Santo Gold

A participant passed away shortly before her RMD age. Her spouse is the beneficiary and he is beyond age 72. He does not want to take distribution of the account balance and prefers to leave it in the plan. (1) Can he leave the balance in the plan indefinitly? (2) He must begin taking RMDs from the plan; is this based on his DOB alone or does the deceased spouse's DOB factor into this as well? Thank you

The IRS letter suggested DFVC is an option if the DFVC requirements are met. The only requirement I could find is that the plan has not been contacted by the DOL about the late filing. Which they have not, but the IRS has contacted them. Can they use the DFVC then in this instance? Thank you

We have a pretty straightforward small 401k plan (about 6 participants) that uses W-2 wages for plan compensation. The owner wants to transition from W-2 wages to providing "guaranteed payments" to all employees. I am not certain I completely understand what this involves but he says they can withhold 401k contributions before making the guaranteed payments. But do guaranteed payments also have federal/state/local taxes withheld before being paid? If not, can these wages still be used for 401k plan purposes? Any advice on what questions we should be asking would be greatly appreciated. Thank you

These situations seem to follow me around...... Different individual with a slightly different situation. Individual is an Independent Contractor and is paid from the financial firm he works for but not via W-2. He wants to set up his own 401k just for himself but he does not have a "business", let alone a FEIN or Plan ID number. Based on the above he would need a FEIN to file 5500s (even though he would be under $250K for quite awhile). But am I correct that to sponsor a plan, there needs to be a business, even if the sponsor is himself? John Doe the sole prop can sponsor a plan but John Doe the individual cannot, is that correct? Thanks

I have a small plan where the owners were the only eligible participants and enjoyed a few years of after large after-tax contributions and no ACP testing on them since all were HCEs and there were no NHCES. But starting next year there will be a non-key/non HCE and the owners (3) are desparate to keep their after-tax employee contributions going. The after-tax has to be tested via ACP and there is no safe harbor to get around that. But the plan does have a 3% non-elective safe harbor. Based on the original post and reply, am I correct then that if the 401k test would pass on its own (without the 3% SH), then that 3% could be used in the ACP test which in this case might help a little? The employer could make also make a large QMAC or QNEC just for the NHCE, include that in the ACP test and that would help as well. Any comments on these options or other recommendations? Thanks

I know I am reaching on this, but could you start a safe harbor match effective 1/1/2022 with the notice going out as late as 12/13/2021? I know that the rules for proper employee notification would require that notice to be distributed no later than 12/1, but is that a "safe harbor (so-to-speak)" notice deadline? If the safe harbor match notice is given after that date and if the eligible participants then still have enough time to make a decision, receive education material, ask questions, and are ready to go by January 1, 2022, can that still be considered valid enough to have the safe harbor effective 1/1/2022? For a small group of employees, this could probably be done. But would it be considered valid?

A >5% business owner, still working, turned 70-1/2 in 2019 and took an RMD in 2019. He did not take an RMD due to the waiver in 2020. In early 2020 he sold all of his ownership shares but continues to work. For RMD purposes, is he still considered a key employee who would need to take an RMD in 2021? Would the RMD requirement for him change in any future years if he continues to work? Thanks

Thats sounds pretty definitive. Thanks for the replies.

Could a 403(b) loan program be established in a way that a loan can be taken for any reason, but only for individuals with “X” years of service (e.g., 10 years of service)? The plan in question does not have any HCEs so there would not be a discrimination issue, but in general is it permitted to structure a loan program in this manner? Thank you for any replies

We have a 403(b) plan that has all assets held in custodial accounts. Can the participant take a hardship from the employer contribution account? The new regs prevent taking ER QNEC and QMAC from custodial accounts, but if this is just a matching contribution account, could the hardship come from that account?

That is interesting. The odd thing about what was referenced and this case is that this is a NHCE and there was no deception on the plan sponsor's part regarding the termination. Its possible that the employee quit and was counting on being rehired, in part to get her benefit. That would seem like a "sham termination" but the plan sponsor had no part in it.

Could the participant have a legit argument that the plan document states that distributions can be made upon termination of employment. She did have a termination of employment. She was rehired, but in the SPD there is no mention of what happens if you are rehired. Therefore, since she did have a termination of employment, she had a distributable event and should be paid out?

