DMcGovern

Thank you all for your responses! I looked at another plan we have with this investment company and found a couple similar discrepancies. The smaller discrepancies are the same as my original post - participants with low balances and their system is removing what they refer to as "de minimis amounts". However, I also found several participants that had corrections done that they backdated. This is another thing I have never seen before. Examples: correcting deposits to the wrong source; correcting deposits to the wrong participant. One was a correction to a correction the investment company processed incorrectly. In each situation the participant lost money in the transactions. Again, not a big amount, but $5 here, $8 there.....it adds up after a while. I have asked for details on the transactions, will see what they provide. But in the meantime, do you have investment companies that backdate things like this? Thanks again

Good thought, @duckthing I'll see if I can get more details and review the service agreement

Thanks for the reply, Lou. I have another participant in this same plan with larger differences (possibly due to larger balances). It's a large plan, so it's gonna be fun explaining these to the auditors 🤪

Working on a 401(k) plan's trust accounting. Calendar year plan. I noticed one participant's balances from 12/31/19 to 1/1/2020 changed. The safe harbor match source at 12/31/19 was $1.58; at 1/1/2020 it was $0.99. The Employee Pre-Tax source at 12/31/19 was $1.27; at 1/1/2020 it was $0.65. When I asked the investment company what happened to the differences, the response was: "At 12/31/2019, the participant had deminimus balances in various source/fund combinations (for example, 7 cents in American Funds New World R6 fund / Employee Pre-Tax source). The $1.21 difference comes from these small amounts that were removed from the system at 1/1/2020. Our understanding is that this essentially amounts to rounding in the recordkeeping system." I'm not used to money just disappearing from a participant's account. Others find this "normal"?

Thank you @Lou S.

With the final regulations published Jan 6th, I want to make sure I am understanding these new requirements. A plan loan offset that occurs in a DC plan solely due to either termination of the plan; or, termination of employment AND an offset that occurs within 12 months after the employee's termination date (NOT 12 months after employee takes the distribution) is a QPLO. Example: Participant terminates employment on 2/22/2021. Participant elects to take a distribution of the account balance in August. Total account balance is $50,000. Of this balance, there is an outstanding loan in the amount of $10,000. Participant receives a check in the amount of $40,000 as the $10K loan balance was offset. To report this distribution in January 2022, a 1099-R is issued reporting the $40,000 as a lump sum distribution (code 7, 1, or 2 depending upon the situation) in Box 7. A second 1099-R is issued to report the $10,000 QPLO using code M in box 7. For 1099-R purposes from the plan it doesn't matter if the former participant does a rollover of the $40,000 within the 60-day period, and also does not matter if the participant funds and rolls over the $10,000 amount before their tax filing deadline for 2021. Correct? Thanks in advance for your help!

@Peter Gulia are you saying that the recordkeeper contract trumps the plan governing document language?

Thanks, Bird! The participant received payments from the assets of the plan on two different days; each in a different deposit period, but both over the $100K limit. (Yup, took it all in cash!) I think both would be subject to the next day filing requirement. At this point, the CPA had said he needed to set up an account for the plan to submit the withholding taxes. (We did tell the client and CPA they needed to get that done in December.) If they get an IRS notice on penalties for late filing, will have them complete Form 843 to request abatement. Absolutely no intent to willfully neglect paying this.

A one-participant DB plan terminated in December 2020. Participant received full distribution on 12/22/20, amount in excess of 2 million. Read the instructions for Form 945 and Publication 15. Pub 15 refers to filing for Form 941. If we use that, and the lookback period was zero, is the client a semiweekly filer? Or does the next day filer rule apply?

Agree with StephenD!

I'm seeing various opinions on this. From a conservative standpoint, some are saying "no". Mainly because of the timing to fund them (as well as profit sharing, safe harbor nonelective, etc.) A match is directly tied to payroll, so I think that is acceptable. However, the language of the Act says "payment of ANY retirement benefit" (emphasis added). That's where others are saying that limiting it to match is too conservative. Applying for these loans is available starting today (4/3) for small businesses and sole proprietors. I imagine they could discuss it with their SBA lender.

