ConnieStorer

I would appreciate any thought from the Pension Guru's out there. Here is a little backgroud information: I have a somewhat large Profit Sharing 401(k) Plan where everyone has individual accounts. The Participants all have an investment account (with Advisor X)where their profit sharing and deferral contributions are deposited. More than 50% of the Participants also have individual advisors with separate accounts at other financial institutions. Periodically the assets are moved from the Advisor X accounts to their separate individual advisor accounts. The Plan Sponsor is thinking of doing away with the individual advisors and forcing all Participants to house their assets under a single platform provider. This will most likely meet with some resistance so they want to allow individuals to periodically take in-servive distributions in order to rollover their assets to an IRA with their individual advisor. The biggest issue with In-Service is that about 5 years ago the Plan Sponsor merged their old Money Purchase Plan into the Profit Sharing Plan. The old Money Purchase accounts have been maintained separately from any of the Profit Sharing Accounts and we have always restricted In-Service to those age 62 and over. Is there anyway, short of terminating the entire Plan, to get the Money Purchase Accounts out of the Plan? Can the Profit Sharing 401(k) Plan be terminated and only allow the Profit Sharing and Deferral money sources to be rolled directly into a new 401(k) Plan? Any ideas would be helpful.

The reversion will be roughly $60,000. Peter, thank you for the advise. We will throw this back to the attorneys.

Here is a strange problem that an associate of mine is dealing with... A defined benefit plan is being terminated. The only participant, I will call Mr. Bill, received the maximum payout allowable and there are excess assets. There is no possibility of a qualified replacement plan so our only option is to revert the excess back to the Corporation. Now we find out that the Corporation no longer exists. My understanding is that there was a divorce and the ex was awarded ownership of the Corporation. The only employee of the corporation and the sole Participant in the Plan was Mr. Bill. He terminated employment with the corporation that the ex took over and started a new company. Now we found out that the ex closed out the corporation. Any suggestions on what to do with the excess assets.

I have to disagree with some of the other comments. According to AC, the document says that the amount contributed or allocated wil be reduced to avoid exceeding the annual additions limit. The annual additions limit applies to each participant individually, not the entire plan. I think the wording allows for the reallocation of the excess to other participants. I do not think that the wording implies that the Employer Contribution must be reduced. "If the Employer contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed such maximum permissible amount, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the maximum permissible amount."

Just a thought... if the plan name, SSN, EIN are identical on both 1099-R's you probably only need to send one corrected 1099-R showing $0 in box 1 and 2. Also, if the 1099-R's were coded as rollovers there should be no taxable income.

Thanks CuseFan... I was hoping to get support for using December as the ninth month so January 1 would be the first day of the 10th month.

We have several non calendar year Plans. A discussion recently came up as to the due date of the AFTAP certification. One opinion is that the due date is based on the exact date of the end of the Plan Year; just nine months later. A 3/27/2022 Plan Year End would have a due date for the AFTAP of 12/27/2022. However, the other opinion is as such. The instructions say that the AFTAP must be certified by the first day of the 10th month. Could the 10th month be interpreted to be April? In this case the AFTAP would need to be certified by 3/31/2022. I cannot find anything specific to a non calendar year plan. Any insights would be appreciated.

I ran into an issue when I used the allocated like for a John Hancock case. Make sure you have at least one Voya investment selected in the investment funds for the Plan. It does not matter which Voya investment it is... Relius just needs one in the specs in order to connect the allocated link.

Thanks Mr. Bagwell.... you are correct about the messy situation part. The document is an FIS volume submitter. There is minimal language regarding going from an eligible classification of employees to an ineligible classification.

I am working on a cross tested 401(k) Plan. This Plan has a few allocation groups that are defined as ineligible for Plan Purposes in the Plan Document. In 2022 one of the participants moved from a non-Partner group that was eligible to participate in Profit Sharing to a Partner Group that is ineligible for participating. This individual is less than a 5% Partner so he is considered non-key. In addition, he is not an HCE. He made employee deferrals prior to becoming a Partner. Since he is considered ineligible as of 12/31/2022 would this require the return of his deferrals made when he was eligible to Participate? He is still employed as of 12/31/2022 so does this require a 3% top heavy minimum and the gateway minimum of 5%? If yes, would this be on his W-2 wages only or would we also need to include his K-1 wages. Thanks for any insight.

Just an FYI... I had a plan with no active participants. We offered lump sums to the non-retirees and then purchased annuities for those in pay status. After that we filed a plan termination with the PBGC showing 0 participants and $0 assets. PBGC stated I was circumventing the plan termination rules and that then audited the Plan. Everything was fine but the PBGC was not happy!!!

