Young Curmudgeon

Thank you, I believe you. I would not make sense to require a contribution and not allow it to be deductible. My Actuary is who is telling me the contributions would not be deductible for the year they are made.

An employer is required to fund additional money due to market fluctuations to pay out the final benefits and close a plan. The date of the funding is past the deduction deadline (9/15/20) for the year of plan termination (2019). Can they deduct the contribution for the year it is made even though the plan was not active for that year? I am being told that it's not deductible for 2020 since they do not have a plan for 2020. Here are some example dates: Plan termination date 12/30/19 Tax deadline 9/15/20. Contribution date 11/1/20.

Is there any transition or grace period before family attribution between spouses applies? Details: Business owner A marries Business owner B in a community property state on 5/1/19. Are the immediately a controlled group for 2019 or could I treat this like an acquisition and apply the transition period for coverage?

I have inherited a plan which has been historically told they do not need a bond since all the participants (four in total) are Trustees. I do not see an exclusion from the bonding requirement for this situation. Only three of the Trustees are owners and the plan files full 5500 due to non-qualifying assets. The bonds I have seen do not cover Trustee benefits in the event of a loss so is this the roundabout logic? Since none of them are protected by a bond, they do not need the bond? If the plan were 100% qualifying assets, I would not be concerned. However, it is 70% non-qualifying assets. If they are not exempt from bonding, they will have to get an auditors opinion if caught. Thoughts?

I am getting conflicting answers as to whether the transition rule for acquisition solely applies to 410(b) or whether we can apply it to 401(a)(4) testing also. Situation is company B becomes a controlled group with Company A due to ownership change on 4/1/18. Company A and Company B each sponsor 401k plans with calendar plan years. A's is a cross tested Safe Harbor 401k, B's is a cross tested non-Safe Harbor 401k. Do you think we have to combine them for testing 401(a)(4) for the 2018 and 2019? What about ADP testing since B is not a Safe Harbor 401k? Does anyone know of a cite that addresses this?

Yes, that is the question. It is the same table for everyone with the set forward. I have opposing views from two actuaries. Is there anything that can be relied on in the regs?

How aggressive is it if I set forward the testing table (software allows up to 9 years) for my combined plan testing? Without a set forward, the gateway requirement jumps to 7%. With a five year set forward, I'm back to 6%.

I have a prospective client who wants a Profit Sharing plan so they can roll IRAs into in and borrow. I am sure that I have read that this practice is frowned upon and the IRS can claim the plan is not qualified since the intent never existed to make contributions. I can not find anything that states this now. Is this just early dementia or does anyone recall where this position may have been published?

Stuck with 2016 provisions in a 401k due to Safe Harbor. Is there anything that prevents me from setting up a second 401(k) with different provisions for 2016 and then just merging them together at year end? This seems like a solution for a company that wants to start PS contributions with a tiered formula when their old plan has SS integration.

Assumptions: This is a 401(k) plan in which no owner or HCE participates. The sponsor will make a discretionary match which they will contribute on a payroll basis. They want to be able to vary the amount of the match throughout the year without "truing up" at year end. For example, January's match might be dollar for dollar while February's match might only be 50 cents on the dollar. Our document would seem to allow this, but compliance opinions are in disagreement on whether this is allowed without the true up to a consistent formula at year end. Any thoughts? Citations would be appreciated.

It was a SIMPLE IRA under 408(p). The financial advisor linked to the old SIMPLE accounts is not the advisor for the 401(k). He is not willing to re-open the accounts and act as a conduit.

Client had a SIMPLE for 2013, established a 401(k) 1/1/14. All of the participants have elected to roll their SIMPLE accounts into the 401(k) plan and the money has been transferred. Now the SIMPLE matching receivable needs to be funded from 2013. The client would like to just put the money into the 401(k) rather than re-open all of SIMPLE accounts since everyone is rolling their money anyway. While this is clearly "wrong", it does keep everyone "whole". Any thoughts on how the IRS would view this if we call it self correcting ?

I took the question to outside counsel and while they agreed it does not fit VCP perfectly, they recommended VCP to resolve the issue. It is being submitted in August.

