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Lou S.

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  1. Like
    Lou S. got a reaction from Luke Bailey in State withholding on loan offset   
    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. Like
    Lou S. reacted to Bri in SHM in gateway   
    No, matching contributions do not count towards (or "trigger") gateway minimums.
  3. Like
    Lou S. got a reaction from acm_acm in May an employer design a plan with no payout until normal retirement age?   
    Oh that's different. I don't recall if hardship is a protected benefit, you may or may not be able to amend that out, but if the Plan has in service at 59 1/2 and/or severance of employment already you'll need to preserve that for all current participants at least for funds currently in the plan and any earnings thereon or you'll have a prohibited 411 cutback. Accounting for pre and post amendment balances by source for all participants seems a nightmare and just asking for trouble. Oh and then telling folks that some of their is available when they terminate and the rest when they turn 65? That sounds like a fun conversation.
  4. Like
    Lou S. got a reaction from Luke Bailey in May an employer design a plan with no payout until normal retirement age?   
    A plan can allow for no distribution prior to normal retirement age. Though I believe that's much more common in a DB plan with annuity only options. I don't see why you couldn't do it in a safe harbor 401(k) Plan, but I'm not sure you should do it.
  5. Like
    Lou S. reacted to Bri in Mandatory Federal Withholding - Form W4-R   
    of course they could roll the proceeds to an IRA, avoid the 20% withholding, and then turn around and raid the IRA without mandatory withholding.
  6. Like
    Lou S. reacted to truphao in Sole proprietor - Defined Benefit Plan   
    the OP says "contributing".  If the ER portion of DC has not been contributed yet, then there is a lot of flexibity.  If it has been contributed in 2024 then there is flexibility too.  Even if the dedcution for 2023 become limuted to 31% It is definitely worth it to do a retro plan from 415 perspective.  It is time to get an actuary engaged.
  7. Like
    Lou S. got a reaction from Luke Bailey 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.
  8. Like
    Lou S. got a reaction from Luke Bailey 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 Luke Bailey in Plan's NRA is 55 and Participant is leaving on medical disability at age 56   
    No 10% penalty if taken from the plan if on account of separation after age 55. 1099-R code would be 2. Plan's NRA doesn't matter in this case, just the age at which he separates service.
  10. Like
    Lou S. got a reaction from Luke Bailey 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. got a reaction from Bri in May an employer design a plan with no payout until normal retirement age?   
    Make sure the owners know that the no pre-65 distribution rule also applies to them as well as any "executives" then might hire.
  12. Like
    Lou S. got a reaction from Bill Presson in May an employer design a plan with no payout until normal retirement age?   
    Make sure the owners know that the no pre-65 distribution rule also applies to them as well as any "executives" then might hire.
  13. Thanks
    Lou S. got a reaction from Peter Gulia in May an employer design a plan with no payout until normal retirement age?   
    Oh that's different. I don't recall if hardship is a protected benefit, you may or may not be able to amend that out, but if the Plan has in service at 59 1/2 and/or severance of employment already you'll need to preserve that for all current participants at least for funds currently in the plan and any earnings thereon or you'll have a prohibited 411 cutback. Accounting for pre and post amendment balances by source for all participants seems a nightmare and just asking for trouble. Oh and then telling folks that some of their is available when they terminate and the rest when they turn 65? That sounds like a fun conversation.
  14. Thanks
    Lou S. got a reaction from Peter Gulia in May an employer design a plan with no payout until normal retirement age?   
    Make sure the owners know that the no pre-65 distribution rule also applies to them as well as any "executives" then might hire.
  15. Like
    Lou S. reacted to Paul I in May an employer design a plan with no payout until normal retirement age?   
    I agree that this plan design is permissible.  The safe harbor rules do not impact and are not impacted by the normal retirement date.  If the State has a requirement that the employer must maintain a retirement or acceptable alternative, this plan design is a retirement plan.  While we are at it, why not add auto-enrollment and auto-escalation and no EACA withdrawals?  You also could add in rollover in and keep those to NRD.
    Over time, the plan proportion of terminated vested participants very likely will accumulate to be greater than the proportion of active participants.  The plan will have the burden of providing all of the required disclosure to these terminated participants (SH notice, SPD, SAR, QDIA notice, 404(a)(5) notice...). 
