ESOP Guy

If it talks about investment experience from 12/31/2018 the split will have gains/losses based on actual gains/losses on the account from 12/31/2018 to date of the account is split.

If Fidelity does a direct transfer back to the plan there shouldn't be any taxes or penalties from the IRS. What you really want to make sure is Fidelity does a transfer that doesn't generate a 1099-R to you more than anything else.

The TPA firm i work for has many staffing firm clients who have set up ESOPs. I personally work on two. They all want the benefits to just go to the corporate employees and not the people they are jobbing out to their clients. And they can't do that and none of our clients exclude the people who work the temp jobs for the staffing firm's clients. I completely agree with you. They have to include those employees or pass coverage without them which sounds impossible. If they want to try and set up some kind of points based allocation or other kind of allocations system that can pass discrimination testing that favors the internal employees go for it. My guess is those 6 employees also have all of the HCEs making this very hard also. To answer your last question I don't know of any staffing firm that is excluded these types of people and we have a pretty good sample size at the firm I work for. We here have at least 5-8 staffing firm clients I am thinking. I don't know of any that are doing what you describe.

I am happy to be told I am wrong on this as I am doing this from memory. But back in the day (the early '90s) when I first started working on 401(k) plans I remember being told there is no such thing as a stand alone 401(k) plan. I was taught that all 401(k) plans were a provision in a Profit Sharing plan or ESOP (thus being a KSOP)..... You might even be able to put a deferral provision in an MPP but never a stand alone 401(k) plan. Are you sure the document doesn't have a PSP provision? If a prototype check the base document or something. I has always been my understanding if you have a 401(k) plan you have a Profit Sharing plan. To repeat someone wants to tell me I am wrong fine as I am doing this from things I was taught decades ago.

I can't cite anything off the top of my head but it is my understanding is if the person doesn't pay the taxes the IRS can come after the Plan Sponsor for the taxes still. Once the taxpayer pays the correct taxes the plan and sponsor are pretty much off the hook.

I am sorry if my reply was too harsh. In a bit of my defense go back and re-read your original comment. You make it sound like your whole strategy is hope so I replied to that. In regard to your 2nd reply. No, I don't know if any good way to do it other than several letters. Yes, the days of calling someone and fixing it with a simple call are gone.

I agree with Belgarath.

You can never make the participants pay for the Plan Sponsor's/Administrator's mistake and not filing on time is their mistake.

I don't see any reason to issue a 1099-R. There hasn't been a distribution from the plan. To me if the spouse is the beneficiary the money became hers when the participant died not when you changed the title on the account. In fact since this is a qualified plan and not an IRA I don't think you have to do the whole John Doe deceased FBO.... stuff. In these situations we simply changed the name on the account to Jane Doe. We marked it was a spousal beneficiary and not a normal participant just so we knew and kept thing clear.

Off topic but I don't find this so odd. Presumably the father in this case spend money out of pocket already to pay the needed expenses. This is no making him whole after the fact.

Yeah, I got used to it at this point.

I have noticed it will allow me to open it several times but I don't think it allows you to save changes until you have only one open.

The CP-403 Notice have instructions on how to reply to them the last time I checked? You didn't reply to that notice? If not, that was your mistake. I would have sent a reply to the CP-403 notice explaining we did file and sending a copy of the EFAST2 5500 with that long number proving it was filed. Filing the amended return was not enough. That notice demands a reply in the body of the notice. It gives clear instructions on what they want in that reply. The IRS' instructions on their website talk about the reply deadlines and what they expect back. https://www.irs.gov/retirement-plans/understanding-your-cp-403-or-cp-406-notice If am I understanding what you are saying you need to stop being so passive and assuming the IRS will figure out it out on their own. Write a letter to the IRS proving you filed a return on time with the wrong EIN but it was on time. Prove you filed with the right EIN as soon as you knew there was a problem. And ask for a wavier of penalties. Make it clear it was an innocent mistake and a one time problem. So it won't happen again. There is a good chance you will get a penalty waiver letter. And once again they will send a letter saying they have waived the penalty. Next time don't let it get to the penalty phase of things. Reply to the IRS with the first notice they send you. I would add most of their letters come with instructions on how to fax a reply to them. Fax the reply to them. Fax replies get the best replies back from the IRS. Since there are now penalties being talked about send the reply also by a method you can prove it got there. But "hoping" the IRS will correct it on their end is a terrible plan on your part in my mind. Sorry, if I am being harsh. Someone in our firm makes this kind of error now or then. We never let any IRS letter/notice go with no reply when it happens. Change your procedures to stop being passive when you get IRS letters/notices. The expect a direct reply to the letter/notice within days of sending it meet or beat their expectations.

It is clearly allocated in the year of deposit. I am not sure you aren't confusing after-tax or Roth money that isn't deducted and employer discretionary that they didn't deduct. This isn't after-tax money in my mind this is stupid money that is put into the plan after-tax that people have to treat as pre-tax money when it comes out.

I vote yes also.

