Bird

Was it terminated (and presumably balances voluntarily moved to plan B) or was it merged? Your description has a contradiction in it. If it was merged then I'd say no doubt Plan B can accept the contribution. If it was terminated then the proper thing to do would be to re-open the plan and give everyone the option of what to do with their (new) money. (Not speaking to other potential issues if it was terminated.) Although practically it probably makes sense to just deposit the contribution to Plan B, but definitely make that someone else's liability/problem by explaining that it isn't "right."

Thanks for posting. IMO this is dumb, should have just said tough you can use the the business extension and that's that, or maybe given an auto extension to October 15, but I suspect they thought their hands were tied for some reason.

You mean he had W-2 comp? Not sure what kind of comp he received. You mean gives him a 1099 so he can file a Schedule C? If he received money and it was not W-2 income, then it should have been reported on a Schedule C whether he got a 1099 or not.

You are not wrong

Good point; if the brokerage statement doesn't show loan balances, and it probably does not, then they are not getting their full balance on the statement. I guess you could argue that if you gave them an amortization schedule they have all the info they need.

You don't have to provide a participant statement if they get their brokerage statements. But there is a bunch of "stuff" that needs to be provided in an annual notice - as you note, vesting. But also fees, voting rights...that's the gist of it. Oh and some nonsense about permitted disparity if that applies.

It just makes you shake your head sometimes...I don't know how many times I've wondered how these people get out of their driveway without hitting their own mailbox.

Personally, I think a restatement is, or should be, so easy that it's not worth thinking about; just do it and move on. If the concern is charging a "large" restatement fee just as the plan is terminating, we changed to an annual doc maintenance fee two cycles back and it eliminates a lot of this consternation and wasted thought/time over these issues.

Of course there should be a loan policy in place, so either they didn't have one, which is a problem, or they didn't follow it, which is a different problem. Too many people without a clue doing plan stuff, sigh. As far as getting their "system" to stop sending reminders and charging fees, it might be possible to just tell them the loans are paid off. Of course when they get loan payments the system will freak out and try to treat them as contributions, so I don't know. Best solution is to move the money elsewhere, but I get it, clients are strangely loyal to their brokers even when they prove their incompetence.

I want to (sheepishly) thank you for reeling me in here. While I think the appropriate reference is the "regular" $250/day penalty (no one is failing or refusing to file a return, although yes I see the word "accurate" in there...), I have to admit I was mixing up the $25/day DFVCP penalty with that one and thinking the worst case was just paying the $25/day. I don't mind admitting when I'm wrong and here I was just flat-out wrong, bordering on stupid - maybe over that edge but let's not go crazy.

You were filing the SF with the one-man box checked? Yes, you should file the EZ since they don't have the one-man option on the SF any more.

Just to clarify, I was assuming the policy was literally split into two and one was going to the plan. I don't think a single policy could be jointly owned by an individual and by a plan. And I don't think you should assume it will never have cash value buildup; money will be going into it. Just musing but I suppose the bright idea is that he is using "tax-deductible" money to pay premiums (and loan interest) just like he would with a new policy in a plan. Unfortunately it is easier to make that statement than it is to actually run numbers and analyze the long term costs and benefits.

Aargh, I should just let it go and not come across as a jerk or someone with no moral code. But let me explain my reasoning, which applies to a lot of these issues. What is the worst case scenario for the client? They get "caught" and have to pay a late filing penalty? What is that cost, and what is the cost of going through the hoops of a DFVC filing? If it is a consience/moral thing, and you just can't do something "wrong," ok. But there is a flip side to that, and you are (presumably) charging the client (and making money for yourself) when you insist on doing the DFVC filing. Maybe it's because I am, or was, an owner, and was always sensitive to the bottom line...not necessarily making as much as possible but doing the right thing for the client in the overall scheme of things and being fair. And my moral code wouldn't let me do something so...wasteful (at least in my view).

I think I would explain that this throws an incredible amount of sand in the gears and ask what is the (perceived) benefit? It's so nonsensical that I can't really answer the question of how to process it. Probably the first thing to do is figure out what your marginal costs are and lay that on the table, or perhaps just say no you can't do it. Again, not wanting to dig into this inanity too deeply, but NO, that check does not go to the plan. He personally took the loan so it is his money. He is transferring the (basically empty) policy to the plan; in theory that is a $0 transaction. Nothing back and forth except the valueless policy. (But now he has a crippled policy within the plan...what is the game plan for paying interest AND premiums?!)

Oooh, I don't think it is in the instructions. I was fortunate (using that word cautiously as any experience with insurance in a plan is an unfortunate one) to learn about this when I was young so it is stuck well in my brain. God forbid any of those reporting rules have changed because I couldn't get it unstuck. Anyway, while not directly in the instructions, I think someone smarter than I could cobble together or otherwise trace the reporting trail from regs, law, etc.

Yes, being precise, the plan year end was 11/30 so this doesn't work. Having said that, I'd just file it as a full year and move on. Sorry to anyone who thinks that is godawful.

Mostly correct but the insurer should be paying everything to the plan, and the plan is responsible for paying and reporting to the beneficiary. No reason that the tax-free part should not be reported on a 1099-R but as non-taxable. The taxable portion just becomes part of the account balance and is eligible for rollover. Of course we know that doing things right is somewhere down the list for agents, so the bene on the policy might be the spouse, or the company, or who knows what. All bets are off then.

I'd say it's not a late deposit issue if the money gets into the plan within the safe harbor period. It's out of the employer's account so there is not a prohibited transaction. It's a following-the-terms-of-the-plan issue. If it says money is self-directed and there is this built in delay, is that a problem? It's not ideal, but honestly, I don't think it's a big deal. Unfortunately you don't know for sure if/when the DOL is going to want to harass you about it, and when they get up in your grill you've lost whether they are right or not. I'd probably say all of that to the client and they will hear "it's ok" and keep doing what they are doing.

You can do it. You might want to ask the software provider why it won't allocate all; there might be a setting although I can't see why it would ever cap an individual like that.

no

Why would anyone want to do such a thing? It makes no sense to me but maybe I'm missing something...anyway, the first thing I'd do is try to dissuade him from doing it. Having said that, "transfer" in a plan context really means "contribute" (as in a rollover) or "buy" (as in the plan buys it from him). There is no simple "transfer" (as in "let's just slide this asset into a plan"). The appropriate value is the interpolated terminal reserve - I doubt that is $0 - and as I see it the most likely scenario would be a purchase by the plan.

Agreed but the flip side is that you might want to give one of these folks an allocation. Yes you can do an -11g amendment but since most of our plans are using a safe harbor nonelective they are already getting something so the coverage test is not a concern. We've dropped allocation conditions on most of our everyone-in-their-own-group plans.

What Bill said. How is it titled?

I don't like to use the term "forfeiting" because there is no forfeitable event, but I think an argument can be made that the money could be removed and put into a holding...or forfeiture account serving as a holding account. All such monies would have to be treated as 2021 contributions. It's not ideal. You might also consider leaving the excess as a 2021 contribution (of course if someone isn't entitled then you have to take it out...again, not technically a forfeiture).

I think you use total deferrals, not just those deposited during the year. What if only $100 was deposited during the year? I'd use 5800/5850 as the factor.