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Like Andy H., I am retiring tomorrow, January 31. These message boards have been a great source of knowledge and information, and I thank the folks who make this possible! Best wishes and good luck to everyone!

A client has asked me this question: On 1/1/2023, ownership of A corp was transferred from Mr. & Mrs. A to the A's 3 children. As of 1/1/2024, can Mr. & Mrs. A have deductions through our Section 125 Cafeteria Plan for their insurance premiums? Not quite sure on the family attribution rules as it relates to IRC 125 plans. Any responses would be appreciated, thanks!

If your plan had totally liquidated and all benefits paid out on 12/26/2023, then the final 5500 would be for the calendar year 2023, assuming that this is a calendar year plan. However, since you had residuals posted on 1/2/24, you may have to consider a short year filing for 2024, from 1/1 to the time when the residual was paid to the employees. This is especialy true if your plan was a large plan, subject to audit. We tried, many years ago, to show the residual as attributable to the prior year, but the audit firm was having nothing to do with that, and performed an audit for the period 1/1 to 1/6/XX. Had to file a final 5500 for that 6 day period. Hope this helps.

Got asked this question today: Owner of company requested an in-service withdrawal for $10,000 (numbers are rounded and fictional). Received two checks, one for $8,000 and one for $2,000. Owner then turned around and ran the $8,000 through payroll, taking no withholding or taxes whatsoever on it. And then, to top it off, remitted the $2,000 through EFTPS as a Form 945 tax. The owner got forms from their payroll provider as to how to "correct" the error. I looked at them and have no idea what they want this individual to do. Has anyone ever encountered a situation like this? Thanks for any replies.

I've seen this a couple of times in the past. First, check the number the IRS says the return should be filed under. Is it applicable to your employer? Then, what number are you using on the 5500-EZ? In my situation, I had filed the EZ using the Trust EIN instead of the company EIN. The correction given by the IRS in my situation was the correct one, so I started using the corporate number on future EZ's. In your case, you could either (amend the 2022 Filing to show the proper number) or to start using the proper number at 12/31/2023. Hope this helps.

As a DATAIR user, perhaps the lost earnings allocation made in 2022 is coded as happening as of 1/1/2022. If TinaW changes the allocation date of the lost earnings to something later in 2022, I think (but cannot say for certain) that it would drop the BOY count to 99, thus getting out of the audit for 2022.

A CPA/Auditor friend of mine came up with these two questions today. First, she is auditing a 401(k) Plan that has been "frozen" since January 1, 2020. The reason for the freeze was to correct operational defects in the plan from 2017-2019; which, after she described it, was failure to complete compliance testing and make appropriate refunds to HCE's. Her question was whether the plan should be considered terminated, due to lack of contributions for 3 years (still frozen as of today); my thought is that perhaps the Plan Sponsor (still a viable company and not subject to closing or bankruptcy) froze the plan to avoid 100% vesting on the matching contributions going into the plan. My response to her was to question the plan sponsor as to whether, once the defects are corrected, was going to unfreeze the plan and let deferrals resume. Otherwise consider formally terminating the plan. Any thoughts on this? And second, a participant took a $50,000 loan in June, 2022 for the purchase of a principal residence, payable over 30 years. However, the house was purchased in December, 2021 and closed in February, 2022. Isn't this out of order? And then the participant "refinanced" the loan in September 2023. And, just to make it more interesting, the participant is the owner of the company. Thanks for any replies. I'm both a TPA and a CPA/auditor, and these are 2 questions that made me scratch my head.

Thanks for the response. Don't think this person consulted with his CPA before doing it.

Here are the facts of a situation I've not heard of: As of 12/31/22, individual taxpayer has no IRA accounts. AGI around $1,000,000, which is expected to be the same in 2023. In Janaury, 2023, individual makes a 2023 non-deductible IRA contribution of $7,500 (over age 50), and immediately converts it to a Roth. In September, 2023, individaul rolls over a prior retirement plan balance into a Traditional IRA. Question: Would the entire Roth conversion of $7,500 be considered non-taxable, or would the individual have to consider the rollover traditional IRA to determine if a portion of the conversion, for earnings, is taxable. Thanks for any replies.

Short Year End is 5/31/23, due 12/31/23, extend to 3/15/24. Doable, I reckon.... Or.... File a Form 5500-SF for the short year, and show the active participants as of the beginning of the as 95. Think IRS/DOL might have an issue with that?

Had a plan subject to audit for 2022, that showed 120 active participants as of 12/31/22, but only 95 with balances. Plan is now fully liquidated this year. How would you report this on a 2022 Form 5500 for the short final year in 2023? Don;t have a box for participants with balances as of 1/1/23.

