Brenda Wren

Thank you, David. The only reason the J&S rules are in the plan is because the old MPP was merged back in 2002. They did not limit it to only old MPP in the previous restatements because they just thought it would be easier! Well, it's not easier now that we are terminating! The recordkeeping has separated the money types so it's very clear who has old MPP money and who doesn't. I'm thinking that we can amend the plan to remove the J&S rules at least to the extent of non-MPP money. That may reduce and will certainly limit the problem. As I recall, we are permitted to do that without notice. Thoughts on that idea?

I don't do DB/CB work and don't normally have to deal with J & S rules. However, I have a terminating DC plan with J & S in it. If a participant is unresponsive or the spouse refuses to sign, it appears that we have no other choice other than go to the marketplace and buy an annuity for them. Is there any other option? Penchecks says they will handle funds over $7,000 for terminating plans but if the participant doesn't respond, they don't buy the annuity....they move them to an IRA and thereby ultimately are bypassing the spousal consent rules. Since the plan isn't covered by the PBGC, we can't move the funds there. Any other options?

Thanks again to responders! We decided to provide the former participant with a letter stating that as a former participant with no benefits in the plan now, she is not entitled to receive an SPD at this time. We provided a copy of the last statement she received which reflected the amount she was paid along with the check number and date of her benefit check which was rolled over to an IRA. We stated that we do not maintain historical copies of SPDs. We think she met with SSA in-person as she was never reported on Form SSA which would explain why her request was stated the way it was. We do have copies of historical plan documents but did not provide that to her.

Thanks for the comments. It appears that the letter may have been prompted by her application for SS benefits as she states "as recommended by the SSA" in her letter. I am unaware of any such comment in the SSA letters I've seen. She further states that the US DOL EBSA has requested that she obtain the SPD. This is ridiculous.

My new client received a certified letter from a former employee requesting a copy of the SPD from the years in which she was employed (not necessarily a participant), 1997-2003. Since I was not the TPA I don't have the SPD and my client doesn't think he has it either. She was paid a benefit of about $50K in 2005 and apparently is not disputing that. Is my client obligated to provide the old SPD from 23 years ago to the former participant?

Belgarath, I think you're right....I'm finding more on it....looks like it was clarified that distributions from the Roth portion do not satisfy the RMD after 12/31/23. Thanks for responding.

I understand that new rules starting in 2024 disregard Roth balances when calculating RMDs. I also understand that an RMD is not required from a 401(k) if all you have in the account is Roth money. However, I am not aware of any rule prohibiting you from taking your RMD from the Roth portion of your 401(k) if you have pre-tax and Roth funds. Two recordkeepers (so far) will not allow you to take an RMD from Roth. Am I wrong or are the recordkeepers wrong? This excerpt from the IRS FAQs seems to agree with me. Q11. How are RMDs taxed? The account owner is taxed at their income tax rate on the amount of the withdrawn RMD. However, to the extent the RMD is a return of basis or is a qualified distribution from a Roth IRA, it is tax free.

My client has a 2-person 401(k) with non-qualifying assets. The plan covers the business owner and his girlfriend. We have been filing Form 5500SF. They are not legally married but are "legally domestic partners". Not sure what that means. For years now we've been advising him to obtain the very expensive bonding needed to qualify for the audit waiver. It's time again to pay the premium again and he is questioning the need for the bonding based on his domestic partnership status. Any comments, experience or thoughts to share?

Can anyone explain why IRA custodians request the "first year of Roth" when a Roth 401(k) is rolled over to a Roth IRA? The 5-year clock starts over when Roth funds are rolled over from a 401(k) to a Roth IRA. Besides the fact that I also don't understand WHY the clock starts over, why is this data collected?

David, many thanks for this great publication. I read it every day although sometimes I only have time for the headlines. Remember you fondly from your Orlando days. Thanks a bunch! Love the comment "ERISA and an eraser"! Too funny!

You could have established a separate plan and accomplished that.

Thanks for the input, CuseFan.....no concern with that issue at all in this case.

I have a small dental practice plan. Sole owner is married with a minor child to spouse who has a sole-proprietorship business earning about $100k annually with no employees. Both spouses participate in the plan, make employee deferrals and receive a SH match. With the change in the rules for 2024, since the spouses no longer have to aggregate for testing purposes, I guess I now have a multiple-employer plan going forward. Sole-proprietorship will be desirous of funding a PSP contribution on top of the match. Other than changing the employer type on the 2024 Form 5500 and adding the MEP addendum, is there anything else required on the government reporting side or the plan document side?

Not opining, but I can tell you that Datair does exactly that. If you are processing payroll in Datair and calculating the match every pay period, it will not calculate the match if a participant's compensation has gone over the limit. Fortunately, I only have one plan like that and it has a true-up provision in it. So all is well in the end.

Thanks, Lou. Appreciate your input. When I pushed back with the auditor, she did admit that an independent appraisal was not required, but that the Trustee has an obligation to determine FMV annually. So we usually advise our clients to get comparable sales or SOMETHING to justify the value they place on the alternative assets each year. We don't need to see it, but we tell them to keep it in their records.

