ConnieStorer

Like you we mailed all ours in one envelope. The postmark date on the envelope was July 28th and we show a delivery date of August 2nd.

We are now up to four denial letters!

We have received the same "your 5500 is late" letters that we respond to with a copy of the extension. The extension denied letters that we received this week were totally new to me. We sent the extensions by certified mail so we do have proof that they were mailed timely.

We mailed all our calendar year extensions in the same envelope the last week of July.

Has anyone else had their Form 5500 extensions denied? We have had two clients contact us this week regarding the extension letters they just received from the IRS that said their extension was denied. One client that had two plans had one plan extension approved and the other plan extension denied. I have never seen this happen before.

Thanks all for the response. The Plan has always operated in accordance with standard regulations. Current Plan Documents, Annual Valuation Reports for the Defined Benefit Plan, Contributions made in accordance with deduction limits and annual Form 5500-EZ filings. The debtor wants to exclude the assets in his defined benefit and 401k Plan. The bankruptcy trustee seems to think these should be included since this Plan is not covered by ERISA.

Facts: Single member LLC with no employees other than the single member. Properly formed pension plan, and properly formed 401k/profit sharing plan. IRS opinion letters issued with respect to both. Plan contributions made timely and in allowable amounts. The Single member LLC has filed for bankruptcy Issue: The trustee in the bankruptcy case has said that (i) under the US Supreme Court decision of Raymond B. Yates, MD, PC Profit Sharing Plan v. Hendon, a single member LLC having no employees other than the member cannot have a plan that is ERISA qualified, and (ii) if the plan is not ERISA qualified, then the plan cannot be tax-exempt under IRC sections 401 and 501 (and as a result cannot be claimed as exempt in bankruptcy). Question: I agree that a qualified plan that does not cover any employees (just the owner) is not subject to ERISA. However I think the logic is flawed that if they are not covered by ERISA then they cannot be tax-exempt under IRC 401. Does anyone have an opinion on this?

After reading some posts on the message board I realize why the PBGC method of calculating the payment is based on the monthly annuity rather than the hypothetical account balance. Any insurance company would do the same based on a deferred annuity with lump sum options.

I terminated a Cash Balance Plan in 2018. We were unable to locate two participants so their account balances were sent to the PBGC under the missing participants program. The PBGC audited this termination and sent me and email stating that the payments made for the two missing participants was not calculated correctly. Both individuals had benefit values in excess of $5,000. I was told I needed to use their standard calculation method applicable to traditional defined benefit plans. Is this correct? If the lump sum value was less than $5,000 would the account balance be the correct amount to send to the PBGC. Thanks,

Thank you for the information. That is exactly what I was searching for!

I need a little help from anyone who has some reference material from way back. What year did the eligibility requirements drop from age 25 to 21. In a plan termination audit by the PBGC I was asked to provide an explanation as to why someone did not enter the defined benefit plan until 4 years after their initial employment date. I do not have census information for the early 1980's so I can only speculate that it had something to do with the change in eligibility requirements. This individual was only 20 when he was hired. I do not have a copy of the original plan document.

Thank you very much for your responses.

This is a general question regarding the assumptions used to value a QDRO for a defined benefit monthly accrual. Is it appropriate to use the current year Applicable Table with the current 417(e) rates for both a public and a private pension plan payment. Or, is there some other industry standard that is used. Does it make a difference if the plan does not allow a single lump sum payment to the alternate payee?

Thank you so much for the information.

We have a client where we review their ADP/ACP tests and prepare the Form 5500. The client determined that the ADP test failed and they refunded the approximately $1,500 back to one of the HCE's. The problem is that the client did not perform the tests properly and the Plan did not fail the ADP test. Thus, there should have been no refund. We now have a situation where deferral money was distributed to a highly compensated participant who was not eligible to receive a distribution. I am clueless as to how to fix this. Any thoughts out there....

