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Lou S.

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Everything posted by Lou S.

  1. If the plan allows for After Tax Voluntary Contributions, ROTH 401(k) and In plan conversions/rollover provisions to ROTH, then yes. After Tax Voluntary are subject to ACP testing so if the Plans has any NHCEs that are included in testing you will probably have a testing issue that will make this impractical but if these plans are HCEs only you should be good.
  2. 1 - the first time home buyer of $10,000 refers to the exemption to the 10% penalty on early distribution. However to my knowledge that exemption only applies to IRAs, not qualified retirement plans unless I missed a law change. As to the amount, it is the amount to meet a heavy and immediate financial need and is not limited to $10,000. 2 - The Bipartisan Budget Act of 2018 allowed for the expansion of safe harbors for hardship distributions to allow among other things, post 1989 earnings on 401(k), safe harbor funds, QNEC/QMAC as eligible for hardship. This was an elective provision and required an amendment to the Plan's definition of eligible hardship to include them. 3 - As far as I know unless the Plan document limits it or it is an unusual situation like money purchase or target benefit money.
  3. In this particular case it sounds like there were multiple other factors contributing to pursing this charge in addition to others. I feel it is unlikely the IRS will challenge most self certification by the participant unless it is egregious if that is the only issue. Though as LANDO points out, if the IRS discovers it on a tax audit the IRS might strongly pursue the penalties and interest for under reporting if they feel the 10% penalty should also have applied. Since participants were given a 3 year window to repay CARES act withdrawals as a rollover, I wonder if the IRS position would be more or less severe if the withdrawal was repaid and the IRS determines that the initial distribution did not qualify? That is would they also try to disqualify the subsequent rollover repayment? Thinking back to 2020, I would hope the IRS would rely on the participant self certification absent clear and compelling evidence that the participant fraudulently self certified.
  4. Lou S.

