thepensionmaven

Agree with Dave and Lou S.

"and paid for from the participant's money" - the insurance premium is paid by the company as part of the total contribution for the guy. Individual accounts, and not discussed yet, client just inquiring on the options and ramifications.

Pardon my igmorance, I have not had this issue come up in quite awhile. One of our clients maintains a profit sharing plan, one individual has a life insurance policy owned by the plan and he has terminated employment. As far as I can remember, the choices are either to surrender the policy for its cash value and the deposit the cash value into the participants' individual account - just a change in investments OR participant buys the policy for the cash value from personal funds Questions - when he purchases the policy, where does that money go? Part of the general assets of the plan, or into the individual participant's account? If the money stays in the plan, is it allocable to the remaining participants?

My clients are located in the areas covered for Hurricane Ida relief. I have not as yet heard of any specific wording to add to Box C - Special Extension - Enter Description I was thinking of "Section 8 - RevProc 2018-58" Any other suggestions? Without any specific wording from IRS, I'm afraid every client will receive an IRS love letter; of course we know it's the TPAs fault.

We file all our calendar year extension for 2020 in May, equesting extension to 10/15/21. More than one client recently faxed an IRS extension approval dated 8/30/21 aporoving the extension to 8/15/21, which assumes a PYE 5/31/20, which obviously is an incorrect extension for our plan. Since the IRS wait time averages 30-60 minutes, I faxed a letter to Ogden, attaching our extension to 10/15 as well as their incorrect extension to 8/16/21 and a note to please change their records. Anyone else run into this??

What I meant was... how would we in fact know that the contribution for the self employed was an employer contriubtion or an employee contribution, let's say, for purposes of 401(a)(4) testing on a new comp PSP/401K, with a sole prop and an employee?

OK, so the suggestion is...... ? Wait for an official IRS Notice concerning the filing? We already wrote in and explained the circumstances.

Since a sole proprietor reports all his contributions(including any elective, if any), what triggers reporting his elective (if any) on 5500 form

Our client, a sole proprietor, took on a partner and formed an LLC in late 2017. We did a resolution of the LLC changing the sponsorship of the plan to the LLC from the SP, as a sole proprietorship never dissolves. We faxed a letter to Ogden informing them of the change. A Form 5500-SF was filed for 2017 under the SP EIN; we filed a 2018 5500-SF under the LLC and used the LLC EIN, noting the change in sponsorship in item 4. Our client receives a letter from the TE Compliance Unit inquiring as to why the 2018 Form 5500-SF for the sole proprietorship had not filed a 5500-SF. The Notice mentioned that this was not an audit, just a compliance check. I spoke at length with the IRS person that wrote the letter and explained the circumstances (without a POA at that!)- she said she would note the file and that we call main IRS number; and they would be able to make the change, but we must make one of the two selections: a. either file the two plans as a merger, which makes no sense at all; or b. file the sole proprietor plan as a "final return" and $0 at the end of 2017; show the LLC plan as a "new plan and show the money transferred from the sole prop plan in 2018. Neither of these choices really make any sense, but the woman at the IRS when I did call only mentioned that "this is the way they told us to handle". Usually when we receive an IRS Letter or Notice, we attach an explanation and receive about 4-5 love letters before the matter is resolved.. I am inclined to go with option b., if, as they say "this is the only way to handle."

In this instance, without yet filing under DFVC, your client is likely to receive a love letter from IRS; possibly an invoice as well. I would be inclined to chalk up the $750 as and file as an "amended return" and check the box DFVC ASAP.

What do we consider to be the difference between a recordkeeper and a TPA???

Similar situation, but now in 2020. Client sponsors both a csh balance DB and a PSP (no elective deferrals). Top heavy being met by 5% contribution in the PSP. As usual, the owners and family want more of a contribution geared toward themselves. Without numbers crunching, what follows does not seem feasible or practical. However, many of the participants are older than the principals. As we all know, the employer has until the due-date of their company tax return to adopt a new plan for the prior year. Being August already, I do not believe the existing the PSP can add a 401(k) provision, with the notice reqts, etc. Of course, the family will be the only 401(k) deferrers. As that is the case, the broker mentioned adding a new plan for 2020 to which, of course only the family members will defer. Again, any notice requirement would be blown. They could, I believe, establish a safe harbor 401(k) for 2020; give notices immediately as long as done by 9/30 and then use the full years' W-2, which we are doing anyway. BUT, now we have 3 plans (albeit 3 admin fees plus new doc plus amending the other 2 docs), which is a nice fee, but a waste of time, since this scenario will not work. I do not believe, but could of course be incorrect, the safe harbor would still be met, only now by the 3% non-elective plus a 2% PS contribution. This is the same as is provided currently except the 3% now would need to be 100% vested. so why bother. Additionally, we have 401(a)(4) and 401(a)(26), so nothing has changed - except with the addition of the 401(k), each component needs to be tested separately, the DB separately tested, then combined testing. I don't see how this can be anything but an exercise in futility or am I off base?

