AlbanyConsultant

Sounds reasonable - I was going right past the 'segregated' issue. Thanks!

I have a client who made their final deposit for 2016 (payroll date 12/30/16) and first deposit for 2017 (payroll date 1/13/17) were not processed by the recordkeeper for several weeks; it wasn't discovered for another month or two. To make good, the recordkeeper reversed the initial transactions and re-processed them as of the date they should have been done, using that dates' share prices (I wonder if the relative share prices made it come up a net positive or negative for the rk?). So... I presume that this gets us out of having to calculate any lost earnings (presuming that the rk also made sure to correctly credit any dividends or capital gains)? And how in the world do I begin looking at a 5330? Any suggestions?

I've got a plan with a non-safe harbor discretionary match that is calculated per payroll with no true-up. Halfway through the year, the plan sponsor now wants to cut the rate of the match in half. Is there anything that would prevent this? I don't see anything in the plan document that discussed this specifically. I know they'd still have to pass the ACP test, so if this is a ploy to lower the match after the HCEs have maxed their deferrals, they'll just fail that anyway. Is there anything else that could come into play? Thanks.

Just saw the new article that ASPPA now wants us to Save our Savings: https://www.saveoursavings.org/ I thought we were still saving our 401k and protecting our piggy. I can't save everything - I'm not Melissa McCarthy. :)

I've got a typical ASG - 2 lawyers O and P who each have their own sole-prop practice, and they have a partnership where their receptionist and other staff are paid from (and they receive small K-1s from it). O owns 1/3 and P owns 2/3 of the partnership. When I split the pension cost for the staff, does that also affect the Schedule C income because this is treated as one employer (i.e., add the Schedules C and K-1 together and then subtract the portion of staff contribution)? Or do I reduce only the K-1 compensation and then add the Schedule C compensation? Or is it the same thing and I'm just overthinking this? Thanks.

I can't believe I had forgotten about the S-corp owner restrictions... wow. Thanks for the reminder. So maybe that's the problem. That situation doesn't (hopefully) come up too often anymore. What about where the loan was only taken recently? When does non-payment create a PT, if it does at all?

This came up because a local CPA asked our advice for an audit his (not ours!) client is going through. The owner of the business (an s-corp) took a loan that satisfied all the 72(p) loan provisions when he took it out. He never made a single repayment, and the CPA is still carrying it as a plan asset for the face loan amount. Oh, did I mention that the loan was taken 20+ years ago? No doubt this is bad. But we in the office can't agree on where the badness starts... Is this a PT? Where? When? Is it different because it's an owner? I've heard that they have a "higher standard", but unless this owner is a fiduciary (which of course he is), I don't think that's generally true. Thanks.

I have a client who is just now realizing that the safe harbor match true-up provision they've had in their plan for almost a decade is "costing [them] money" by making them do more match than just what they calculate weekly (I suspect a new bookkeeper). They want to do a mid-year amendment to remove the annual true-up of the safe harbor match effective ASAP. I don't see where this neatly fits into one of the prohibited amendment boxes, so I'm thinking this might not actually be too bad. It feels wrong, but maybe that's just me. If this is OK, would you keep the true-up through a date 30-days in the future (maybe April 30)? Thoughts? Thanks.

It seems to be about three years since this topic has come up, so I was just wondering what everyone's current opinion is regarding making the deposit of employer contributions timely. Obviously, we'd prefer if the money was actually deposited into the Trust by the deadline date. But we all have clients who, for one reason or another, aren't ready to make the deposit until the day before the deadline and still have to mail a check somewhere. What's the best current guidance we can give those poor souls? From searching previous threads here, I've found: There’s a footnote to the 1996 DOL deposit regulations (the regulations that relate to the definition of “Plan Assets”) that gives an example of an employer mailing a check to the plan counting as the money being segregated as of the day the check is mailed (provided that the check clears). This example relates to employee deferrals and doesn’t mention employer contributions. IRC 7502 gives general guidelines about using the postmark date, but it explicitly says that this section does not apply if you’re making the deposit to “any court other than the Tax Court”. There are apparently several Private Letter Rulings that use the mailing date as the deposit date for their various scenarios. There is at least one instance, however, where the postmark date was rejected because the employer couldn’t prove what was in the envelope they postmarked. Some of these threads are over a decade old, so I'm hoping that someone has gotten a clearer answer by now. Thanks.

Thank you!

Working on an s-corp where the two owners deferred $25K in 2016. They are both over age 50, so they'll get $1K (+ earnings) refunded by 4/15/17. Fine. This plan also has an integrated profit sharing that they like to max out. I know that these excess deferrals would count in the ADP Test (if the plan wasn't a safe harbor 3%), but could they affect the profit sharing? Do they count towards their individual 415 limits? Thanks.

Because... they're not due yet? That's our viewpoint, too. But it's nice to know so we can answer the question. :)

I've got a participant's CPA who is saying that because we haven't electroncially filed the 1099-Rs yet, if his client electronically files their 1040 it will bounce because there is no 1099-R at the IRS to match it up to. I don't think I've ever heard of this before - is this is thing? Thanks.

Thanks, everyone.

A question similar to this started quite a debate at the ASPPA Annual Conference a few months back, but I don't think there was ever a clear answer... Small plan with immediate eligibility, the participants are the owner, his son, and one non-related worker. The son was not employed when the plan started in 2015 (he came aboard in 2016) and has never worked more than 1,000 hours per year. The company is expanding and now wants to change the eligibility provisions to have 1 Year of Service (1,000 hours). If the plan provision is changed to require a YOS, is the son grandfathered in the plan, or is he now considered an excluded employee (i.e., no future contributions) because he has not met the new eligibility requirements? Could the resolution (if the adoption agreement itself doesn't give you the flexibility to do it) be written to grandfather him in? Is that discriminiatory? If the son is terminated (and hopefully paid out) before the change, does it even matter? Thanks.