Is the delay of repayment applicable only to "qualified individuals", or any participant with a loan payment due during that time frame? I'm getting conflicting information on this

Thanks for your reply, Larry! Everyone stay safe and healthy out there

This one is different. 401(k) plan was moved to a new platform. A part of the agreement for investment advisor fees was to deduct a specified portion from the participant accounts on a quarterly basis. This was properly disclosed to participants in timely notices. Investment company failed to set up this fee deduction for six months. Investment company's position on this: "our position is to follow IRS correction principles of returning the plan to the state it would have been in if no error had occurred- in essence deducting fees from the participant’s accounts" The investment advisors would rather forego the payment than deduct fees from participants. I could not find anything that required a fix for something like this. Anyone else have a similar situation?

Instructions indicate that a "responsible party" needs to report the address change within 60 days of the change. Would that be the start date for charges? How would the IRS know the effective date of the change? As a TPA, we frequently would not be aware of the change within the 60-day time frame.

It's my understanding that the Act is effective for distributions made after 12/31/19, and are for individuals who attain age 70 1/2 after 12/31/19: This requires an amendment to the document provisions and is optional; plan sponsors may choose to retain an earlier age.

One more wrinkle in this - the QDIA is a target-date fund. What age would be used for this? I have suggested (highly recommended) the client seek legal counsel on this one. I wonder if most (or all) recordkeepers have a similar disclaimer divesting them of any liability for unauthorized activity.

A participant in a large 401(k) plan passed away earlier this year. There is a legal case pending regarding his beneficiary designation. (The girlfriend appears to have gone online and changed it to herself the day before participant passed away; family is contesting it.) The lawyer for the girlfriend has sent a letter to the plan sponsor telling them that they should invest the account balance in a QDIA. So a couple of questions have come up. 1. What fiduciary duty would there be for the account when the participant has died and beneficiary is unknown? (This plan has full participant-directed accounts.) 2. Should access to the deceased participant account be closed to others? (It appears the girlfriend still has view-only access to the deceased participant's login information.) Additional information on the investments - the overall earnings on the account year-to-date are over 20%. Market fluctuations recently have decreased the value.

OP states that the 2017 5500 EIN was incorrect. What about the previous year? Have had this situation a couple of times. Each time a phone call to the IRS resulted in them telling me to file using the correct EIN for the current filing and wait for a letter from them on the previous filing. That said, they still seem to get confused even if you wait for the magic letter. RBG is correct - it is a PITA! (Took me a minute to figure out what that meant ;))

Thanks for your help, Tom!

Similar situation, except the participant DID participate in two different employer plans. Participant notified current employer on 4/16 that he over-contributed over $4000 in deferrals. Our client's plan did not exceed the section 401(a)(30) limit. What is the correction? The participant is a non-highly compensated participant. How is the excess treated for testing purposes - not counted in ADP test? counted as an employer contribution for 415 purposes? Thanks in advance for your help!

Any chance someone could share sample document language that deals with this? Thanks in advance!

From the 2017 instructions for the 5500 EZ: You do not have to file Form 5500-EZ for the 2017 plan year for a one-participant plan if the total of the plan's assets and the assets of all other one-participant plans maintained by the employer at the end of the 2017 plan year does not exceed $250,000, unless 2017 is the final plan year of the plan. (Emphasis added)

2018 and instructions still do not address this situation. I did find in IRC Section 4980(d)(2)(B)(iii)(III) that "such transfer shall not be treated as an Employer reversion for purposes of this section." This relates to the excise taxes when the amount meets the requirements for the 25% cushion. The cushion amount has to be a direct transfer to the replacement plan, and done before any amount is reverted back to the Employer. Would it be possible to treat the cushion amount as a transfer to another plan? Report on 5500 SF the amount transferred in Part III.7.j; 13a would be "no" (assuming no assets remained after the transfer to the replacement plan), 13b would be "yes"; and report the replacement plan information in 13c. Would you also need to file a 5310-A in this situation?

It's about 2 years later....any updates to this question? Anyone discussed this with the IRS? Thanks in advance!