    The accumulation of participants with account balances very likely will push the count of participants with account balances beyond the threshold for requiring an audit (keeping in mind that the deferrals and safe harbor are both 100% vested).
    There likely will still be payments other than retirement benefits for QDROs and death benefits.
    Autoportability is off the table since it now pretty much relies on the benefits being distributable.
    If the plan is going to hold the account balances until NRD, then it should at least allow for the contributions to be made as Roth contributions.
    I expect that our BenefitsLink colleagues who have read this far are cringing at the thought of such a plan.
     
     
  16. Like
    Lou S. got a reaction from acm_acm in May an employer design a plan with no payout until normal retirement age?   
    A plan can allow for no distribution prior to normal retirement age. Though I believe that's much more common in a DB plan with annuity only options. I don't see why you couldn't do it in a safe harbor 401(k) Plan, but I'm not sure you should do it.
  17. Like
    Lou S. reacted to david rigby in Small Plan PBGC Termination Question   
    Generally, getting participants paid out (or annuity purchase) before your plan termination date is a good idea.  It simplifies many things and reduces the paperwork.   Suppose you do all this during 2024, and then a formal termination date at 12/31/24, you should also be prepared to file a 2025 PBGC premium filing, with all zeros, and the "final filing" check box.  
    This process may not work well if you are allocating excess assets, so think creatively with this process.
  18. Like
    Lou S. got a reaction from Luke Bailey 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.
  19. Like
    Lou S. got a reaction from David Schultz in Anticipated QDRO during Plan Termination   
    Let them know you'll be buying an annuity with a QJSA unless they can get you a finalized QDRO? They can't hold the Plan termination hostage by saying we don't have a QDRO 2 years on.
  20. Thanks
    Lou S. got a reaction from Peter Gulia in Anticipated QDRO during Plan Termination   
    Let them know you'll be buying an annuity with a QJSA unless they can get you a finalized QDRO? They can't hold the Plan termination hostage by saying we don't have a QDRO 2 years on.
  21. Like
    Lou S. reacted to Bri in Automatic Enrollment question   
    just get them to re-sign-up for the $X per paycheck as you claim it's not always obvious whether they'd be above or below 3% each time.
  22. Like
    Lou S. reacted to C. B. Zeller in Automatic Enrollment question   
    This seems like a procedural question. The employer should come up with something reasonable, document it, and apply it consistently.
  23. Like
    Lou S. got a reaction from Luke Bailey in Our family's dairy farm is selling and we'd like to buy a lot and build a house - how do avoid capital gains   
    Definitely not my area of expertise but if the farm has been in the family for 200 years, wouldn't there have been some step-up in basis along the way as prior owners passed on and left their sharers or interest to future generations? It sounds like you need a good tax accountant who is well versed in family business transfer and sale and that's not really the focus of this board.  On the bright side, long term capital gains tax rates are much lower than ordinary income taxes, at least at the federal level, state taxation may vary from state to state quite a bit.
  24. Like
    Lou S. reacted to fmsinc in Anticipated QDRO during Plan Termination   
    Don't make payments to anybody.  Do so at your peril. 
    You have actual notice of a forthcoming QDRO.
    One option is to file an interpleader and deposit the money into the Registry of the Court.  
  25. Like
    Lou S. reacted to Paul I in Our family's dairy farm is selling and we'd like to buy a lot and build a house - how do avoid capital gains   
    I suggest you hire a tax accountant who is well-versed in 1031 exchanges to work with you.  Your frustration is not surprising.  These exchanges have many, many rules upon rules and each rule seems to have several exceptions. Someone who has expertise and experience will ask about all of the facts and details about the farm, the sale, the S-corp, your goals, your siblings' goals and more.  With that information in hand, they can lay out a path forward and explain in detail to you and all other stakeholders before taking any steps.
    Typically retirement plans and IRAs are not involved in these exchanges because distributions from these vehicles are subject to ordinary income taxes (unless Roth amounts are involved on which ordinary income taxes were already paid).
    May you treasure the heritage of a 200+ year old family farm, and good luck to you and all of the siblings!
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