Sorry, I guess I assumed they only deducted 108k because they hit the limit not because of some other error. The way the first question is written it didn't make sense if the 108k wasn't the limit but now I see what the writer was saying. If the deductible limit was above the contribution made there is no excise tax. And while not a huge expert on the deduction side of things no I don't think they can take the $2k in 2020. You are allowed the deduction in the year made or up to the filing deadline of the corporate (or other tax return) for that year. So you can deduct a contribution made in the next year if it qualifies. I know of no provision that allows you to deduct a contribution made in the past. If the CPA refuses to amend the prior year's tax return I think the deduction is lost. I am happy to be told otherwise.

It is subject to the excise tax for 2019. Yes, in fact you have to use the excess tax up in 2020 or you pay the excise tax again and every year following until the excess is gone. This is why this mistake is so expensive. Back in the '90s we took over a plan that was admin internally. They had been over contributing for over 15 years. The the ever increasing layers of the excise tax being charged year after year plus the current year's excess being added resulted in a total excise tax that would have bankrupted the company had we not found a solution.

The firm I work for moved to Foxit a few years ago. I still don't find it as slick as Adobe but I also am not one of the people who sees how much the costs are If the price turns out substantial I can would agree that the money saved to lose a bell or whistle here or there is worth it.

You are asking for a lot. I don't know if you will get it all. As for your other question it depends some. You have money that isn't eligible to be rolled into an IRA. Depending how the new 1099-R reads it might make that clear to the IRS. I would focus on getting a decent accounting of why and how much you really owe and help to get the money transferred out of the IRA back to the plan that doesn't cause you to owe any taxes on the distribution.

Can a case be made that one of the choices is to stay in the pooled part of the plan? That seems to be the choice they made in effect after all.

I will point out that if (and that is a big if) the IRS were to find out that those funds are in the IRA and there still in there that could be subject to an excise tax every year until the money is taken out. Depending on the new 1099-R they send out that might tip the IRS off. I have seen the money sent back but it is rare for the obvious reason. The cost of a lawyer to get you to give the money back if it comes to push vs shove will add up to the amount they over paid you pretty quickly. So it does come down mostly to what is your ethics in this situation. I stand by my earlier recommendation in that regard- go talk to them. There is a good chance it isn't your money but someone else's money you have in the IRA.

What you should do is talk to them. They do owe you some explanation of how the amount was computed. There is an excellent chance you owe the funds and you have funds in your IRA that shouldn't be there. You should also ask them for help in getting the money transferred from the IRA to the plan that doesn't generate a 1099-R from the IRA. You shouldn't be taxed or have to pay any kind of penalty for giving back money. If you don't get to keep the money why should you pay taxes on it? While the fact they made a mistake doesn't relieve you of the duty to pay back the money it does put some burden on them to help you make the correction as painless as possible. So start with communication.

You people seem to be over thinking the example in the details and are missing the main point. I find the idea that my compensation will be in part based on if I do behaviors my employer approves outside of work odd at best and offensive at worst. Who are they to judge if my idea of hobbies, ways to better myself, deciding to own a pet, other lifestyle choices I make.... are worthy enough of their approval seen by given cash to people? Just pay people and they can spend THEIR money as they see fit and stop making me go and find out if my employer approves of my spending/lifestyle or not. To get real blunt (if I haven't crossed that line already) I would find this benefit a negative. I might not refuse to work for an employer that offered it but if I was making a list of good and bad things about the company as I was making a decision to work for them this would be on the bad list. It points to the idea they are too paternalistic. I don't mind a boss but I don't need nor want a new parent.

I say this all the time a well written termination amendment will answer this question. Does the amendment discuss when a person is fully vested? If not, review the document again. Does it say exactly when a person forfeits? For example, I have some documents that says the person forfeits on the day they terminate (this is mostly for people who are 0% vested which your example isn't) , some say the day they are fully paid their vested balance and some that say on 12/31 of the year they are fully paid. In your example if the plan say forfeits the day they terminate would result in a much different that day fully paid or 12/31. If all of that still doesn't answer the question I think the safest route is to vest but I can't cite anything. This has become one of my pet peeves. If a client tells me before hand they are going to terminate the plan I try my best to get the attorney writing the termination amendment to make this clear in that amendment as this question come up in just about all terminations for plans with vesting- or just about all plans.

I am sorry I am not answering your question.... I just have to know who likes this idea as a benefit that is a "trending" benefit? Am I understanding how this works correctly? Say we have employee A and employee B. They both do the same job and get paid exactly the same in terms of salary and benefits except for this program. A has a pet they board and B doesn't. So A's W-2 will reflect a higher gross and taxable wages because of the reimbursement of the pet boarding? If so, that means a person's total compensation is based on a personal choice to own and board a pet and not work place actions, is that correct? Like I said I am not answering your question at all so if you want to ignore me as I am being way off topic there will be no hurt feelings on my part. This board collectively can hijack a topic and I am as guilty as the next person. I am however curious about my questions enough to write them.