bzorc

As both a TPA and an auditor, when I'm wearing my "auditor" hat, I go pull the prior 5500 from EFAST. You'd be surprised at how many auditors that have no idea what EFAST is!

Default IRA?

They use a 1/1/2019 effective date, which is also in the adoption agreement. We haven't been engaged as the auditor yet. This one we might hope we don't......

So do I. The TPA is a well known one, so I'm surprised that they checked that box. And surprised they wouldn't file 2020 without an audit. Opens the client up to having to file under DFVCP, instead of waiting for the DOL 45 day letter.

Company started a new plan, with a 1/1/2019 effective date. 2019 Form 5500 was filed, with a beginning of the year participant count of 188, making plan subject to audit. However, on Schedule H, Part III, the Form 5500 prepared and filed on EFAST checked box 3d2 - the audit will be attached to the next Form 5500 pursuant to 29 CFR 2520.104-50 (less than 7 month exception). Our reasoning for the exemption is that, for plan eligibility purposes, the plan Adoption Agreement indicates that anyone employed on July 1, 2019 was eligible. According to the plan sponsor, deferrals began in August 2020. The 2020 Form 5500 has not been filed, as the TPA will not file the return without a 2019/2020 audit. We have been brought in to perhaps prepare the 2019 and 2020 audits. Question: Can the plan claim the exemption for a year less than 7 months, utilizing the eligibility feature noted? Or should we, if engaged, recommend an amended 2019 filing with a 2019 audit, once it's complete, attached to the amended return? Thanks for any replies.

Received the following question from an auditor friend of mine, who is trying to wrap up a 12/31/20 plan audit before Friday: Got a plan that dropped its interest rate down to 1% due to the pandemic....not sure why they did this, but we are not sure that this would be considered "reasonable rate of interest" per IRS standards and that if it is determined that it is not, then isn't there a risk that the "Loans" would be considered distributions? We have a call into the client to see why they did this and if anyone weighted in in terms of ERISA allowability. Any thoughts on this one?

Plan sponsor has two groups of employees: "Exempt" and "Non-exempt"; both groups are eligible for the company 401(k) Plan However, they wish to have two separate eligibility requirements for the plan: The "Exempt" group must complete 30 days of service, and they enter the plan on the 1st of the month following. The "Non-exempt" group must complete 60 days of service, and they enter the plan on the 1st of the month following. Questions: One, the prototype we utilize does not allow for a 30 (or 60) day requirement; it appears that it must be in months. Am I missing something?; and Two, I don't believe you can have a dual eligibility requirement for the 401(k) feature of the plan. Thanks for any replies.

No moving expenses covered. Plan only covers the IRS Safe Harbor reasons for hardships. I am telling the sponsor that this is not an allowable hardship withdrawal application. Thanks for your replies.

I have a participant in a plan that, as a result of her employer moving her from one location to another (and then having to also move her parents, as she is their caretaker), is requesting a hardship withdrawal to "lease" (i.e, rent) a house in her new location. She has no other source of funds and the employer would like to grant this request. As the lease is for, technically, her principal residence, would you be inclined to grant the withdrawal? Thanks for any replies.

An individual withdraws $100,000 as a CRD in 2020, and the $100,000 includes the individual's 2020 RMD. Can the RMD be repaid in 3 years, as it was part of the CRD?

401(k) Plan with over 100 participants was audited by a CPA firm for the period 4-1-19 to 3-31-20. Plan sponsor has changed the year end to September, with a short plan year 4-1-20 to 9-30-20. Question is whether the short year audit can be put off under 29 CFR 2520.104-50, and be included with the audit for the plan year 10-1-20 to 9-30-21? Looks like it can, but I've never seen this or been asked the question before. Thanks for any replies.

In 2016, a taxpayer inherited the IRA of his brother, and he elected to stretch the IRA. In 2020, he passes away, and the beneficiary is his spouse. Question is can the spouse take the IRA as her own and continue payments over her lifetime? Or is she subject to the CARES Act 10 year rule? Thanks for any replies.