    1099s

    That's a pretty broad open ended statement that doesn't really let us know the extent of your assistance, involvement, or service contract. Some of the steps you may or may not have been involved with assisting them could included any of the following: Amendments and resolutions to terminate the Plan and bring it into compliance with current law. Preparing and/or distributing notices and withdrawal packages to participants. Search for lost/missing participants. Assisting with processing the payments to participants and disposition of assets for lost/non-responsive participants/closing of the trust. 1099-R processing and filing for participant distributions. IRS nondiscrimination testing for the final year. Preparation of final year Form 5500 Submission of the Plan to the IRS for Determination Upon Plan Termination. If it was a DB Plan there are host of other things you could have assisted them with ranging from selecting annuity provider to PBGC termination processing. And I'm sure I missed a few in this brief overview.
  5. You can give them the guidelines on Plan permanency rules and let them make the decision if they want to implement a plan and what kind. Then you as a service provider need to decide if you are comfortable with providing administration for the decision they make or direct them to seek other service providers. While the IRS views any plan in existence for 10 years to be permanent, plans can (and do) terminate in shorter time frames but it would be a facts and circumstance determination whether the IRS would view the Plan as qualified or not based on the Plan permanency rules. Based on your facts, I agree with you that this seems to fit well with in the regs of a plan that is NOT intended to be permanent but I've certainly seen plans over the years, even ones that have gotten DLs on termination, (though not for many years) that fit your fact pattern and i have not yet seen the IRS come to disqualify one. Though that is purely anecdotal and I am not suggesting you propose audit roulette to the client, just an observation. Interestingly I don't think the Plan permanency rules apply to SEPs so that might be an alternative for them if demographics work if you and/or they are not comfortable with the risk of a qualified plan
  6. I think this would be question for the court to determine. I could see several interpretations and I'm not a lawyer.
  7. I somewhat agree. I think for 2024 they would still have the quarterly deposit requirement on the match for 2024, but that this amendment would not be a cutting anyone's benefit as it's making sure everyone gets the annual safe harbor match so I think the amendment is allowable if they follow the deposit timing requirements of the per payroll match rules.
  8. Sounds like question for an ERISA attorney since the then management regs were proposed in 1987 with no reliance and withdrawn in 1993 as though they had never been issued. I'm sure they'll get around to updating them "soon".
  9. Did she have the 15 years of service? If so it sounds like she would qualify for the ER benefit and that it's a question of getting the Plan Sponsor who terminated the plan and transferred liabilities to the Insurance Company on the same page.
  10. If it's eligible for rollover then mandatory 20% withholding applies. I'm assuming the participant has an in-service distributable event under the terms of the plan. If it's a hardship withdrawal, that's not eligible for rollover. I believe the presumption on those is 10% federal withholding but a participant can elect a different amount even 0% on form W4-R. As for timing and submission of withholding see ESOP's link. edited for Bill's correction.
  11. The NEC does not have a limit other than those mentioned by belgarath. The safe harbor match has limits some of which are tied to not matching on deferrals above 6% of pay. But outside of 415 I 'm pretty sure a if you want a match something like of 400% of the first 6% that would still qualify as a safe harbor formula.
  12. File a claim for benefits and send the supporting documentation you have with the early retirement eligibility. Removal of an early retirement benefit the participant was entitled to would be a prohibited cutback.
  13. If you have to aggregate a SH and non-SH plan for testing, then you lose the SH exemption in the SH plan for the year you aggregate them, at least that's my understanding. As to the different match formula you'll need to test under BRF and make corrections if you you are failing. I have not had to do this in practice, only theory.
  14. Again I would be shocked beyond belief if the IRS took the position that a transfer of Money Market shares was not considered a contribution "in cash" as once again money markets are considered cash equivalents and designed to have a fixed 1.00 share equivalent. I suppose if we get to a point where "breaking the buck" becomes somewhat commonplace, then money markets will no longer be considered cash equivalents, until that day comes though I personally would not give it a second thought. Though if you are super concerned then I would recommend you advise your clients to sell money markets for cash, transfer the cash to the Plan, and then buy whatever investments they want in the Plan, including perhaps repurchasing the money market. It's not like they are transferring bitcion, bars of silver or some other form on floating value currency.
  15. Money Markets are considered cash equivalents. I doubt there is any IRS auditor who would raise even one eyebrow at the contribution being made in the form of a money market transfer to the Plan.
  16. Without thoroughly researching, my guess would be that the excess that is not allocated to participants would be a non-deductible contribution subject to the excise tax and that it would be deductible in the following year when allocated.
  17. You're right I must have read it somewhere else. But I did find several other referenced that all seem to read something like this and the summaries seem to agree with both our recollection on timing. Section 317, Retroactive first year elective deferrals for sole proprietors. Under the SECURE Act, an employer may establish a new 401(k) plan after the end of the taxable year, but before the employer’s tax filing date and treat the plan as having been established on the last day of the taxable year. Such plans may be funded by employer contributions up to the employer’s tax filing date. Section 317 allows these plans, when they are sponsored by sole proprietors or single-member LLCs, to receive employee contributions up to the date of the employee’s tax return filing date for the initial year. Section 317 is effective for plan years beginning after the date of enactment of this Act.
  18. I'm confused. Has something changed with After-Tax -> ROTH conversions? My understanding is you can convert all or part of the After-Tax source to ROTH (without touching the Pre-Tax Source). But any distribution from the After-tax source including a ROTH conversion has to the prorated between after-tax basis and previously untaxed gains. The basis is tax-free, the gains are subject to taxation in the year of conversion but then become ROTH basis
  19. I believe recent Notice 2024-2 clarifies that and is in agreement with your statement.
  20. I'm not sure the IRS has opined directly in written guidance on the issue, if they have and I've missed it and I would love a citation. I believe this has come up in other topics on benefits link, often in conjunction with an unpaid working spouse who they now want to give a benefit to based on prior unpaid service or enter the plan under year of service saying the DOH was really when they started having unpaid service. So I think you are in a gray area where some will say "yes" the 415 service should count and others who will say "no" it should not count.
  21. The onus will be on them to show they paid you but it may be difficult to track down the responsible party for a plan terminated in 2010. It's possible you were paid from the original plan and you forgot but they never removed you from the SSA rolls, or they did remove you but SSA didn't update. It's possible you were paid from the acquiring plan and the same thing happened. It's possible you were a lost participant at the time of termination and your benefit was sent to an IRA in your name when the Plan was terminated, if that's the case the Plan should have records as to where the funds were sent and you could take it up with that custodian. The above is all just speculation on my part and may or may not reflect what happened in your particular case. At this point you are looking for records that are at least 13 years old on a terminated retirement plan where all the assets have presumably long since been paid out. This is a great example of why you shouldn't leave funds at your prior companies retirement plan if you can help it or if you do, make sure you keep tabs on the balance in the Plan.
  22. justanotheradmin has the details correct. All employer contributions are pre-tax by default. IF the plan allows under SECURE 2.0 for the participant to elect the Employer contributed to be deposited as ROTH and the participant makes an election for the employer contribution to be deposited as ROTH then the contributions would be deposited to the ROTH account. And yes those contributions are taxable to the participant in the year they are contributed. Perhaps there is some recent IRS guidance that I missed as to how such contributions are reported to the the employee as taxable in that year - W-2?, 1099-R?, 1099-Misc? don't know. Which is why I'm not really aware of any providers yet offering ROTH employer contribution elections until we have clear IRS guidance. EDIT - oops, I see I did miss the IRS guidance. Guess I have some weekend reading.
  23. None that I'm aware of. The only recent change I recall to the audit rules is now you need more than 100 participants WITH ACCOUNT BALANCES and not just 100 eligible. Assuming none of the 80-120 rules comes into play.
  24. I had a good one at lunch. My wife's old boss has an inherited IRA and Fidelity told him earlier this year his RMD is X; he takes X plus some more a few months ago. He just happened to log on to his account on 12/28 and Fidelity has a note your have only taken 95% of your RMD and it says he's $273 short. So he says OK, sets up a withdrawal for $273 to cover it, whatever. Gets a note - it's too late to process in 2023 it went out 1/2/24. It's not the money since I told him the penalty is $27, he's just upset at Fidelity somehow changing the amount he needed to take and if they notified him he didn't see it. We have no idea why, he's going to call them but my guess is since it's an inherited IRA where he was not the spouse they had the wrong divisor the first time.
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