BG5150

Thanks, Lou!

Participant is allowed to defer more than the 10% limit that the plan allows. Not catchup eligible. Per EPCRS, and Excess Allocation arising from a deferral must be distributed to the participant. What 1099R code is used on that distribution?

So is the ER monitoring during the year who will be an HCE on January 1 and stop their deferrals right then? Otherwise, they might be deferring and they will become retroactively (so to speak) ineligible for deferrals on 1/1 and will have to have those deferrals (plus earnings) refunded to them. (Via EPCRS SCP)

Accrued benefit means benefice the participant has earned. Not if there is an accrual due but not deposited yet.

Here an old BL thread ont he subject:

Employer missed the SH match for several employees in 2020. Most of the other employees were ok. It is a payroll-based SH Match, and therefore, the contribution must be made no later than the end of the quarter following the quarter in which the deferrals were taken. Did they just blow the SH protection for both ADP/ACP tests and Top Heavy?

So what happens to the J&S attached to the balances? Does the PBGC enforce it when they eventually pay out the benefit?

Money Purchase Plan terminated 3 years ago. Only accounts left are for lost participants and each has over $5,000. Record keeper will not cash the accounts out and move to an IRA because of the spousal consent issue. What can the sponsor do to get this plan closed up?

The above is from Sec 416. (the bold items are my emphasis and commentary) Basically is says that if Safe Harbor is the SOLE funding method (other than deferrals), then the plan is NOT TOP HEAVY. If the plan is not Top Heavy, then, of course, no minimum is required. So, in your case, if the SHM is the ONLY employer money (or, more specifically, the SHM and a discretionary match that together satisfy ACP Safe Harbor), then your plan is NOT TOP HEAVY, regardless of the key assets held. Picky point: Safe Harbor doesn't satisfy TH minimums (if the SH is the only ER contrib); the plan is simply not TH in that case.

Being picky here: If the SH Match is the ONLY employer contribution in 2021, then the plan is not considered top heavy for 2021 regardless of the balances of key employees.

Was a 5500 filed for 2019?

Given the fact there were no contributions in 2019, was 2020 in fact the first year of the plan? Then given the 12/31/20 balances, the plan was TH for '20? And if the Key EEs only had a 1.5% rate, then the TH contribution is only 1.5%. Better than 3%!

How big were the RMDs? A few thousand each? Tens of thousands? Hundreds of thousands? I sure the govn't gets less lenient the bigger the un-reported payouts got. Could the IRS disqualify the Plan for something like that? Obviously some sort of operational failure on part of the Trustee to assure the participant (himself) received the proper tax reporting documents. Also, does the govn't cross check between r/o on 5498 and 1099-R under the same SSN?

I'd speak to the manager. There might be a systemic failure of not producing 1099's for most if not all their clients...

What if 2020 is the first year. That will be TH, too. Does the 2021 SHM do double duty for the '20 and '21 minimums?

Was this the first year? Could there have been the prior year/3% provision? The person who got the refund, is she the only Key EE? Was there a match? If so, how much does she make? $2500 is 3% of $83,333. Could it be the key allocation this year was less than 3%, so the TH is less?

How/why was this not discussed with the client beforehand?

This is my prime gripe with EPCRS's correction of this issue. It leaves zero responsibility to the participant. I ask for 5% of my pay taken out, and then nothing happens. Free money baby! I'm almost hoping my ER messes up...

I wouldn't worry about not reporting them this year. Has anyone been in trouble for missing ANYBODY on an SSA, let alone someone who missed their RMD payment?

Yes they are.

I believe you can eliminate it prospectively. That is, r/o money in the plan now (and the future earnings thereon) is protected. But any r/o money coming in after amendment date can be restricted.

They hit 415? Or did you mean 402(g). And don't forget, if there was any sort of match, they get the full amount of the match they would have received.

You knew what the deferral % was supposed to be, so you don't need to worry about ADP percentages. Calculate how much was to come out of each paycheck and you have the missed deferral. Your QNEC is 50% of that. From EPCRS:

Are they contemplating the father's balance was artificially inflated? For what reason? So he could get a higher payout? Or to lower the son's balance? How far back does this go? Did your firm do all the allocations? Is the atty questioning your integrity? Who is going to pay for all this research?

And if the ex-spouse thinks the account is lower than it should be, she should get the old statements and see how they track out. Do they think the plan was purposefully under-valuing his account all along? Or just the most recent valuation.