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Lou S.

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Everything posted by Lou S.

  1. My understanding is if there is another taxable distribution where the participant is receiving funds then you withhold on the total including the loan offset. If there is no cash distribution, like the participant is rolling over the rest to an IRA, then you don't withhold. This understanding is for Federal Tax withholding but I believe most states that have withholding on qualified plan withdrawals mirror the Federal rules though I don't know about MI specifically.
  2. Presumably what you want to do is restate the Plan from the Vanguard document to the E-trade document retaining the same Plan number 001 and simply transfer the assets from one brokerage to the other, unless you already have a plan document that isn't brokerage house specific in which case you just need to transfer the assets.
  3. Yes 401(k) that offer annuities have always been subject to those rules. At one time you could not amend it out as the IRS viewed it as a 411 cutback, but now you can as some law changed it if you meet certain notice and timing requirements. I think the change was in the late 90s or early 00s but I forget which piece of legislation allowed you to remove the QJSA/QPSA from non-pension plans.
  4. Under the code yes, but what does the document say about compensation?
  5. It would be up to the Plan Administrator but if they had sufficient evidence and believe that this is his primary residence (where his W-2 issued, his drivers licenses, a power company bill in his name, etc.) , I don't see why it would not be approved.
  6. I'd vote with you. No 5330, reflect the earnings in 2024 when received.
  7. I think it depends on your amendment. Are you only correcting for the year of failure and bringing people in for just that year? If so I think you could do a QNEC of 3% plus the missed deferral opportunity which I believe would be the average ADP of the NHCEs for the year in question. If you are bringing them in as full participants because you expect ongoing failures, then yes you would have to give them the ability to deferral as well.
  8. Corrective -11(g) amendment to include commissions for NHCEs with a true up match calculation? That seems to be one way to handle it, there are probably others.
  9. The QACA employer safe harbor contributions have to vest over no more than 2 years, but it can be 2 year cliff if I recall correctly. as Belgarath points out other employer contributions such as a profit sharing contribution could use a different schedule such as 2/20 if provide in the document. God bless the job security of piece meal retirement legislation that brings us multiple different vesting rules for different types of plans and sources or money.
  10. I don't work on them. But since they are a type of DB Plan I would assume they would have to satisfy the RMD rules just like any other DB plan would. One way, presumably would be to start annuity payments under the normal form or optional form with spousal consent.
  11. I think you can but if you sent them checks with a 1099-R associated with it, later rolling the uncashed checks to an IRA could be problematic from a reporting standpoint, especially if there was withholding on the original check. I also assume this is their whole balance and not a series of periodic payments you are talking about. But I see no problem with cashing out small balances in a DB plan if you are following the terms of the plan document.
  12. If you are using the PBGC missing person program that is all or none as I understand it, you can't pick an chose which participants you cash out and which you send to the PBGC if that is the question you are asking. If you are buying annuities for everyone and not using the PBGC program, I'm pretty sure you can force out the under $5K (now $7K under secure 2.0?) to IRAs.
  13. If they were all NHCEs you can probably self correct by retroactive amendment to conform the document to the actual match contributed for the Plan year if they all got more than the match formula even if it's not uniform since with will clearly be non discriminatory if the extra natch only when to NHCEs.
  14. I believe you are required to File Form 10 to notify the PBGC within 30 days unless an exception applies. Filing a distress termination with the PBGC may qualify as notice, I haven't looked. But one way or another, you are going to have to involve the PBGC to terminate the Plan.
  15. If the participant dies before and election of payment, see the Plan document for payment to the beneficiary. If the beneficiary dies before the election of payment to the participant, the Participant's contingent beneficiary would be entitled to the death benefit. Assuming the participant and beneficiary are going to waive the annuity benefit and roll to IRA than assets in excess of the 415 limit will revert to the Plan Sponsor and be subject to any excise tax on reversion. If you are looking for ways to reduce the excess tax and the participant and/or beneficiary are in good health they could consider purchasing and annuity which might eat up some or all of the excess but that won't leave assets for other heirs if that's a consideration. Or they could look into merging with a company with an underfunded DB Plan and negotiate the excess assets as part of the transaction, not my area of expertise but I do know it can be done and there are some companies who specialize in that field.
  16. I believe that is called fraud if someone else signed on behalf of the wife prior to the divorce. As to the rights of the wife following the divorce, that should be address by the Qualified Domestic Relations Order (QDRO) that should be prepared and agreed to durring the divorce proceedings.
  17. A good CPA or maybe even a tax attorney would be a wise move. She could probably take legal action against her son but I'm guessing the odds of recovery on that front are quite small.
  18. But that's my point. if it was deposited to the ROTH source initially how will the Plan ever know it's not supposed to be in the ROTH sources and is not eligible as qualified ROTH distribution if there is no excess in their Plan? Plan A only had $15K and Plan B only had $15K. To each of them, it looks good. So which Plan has to recharcterize the ROTH excess over the 402(g) limit when neither exceeded it? If it was Pre-tax, you wouldn't need to worry because it would be taxed again when it is ultimately distributed and no special record keeping or tracking needs to be done. But if it's in the ROTH source, when it comes out if the participant is 59.5 and 5 years, I can guarantee you that 99.9% of plans will code that as a qualified ROTH withdrawal on the 1099-R when it comes out of the Plan unless it gets moved to a different source in the Plan. And according to the guidance above, that's not correct.
  19. RMD first, then rollover. Must have typed too fast.
  20. If the participant is RMD age, I have always processed the RMD first in terminating plans then the rollover. Edited to fix error.
  21. WRT the bold, is true even if the contribution is after tax ROTH? Was that Example written with Pre-tax deferrals is mind? Did it consider the possibility of ROTH? Maybe it did because the excess is not deductible normally so it would make sense that even though it was ROTH it would later be taxable when it comes out. That said, how does the plan even know the participant has an excess and if it does know how is it corrected? Do you move the excess (plus earnings) from the ROTH source to a Pre-tax source so it gets taxed when later withdrawn? And which Plan makes the correction? I assume the participant has to be honest and direct one plan to make the correction or otherwise the Plan doesn't know and they see no problem with the $15K ROTH.
  22. But to which plan is there an excess and how dose the Plan know there is an excess if the two plans are unrelated? It seems like a problem for the Participant rather than the Plan but not one that has an easily tracked component for the IRS to catch or the Plan to properly code future 1099-Rs. Snare indeed. Just an observation, not a suggestion to try tax fraud.
  23. Sounds like a loophole. Though I would think the excess contribution doesn't meet the definition of eligible ROTH contribution though which plan recharaterizes it somehow is anybody's guess. Maybe there is some guidance on this question but if there is, I don't where it would be.
  24. Forfeit the money (along with earnings), allocate to participants as an employer contribution or reduce employer contributions per the Plan document. It's a little unclear to me who the owner of the real estate note is. Plan holding account? Plan Pooled Account? FBO account of owner?
  25. Do you use a pre-approved plan doc? Can you ask that provider? I think most have some kind of amendment system to generate a short amendment to change the Plan Sponsor. Is the EIN changing? If yes, there is a place to report the sponsorship change on the 5500. It might also be easier to just amend the Plan to have the FL LLC as an adopting employer (that seem a clear CG), then end the participation of the NY LLC when it dissolves and have the FL LLC take over as lead adopter.
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