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Lou S.

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Everything posted by Lou S.

  1. I don't think there is anything magical about the first of the month. But you do have some prorated limits if you run a short plan year. Though i think those limits are prorated on month with any partial month treated as full month with 1/12th the limit. Is there some reason you don't want a retro effective date to get the full 415 and 401(a)(17) limits? Like trying to keep out terminated employees so you pass coverage?
  2. I don't work with 403(b)s so if the rules are different then this isn't applicable. But my understanding is the 11g amendment has to have a tangible economic benefit for it to be valid. One approach of the 11g amendment might be to give a QMAC to the the newly included group equal to the ACP percentage of the NHCEs in the plan.
  3. I don't see why this would not apply to this situation assuming the amendment/merger documents are drafted accordingly.
  4. This is such a great question that highlights the absurdity of the the RMD rules in that the answer is not immediately obvious. It also has the bonus of the the plan being adopted no only after the PYE but after a potential 4/1 RBD date! I really don't know what the answer to the question is but best guess is he would have an RMD for 2023 by 12/31 and future ones going forward. But the rules seem so opaque that no reasonable answer would surprise. @michael burkow, if this thread doesn't yield an answer and you find out elsewhere, please share your results here.
  5. A roth conversion source of an after tax account account that is converted is not the same as a roth 401(k) contribution account and the two should be account for separately.
  6. I'm not sure I understand. The conversion will be to a sources that mirror's the characteristics of the original source. So if he could take in-service withdrawals of after tax contribution source, he can take in service withdrawals of roth converted after tax contribution source. That is you might need a separate ROTH source for each type of money that a participant may convert to roth. As for the taxation I think if he takes a later distribution from the roth source before age 59.5 you'll have some recovery of roth basis and some taxable piece based on the protated potion that is earnings. Unlike an IRA where you recover the ROTH basis on a FIFO basis, I think in qualified retirement plans you still have the protata method you need to use. Unless there was a change I missed.
  7. It's a pooled contribution to the plan until it's allocated to participant accounts so standard prudent fiduciary rules would apply.
  8. Purchase an annuity with a J&S benefit? I don't think the other options are acceptable for a DB plan unless you'd like to be on the hook for a claim from the spouse.
  9. If they are no longer due a benefit, I don't think there is a time limit on reporting them as "D". Now how well that gets translated to removing them from the government data base so they don't get the "you may have a benefit" letter I can't say. I also don't know if reporting a large number of "D", possibly in excess of the current participant count(?) would be viewed by the programs that filter for potential additional attention.
  10. Have you asked FIS/PPD? IMO, I think rolling over to default IRA is the "best" of the allowable options available in these situations and personally I would not have any problem with sending the funds to a rollover IRA if good faith effort to get these non-responsive participants out of the Plan to facilitate the final distribution of assets in conjunction with the Plan termination. What are your other options? Send to PBGC program? Send them a taxable check less federal withholding and tell them they have 60 days to rollover? I think it's clear you're not required to keep the trust open for non-responsive participants just like you're not required for missing ones.
  11. I think that all sounds correct. I think in 2024 is where you are going report the sponsor change from A -> D on the 5500.
  12. @Peter, I'm a aware of multiple providers who will take cashout IRAs under the dollar limit or will take cashout rollover IRAs of any dollar amount if the Plan is terminated, but I don't know of any who take cashout rollover IRAs over the cashout limit because the participant is at the later of age 62 or Plan's Normal Retirement Age and the Plan calls for them to be cashed out. These providers may exist and if they do, I'd be interested in them. As to the OP question whether it is correct or not, our Plans will pay the RMD, if the participant is terminated and if they want more then the IRA we tell them the plan requires they take a full distribution either taxable, rollover or split between the two but the Plan does not make ad hoc payments.
  13. No, the DB won't be OK if you have 2 and excluded one of them, even if one of them is an HCE.
  14. Make sure you're billing time and expense? If you have account numbers a letter signed by the Plan Trustee requesting duplicate copies off all statements from X/X/XX -> Date of Account closure might help. Can't guarantee it but it might be a starting point.
  15. Paul while I generally agree, it sounds like the funds were sent to the record keeper and thus segregated from the assets of the employer, just not invested in the employee specific account, unless I'm missing something. I agree with Bill's comment by "back dating" I think they mean "invested as if it had been invested on the original receipt date".
  16. Doesn't sound correct. It sounds like the funds were segregated from the employer and held in suspense until an allocation could be made. At least if I understand it correctly.
  17. If it is a DC Plan you can exclude non-onwer HCEs by some classification. But they need to be excluded, not just not participating. If it's a DB you'll fail 401(a)(26) if they are the only two. If there are any non-keys in the Plan, they will need to get a required TH minimum if any key has a non-zero allocation rate and if there are and NHCE eligible, like the guy becomes a NHCE in the future but is still employed, you'd need to bring them in for coverage.
  18. Refer them to their legal counsel for any such questions unless you are an attorney. Tell them it is outside the scope or your services or expertise.
  19. If it was paid to the participant then the participant will receive the 1099-R. If it paid to the spouse as beneficiary then the spouse will receive the 1099-R. Not exactly your situation but close enough to illustrate - participant who is in RMD status dies during the year - Example 1, participant received full RMD before dying then spouse rolls over remained before 12/31. Two 1099-R one to the participant for the RMD with code 7 under their SSN and one to the beneficiary under their SSN with code 4G for the death benefit rollover. Example 2, participant does not receive RMD before death. Spouse beneficiary takes RMD then rolls over remainder to IRA. Two 1099-R both to the beneficiary under their SSN with one with code 4 for the RMD and one with code 4G for the death benefit rollover.
  20. See Peter's answer in post #2. I think that is as clear as you are likely to get.
  21. That is my recollection as well. No additional taxable income at time of offset. Which brings up an interesting question that I've never had to deal with in real life since I have not had a participant default and then later pay back. The previously defaulted loan amount is clearly after tax basis . If the additional accrue interest is also paid, as required to retire the loan, is that also after tax basis or is that portion considered pretax earnings subject to income tax when distributed?
  22. You have to give the Special Tax Notice for distributions eligible for rollover no less than 30 days and not more than 90 days before a distribution. Participants can waive the 30 day period in writing and get a distribution earlier but you're not supposed to force them out without the waiting period. Maybe that's what your thinking of?
  23. We'll if it's an EZ you don't actually attach the SB at all. But you do have to send a signed SB annually to the client for their records. Maybe propose a smaller formula for a few years then terminate?
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