thepensionmaven

Somewhat of a wrinkle - My original thinking was to have the 3 plans effective for 2022, but the 2021 contribution will be made in 2022. I don't believe it would be correct to show 2 years' accruals in one plan year (2021 in 2022 as well as an accrual for 2022). However under SECURE, since the client has not filed their 2021 tax return (and are usually on extension until 9/15), if the above can't be done, I see no reason why the 3 plans can't be effective 1/1/21. Since the existing plan is a profit sharing plan, the trustees have decided to make a 0% contribution to the existing plan; and instead into the new plans. Each dentist sponsors his own plan; the two dentists are the trustees of the employee plan, which will be on a separate account platform.

I'm setting up a DB and 401(k) for a prospect. All employed on the effective date enter the plan on the effective date; anyone hired after, 12 months of service. Plans will state Vesting from the effective date of the plan - DB has to be -3 year 100%, but PS will use 2/20. I do recall a thread mentioning this would not be possible?

Did you check the box "special extension and write (state)-Ida Extension-FEMA-4615-DR" So far, we have had no problem.

I got the answers to my inquiry - thank you all very much. 401(a)(4) is the answer I was looking for. All three plans will be aggregated for testing purposes; have recommended a platform for the employee plan. One of the dentists is balking at this I told him if it wasn't done this way, I'd walk away and he is free to find another TPA. Thanks to all for your input.

A dental office consisting of two dentists and about 5-6 employees. Currently there is one profit sharing plan and all the money is pooled. Each dentist wants to take his portion of the pooled account and open up a new plan (not account, but plan) as well as creating a new plan (not account, but plan) with a pooled account for the participants. Does not make any sense to me, keep the existing plan and amend to allow for individuals to direct their own investments; but the dentists do not want to do that. Is this discriminatory??

I think I did not pose my question correctly, my question was concerning Form 5500 and a change in Sponsorship. Either done correctly or not, the facts are that the sponsorship of said plan has changed." In the past, if there is a name change in the sponsorship of a company and its retirement plan, we generally have prepared the 5500 in the year of change using the new company, new EIN and mark off box 4 on Form 5500, showing name of prior years' Sponsor and EIN. IRS does not recognize this and sends out letters and invoices asking for the 5500s under the old sponsor.hey are looking for the following years' 5500 for the "old" company" with that EIN and obviously we haven't prepared, as this would be for the "old company", which the seller does not control any longer.Gets a bit exasperating after about 2 months and at least 2-3 letters from IRS, which we answer and the matter eventually closed. Of course, we as TPA, do not get paid for this as the client thinks we did something wrong. I was told by an IRS individual, in such a case they will only recognize that we file either as a "merger" of the two plans OR a "termination" of the existing plan and the start up of the "new" plan they call it. Suggestions on how to handle Form 5500 in this instance, please.

Well, I assume someone approved this, either one of the attorneys or one of the accountants. My question remains the same concerning the 5500s.

"Old company" (seller) keeping the plan going, but buyer keeps the old company and its EIN. Apparently, buyer keeping name of seller's corp as well as the EIN of the seller's company; insisting seller file under a new corporate name and new EIN. I have done this before, and always kicked back by IRS. This is just a Sponsorship change. They are looking for the following years' 5500 for the "old" company" with that EIN and obviously we haven't prepared, as this would be for the "old company", which the seller does not control any longer. We generally have prepared the 5500 in the year of change using the new company, new EIN and mark off box 4 on Form 5500, showing name of prior years' Sponsor and EIN. IRS does not recognize this and sends out letters and invoices asking for the 5500s under the old sponsor. Gets a bit exasperating after about 2 months and at least 2-3 letters from IRS, which we answer and the matter eventually closed. Of course, we as TPA, do not get paid for this as the client thinks we did something wrong. I was told by an IRS individual, in such a case they will only recognize that we file either as a "merger" of the two plans OR a "termination" of the existing plan and the start up of the "new" plan they call it. I filed for an extension, which is now due January 3rd. Does this explain a bit better?

Confused...senior moment? Sponsor of a plan has had 401(k) under existing company for many years. Sells assets of company, not the company, the employees stay with original company and receive the W-2 under the name of the newly formed company. Buyer keeps company name, keeps employer ID number; my client changed the name of his company and has a new EIN, keeps the employees and the plan remains intact, no distributions. I have been told by IRS (after being on hold for over an hour), that IRS agents have been advised to treat this in only one of two ways, neither of which makes any sense in this instance: 1. merge the plans or 2. terminate the existing plan and the new sponsor has to set up a new plan and file as an initial return. This totally makes no sense, as the assets are not being merged, they are with, let's say Hancock. Hancock just changed the sponsor to the new name and the contracts under the plan with the name change. The plan is not being terminated, the sponsorship has been terminated. In the past, we have entered the name of the new sponsor in Box 1 and noted the change since the last 5500-SF had been filed in Box 4. Doing so has been a disaster in previous years. This has led to IRS Letters, Notices and Invoices ad infinitem asking for the 5500s for the old sponsor, and the client has really gotten angry and of course, blames the TPA. Client receives letter from IRS, sends to accountant as client does not know what to do, accountant sends back to client at least one month later, after the response due date, and TPA, with POA of course answers. Wouldn't it spare the client, TPA and accountant a lot of time and trouble if we mark the existing plan as terminated, do a final return; and an initial return under the name of the new sponsor and show either distributions or trustee-to-trustee transfer, as the Trustee has not changed. But then, wouldn't IRS be on the lookout for 1099Rs?

