Bird

Just to drag this out (and I know Larry will not let anyone have the last word)... I do see them as similar. You (Larry) are signing those returns for the client. The DOL made it very clear that the one pushing the buttons to file should be the one whose name is on the return. There aren't any consequences because 1) nobody knows, and 2) the only way it is a problem is if there is something fraudulent in the returns, and since you're preparing them, you have every confidence that they are not fraudulent. But if sh*t hit the fan for some reason, and they investigated, they could say that you followed improper procedures and ultimately hold you responsible for the fraudulent filing (IMO). I know they admitted there is no "penalty" but I think you caught them on a bad day when they weren't thinking it through. The penalty is being held responsible for filing the return. With the bonding issue, there is no "penalty" (and in reality we know that consequence is "you better get a bond") but as you note trustees can be held personally liable. Well, when you have self-directed accounts (or not, but prudently invested assets and a modicum of care) and the owner has 85% of the assets and isn't actively stealing the rest, well, let's admit it, the bond isn't protecting much of anything and similarly never becomes a real issue.

It's on the long list of things that we "have" to do but many don't and there are no consequences. Maybe not government "at its worst" but it's not good. We do it, sometimes by spelling it out but more often with "everyone in their own group" by a very specific reference to the allocation report. As noted above, the language is very specific that the trustee be given this information. The reasoning is that this makes the allocations definitely determinable - of course that part is a joke but in some sense the trustee needs to know how to allocate the contributions when received. There are scenarios where the plan sponsor does not wear all hats and it can't be assumed that just because it is in a val report it is generally known to all parties.

This scenario is limited to incorrect overcontributions; the other was more about about embezzlement and trying to recover from a plan. The first step of removing the excess from the participants' accounts should be a no-brainer; we do it all the time for simple administrative errors. The second step of actually removing them from the plan and returning them to the employer would seem to be totally logical, although of course much of what we do has nothing to do with logic - and my recollection of an example the IRS gave would be incorrect census data, such as a date of birth. I'd try to leave it in the plan and use it against future contributions, and only actually return it to the employer as a last resort...with approval of ERISA counsel, blah blah.

I thought they made it clear - somewhere - that the person filing had to be the person who signed. But, whatever, we'll continue to file with an authorization if for no other reason than it is easier.

I think there is more to it than the honor system. The IRS will know about the overcontribution and I think it is in fact something their computers will flag on the front end. How they would enforce the back end - taxing the distribution of supposed Roth money - I don't know. It is very hard to imagine the "regular" (1040) IRS folks somehow telling a participant that they have to tell a plan sponsor to segregate that money for future distribution taxation purposes. The pre-tax scenario is very simple - they will flag it (if not reported properly) and just tax you on the excess in the year contributed, and the plans don't have to do anything other than report the distribution when made.

They are part of earnings.

Larry, would you literally sign a 5500 for your client before the E-Fast system came along? Isn't e-filing for them doing the same thing?

I'm reviewing them right now. Some of the canned stuff that spits out includes "The plan may also incur unexpected expenses that may be deducted from participant accounts" and "Your account may pay a pro-rata share of certain administrative expenses." Right or wrong, there is some pretty vague stuff out there.

Yeah...in my world, the recordkeeper is just that, a recordkeeper tracking money by source and participant and providing a website, etc. Compliance work, including filings, is done by the third party administrator. But there are bundled providers who do both, so, yes, if they are bundled I would expect them to prep and file the 5558.

I think Mike is (cryptically) suggested you read the reg thoroughly to review the requirements. This one might be of note (boiled down - the amendment itself may not be discriminatory): (v)Corrective amendment for coverage or amounts testing - (A)Retroactive benefits must be provided to nondiscriminatory group. Except as provided in paragraph (g)(3)(v)(B) of this section, if the corrective amendment is adopted after the close of the plan year, the additional allocations or accruals for the preceding year resulting from the corrective amendment must separately satisfy section 401(a)(4) for the preceding plan year and must benefit a group of employees that separately satisfies section 410(b) (determined by applying the same rules as are applied in determining whether a component plan separately satisfies section 410(b) under § 1.401(a)(4)-9(c)(4)). Thus, for example, in applying the rules of this paragraph (g)(3)(v), an employer may not aggregate the additional accruals or allocations for the preceding plan year resulting from the corrective amendment with the other accruals or allocations already provided under the terms of the plan as in effect during the preceding plan year without regard to the corrective amendment.

It depends. Most of our plans have decent employer contributions, and most of the time we'll be able to shift it over to a different source for the same participant, or perhaps to a different participant if necessary. If that doesn't work and it's a small amount I guess we might treat it as being for the next year but that creates a negative accrual/liability and I'd rather not do that...because it is not permitted as per BGs post which came through as I was typing. (But if it's a deferral-only plan, I will not let it create a scenario where we are allocating a $50 PS contribution across 15 participants who otherwise would not have an account balance! "Sane" trumps "right" sometimes.)

