BG5150

I understand. I'm trying to make sure we are preparing the 5330's correctly. Do I file BOTH 2024 and 2025 and only pay the tax once (forgetting about late penalties for either the tax or the filing)? And I'm not sure how to fill out the 2025 5330. Right now, it has: 8/1/2024 $400/60 (original error) 12/31/2025 $400/60 (carry over) Total: $800/120 I THINK it should somehow be: 8/1/2024 $400/60 (original error) 12/31/2025 $460/69 (orig +tax + 15%) But what about the filings? Do we file 2024 and pay nothing on that, file the 2025 and pay $69? If so, how does that get explained in the appropriate section? Is it one line: $460/69 with explanation of carryover?

I'm guessing it depends on if the ER took a deduction for it. If they took $115, then put it in suspense. If not MOF.

Isn't the 2025 tax due by the date they file their taxes?

Right now, we have two 5330's. 2024: $400 involved, $60 due 2025: $400 involved, $60 due for 2024 and $400 involved and $60 due due to carryover for 2024 (So if you add them up, it's $180 due!) Also, it seems as though the 2024 form is now late and subject to penalties. Do we have leeway to ask for abatement since the error was not caught until 2025?

Employer properly deducted and remitted participant deferrals. But due to some accounting mishap on their end, they won't up contributing additional amounts for several participants. It wasn't a correction or anything. All the amounts were properly withheld and remitted the first time. So say Jimmy had a $100 deferral from his paycheck and the company deposited that timely. But when they went to do in-house balancing, it looked like he was short $15 so they sent that in for him, too. (the $15 was NOT withheld from pay) What's the correction? Put the funds in suspense account? Should it be sent back to the company (with earns, if any) as a MOF? I am leaning toward the latter.

Plan had amount involved of $400, so tax is $60 for late deposits in 2024. Amount was corrected in 2025. We prepared the 2024 5330 for $400/60 Since it was corrected in 2025, we are preparing a 2025 form as well. My admin group wants to put $800/120 on the form because it extended two years. is that right? Do they have to pay $60 tax for 2024 AND 2025? Seems to me like a 100% penalty for not paying the tax right away.

If the provisions and investments are the same, just transfer them from one plan to another. Make a note in the file and move on. The W2 will be correct. Just remember to decrease his contribs in Plan A and increase them in Plan B when you are doing your testing.

Good point.

I think the context of 'after-tax' there is the 'old school' Voluntary After Tax, the stuff that's included in the ACP test, not after tax Roth. I believe it is an administrative procedure (or it is doc-related?) to determine which goes first: pre-tax, Roth or pro-rate between the two. Or is that just for ADP refunds.

I think the 415 corrections are in EPCRS.

It's not too late to correct 2025. They just owe a penalty tax.

If they deducted the deferrals on their taxes, it was not reported as cash income. And even though it didn't come out of a paycheck, I think that it's a parallel idea. So I believe that it's a late deposit and should be corrected via the DOL VFCP.(It's so nice and easy now.)

@AlbanyConsultant beat me to it.

Is this a missed deferral opportunity? Or a late deposit? Did the partners take a deduction other taxes for the deferrals?

I don't think you have a year and a half after you find out about the error to use an 11-g amendment. If you do, they then need to amend 11-g.

Deferrals are 3 month wait, but SHM is one year. But are they still subject to the TH even though everyone in the plan has been eligible for SHM since 2020? (No new EEs in the interim.)

I didn't even realize 5 yr cliff vesting was allowed in 401k plans any more.

Plan has dual eligibility for deferrals and SH Match. I understand that removes the Top Heavy 'pass' plans often get. The Plan has like 10 participants, everyone has been there several years. Plan is 80% TH. Are they subject to the TH minimum every year? Or is it just for years where there is someone new and they are not eligible for the SH Match? (We have since amended the Plan to have the same eligibility for SH as deferrals.)

Actually, I believe the deposit date for a 2024 415 contribution was 10/15/25. Anything after than is considered 415 in the year of deposit. usually not a big deal. Unless there are HCEs maxing PS.

If Remember correctly, the SH must be deposited no later than 12 months after the plan year. So if the PY is 2024, then 12/31/25 was the deadline.

Don't forget, the deposit will be considered 415 contribution for 2026 for the participants. IMHO the DOL calculator should on be used for VFCP filings.

Basically, by 'forfeiting' these funds, the ER is basically taking them for use later for the plan. Either by reducing their own fee obligation or offsetting their contribution obligation or adding to the contribution. Side question: who gets the benefit of the fee(s)? Often there are two fees, one for the TPA to review the transaction and one for the record keeper to process the distribution. If the amount does rise to the Toal of one or both of the fees, who is first in the hierarchy: TPA or R/K?

In this case "OP" stands for 'Original Post' (sometimes it refers to the 'Original Poster').

Where in the plan doc does it say you are allowed to forfeit the funds instead of paying them out (even if it's all going to fees)? Why should the employer get use of those vested funds?

Side note: Is this a really big plan? $100k in forfs seems like a lot. Disclosure: I deal with mostly small(er) plans.