Bird

A 5500EZ must be filed for a one-man plan with over $250K in assets. Moving IRA money into the plan would make the plan hit that mark earlier. That may or may not be a big deal depending on diligence and oversight.

Y'know, this must be making the rounds in accounting circles. I've had a couple of clients inquire about it. Doing this just to get the credit is so...accountant. I've told these clients that it would cost...pause...$500 per year. All have decided against it.

No. NO. If they had an account at XYZ Bank and wrote checks from the XYZ Bank account would you call XYZ Bank the payor? I hope not. That's all that is happening here; the brokerage firm wrote checks or transferred money under instructions of the trustee. I don't find it unusual at all.

5500EZ instructions, page 4 "Do not enter a...SSN"

Yes this scenario is daily valued and can be 404(c) compliant.

This is not a complete list but here are some thoughts: it sounds like the life insurance proceeds are in a plan checking account* he can definitely roll that into an IRA. It is NOT a 60 day rollover; it is a DIRECT rollover - no surprise that Fidelity would give erroneous advice. IF he paid taxes on PS-58 costs while the policy was in the plan (or was a sole prop and did not deduct them**), he gets to recover those cumulative PS-58s tax free. In that case, he should be paid cash for those cumulative costs, and should get a 1099-R showing $0 taxable amount. The rest could be rolled over. *But somehow I doubt it. Odds are pretty good that this is broken and not fixable with free advice on a bulletin board. Are you a TPA, broker or what? **EDIT - I was politely corrected off-line. Apparently a sole prop cannot recover PS-58s.

If the employee is ok with it it's ok by me. The time involved to correct this would be ridiculous compared to the harm (none).

Yes, exact same and I assumed it was spam or worse. Thanks for mentioning it.

Who/what was the life insurance proceeds payable to, and where is the money now?

You switched tenses; is this (after-tax) something that actually happened? Come again? I don't know what a true up for deferrals means. Anyway, aside from my nit-picking above, I agree with the prior posts, which essentially say this boils down to a mistake by the payroll company. I suppose there are plans out there that somehow limit deferrals on comp above $285K, but I've never seen them and am not sure what that language looks like or why someone would take pains to do something so stupid. I don't think it is too late to fix it and it should be fixed. I think we need to organize a Reddit mob to teach these idiot payroll companies a lesson.

I don't think that "accepting" or "receiving" a bene des means it has been "approved." Having said that, we do make an effort to assure that they are completed properly and are valid if we get them. I'm not a lawyer...

Not sure why anyone would think it is not taxable, and withholding would be whatever it was. My attitude is/was that once out the door, a CARES distribution was like any other distribution, and not our job to tell anyone it was qualified or not for tax purposes, just report it.

I don't know what the majority are doing but we did "1"

What ESOP guy said. Everything should be done under the plan name and id number; the brokerage firm writing the check(s) is irrelevant info.

I'm not arguing with you about the correctness of any of this but I can try to tell a new client why a giant like ADP is wrong, or I can poke myself in the eye with a sharp stick and get to the same place.

There is no flexibility on SEP-IRA contributions; you can't waive your own share.

I agree but tell that to the "no service" service providers. As Austin notes, there is no way ADP is going to incorporate data prior to them gobbling up the assets. I don't think there is any choice but to use the transfer date. It might even be possible to clean up the paperwork - e.g. "whereas the actual transfer of assets occurred xx/xx/20 that is the final date of merger." Just spitballing. (We have a transfer incoming from one of those types of providers and after getting their computer to spit out a transfer date we used that as the merger date.)

Yes, thanks - slip o' the fingers.

Yes, YES, YES! Not only does it make cases such as the one posed easy to handle, but we've had MD groups - anesthesia in particular, where the owners tend to be young - where cross-testing doesn't work. But we can max the owners, and give other HCEs (e.g. CRNAs or non-owner MDs) 3%, and give a staff member or two 13% or whatever, and all is good. I call it "Ageless" testing but haven't seen that term stick anywhere. I have to be honest and say I don't know what that means. I think it means that if an HCE gets less or nothing due to some formulaic application (maybe where the limitation is hard-coded) then it will be ok. It does NOT mean that you can take a pro-rata formula and arbitrarily say "but we're not including the owner."

If the plan permits you to give everyone except the owner 3% then you are fine. Saying that it is a pro-rata allocation except you are excluding the owner is a shortcut way of describing what is actually happening, which is - you are deciding to independently give each person 3%, except for the owner. You then general test on the basis of current contributions and no HCE is getting more than any NHCE on a percentage basis so you will pass the test. Of course the plan has to have each person in their own group or at least have the owner in a separate group in order to not give the owner a contribution.

You didn't ask, but this is almost purely a psychological issue - it feels better not to pay the surrender charge but the reality is that the higher expenses over the remaining surrender period are roughly equal to the surrender charges. 100% correct. The accumulated values are meaningless except in the case of death. Always use cash surrender value net of surrender charges.

The question is "who is (was) the owner?" Obviously it should have been the plan but it sounds like it was set up incorrectly in the name of the individual. Or...I've never seen an annuity actually "mature" (they always just continue until surrendered). I suppose if the individual was the annuitant and it was paid or supposed to be paid to the annuitant it would be "proper" to issue a 1099-R to that individual. I'm very surprised the insurance company prepared a 1099-R showing the plan as the taxpayer. The whole thing sounds weird to me; probably set up wrong from the get-go.

It's not the way we in the biz would title the accounts but frankly it doesn't matter. No one is comparing your plan filings to your account statements, trust me. If you were audited I doubt an agent would even raise an eyebrow. As Bill Presson notes, all plans are aggregated for purposes of the $250K limit so if that was a motivation it was ill-founded. I also wonder whether you have one plan or two. Probably two, at least that's how it should be since I doubt Vanguard allows their plan to be used with E-Trade accounts and vice versa. You should file two returns.

No idea...401 I suppose. No. I'm not familiar with the TSP plan reporting but I can tell you that regular 5500 reporting would show this on Schedule H, Expenses line e (2) To insurance carriers for the provision of benefits.

I'd say so even before the SECURE Act, but with no doubt now since you can create a new plan up to the due date of the tax return.