SE income. I just wanted to make sure that an NOL does not reduce my earned income amounts in any way. Hopefully someone can confirm!

Missed this one until I saw it in my emails!🤣

Client has an old 403b, pre 1/1/09 contracts. They need to sign off on distributions and she wants to know if she has any fiduciary liability with respect to these old contracts. They are all individual contracts, such that they cannot move them to a new provider without consent and they cannot change the funds available as they would in a 401k because they are essentially IRA's. I gather the answer is "yes" but curious if anyone has an article I can provide that sort of delves into this issue in some amount of detail. Also curious what others are doing about the these "ancient frozen Non-ERISA plans" and the related plan documents. A lot of sponsors don't even know these plans are out there (they only find out about them a participant comes out of the woodwork for a distribution).

Odd. I guess I feel better that what I have been telling people for 15 years was not wrong.

Well the difference I guess is that 404a6 doesn;t apply to a defined benefit plan. Th crux of the case is that 404a6 makes it obligatory to treat as deposited on last day of prior year.

I actually saw an IRS training manual in which the IRS said "it's their choice" and its on theor website. This "individual" said he wasnt thrilled about relying on a 20 year old document... But I will send!

(6) Time when contributions deemed made For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). According to a "national legend" this leaves no wiggle room. If you deposit in the window described it as though you actually deposited the money on 12/31/2020 and you must deduct on 2020 return. HE said the only way to really accomplish this was to wait until after the due date of the return and deposit in the 415 grace period (which is 30 days after the deduction due date). I did not have time to poll a few CPA's as I am really confident that they are doing just this "fairly regularly." (i.e. deducting contributions on a cash basis). OBviously it is not the norm, but some do it for example because they are "trapped" as it was done once that way and they don't want to double up the deductions in one year. Anyway I thought it was important to share this update with y'all!

It’s a nice little arrangement we have, he relied on me flr free advice and I rely on him for free referrals!

His position to ask me the proper treatment..

How about relying on this though from the EOB. It appears to only relate to 401ks/PS but it seems to be pretty on point... "9. IRS permitted return of “excess” contributions due to errors made in computing earned income. In PLR 200639003, a limited liability partnership encountered a number of errors made with respect to the LLP’s accounting, as a result of a change in accounting systems, including: (1) overstatement of certain income, (2) treatment of certain non-billable costs as billable, (3) double inclusion of certain advances, (4) certain income understated as a result of a failure to implement certain accounting changes, and (5) certain income that was reported not being supported by journal entries. The net result of these errors was that the LLP’s income was overstated. As a result, the earned income of the equity partners was overstated, resulting in excess profit sharing contributions made to their accounts. The IRS ruled that the profit sharing contributions made with respect to the overstated income were made as a result of a mistake of fact. Therefore, the plan could return the excess contributions to the employer without violating the exclusive benefit rule"

It actually doesn't really seem to fit...

As long as you agree it would be reasonable to assume that the treatment would be the same for employee and employer contributions. I suppose it makes sense that it would be the same? Do you agree?

I'm trying to find something that is written by the IRS or perhaps a prestigious law firm that talks about the proper treatment when a schedule C proprietor has negative self-employment income but has already funded his or her simple IRA contribution. Does anybody have such a resource? My assumption is the contributions are refunded, adjusted for gains. Because the deduction will not be taken in 2020, my assumption is that solely the investment earnings will be taxable in the year distributed. But I would still like to find something written on the topic in a formal way that I can provide to a CPA I work with.

Depending on the language in your pre-approved doc (if that is what you are using) that might not be workable). Ours is sufficiently flexible that it would be allowable such a cap to be implemented operationally, but someone mentioned at one point to treat it like a New Comp allocation and prepare a written certification as to the allocation. I'm not seeing a super-excellent field in our document to include such a cap. Maybe yours has a good field for it...

That's a good point actually...

Plan A wants to contribute $50,000 for the 2020 year but needs more deductions in 2021. Can they deduct the 2020 contributions (which are deposited in 2021) on the 2021 tax return (i.e., you can always deduct on the cash basis) and then use the special 404a6 timing rule to deduct 2021's contributions (which are funded in 2022) on the 2021 tax return as well? The combined deduction is less than 25% of 2021's comp (it's a virtual certainty so that is not a concern). My position has always been "of course because both deductions are perfectly legal, so why in the world 2 completely allowable deductions be disallowed?" There is simply no rule on the books that says you cant take them both. Now someone did mention that maybe there is some tax law that says you have to have consistency in approaches, and to that I can't speak. Anyone have some first hand knowledge on that?