February filings through FIRE for me. Gotta love the IRS.....

The IRS is at it again... Have received two penalty notices from clients today regarding the 12/31/2022 filing of the Form 8955-SSA through FIRE. Penalty is for $660, with the reason that the Form 8955-SSA was not filed timely. Have confirmations from FIRE that the returns were filed in February and June of 2023. Get ready to start responding to yet another IRS mess-up.....

Has anyone ever encountered the situation where an unused forfeiture account reverts to the employer on plan termination? Got asked this question today and in all the years I've been a TPA, I've never seen it. Thanks for any replies.

Let's add this: If a plan falls below 100, and above 80, and elects to file as a large plan, do they file the 5500 with Schedule H and all of the other good schedules (A,C,D,R, and the audited financial statement), or can they file Schedule I, or even 5500-SF? Then they keep the audited financial statements "in their back pocket", so that an auditor does not have to go back and perform procedures on a prior year that was not audited, as is mentioned above.

As I dabble as a benefit plan auditor in my spare time, the following issue came up yesterday; any thoughts would be appreciated: We have a benefit plan out in New Jersey where the manager on the plan reached out to Nationwide for an asset certification so that an ERISA Section 103(a)(3)(C) audit could be completed for 2022; they have always received a certification from Nationwide in the past, but one was not included in the package they received this year. They received a response from Nationwide that “after consultation with our auditors, we are no longer issuing certifications on assets held with Nationwide”. I have a Nationwide client that I have already received the certification letter from for 2022. Has anybody heard anything about Nationwide not certifying their reports anymore? All of a sudden there could be folks out there that need a non-ERISA Section 103(a)(3)(C) audit…..

This agency also has a "Safe-Harbor" 403(b) Plan, which is also subject to audit, and we're trying to finalize the 2021 calendar year audit at this time. The only other 401(a) plan I saw was back in the 1990's, and it was part of a 401(k) Plan. Yes, I'm that old..... So if it's an employer sponsored plan, is it subject to 5500 filing and the audit requirement?

I have come up with a question that I’m not sure I know the answer to: A social service agency we just inherited sponsors a 401(a) Thrift Plan. The only contributions allowed to the plan are discretionary employer “Profit Sharing” contributions; no employee contributions are permitted. The Plan has been filing the Form 5500 series, and, since it has greater than 100 participants, has been audited by an independent accounting firm; however, the last audit performed for the plan was for PYE 6-30-2019. For 6-30-2020, the prior accounting firm attached the company financial statement to the 5500 filing, and for 6-30-2021, the accountant’s opinion section was left completely blank. I have not personally dealt with a 401(a) plan for a long time, and I seem to remember that 401(a) plans are not subject to ERISA, and therefore, not subject to Form 5500 filing requirements. Therefore, should this thrift plan even be filing a 5500? The though of having to go and do a 6-30-20, 6-30-21 and 6-30-22 audit is making our assurance department head very sickly…..

This question might go out of style with the change in counting participants to determine whether a plan is required to have an audit. Normally, the answer is yes, you can split a plan into two and avoid the audit, assuming all of the good things that go into maintaining separate plans. The question that was brought to my attention is whether a sponsor, finding out today that their particpant count went over 120 on 1/1/22, do the split retroactively to 1/1/22. I don't think you can, but I raise this to make certain that I'm correct on that. Thanks for any replies.

Thank you, very informative!

Personal question: I turn age 65 in November, 2023, and am currently deferring amounts to an HSA account to cover the HDHP deductible. I know I have to cease HSA contributions when I turn 65, but the question is when do I have to stop? I currently plan to retire in January, 2024, and keep my health coverage through my employer through the end of 2023, starting Medicare Part B on 1/1/24. I've heard conflicting theories as to when deferrals have to cease, so I'd thought I'd ask the question here. Thanks for any replies.

Here is a question posed to me: Plan with effective date of 2/1/22 had 145 participants on 2/1/22, but only 40 with balances. Question is whether the plan is subject to audit for the 2022 plan year end, and then drops out for 2023, because they won't hit 100 with balances. I think they need a 2022 audit, but just want to see if I've missed anything. Thanks for any replies.

Peter, don't know the answer to that. I'll contact them. We did a lost employee search last year, sent a form there, and it came back unclaimed. Think I'll just use that address.

Profit Sharing plan took the balance of an unlocatable participant and transferred it to a Default IRA. Question is does the plan have to prepare a 2022 Form 1099-R for this participant, knowing that the form will never been received by the person? Thanks for any replies.

Thank you, Peter. I thought that was the case, but a representative from an Investment Company led the participant to believe that he could gross up. Moral of story: Don't believe everything you hear from a customer service rep......