And.... the lucky number is 6. Agree.

Are you speaking of deduction or minimum funding? Minimum funding is not covered by IRS; you still only have 8.5 months after the end of the plan year to meet minimum funding. Most accountants do not understand the difference.

I think the reason is that these notices are spit out by computer that has not been programmed to separate notices by state?

I don't see a problem, in fact I have a few plans that have deleted the loan provision going forward but grandfathered the ones in existence. I don't believe loans are a BRF provision that can't be cut back. Matter of fact, I advise my new clients not to have a loan provision in the plan. As well as being an "administrative burden", participants do not follow the amortization schedule, have late payments, some have stopped repaying all together. Then they complain about receiving a 1099.

Absolutely, I tell my clients all the time, come to me first, I will field your questions. Thanks for the reassurance. After a while, one starts to question his own answers.

Son is 100% owner of corp, father over 70 ½ has been taking RMDs since 70 ½. Father owner by attribution, new broker advising him the father does not need to take RMD because he is not an owner, and he is still working. I think it would have been in best interests of client for broker to keep his mouth shut before volunteering info to client w/o checking with TPA first?

Thanks to all for the concise clarification.

Thanks, maybe I'm having a senior moment, but are you saying that if the participant is not deferring, the 3% is treated as a "non-safe harbor", meaning top heavy only and thus has nothing to do with the 100% unless the top heavy vesting schedule was 100%?

The top heavy vesting schedule same as non-top heavy vesting schedule, 2/20. In the case of the participant who deferred, she received a 4% of W-2 match and a 5% profit sharing contribution; and the profit sharing contribution is subject to the 2/20 vesting. The balance was forfeited. In the case of the person that did not defer and received the 5% contribution, she left after 1 year and the whole 5% is forfeitable?

My question is - and I am just checking the insurance company calculation - payments stopped 4/1/20 and resumed 9/17/21. Does the reamortization start with the April 1, 2021 payment and run for 6 years; or start 1/1/21?

OK, I think I did not post correctly. Plan is top heavy. Client maintains a SHM 401(k) with optional PS, which happens to be a new comp. formula, let's say Group 1 - owners, Group 2 - all other eligible employees. Group 1 - max , Group 2, whatever needs to pass 40(a)(4), let's say 5% All employees meet age/service. One participant defers, gets 4% of W-2 match plus allocation of 5% profit sharing. Another participant does NOT defer, obviously no match. She gets the 5% profit sharing. My question is - participant must receive the 3% top heavy, 100% vested. Since the PS contribution is 5%, is the additional 2% subject to vesting schedule, let's say 2/20. Not sure, all my SHM are stand-alone up to this point.

All of our 401K SH plans are the safe harbor non-elective, so this situation has not come up yet. Our client maintains a 401K with safe harbor match, 100% up to 4% of compensation. To date, all eligible have deferred, for next year there will be one participant who will not be deferring. Q. If a participant does not defer, obviously they need to get the 3% non-elective if he meets age/svc; if the client makes a discretionary PS contribution greater than 3% (minimum is 5% to pass gateway for the new comparability profit sharing portion), is the full 5% contribution considered to ALL be profit sharing subject to vesting schedule, or does 3% need to be at 100% and the remaining 2% subject to the vesting schedule?

Oy vay, I've read and studied the whole string several times and still confused. The conversation above mentions that after the suspension, the first payment to begin one year after the date of last payment, which would be April, 2021; the another portion of the string mentions repayments need to be restarted 1/1/2021. The following has definitely resulted in a deemed distribution, but here is the scenario: Participant suspends loan April 1, 2020, at that time outstanding balance was $x. Despite more than many attempts to get her to start repaying, the client for whatever reason, never got around to entering into payroll. The payroll company also mentioned several times. Client just informed us that loan repayments recommenced September 1 of this year for the same repayment amount as pre-COVID suspension. At this point, a reamortization of the reamortization as well as a recalculation of the amount of deemed distribution is necessary, but we are at a loss as to the start date - 1/1/2021 or 4/1/2021 to run the additional 12 months. A good reason not to have a loan provision in a plan.

Maybe I'm losing my marbles, but wouldn't the outstanding balance of a loan as of the date the participant stopped payments be reamortized with an additional one year? So a 5 year would now be a 6 year loan? That's what the recordkeeper for a plan is telling the client.

If you need samples, let me know.

Some of our clients have received late payment invoices, as well.