Thanks for the response. It occurred to me to ask the accountant to limit the deductions he was reporting on the Schedule C so that the full contribution is deductible. Same result of $0 income but now no excess contribution. The accountant agreed that would be best!

I have a small Defined Benefit Plan that is terminating due to the sale of the Sponsor's dental practice. The Plan is underfunded so the owner will be signing a waiver for the unfunded portion of his benefit. So far no problem. A substantial contribution was deposited in 2019 to make up some of the unfunded shortfall. The amount deposited was well within the Plan's maximum deductible limit. However, when the accountant completed the 2018 preliminary returns the Net Schedule Income for 2018 is about $17,000 less than the deposited amount. The accountant is going to take a deduction for only the portion up to the Net Schedule C amount, not the full amount of the deposit. According to the accountant there will be no Schedule C Income after 2018 so the excess $17,000 cannot be deducted in a later year. My understanding is that the Sponsor will owe a 10% penalty for the non deductible contribution for the 2019 Plan Year (the year of the deposit). How is the excess contribution paid out of the Plan?

Thank You CuseFan.

I recently took over administration of a Cash Balance Plan that was effective in 2016. When I reviewed the document I was a little concerned that under the Eligibility Section there was an exclusion for anyone other than Direct Owners, Spouses of Direct Owners and other HCE's. I just assumed that the document was written in error or that they purposely did this to be able to add back in sufficient NHCE's to pass 401(a)(26) and 410(b). Based on the printouts in the Actuarial Valuation Reports the Valuation Reports were run through Relius. The 410(b) and 401(a)(4) tests all show "Pass" for 2016 and 2017. However, when I reviewed the census information it appears that 8 employees out of 12 were coded as ineligible. All 12 met the eligibility requirement of 1 YOS and age 21. It is my understanding that the 8 "ineligible" participants should have been coded as Active with a $0 benefit. Am I totally off base? I would love to have some feedback before I go to a new client and say there is an issue with their prior years.

Thanks everyone for your input. I can pass the general test by giving the NHCE's in the PSP contributions since this Plan does not have a last day requirement. I was just hoping to provide the employees in the 401(k) Plan more than the safe harbor and gateway minimums since these are the employees the Doc wanted to benefit most.

The Corporation sold the assets but is continuing on. The new owner did not take over the plan sponsorship. Effectively all employees terminated with the Corporation on the date of the sale. This is the reason for the partial termination.

I have a client who sold his dental practice in September but is continuing on with his Corporation for two more years in order to fully accrue his benefits in a defined benefit plan. This client also maintains a cross tested safe harbor 401(k) Plan and an additional straight comp to comp Profit Sharing Plan. Now that we are at the end of the year I am not sure how to allocate benefits. All active employees (except for one who terminated a few days prior to the sale) continued employment with the new owner so they all have the same termination date with my client. At the very least we have a partial termination and everyone is 100% vested. That is the straightforward part..... Now for the tough part....the 401(k) Plan has a last day of the year rule along with 1000 hours in order to get a contribution. Is there any way to justify allocating a contribution to all employees employed on the date of the sale? If I do that then I guess I would also need to prorate the hours requirement for the "short" plan year. There is no fail/safe for 410(b) since we aggregate all three Plans for testing with the general test. The Profit Sharing Plan and the DB Plan do not have a last day of the year rule so they do not really present a problem. However, if I allocate a contribution to employees in the 401(k) Plan using the "short" plan year theory then I guess I would simply prorate hours in the PSP and DB Plan in order to determine who is eligible for benefits. Also, the Plans are Top Heavy (of course) so should I be concerned with providing top heavy for all employed on the date of the sale. Does anyone have any suggestions!

Thanks for the suggestion. We will contact BGC to see if they can help.

We were going through two different insurance agents to try and see who could get the best deal. I will find out what reason they were given when they declined to quote.

His date of birth was actually 1923 so I guess he is 92 years old right now. The forms of benefit is Life Annuity. The Principal would not quote on him!