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Lou S.

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  1. Like
    Lou S. reacted to Paul I in In-Service Distribution with an Outstanding Loan   
    Keep in mind that in-service withdrawals, including hardship withdrawals, are not required to be permitted in the plan document.  You are going to have to look at the plan provisions to see what is or is not permissible for this employer's plan.  Most likely, you will not find a restriction in the plan that in-service withdrawals are not available to participants with outstanding loans.
    Until recently, the hardship withdrawal rules required a participant to take a loan before taking a hardship withdrawal (assuming loans were available under the plan and the taking of the loan itself was not causing additional hardship).  While no directly relevant to this situation, it does illustrate that taking an in-service type withdrawal while having a loan was and is permissible.
    The amount of a loan @Bill Presson notes is based on vested amount in the participant's accounts available at the time the loan is taken.  There is a strategy with taking a loan first and then taking an in-service withdrawal.  It maximizes the amount available when the loan is taken and the loan is a not distributable event, does not incur potential early withdrawal penalties, and does allow for the opportunity to repay the loan.  The amount of the subsequent in-service withdrawal was less and hence the adverse consequences of an in-service withdrawal were less.
     
  2. Like
    Lou S. reacted to Bill Presson in In-Service Distribution with an Outstanding Loan   
    Loans only have to meet the 50% criterion at issue. After that, it’s irrelevant. 
  3. Like
    Lou S. got a reaction from John K in Amendment Timing   
    And amendment can't be effective for the year if it has a prohibited cutback of benefits.
    Adding after-tax is an expansion of benefits so should be fine. Though it will be subject to ACP testing, just so you are aware in case you were not.
    The second part is a bit trickier if you can do it or not. If anyone is entitled to an allocation under the old formula you won't be able to change the formula until next year. However, if no one has yet earned the right to  the allocation formula then you could amend this year. generally speaking if your current plans has a last day requirement or an hours requirement that no one has yet met you could do  the amendment effective in the current year, provided it's adopted before anyone has accrued a right to the old formula.
    Safe harbor 401(k) plans have a few additional levels of hoops to satisfy where you might not be able to make the change even with a last day requirement, you'd have to double check on that one if that's you situation.
  4. Like
    Lou S. reacted to Peter Gulia in When does profit sharing accrue   
    Consider that a writing (even a little email) stating or describing a nonelective contribution might be among the “documents and instruments governing the plan[.]”
    Consider too that what the plan’s governing documents provide is only one of several lanes a claimant might drive in.
    Among others, a disappointed participant might pursue one or more of the other legal and equitable remedies ERISA’s title I provides. Those can include remedies for miscommunication.
    The plan sponsor, the plan’s administrator, and other plan fiduciaries each will decide how much risk one wants to assume.
    If the employer wants to evaluate how relevant law applies and which risks to assume or manage, it might call in a lawyer.
    This is not advice to anyone.
  5. Like
    Lou S. reacted to Paul I in Custodian delays cause deferral issues   
    Take a look at the rules for correcting missed deferral opportunities for plans with auto-enrollment.  They are very generous for the plan, and the IRS admitted the leniency was because the IRS like auto-enrollment.  There also is a three-month rule which can reduce the cost of a corrective action.  Do keep in mind that if there is a match involved, the missed match plus earnings are more likely to be required.
    Take care in pointing fingers at any one particular party, and do so only after carefully reading not only the plan documents but also each service agreement with each service provider.  Ultimately the responsibility and accountability for the proper operation of the plan falls on the shoulders of the plan fiduciaries.  Also document a timeline of events of what should have happened and what did happen, and note any causes of delays.  This is invaluable should the plan fiduciaries attempt to recoup anything from any of the service providers.
    As some have noted above, deferrals are a payroll function which may not have been under the control of the Custodian, and if the Custodian was not in a position to accept the deferrals, there were alternatives available until Custodian fixed its problems.
    Stick to the facts, take advantage of the breaks available to auto-enrolled plans, and work with the service providers to right the ship.
  6. Like
    Lou S. got a reaction from CuseFan in Missing 1099-R   
    How do you enter into a collective bargaining agreement and not keep a copy?
    Yes you can file a late 1099-R, as you have discovered, penalties apply.
    The participant is probably fine as the taxable amount will be $0 if it was properly rolled over. But the plan has a duty to file the 1099-R and supply to the participant. At most he'd need an amended return showing ~$1.5M distribution, but report it as non taxable rollover.
  7. Like
    Lou S. got a reaction from CuseFan in Custodian delays cause deferral issues   
    If deferrals started with payroll but couldn't be deposited because of the custodian, you have late deposits. Simply deposit the payments along with the lost earnings, file the 5330 and decide if you are going to though the DOL late contribution program or not.
    If the deferrals didn't start you can calculate a QNEC on the missed deferral opportunity and deposit that,  but I think you might just be able to self correct and start the deferrals 3/22 as the delay was "short" and folks have 9 months to catch-up the missed deferral opportunity.
  8. Like
    Lou S. got a reaction from Bird in When does profit sharing accrue   
    Ignoring the public relations issue with the employees for the employer changing their mind after notifying the employees they would be getting a PS contribution, unless it's required by the plan document then it's not required to be made. They could give a supplemental notice something like - we regret to inform you but the prior notice of a 2023 contribution was distributed in error, there will be no PS contribution for 2023 - something like that.
    That said I am not a lawyer and I don't know if the initial notice created a de facto contract obligating the employer to the PS contribution when they notified employees. Were corporate minutes filed approving the contribution? Have they filed a tax return claiming the contribution?
     
