K-t-F

I know that the Secure Act says that a PS or DB plan can be adopted for the previous year up to the time the plan sponsor files their taxes. That December 31 deadline date scramble is no longer for them. The act did not change the 401(k) rule that says you need to give the NHCEs time to defer for that initial year. But what if it is a single member plan, a sole proprietor? Could they adopt a plan now for 2020 and still make deferral contributions in addition to a non elective contribution?

Great help.. thanks! I will clarify merger or termination with them. If they are ambiguous I will press for merger. Merger actually makes sense. All of this happened after my time with the plan. I honestly am in the dark. Plan merger... if a plan merger do 1099-Rs need to be prepared? It is my understanding that everyone rolled their accounts to the surviving plan. AND.. if a 1099-R is required do I only put on the form what was actually rolled over, what came out of the investment accounts and transferred into new accounts established by the surviving plan? or do I include what should have gone over had the plan been fully funded prior to the merger (hard assets transferred + SH Match receivables?)

Well... the financial advisor is asking me to jump in and help get the 5500 filed. The client didn't leave me due to my work, it was all about the ADP platform and supposed ease it brings for the employees to manage their accounts.... and for the sponsor to make deferral deposits. I would like to be thought of in a good light should more potential clients come down the pike by the advisor. A small TPA like myself... not a bad strategy All that said, is there an issue? At this point it's all water under the bridge.

Companies A and B are a controlled group. Both had their own plans... both exactly the same design (hey, they wanted 2 separate plans). I was handling the 2 plans up to the point where ADP stepped in with a bigger better way to handle everything. My services were terminated. This all occurred December 2020. I pressed to let me finish 2020 and let ADP take over first of the year nice and fresh. I was told that was not necessary that ADP would handle the 2020 Form 5500 (in writing). Come to find out they terminated Company A's plan and rolled it into company B's plan. All assets liquidated and transferred. Thing is.... Company A's plan was not whole. They moved the money even though the SH Match wasn't deposited. Is that ok? Since A's plan merged with B's, can B's plan accept the receivable SH Match? It is a control group situation. Thanks

Ok... so the plan is only required to file an EZ... and is technically not a one participant plan. Is a Fidelity bond required Is everyone an HCE due to attribution so the ADP test is a pass Is the plan entitled to ERISA protection This new rule only pertains to what form to file, an EZ or an SF I appreciate your patience.

2020 on, adding a child would not cause the plan to now need to file a 5500-SF. And because "all participants are partners" due to attribution the plan will not be covered by ERISA. Correct?

I also lean towards no. There is no control group. And I'll concede that if 250+ returns are filed on behalf of a single member business sponsoring a plan then maybe the IRS would want to see the EZ filed electronically. And just because he's a CPA preparing and filing returns for his clients should he be held to a higher standard? Be forced to file his 5500-EZ electronically? Maybe I'm naïve. In that example... a business that files 195 W-2s... would that business be eligible to file a 5500-EZ form anyway? Odds are unlikely I would say. Thanks, I just didn't want to miss anything.

I setup a plan for a CPA. He is a single member entity and files an EZ form . He called me in a panic this morning after reading the EZ instructions. Mandatory electronic filing. A filer must file the Form 5500-EZ electronically using the EFAST2 Filing System instead of filing a paper Form 5500-EZ with the IRS if the filer is required to file at least 250 returns of any type with the IRS, including information returns (for example, Forms W-2 and Forms 1099), income tax returns, employment tax returns, and excise tax returns, during the calendar year that includes the first day of the applicable plan year. If a filer is required to file a Form 5500-EZ electronically but does not, the filer is considered to have not filed the form even if a paper Form 5500-EZ is submitted Now as a CPA he prepares a myriad of returns for his clients. He is telling me that because he prepares more than 250 returns on behalf of his clients that he is required to file his EZ return electronically. I don't think so and tried to explain to him that my interpretation of the instructions is that if his business files 250+ returns on behalf of the business itself then he would need to file electronically. Because he as a CPA who prepares returns on behalf of his clients, those returns don't count. Correct?

I have read so much I am now becoming confused..... here is the situation - A CPA reached out to me regarding a single member client she has. This client was persuaded to open a 401(k) by the financial advisor who quite frankly I don't think knew anything about pension plans. Anyway, here is what happened: She opened a 401(k) for 2020 Rolled SEP money in (lots) Contributed to the plan in 2020 - Deferred the max (23K) - Maxed the employer (37.5K) upon advise of the financial advisor ONLY HAD $35,212 in schedule C compensation All contributions made in 2020. Taking the excess contribution out starts with deferral money then employer? or does it matter? Depending on what comes out.... 1099-R the deferral... withhold taxes 1099-R the employer, don't withhold taxes, code 8P perform the withdrawals before the 2020 taxes are filed Thanks

That is how it will be done. Thanks.