Would it make a difference in this case that the only two remaining participants were past age 65? The active participants did not need a plan termination to have a distributable event.

Great points..... thank you all.

So would you all agree that the attorney should have argued that the deferrals were excess annual additions and not subject to the double taxation rules?

I recently reviewed a VCP submission where the attorney stated in the application that the Participant exceeded both the 402(g) limits and the 415 limits for five years. Basic facts: Schedule C Employer who sponsored both a defined benefit plan and a 401(k) Plan. The Participant, who was over age 50, deferred up to the 402(g) limit each of the five years in question. This individual made contributions to his defined benefit plan each of the years in the amount of his Schedule C Income less the Self Employment Taxes. The net affect is that he deferred more than 100% of his Earned Income. He obviously exceeded 415 limits and has excess contributions in his 401(k) Plan. However, I did not think that 402(g) was limited by wages. I always thought it was a straight dollar limit. The 1099-R instructions state that Excess Deferrals not distributed by 4/15 of the following year are subject to double taxation. This same language is not included when you are dealing with excess Excess Contributions. I realize that the only contributions to the 401(k) Plan were employee deferrals. However, if they did not exceed the 402(g) limit are they still considered Excess Deferrals or can they be considered Excess Contributions. Thanks for any insight.

I have had several plans recently switch went to Fidelity for record keeping. In every case Fidelity insisted on changing to elapsed time method for vesting from hours of service.

We took over administration of a small defined benefit plan. The Plan covers Husband and Wife who each own 50% of an S Corp. The Plan also covers a son and his wife, both well over age 21. All four individuals have been in the Plan since it was effective. The prior administration firm indicated in both the Plan Document and Form 5500 that this was not covered by the PBGC. The Plan Sponsor is not a professional service corp. I believe that this plan was covered by the PBGC from its inception in 1998. We would like to know in advance what sort of penalties might be applied to the Plan for not filing PBGC Forms since 1998. I am assuming that we will receive an inquiry from the PBGC when we file a 2021 PBGC form for a plan that has been in existence for over 21 years. Any comments would be appreciated.

Thanks Mike.

No, they have not adopted the Plan.

This may be a little (or a lot) off track but what if instead of two Schedule C's there was one Schedule C and two K-1's. I have the necessary prior years' earned income from the Schedule C to calculate a large DB contribution. This contribution would be in excess of the current year's net Schedule C income. The plan sponsor is the Schedule C Employer. The Schedule C Employer is an Active Partner in the two Partnerships; 20% ownership in one and 25% in the other. My first thought is that the maximum deductible contribution would be limited to the Schedule C Income (less the 50% SE Tax). However, I do not want to limit his contribution if it is permissible to include any of his K-1 wages for purposes of calculating the maximum deductible contribution. Any thoughts!

Has anyone successfully uploaded PBGC Forms after the update on PBGC's website. We can log onto the site with no issues. We can even see all our Plans via "List Plans". However, when we select "Upload Filings" the Schema Validation - Select XML File button does not appear. We sent an inquiry to PBGC and they think it is a problem with our web browser. We have logged onto the PBGC site using Internet Explorer, Google Chrome, Microsoft Edge and Fire Fox and we have the same issue with every one. If anyone has had success what web browser are you using? Thanks,

Thanks Everyone for weighing in! I agree with the consensus that separate plans are the way to go.

Thanks Lou, I want to go the Cash Balance route in order to get a larger contribution. The Schedule C Income is over $300,000.

I was hoping the experts on this message board could provide me their opinions. I have a client that sponsors two Plan; Cash Balance and 401(k). These plans have been in effect for several years. The Plan sponsor is a Corporation owned 50/50 by two brothers. The W-2 wages the brother receive from the Corporation are well below the annual wage limits and the contributions are well under current year allocation limits. Their accountant called me yesterday asking about setting up a Keogh Plan for one of the brother for his Schedule C Income. This was the first I ever heard about any Schedule C income. In fact, both brother receive Schedule C Income from a sideline business. I would like to include the wages from the Schedule C Income in their current Plan without going to the expense of setting up another Cash Balance Plan and/or Profit Sharing Plan. Since the SECURE Act allows for the adoption of new Plans after the end of the Plan Year do you think this would include becoming an adopting employer to the already existing Plans? I would like to add both brothers as adopting employers to their Corporate Plan. What do you think... is this possible?

Long ago.... when pooled accounts were the norm it was not uncommon for employers to reimburse the plan for administration/Trustee fees. It was my understanding that this was not a problem. I have not seen any reimbursement in a very long time but did I miss a change in the regulations.