  9. Like
    Lou S. got a reaction from Bill Presson in Missing 1099-R   
    How do you enter into a collective bargaining agreement and not keep a copy?
    Yes you can file a late 1099-R, as you have discovered, penalties apply.
    The participant is probably fine as the taxable amount will be $0 if it was properly rolled over. But the plan has a duty to file the 1099-R and supply to the participant. At most he'd need an amended return showing ~$1.5M distribution, but report it as non taxable rollover.
  10. Like
    Lou S. got a reaction from justanotheradmin in Custodian delays cause deferral issues   
    If deferrals started with payroll but couldn't be deposited because of the custodian, you have late deposits. Simply deposit the payments along with the lost earnings, file the 5330 and decide if you are going to though the DOL late contribution program or not.
    If the deferrals didn't start you can calculate a QNEC on the missed deferral opportunity and deposit that,  but I think you might just be able to self correct and start the deferrals 3/22 as the delay was "short" and folks have 9 months to catch-up the missed deferral opportunity.
  11. Like
    Lou S. reacted to Bill Presson in Missing 1099-R   
    I’m not where I can look up a bunch of stuff, but related to item #1, I can’t imagine anyone agreeing to benefits and wages as part of a collective bargaining agreement and not knowing exactly what that agreement said and where a copy was kept. 
     
    What a stupid way to run a business. 
  12. Like
    Lou S. reacted to justanotheradmin in Custodian delays cause deferral issues   
    1. were deferrals withheld? but not sent in? in that case you have late deposits. See VFCP, and Form 5330, and look up late deposits to retirement plans
    2. were deferrals not withheld? but they should have been? In that case you have a missed opportunity to defer. See EPCRS, if there were deferral elections, or no deferral elections, or match or no match, the actual amount will vary, but it all covered in the IRS's EPCRS rev pro. 
     
    Note: the custodian not being ready isn't a valid excuse. Plans encounter this all the time, and purposely pick a special deferral start date farther out, that is written into the plan document, for this very reason. The give service providers time to get set-up with all the info from the sponsor. Even in the event of an unexpected delay, there is no reason why the deferrals couldn't have started on time, and the plan open up a temporary account, such as brokerage/checking/savings account etc in the name of the plan into which to deposit the deferrals. Then they would be deposited to the trust on time, and then once the regular custodian is ready, the money can be transferred to there. 
     