Participant takes a COVID loan on 9/1/20, and defers payments. Question is, when this is re-amortized for payments to begin after 1/1/21, does the loan ending date become 12/31/2025? The participant seems to think that he can go to 12/31/2026, but, truthfully, after reading the literature on COVID loans, I can safely say I have no idea. Thanks for any replies.

Thanks for the replies, and I totally agree. It seems to stick in my brain that many years ago a cohort had a plan they worked on that ignored the "highest outstanding balance in the last 12 months" portion of the calculation for new loans.

Participant in April, 2020 takes a $50,000 loanParticipant, because of COVID, wants to pay off the first loan to take the $100,000 COVID loan. Participant pays off the loan, requests $100,000. Asset Custodian rejects the loan, saying the maximum loan amount is $50,000; $100,000 reduced by highest outstanding loan balance in the last 12 months ($50,000). I agree with this calculation.Question is: Is the loan limit calculation a safe-harbor calculation? Could the plan sponsor decide to ignore the limitations and give the person the whole $100,000 loan? I think not, but wouldn't mind seeing if anybody has run into this before.Thanks for any replies!

A new client to our firm is in receipt of an IRS compliance check regarding their SIMPLE IRA for the year ended 12/31/2017. The compliance check is saying that the client has sponsored a SIMPLE IRA and, for the last 2 years, reported more than 100 W-2's for employees with wages of $5,000 or more for at least two consecutive years. The client has now informed us that this a true statement for years 2015 through 2019. No union employees in the company. The compliance check simply asks 1) did you sponsor a SIMPLE IRA (yes), 2) did you exceed the 100 employee limitation (yes) and 3) did you exceed the two year grace period (yes). What ramifications might the company face from the IRS for sponsoring and maintaining a SIMPLE IRA in violation of the requirements. I do not deal with SIMPLE's often, so I was wondering if anyone had experience with this. Thanks for any replies.

Plan auditor determines that the plan did not follow the definition of plan compensation while performing the 2017 audit of the plan. Tells the plan sponsor to calculate the necessary QNEC at 25% of missed deferrals, plus appropriate match. Going out to do the 2019 audit, they find that the plan sponsor did not remit the QNEC to the plan until January, 2020. The auditor believes that the Sponsor should now go back and recalculate the QNEC at 50%, since the remittance was after the close of the 2nd plan year following the discovery and calculation of the QNEC. Any thoughts on this?

Would a person who was required to take a 2019 MRD by April 1, 2020 (today) still have to take the distribution today? Can't see if the CARES act affects this.

To my knowledge, when you have a failed test, the DATAIR module provides "correction amounts" in the ADP test; i.e., QNEC. Take a look and see if you see it.

Sole proprietor has net income of $25,000 and maintains a solo 401(k) Plan (please ignore the self-employment tax issues here) Want to maximize the amount put into the Solok. Is the amount that can be contributed for 2019 $25,000 (sole proprietor is over 50), or $30,000 ($25,000 deferral plus 20% of net income of $5,000)? Reading the IRS publication on this does not provide a definitive answer. Thanks for any replies.

I would think the Roth deferral is included in Box 1,3,5, since it is an after tax deduction.

Does anybody know of or have a template for a Permanent Opt-Out Form? Thanks.

Thank you! In the past I've always told the Sponsor that it's considered an employer contribution, allocated to eligible participants.

A Plan Sponsor has a Profit Sharing Plan (3 participants) with pooled investments held at a brokerage firm, which charges quarterly investment advisory fees. Plan Sponsor wishes to reimburse the Plan each quarter for the fees paid. I haven't seen this in years, but I believe there are two options: Treat the reimbursement as an employer contribution (Deductible on the corporate tax return); or Treat the reimbursement as an expense of the Employer, deductible on the corporate tax return. Any thoughts would be appreciated, thanks.

On another angle here, we had a large plan be subjected to a DOL audit for late remittance issues. At the close of the audit, the DOL indicated that, based on their review, the Sponsor should "be able to" remit within 7 business days, which is now the standard we hold this sponsor to.