John Feldt ERPA CPC QPA

Just for reference, the unrounded figures are: Compensation Limit: $292,260 Annual Addition Limit: $58,452 Deferral limit: $19,792.50 Catchup: $6,597.50 DB Limit: $233,808 Key Employee: $189,969 HCE: $132,056

Give credit to Tom. CPI-U for September was 260.280. Based on Tom's spreadsheet, the projections for 2021: Increased: Compensation Limit: $290,000 (was $285,000) Annual Addition Limit: $58,000 (was $57,000) Unchanged: Deferral limit: $19,500 Catchup: $6,500 DB Limit: $230,000 Key Employee: $185,000 HCE: $130,000

The CPI-U for September is scheduled to be released tomorrow morning at 8:30am. I have a copy of Tom's file from days of yore and can provide the updated figures shortly after the release based on his file.

If it is required under the terms of the plan, explain the potential consequences for failing to follow the plan’s terms. Recommend they obtain advice from their own legal counsel.

Exactly.

Yes, we’ve seen IRS approval of similar issues for retroactive amendments. The IRS will likely ask for copies of the communications provided to participants. They might ask to see how many HCEs vs NHCEs are negatively impacted.

I should go back and edit "will find" to "may find" in my prior post above. I agree that what you describe is usually the case. However, take a look at the same section in the EOB, 3.c.2 through 3.c.4 when the definition for compensation for matchable deferrals and the matching allocation cap are not the same. Had a case like a few years back.

Does the definition of compensation used for allocating the match satisfy 414(s)? If it does, then my understanding is that you have no BRF issue. If it does not satisfy 414(s), then you can’t test ACP under that definition. And when you look at the rates of match using a definition of compensation that passes 414(s), you will notice that you have differing rates of match for the deferrals that were made.

This is on the IRS website at: https://www.irs.gov/retirement-plans/file-your-one-participant-plans-electronically-using-form-5500-ez Effective for plan years beginning after 2019, a one-participant plan can file Form 5500-EZ electronically using the EFAST2 filing system. Form 5500-SF is no longer used by a one-participant plan in place of Form 5500-EZ. Information for a one-participant plan filed electronically with EFAST2 filing system” will not be available to the public on DOL’s website. A one-participant plan covers only a business owner and his or her spouse, or cover only one or more partners or partners and their spouses in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC Section 1372(b), as a partner). A one-participant plan can file Form 5500-EZ electronically with the Department of Labor’s EFAST2 filing system, or completing and mailing a paper Form 5500-EZ (PDF) to IRS. However, a filer must file the Form 5500-EZ electronically using the EFAST2 filing system if the filer is required to file at least 250 returns of any type with the IRS. I added emphasis in bold for the 2% S Corp shareholder, which was part of the Pension Protection Act. Does this mean an S Corp with only 4 employees, each owning 25%, can file a Form 5500-EZ? Doesn't ERISA still apply, requiring the normal Form 5500-SF?

FYI, Derrin is not convinced that they are tying the definition of owner-employee to IRC 401(c)(3).

Okay, so the assumption is that the definition is tied to IRC section 401(c)(3).

On page 14 of the article, "The instructions for Line 9 of the Application provide for the inclusion of 'any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This amount is capped at $15,385 (the 8 week equivalent of $100,000 per year) for each individual, . . .'" This limitation for self-employed individuals and partners appears to also apply to "owner-employees" as an "owner-employee" is listed as another group to be limited in addition to sole props and partners. Do they define this term "owner-employee" anywhere? What advice are you giving to S Corp owner-employees or C Corp owner-employees?

No.

If age 50 or older, and the plan allows the age 50 catch-up, in 2020 they can defer $26,000 in the 457(b) plan, plus they can receive an employer allocation in the 401a plan of $57,000. Assuming the plan provisions allow. 415 does not take into account any 457(b) allocations.

And what about a first year plan where the account now has less in it than the amount of refund that is due? Or a participant that deferred for the first time starting last year so their deferral account has less in it now than the 12-31-2019 refund that would be due?

Yes, the deadline to sign a pre-approved cash balance plan document, assuming the plan will fit into it, is April 30, 2020.

Sounds like they intend to use the discretion allowed in EPCRS. Section 10.06(4): If the information is not received within 21 days, the matter will be closed, the user fee will not be returned, and the case may be referred to Employee Plans Examinations. Section 10.06(7): If the IRS and the Plan Sponsor cannot reach agreement with respect to the submission, the matter will be closed, the user fee will not be returned, and the case may be referred to Employee Plans Examinations. Section 10.06(8): In appropriate circumstances, the plan may be referred to Employee Plans Examinations. Section 10.06(11): If the IRS determines that the Plan Sponsor did not implement the corrections and procedures within the stated time period, the plan may be referred to Employee Plans Examinations. Well, I certainly hope this can be resolved in a more plan sponsor-friendly manner.

Keep in mind also that the extended amendment deadline was for the items in the SECURE Act. This change from 62 to 59.5 was is the American Miners Act. Unless guidance is provided otherwise, your normal amendment deadline rules apply for this change, which would be the end of the plan year in which the plan operated using an in-service age under age 62.

We'll have the chauffer deliver a copy to you.

Find HR 1865. Go to Division O, section 114.

The new rule, to start RMDs at 72 instead of age 70.5, are only changing the age, like this: If you turn 70.5 after 12/31/2019, then your first RMD year is the year you turn age 72. The rest of the rules that apply, such as being a 5% owner, or being retired, are unchanged. The RBD is also not changed. The first RBD should be April 1 of the year you'll be age 73 with another RMD due by the end of that same year.

My understanding is that pension plans can allow an in-service distribution at age 59.5, but that the normal retirement age rules still apply as described above in Larry’ post.

Thanks! The photo is my son, actually. He's now an eagle scout and is already in college! Boy, time sure flies by when working on this exciting pension stuff!

Yes. Take a look at IRS Notice 2016-16: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwjC5vPSlMXmAhVHZ80KHQiPBPsQFjAAegQIBRAC&url=https%3A%2F%2Fwww.irs.gov%2Fpub%2Firs-drop%2Fn-16-16.pdf&usg=AOvVaw0WCEJy-VYCn2e8f-i6FC6l

My understanding is that any funding deficiency reported on the SB automatically puts the plan on the “please audit me” list for the IRS to consider. Not all get audited, of course.