I just learned that a plan I administer (sponsored by company A) has been receiving salary deferral contributions from an unrelated employer (company B) for the last two years. The two companies share a payroll under company A's name but are otherwise unrelated. I guess you could say company A is acting as a leasing agency for company B. They are not a controlled or affiliated service group. There is no participation agreement and the Company A's plan document is not set up for multiple employers. Does anyone think allowing an unrelated employer to participate in a plan an issue that can be resolved through VCP?

We have a client that received a bill from the IRS for $18,000+ stating "we made changes to your December 31, 2004 Form 5500. As a result, your amount due is $18,000. This wasn't an audit. Your return may be examined in the future. Please keep this notice and your other important documents in a secure place" SInce when do 5500 changes generate a bill? What is this? Anyone seen this previously?

It was covered by PBGC but the two participants for which PBGC coverage was required were paid out in June 12, 2013. On June 13, 2013 only owner benefits remain. So is the plan still considered "covered" and subject to title IV for 2013?

My calendar year defined benefit plan had both common law participants terminate in 2012 and they were paid out lump sums in June 2013. For, the 2013 year, for purposes of applying the combined limits (there is a 401(k) also), is the plan still considered to covered under Title IV? The DB contribution is way over 25% of compensation and I would rather not limit the profit sharing to 6% of compensation.

Yes to both.

The DB plan actually is continuing after the "in plan rollover". My concern is that without money physically moving from the account, there has not been a distribution/direct rollover and all of the assets are still part of the actuarial valuation. The position of classifying assets as a rollover account would hold up since the money never moved.

What if the context was to reclassify assets in the trust to avoid excess assets from gain? For example, one person plan, I have $2.4M in assets, my lumpsum limit. A 1099 issued indicating a rollover distribution, but nothing actually moves. There is still $2.4M in the trust, but now it's a "rollover account" rather than a defined benefit asset so the earnings that would create excess assets are no longer considered. It seems to me that this would fail the criteria as a direct rollover but it's being argued that the current plan is an eligible retirement plan.

Is it feasible to reclassify Defined Benefit assets as rollover assets by simply issuing a 1099? The money never actually leaves the trust, it's just reclassified as a rollover account and no longer affects the DB valuation. I've never heard of this previously but I'm being told it's a normal practice. Sounds a little fishy.

Here's some more detai: The table is from the actuarial equalent section of the document, 5.5% interest rate pre/post, 1994 GAR Projected to 2002. I have a lump sum of $1,577,526 on a monthly accrued benefit of $13,252. It's fully funded. If you draw $13,252 each month from a lump sum earning 5.5%, you exhaust the funds when you're 83. My question is whether we can change to a different table and subsequently lower the required payment by increasing the life expectancy. Possible?

I'm looking at a one-man DB plan where the participant will go into pay status at age 70.5 for RMD purposes. Based on the lump sum and payments, the plan will deplete all assets when the participant reaches age 83. The plan uses the GAR94 proj. to 2002 table. My question is whether we can decrease the minimum distribution by changing to a "longer life expectancy" table, or is this really being driven by the table for the 417(e)? It seems odd that a DB would only fund to pay until age 83 when life expectancy on the DC side is so much longer.

I have a takeover plan where many years ago a failed ADP test was semi-corrected. The TPA issued 1099s for the corrective distribution amounts and the HCE's paid their taxes however, the assets were never physically removed from the trust. The old TPA's solution for the years since the failure was to just reduce the trust assets on the 5500 by corrective distribution amounts. We discovered all this when reconciling the trust for 2012. Objectively, I look at this and think "VCP - one to one correction", but it's a rather large sum of money so the prospect of a one to one correction under VCP is not desirable. Is there any chance the IRS has ever viewed taxation of corrective distributions as sufficient correction?

I just want to verify whether an individual has multiple SEP limits when working for multiple employers. "A" is self-employed, earning $300,000 annualy and sponsors his own SEP making a maximum contribution of $51,000. "A" is also an employee of non-related company X where he earns $200,000 in W2 compensation. Company "X" also sponsors a SEP and contributes 25%. Can "A" receive his $51,000 SEP contribution from his own company and an additional $50,000 SEP contribution from company "X"? I know this is possible in qualified plans but the "individual" limit wording for SEPs makes me nervous. Thank you for your help!