This has to be pretty common - the harried HR manager puts the deferral amount on the wrong line of the template on the product platform's website so that Particpant A doesn't get his $50, but Participant B does. We find it months later when we do our annual reconciliation because neither A nor B read their quarterly statements (or any of the gazillion notices, but that's for another day). Is this a "lost earnings" situation? On the one hand, Participant A did not have the access to his deferrals, so he was denied use of the money. On the other hand, the Trust was not shorted anything, and the employer did not have use of the funds. What takes precendence? I'm trying to get some outside opinions because I find that people in my office are doing it both ways, and they are passionately defending their side. Just as importantly - how would you correct it? Transfer the overage from B to A? Have the plan sponsor drop in an additional amount for A and short B's next deposit? Have you had one method work consistently better? Thanks.

A client 'fessed up and said that they had given a participant $2,000 in severance pay (that isn't for the payment of unused sick or vacaton time - they actually used the word severance). The participant deferred exacty 10% of gross pay, so while it's still being checked, I'm pretty sure that they took deferrals from the severance, too. Let's say this is the case. Obviously, that is not allowed - if it's not eligible for plan compensation, you can't defer from it. So what is the authority to return those deferrals? It's not a 402(g) failure, and 415 wasn't violated. It's not an excess deferral. What is it? Mainly, I want to know for (a) timing, (b) taxation, (c) earnings calcluations, and (d) to look smart when I tell the plan sponsor. Thanks.

I think that's it. Thanks!

I've got a plan that calculates the employer match on a quarterly basis, and in the back of my head I seem to remember a specific timing issue that relates to when that deposit has to be made. Or maybe I'm mixing it up with something calculated per payroll having to be deposited by the end of the quarter...? And because I don't know what I'm exactly looking for, I can't find anything that makes sense. can anyone figure out what I'm talking about and half-remembering? Thanks.

Hi. I have a 401(k) plan that has terminated effective 12/31/16. The business is still continuing, but the plan is winding down (calculating final employer contributions, testing, etc.). A participant has asked for an in-service withdrawal. Presuming that if the plan were not terminated she would meet the plan's criteria to take one, should be allowed to? I don't see anything that specifically addresses this in our document (Datair) or the regs. Thanks.

I have a new 401(k) plan going in for a client, and we are now getting word that the platform won't have the accounts ready until after the first payroll date, but likely by the second one two weeks later. So the plan document and all the SPDs and the enrollment meetings said that deferrals are effective 1/1/17. There are dozens of people poised to defer with the first payroll in 2017. What are workable options? > I have heard anecdotally that the IRS is actually reasonable in this scenario and will not penalize a plan for missing the first payroll's worth of deferrals. The participants should of course be told in advance that this will happen, but then they can start up with the second payroll with no additional fuss. > The plan document could be amended to allow deferrals starting with the second payroll period. Again, the participants should be told that this is happening. > Take the deferrals from the paychecks and deposit them into a plan checking account that is then transferred into to 'real' plan accounts when they are ready. This is my favorite method, though I'm not eager to see how this unfolds with 50 or 60 participants deferring. The participants are told that their first deferrals will be in a 'holding account' for a short while until the real accounts are ready. > Take the deferrals from the paychecks and hold on to them in the company accounts. This eliminates the extra steps in the last one, but at the cost of lost earnings that have to be calculated. Any options I didn't cover? Any thoughts on these? Any pitfalls to avoid? Thanks.

Has anyone run across as good checklist of information or data request form or something like that to gather the information to review for affiliated service group status? I always feel like I'm missing something, and they tend to become these long, rambling conversations... which are great for building a relationship with the client, but not so great for making sure I get everything I need. Thanks.

Putting in my first plan for a financial advisory firm, and the owner (which is a registered financal advisor) wants to be the trustee and have self-directed brokerage accounts for each of the participants (at least one NHCE). He is OK with giving advice to his participants since that is literally his specialty. All the bells for self-dealing and the sponsor giving participants advice started going off, but there has to be a way this is OK. It doesn't seem reasonable for this employer to have to call a competitor to have them be the advisor on this plan. But the PTEs don't seem to be specific to this situation. Any thoughts? Thanks.

A SH plan sponsor contacted me yesterday asking if she could amend her plan to allow for immediate entry effective immediately. The goal is to allow a new hire to be in the plan now so she can make a 2016 deferral allocation. The safe harbor notice doesn't specifically mention the plan's deferral eligibility rules, instead referring the reader to see the SPD for details. It does mention the eligibility for the SH (which is statutory, though deferral eligibility is currently faster). Obviously, there's no time to give a 30-day advance notice at this point, but I'm wondering if that's really a thing here; the wording in Section III.C. of IRS Notice 2016-16 is not clear to me: It seems like it wants a 30-day notice in advance, but if you can't, no big deal. That can't be the correct interpretation, can it? Is the answer different if the goal is to also make the SH eligibilty immediate, too? Thanks.

OK, so let's remove the safe harbor piece. Clearly, it's discriminatory if the owner deposits $25K into his profit sharing account on January 1 and doesn't deposit the contribution for the rest of the participants until September 15th of the following year. If those deposits aren't meeting a safe harbor allocation, then maybe that's what we have to test, which is why we try to get our clients to not deposit during the year (good luck). But it sounds like we're all saying that, barring something that is clearly discriminatory, it's just one test for the whole year. Is that correct?