Unbelievable, but accountant asking for our opinion here. Sole proprietor sponsors a DB plan, compensation obviously Schedule C. Plan is valued beginning of year, ie 1/1/2020 with Schedule C based on prior year. The client has an auto withdrawal from his personal account deposited to the plan during the year. He had $0 Schedule C for 2020, but since valuation is beginning of year and using prior year Schedule C, we backed into the contribution and showed on Schedule SB as well as form 5500-EZ. He filed his 1040 in March, no Schedule C; but did receive compensation, included in income for 2020, which the accountant showed on the 1040 and claimed a deduction for the contribution He gets a tax bill from the IRS for $29,000; they claim since he had no Schedule C, he is not entitled to a deduction. Since he made the contribution, and is shown on the brokerage statements for each month, in order to reconcile included the contribution, since shown on the statements, and was included on Schedule SB and the 5500s. Since minimum funding and deduction are separate matters, we are thinking of withdrawing just the amount of taxes owed, show as an in-service distribution (client over age 62), give a 1099-R, deposit into his business account; pay the fine; but more importantly, stop the auto withdrawals and make absolutely sure the client that is paying him gives him a Schedule C in the future. Thoughts. besides advising to find a new accountant?

Granted, should know by now, but has been awhile. Received a call from an accountant on Friday, who files 5500s for his clients, asking whether 5500s due on the 31st if 31st is a weekend. Possibly, he was looking at today as the due date as 1040 is due the following business day, isn 't this the case for any IRS tax return. Not 100% certain, I advised file 5558 on the 31st to be safe. You know what "they" say about "assuming", though!

Thank you.

Why file a form if you do not need to???

Good question, the whole thing does not make sense, I'm sure the life insurance agent mentioned his client could put life insurance in the plan and deduct the premium.From what you are saying, the insured would be responsible to pay the interest and premium as if a personal policy. Since that portion of the policy transferred into the plan has no cash value, am I to assume it never will, or if so, when would we start counting any cash value buildup? This is CRAZY, but it's what the client wants to do.

We have a similar situation. Broker is in the process of setting up a new defined benefit plan for a client. The client has an insurance policy he wants to split the policy, 1/2 will be a transfer into the plan (transfer ownership from himself to the XYZ Pension Plan). The other half will remain individual ownership. The actuary, who has now retired, had recommended this and told the client to strip out the portion of the cash value of the face amount to be transferred, ie take a policy loan for the full cash value and then change the ownership and beneficiary to the plan. Years ago, (prior to PPA) when I worked at an insurance company, we saw insurance policies being transferred OUT of a plan as the participant had terminated employment or the plan terminated and the individuals needed to keep the policy; but never seen an instance where a personally owned policy was being transferred INTO a qualified plan. I'm not questioning the wisdom (or lack thereof) of this, but do not recall exactly how this would be accomplished: Is this correct: Insured takes policy loan equal to the cash value of the policy, changes owner and beneficiary to the XYZ Pension Plan, receives check for the cash value. What does he do with the check? Deposit into the plan? He does have the option of not repaying the loan, but not if we consider the loan a plan asset. I can't see him transferring the cash value into the plan, as that would defeat the whole purpose and as a plan asset, would reduce the investment portion of the plan contribution. I'm bit hazy on how this transaction would be done and would appreciate any assistance.

Does anyone have a copy of RevProc 2021-30 with page numbers in the Table of Contents?

Figures.

My client is self employed, sponsors a DB plan, no employees. For 2020, he is not showing any Schedule C income; he has arranged to deposit $6000 per month into the plan brokerage account. The accountant at least knew he could not deduct as a pension expense and "buried" the amount. Would this amount be shown as contribution on SB?

Anyone remember the song from the '50s "Heartaches"? "Well, here we go again" Concerning the PPA restatements, a question was asked about fees, specifically "what is the range TPAs are charging for the documents. EBRI published their survey on fees charged for the PPA restatments, broken down by prototype, volume submitter and IDP; with highs and lows for each. I seem to recall the individual who posted the question (and it could have been me), was totally blasted for having the audacity to ask such a question. Comments like this is a conflict of interest to discuss fees, this is unprofessional, this is against our code of conduct, and something about a servicing agreement. All we are looking for is a range. Something like "we have seen" a range of X-Y. How is that unprofessional, when we are retirement plan professionals asking one another? How is this counter to the Code of Conduct when we are not only speaking among ourselves and not mentioning a particular client? Certainly we are not providing documents to our clients out of the goodness of our hearts, not any of us a re charitable institutions; and I'm sure none of us want to charge a fee so high that a client or prospect will walk away. Just a range - what's the harm?

We know that no signature required on Form 5558, but we have always dated the form. I seem to remember the form has to be dated, but my software vendor says no. Curious, I've got about 75 calendar year extensions, I'm doing currently, and if they don't need to be dated, great.

I am curious, as well. He's 68 years old.

Benefits are fully accrued, this is a cash balance plan, so no average salary. Are you saying just freeze the plan? The principal is going to retire shortly. I have mentioned the 50% excise tax many times, both to client as well as accountant. Seems like all they are thinking of is deduction, deduction, deduction; and the broker? Well, you know - commission, commission, commission. Someone had suggested starting a profit sharing and/or 401(k).