I agree, the spouse must be the bene in a QJSA. But it's not clear to me exactly what you are asking. A non-spouse can certainly be named as beneficiary before benefits are in pay status; there might be a lump-sum death benefit. It might be possible to elect a different kind of annuity, say straight (single) life with 10 years (or 15, or 20) certain payments. If they are not offered by the plan but a lump sum is, the participant could roll the lump sum and buy an annuity that has the desired payout.

In other words, you don't really fix it by just treating the excess as a distribution - it's not allowed, period. I think you still have a loan, albeit one that does not meet the PT exemption for participant loans. I think the proper course of action is to repay it asap and pay excise taxes.

I agree, first day of the current plan year is usually the correct date. Retroactive provisions are generally buried in the Basic Plan Document. But your document provider should provide guidance on this.

LOL. Good job by you; thanks for sharing this.

First, forget about trying to get accurate or even consistent answers by calling an IRS 800 number. You're going to have to research it and know it better than they do so you can browbeat them into submission. 1/13 and 1/17 are not "the very same time." (Although that fact pattern should be ok...if you look at the Rev. Notice 931 for 2017 it says a 1/13 (Friday) payment is due on Wednesday (1/18). I suspect other payments during the year were late. Just remember that this is all computer-driven so the trick for 2018 is to make sure your paydates line up properly with the deposit dates. The 2018 Notice actually has a schedule with dates. For 2017, did you or anyone prep a 945-A with those detailed dates? I'm not some big expert on this but went through it for 2016 for a client in exactly the same scenario. They suddenly became a semi-weekly depositor and the IRS asked for the 945-A; we shrugged and did it without thinking too carefully about the dates, and they came back and said there were penalties. We looked more carefully and said "oops some of those paydates were wrong" and fixed it and it went away.

Arggh. The other option is to literally have a second plan for the employer contributions.

I hear you/no problem. I guess in hindsight I could have expanded and said that I'd flat-out tell them they can't do it because it doesn't fit in my document, and they're taking things to extremes. I can get away with that in my (small plan) world but I'm not sure that isn't the thing to say no matter the size of the plan.

I vote that you do not need spousal consent for the 401(k) part. No substantiation for that position but I'm pretty sure "plan" has been interpreted to mean "account" or "source" within a plan in other situations...in fact in this very situation although I don't have cites.

But these people were previously reported. For $195 I would figure out a way to make this go away, not report on 5500 or 8955.

Thanks for sending the plan info privately. I found the latest 5500 (tax return for the plan) and while there is only general info, we can develop a little bit better picture of things. the plan is on a fiscal year ending 4/30. The last return was for 4/30/17 and it was filed 2/14/18, one day before the extended due date. That could be an indication that information was hard to come by. There were 39 participants with account balances but only 19 actives, so it confirms that there has been a lot of turnover. There's over $1 million in the plan. Employee contributions were reported as $7823 for the year. The return said there were no missing/late deposits. You said that there is no TPA and yet a tax return was filed. In fact it was filed with an electronic signature which is usually an indication of having some help - could be that Transamerica spits out a "sample" form based on info they received, or could be there is a TPA and you got bad info. I don't have any great answers for you but I'd keep going back to Transamerica and ask for a supervisor where you can explain the whole situation. Otherwise at some point you have to confront your employer and demand that your contributions and loan payments be deposited, AND that they take action to reverse the default on the loan. If things happened as you described, then the moment your loan payments left your paycheck they became plan assets and you should have been credited with those payments in order to avoid a default. Good luck and continue to keep us informed.

Yeah but if a tree falls in the woods and no one is there to hear it, did it make a sound?

It's actually Q 6; here it is for anyone who is interested; my emphasis: I'm not sure what to do with that info though; it surprises me. But I've seen IRS websites give bad info plenty of times - not saying that's the case here but it is possible. And you're right, nothing on the 1099-R would indicate that it is ineligible to be rolled over, just that it was a taxable distribution as processed.

Granted a lot of things in this thread are not clear, but I think we have all assumed that he's taking cash, and if the assets lost 10% and you give him the dollar amount from the last val then everyone else bears his share of that loss. If you are assuming he will take 44% of each current asset, then I agree, it doesn't impact others. But that is effectively doing an interim val.

Bingo. The term "schedule" might be confusing; the distributions of course aren't on any kind of schedule but the timing of the tax deposits after withholding is the key "schedule" you have to follow. And if you are the one doing the deposits through your own account, there's barely or maybe not even enough time to let the check clear. The trick is to report the "right" distribution date for the actual deposit date, if you know what I mean.... Or just bag the withholding and have him start making quarterly tax payments.