  13. Like
    Lou S. got a reaction from Bill Presson in Custodian delays cause deferral issues   
    If deferrals started with payroll but couldn't be deposited because of the custodian, you have late deposits. Simply deposit the payments along with the lost earnings, file the 5330 and decide if you are going to though the DOL late contribution program or not.
    If the deferrals didn't start you can calculate a QNEC on the missed deferral opportunity and deposit that,  but I think you might just be able to self correct and start the deferrals 3/22 as the delay was "short" and folks have 9 months to catch-up the missed deferral opportunity.
  14. Like
    Lou S. reacted to ESOP Guy in When does profit sharing accrue   
    Did they do a formal board resolution declaring the contribution?  I believe that can make a difference but a lawyer could clarify that more if needed.
    Did they allocate it or deduct it? 
    But most likely if it isn't required by the document my understanding they can change their mind.  But given how angry people might be it might be better to talk to the plan lawyer and not count on free advice here.
  15. Like
    Lou S. got a reaction from ESOP Guy in When does profit sharing accrue   
    Ignoring the public relations issue with the employees for the employer changing their mind after notifying the employees they would be getting a PS contribution, unless it's required by the plan document then it's not required to be made. They could give a supplemental notice something like - we regret to inform you but the prior notice of a 2023 contribution was distributed in error, there will be no PS contribution for 2023 - something like that.
    That said I am not a lawyer and I don't know if the initial notice created a de facto contract obligating the employer to the PS contribution when they notified employees. Were corporate minutes filed approving the contribution? Have they filed a tax return claiming the contribution?
     
  16. Like
    Lou S. reacted to Bill Presson in Compensation for a fiscal year plan   
    Compensation limit is based on the number in effect for when the plan year begins.
    415 limit is based on the number in effect for when the plan year ends.
  17. Like
    Lou S. reacted to Bill Presson in New CB Plan - short year for the new entity   
    Jak, I'm not a CB expert, but I'm pretty sure you can still have an effective date of 1/1/2024 and a calendar year limitation year which would eliminate all the proration you're discussing.
  18. Like
    Lou S. reacted to CuseFan in Can payment of a "Benefit" be rescinded/revoked/voided if a Beneficiary makes a material misrepresentation to Plan Admin   
    First, any claim for benefits made by anyone other than the known participant should be scrutinized and require sufficient documentation to establish to the Plan Administrator's satisfaction that such person is entitled to a benefit.
    If benefits have been claimed under misrepresentation then the PA/fiduciary should determine if any benefits have been paid in error and if so, whether to attempt to recoup. It is also noteworthy that the time limitations for doing so imposed by SECURE are specifically exempted in cases of fraud/misrepresentation.
    Facts and circumstances, including amounts in question and funded status of the plan, should be considered as well.
  19. Like
    Lou S. reacted to david rigby in Can payment of a "Benefit" be rescinded/revoked/voided if a Beneficiary makes a material misrepresentation to Plan Admin   
    Maybe you could put a little more flesh on that skeleton?
  20. Like
    Lou S. reacted to AlbanyConsultant in two "owner only 401k plans" in the same business?   
    I think we're all getting to the same point... while you COULD do this, if you do it carefully, there's no real benefit to doing it.  At least, none worth the headaches if something gets messed up along the way.

    One person I mentioned it to suggested that maybe the two brothers had separate companies when the plans were created and then merged their businesses, and no one thought about how that might affect the plans.  Of course, he's an optimist and likes to assume the best in people. LOL
  21. Like
    Lou S. reacted to Paul I in Does it make sense to roll out of the § 401(a)-(k) plan?   
    The scheme is intended to allow the individual to maintain the 401(k) plan and take advantage of the higher levels of contributions.  The simplest approach is to make the IRA rollovers out of the existing plan. 
    Next, adopt a prototype plan owner-only plan and set up a bank account in the name of the trustee of the plan.  She can deposit her contributions into the account and then make the rollovers into the respective IRAs. She can keep a very small amount in the bank account and will not have to file a Form 5500-EZ.  Further, with the bank account there likely will be no income to have to worry about any separate accounting between the deferrals and the NEC.
    She will need to prepare two 1099Rs each year for the rollovers to the IRAs.  As rollovers, there will be no tax withholding to deal with. 
    None of this is technically challenging.  If she feels it is still a hassle, there are local TPAs or CPAs that can do this for a small fee.
  22. Like
    Lou S. got a reaction from Appleby in Plan sequence number on rollover 401k   
    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.
  23. Like
    Lou S. reacted to truphao in Plan sequence number on rollover 401k   
    You are not starting a new Plan, you are simply restating the existing Plan to a new Document provider (E-Trade).   Please make sure you implement this properly, the penalties for messing this up are very severe.
  24. Like
    Lou S. got a reaction from truphao in Plan sequence number on rollover 401k   
    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.
  25. Like
    Lou S. reacted to BG5150 in Does this cross-tested plan pass??   
    As long as no HCE has a higher rate than any NHCE then the test should pass on a current/contribution/allocation basis.
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