A participant left employment for 1 day and was then rehired and is currently employed. She wants to take her money out of the 401k plan due to her being unemployed for that 1 day. She cannot take it though because she is now employed again, correct? No other in service withdrawal options would apply. Thanks

A small profit sharing plan under audit was brought to us as their plan document was not amended timely. It was amended for EGTRRA around 2009 and that was about it. The auditor recommended updating their document, which was done and they now have current document. However, while the auditor accepts that, since the document was not timely amended, they auditor is moving forward with audit cap to avoid DQ. The plan appears to have been operated properly in all other areas. Just checking on what an estimate amount of penalty the IRS would likely impose in this situation. Any ideas? Also, while hiring an ERISA attorney is never a bad option with audit cap, will it really make much difference in this case? Is the ERISA attorney mainly there to negotiate a lower penalty? Thank you for any replies

Thanks to all for the comments

I plan sponsor started a new 401k plan in 2020 and gave instructions to the payroll company that a 1 year/1000 hours eligibility requirement to enter the plan was desired. No auto-enroll. Someone at the payroll company dropped the ball and did a 3 month elapsed time eligibility condition and included auto-enroll with it. The payroll company has kind of fessed up to it being their mistake. We now have several participants with employee and employer dollars in the plan due to the early eligibility and auto-enroll who were never intended to be in the plan. is this something that can be fixed via an IRS correction program? The employer would like to treat these individuals as ineligible and refund their 401k amounts if possible all due to mistake of fact. Other options would included amending the plan to do away with auto-enroll and the 3 month eligibility, but that would help for new employees and would not fix the existing employee problem. He could also bite the bullet and keep everyone in the plan, but terminate the plan and pay them out. But that would mean he could not start up a new plan until at least 2023 and he would like to have a plan in place without disruption. Thank you for any replies.

The document was written that anyone employed on January 1st of the current year would immediately participate and after that, a 1 year wait. So we can get the doctor and her spouse in the plan for the current year. I advised that they check with the CPA, but if the only answer is that he can be a 1099 employee, does that prevent him from participating in the plan? Still checking on that.

A new solo medical practice established this year. A 401k plan was created this initial year as well. The doctor has no employees at this time. The doctor's spouse is working during this initial year to help establish the practice. The doctor would like to pay the spouse for services and the spouse would then like to deposit a portion of that compensation into the plan. With no other employees, the doctor does not currently have a payroll service and would like to not have to use one until employees are hired, likely next year. Without using a payroll service, Is there a way for the doctor to pay her spouse for (legit) services to the new practice so that he can be considered an employee? If he is paid as a 1099 employee, can a plan document be written to include him as an eligible employee for the 401k plan, which would allow him to contribute 401k/Roth/after-tax? Thank you for any comments

Thank you

For a hardship withdrawal, is the 20% tax withholding required? Thank you

We have 3 companies that are part of a CGroup and each wants to sponsor a separate 401k plan just for their eligible participants. Lets assume that there are owners who would be eligible for all 3 plans. Would each owner (or participant) have separate 415 limits in each plan? Or does the CG mean that they share only one 415 limit across all 3 plans? Thanks

Our TPA firm obtains authorization from the plan sponsor/plan administrator and files the 5500 for the company. Can the 5500 signature from the plan sponsor/administrator be digital or does it have to be a "wet" signature in order to be valid? thank you

This 401k plan does permit hardships for non safe harbor reasons. But does that mean it can be any hardship that the Plan Administrator deems to be an acceptable hardhship reason? Assuming it meets the immediate and heavy financial need, would an employee purchasing a new furnace for which she has no other means other than the plan be acceptable? She is a non-HCE and we assume that any future requests for new furnaces from other employees would be reviewed and accepted? Thank you

What type of person/organization would you reach out to if you had a client who wanted to establish an Employer Educational Assistance Program? Anyone you can recommend? Thanks

It was an asset sale. I understand, I just thought there was room to argue that since the new owner bought the old business and she is still working for the new owner, that perhaps in this case it is not viewed as an employment termination for RMD purposes.