Quite a few years ago I sat audit for an EZ filer. Although we had always advised him to value his real estate investments at Fair Market Value each year, it did not take our advice. Consequently, the very eager IRS agent sanctioned him $15,000 (after negotiating from $25,000) for failure to do so and for carrying the real estate at cost year after year. No harm to anyone, no issue with RMD's, but she wanted to get him for something, or so it seemed at that time. I remember her coming into the office on September 30, picking up the check for $15,000 before she went on furlough the next day. Obviously, a very unpleasant situation and I posted on this Forum about it at the time. Fast forward to today. I have a new EZ client who has real estate in the plan and has never been told by his prior TPA about this requirement. So I went looking for it in the IRS 5500 instructions. And what do you know? The blurb about "fair market value" is included in the 5500SF instructions with a reference to ERISA section 3(26). But it is NOT in the instructions for the EZ form! Is it possible that EZ filers are not subject to this rule since those plans are not subject to ERISA??????

I was taught that, too! Thought I was losing my mind! American Funds Recordkeeper Direct will not accommodate.....at least not without doing 2 loans! Thanks for responding.

Technically, it's an employer contribution. Move it to the forfeiture account, if recordkeeper will let you. If entitled to other employer contributions, move to another source.

Participant has a vested balance of $75,000 including an outstanding loan balance of $15,000. The highest outstanding loan balance in the last 12 months is $35,000. If the loan limit is 50% of the vested balance not to exceed $50,000 reduced by the highest outstanding loan balance, what is the maximum amount available for loan? Fifty percent of the vested balance is $37,500; $15,000 is outstanding leaving $22,500 available for a loan. But $50,000 less $35,000 is $15,000; $15,000 is less than $22,500, thus $15,000 is the maximum amount available for loan. Good so far? So the Participant takes a loan for $15,000 and now has total outstanding loans of $30,000. Does it not stand to reason that since loans were maxed out that the Participant now has $0 available to take another loan? Let's do the math again. Participant has a vested balance of $75,000 including outstanding loans of $30,000. The highest outstanding loan balance in the last 12 months remains at $35,000. Fifty percent of the vested balance is $37,500; $30,000 is outstanding leaving $7,500 available for a loan. The $50,000 limit less $35,000 is $15,000. Now $7,500 is less than $15,000, thus, what do you know, now we have $7,500 available for a new loan! So Participant is told that he is maxing out his loans on one day, only to find more available for a loan after taking the "maximum" loan the day before. I've been doing this a long time (perhaps too long!) and never came across this before. Do I have it right? Missing anything?

Thanks for the replies! Good ideas!

I believe I understood Ilene Ferenczy to say that if a LTPT employee exists, and chooses not to participate, the plan is subject to ERISA and can no longer file a 5500EZ in 2024 if it otherwise qualified to file as an EZ filer in past years. So if the plan is subject to ERISA, the plan is also now subject to the bonding rules in 2024. Case in point: Husband/wife plan only with an ineligible part-time employee for many years. Part-time employee is defined as LTPT employee on 1/1/24; chooses not to participate. Plan holds $5 million in non-qualifying assets. Now they have to get a bond in place on 1/1/24 for $5 million to bond their OWN assets (as if they would steal the assets from themselves, seriously!) or subject themselves to an audit for 2024. And they also have to disclose to the DOL, and the public, information about their plan. Any thoughts? I think I would choose to terminate the plan at this point.

We filed 2 extensions for 2 plans with plan year ending 4/30/21. The extensions were sent to Ogden, Utah, return receipt requested on November 3, 2021. One envelope, two extensions. We typically file extensions one month before the due date. Today, one of our clients received a denial of the extension request. Upon closer review of the crumpled, torn-up return receipt from the US Post Office, the stamped date of receipt was December 6, 2021. While this is after November 30, most assuredly the envelope was mailed in time as the US Post Office could never deliver anything from Florida to Utah in 6 days! So we notified the other client that they would likely receive a denial as well. Well, guess what? They received their letter from IRS today, too! But theirs WAS APPROVED! It's a darn shame that we are at the mercy of IRS and the US Post Office. This is totally unfair to all of us and our clients. IRS should immediately develop a system to electronically file extensions! Or do away with the 7 month deadline all together! It is painfully obvious that they do not have the manpower to conduct their "business". It took them 2 1/2 months to process a form! We are basically powerless to do anything other than pay $750 and file under the Delinquent Filing program. Not worth the aggravation to fight it or risk it for our client. I guess we need to file these 2 months early to TRY to avoid the problem we had with the 2019 filings. I don't think they got around to processing those requests until the following year! Has anyone figured out how IRS is able to have their letters delivered on the date they issue them? Time travel?

Thanks for the input. So it sounds like this could be just what I thought......not well thought out! I did not know that an extra 20% would apply! Even worse than I thought! I would rather not use my after-tax dollars when I retire to bridge the gap, especially since I have so much available in the HSA. I've saved religiously since 2007 so that I could retire early at age 62 if I wanted to. The last thing I want to do is pay ANY tax on my HSA dollars. I was hoping I could post something here in case anyone who specializes in this area could bring about change in the rules. It seems everybody else gets to pay health insurance premiums with pre-tax dollars except seniors! And the rule about not using it to pay Medicare supplement premiums is unfair too!

If I understand the current rules correctly, if I retire at age 62, I can use my HSA funds to pay COBRA health insurance premiums, but after that (18 months) I cannot without paying taxes on the withdrawal. Seems like a rule that wasn't very well thought out. Is this correct? Anyone else think this is unfair?

Wow, looks like I chimed in on that thread back in 2018! Senior moment! Well, in this case, I am not the TPA for either plan. So no ethical choice for me to make. This came to us from a CPA as he was preparing the 1040. Thanks to all!