This problem has probably been answered. Today I learned that a plan participant terminated during the year and the financial advisor rolled out the balance to an IRA. Little did they realize that the participant is due a SH contribution in addition to a NEC employer contribution. Do they need to re-establish an investment account and roll the funds over or can the contributions be directly paid to the rollover IRA?

Correct, not an attorney. I would like to be able to put it to bed with an answer though. In CBs post there is bullet "C" (C) Not more than 50 percent of such organization's gross income for such taxable year was derived from royalties, rents, dividends, interest, and annuities; Since Betty's business income is derived 100% from performing work for Bob's businesses then I would venture to say there is ownership attribution making all 4 businesses a control group regardless of whether Bob was an employee of Betty's Enterprises. Am I onto something there? Appreciate your thoughts.

Ya Cuse... I always make the point that "I don't make the rules". I told them how it would need to be and they came back with.... If Bob was not a paid employee of Betty's Enterprises (had nothing to do with Betty's) can they separate Betty's Enterprises from the other 3? Can that eliminate the control group including Betty's? Does that work? I think it's obvious that what they want to do is load up Betty's with maximum deferrals and ER Contributions and not be on the hook to provide a large ER contribution for the employees of the other businesses. Also, the admin expense for a qualified plan for all 4 businesses combined is not something they want to pay for (cut me out of a day's pay) So... would removing Bob from Betty's Enterprises take Betty's out of the control group? Thanks

Thanks... that's what I told them. And... come to find out, Betty only works for the other 3 businesses. She could perform management services for unrelated businesses but technically makes all her $ from billing Bob's 3 businesses. I have led them to water.... unfortunately if it is not what they wanted to hear they think the water is poisoned and look for another watering hole. Ahh Zeller, thanks for that!

I have told these people that they have a controlled group. They keep balking at me. Just confirm for me so I know I am not going crazy... FACT: Bob and Betty are husband and wife Bob & Sons Excavating Bob is sole owner. Bob's Pipe & Supply Bob is sole owner Bob & Sons Gravel Bob is sole owner Betty's Enterprises Betty (Bob's wife) is sole owner, sole proprietor. Bob receives W-2 Betty's Enterprises performs management services for all of Bob's businesses Because Betty's Enterprises earns money off of Bob's businesses we must include all 4 businesses ... correct? Attribution? Bob wants to setup a Simple IRA because he thinks it would be cheaper than a 401(k) (because his businesses have employees). Bob and betty want to setup a 401(k) for Betty's Enterprises because it is just the 2 of them... no rank and file employees. Thoughts? Thanks

Actually... that is what is happening. The plan is terminating and the loan would be offset. The participant wants to roll what cash they have into an IRA but doesn't want to take the loan offset as a defaulted loan subject to the 10% tax. How would we show the loan balance as a COVID dist? Simply call it a COVID distribution? No mention of the loan offset?

A plan participant asked me if they could cancel their plan loan because they were finding it hard to make the payments. I wonder if the loan balance could be considered a distribution... a COVID distribution not subject to the 10% excise tax. Thoughts? Note: this participant does qualify for the COVID Dist... works for a dentist and has not worked for months at this point.

I get that when a plan terminates unless a loan is paid back prior to distribution it is offset. Can the participant pay back the loan after distribution? For instance, deposit the outstanding loan balance into their IRA within 60 days? Thanks

Perfect... thanks for confirming my thoughts

If a plan is terminating and the termination is not related to the COVID virus will those who take a cash lump sum be subject to the 10% early dist excise tax? I would think they are subject to the tax because the payout was not instigated as a COVID distribution. AND... should we offer a COVID distribution option anyway?

a quick followup.... is there a cite to hang my hat on? Appreciate it.

A man of few words. NO... it's not the same in qualified retirement plans... and YES .. he can keep them in his safe deposit box. Thanks

A single member plan participant would like to invest in Gold. In an IRA the rule is that the gold must be held by a custodian. Is that the same for qualified retirement plans? Is this single member "solo" plan participant allowed to invest in say Canadian Maple Leafs and keep them in his safe deposit box? Thanks

Ok... 8822-B completion question... I assume I only complete the following for a responsible party change? #2 regarding "Employee plan returns #8 New Responsible Party's name (new business officer) #9 New responsible Party's EIN #10 Officer signs Thanks

Yup! Thanks for all the help. I have never run into this scenario. Never had a business sell. Plan sponsors die but that is just a termination.