thepensionmaven

After reading this, I assume my unanswered question posted yesterday has been answered. There would be NO benefit to merging a client's 403(b) with their profit sharing plan. The client must monitor the deferrals to ensure made to the 403(b) and not the profit sharing plan.

I have not dealt with 403(b) plans for at least 30 years. We set up a corporate profit sharing plan for an employer who is a 501(c)(3) back in 2000; were told by the insurance agent, now known as a "financial advisor", at the time the client had an old 403(b) plan (an old Equitable contract that is no longer marketed, that they terminated and were going to roll over into this new profit sharing plan. The client has been making a 3% contribution each year to the profit sharing plan. The 401(b) was employee only, so no 5500s. This was plan #001, which we were told was terminated. I pulled the trust report from Equitable for 2019 for the profit sharing plan, and noticed employee contributions for the first time, called the client who told me the old 403(b) is still active and those contributions should have been made to the old 403(b) annuity accounts. I was about to suggest to the client that the plans be merged. Since no 5500s were done or needed as there were no employer contributions, (IRS would have no record) a "silent" termination - ie rollover to plan #002 and show as a transfer in on From 5500-SF. In so doing, however, I would need amend the profit sharing to a 401(k) going forward, but the plan would need to be ADP tested or the employer 3% profit sharing contribution would need be the 3% SHNE with 100% vesting. Currently the profit sharing is 100% after 2 years. Any thoughts going forward???

Broker came to me with a question. I have not been involved with the SIMPLE; years ago, we heard the expression "SIMPLE plans for simple minds." His client has a SIMPLE IRA with the 3% match. Apparently the owner has already contributed more than the max deferral. Can a SHM be set up to fund the difference for 2020 so the owner does not have to take any money back; or would the excess need be returned?

Sounds good to me, thanks.

Are the COVID loan and distribution provisions total for the individual, or per plan? Client has a defined benefit plan and a SEP. Accountant wants him to take $100,000 from each. I believe there is only one $100K allowed?

My client maintains a cash balance and PSP. Plans were top heavy for 2018, so the TH contribution has to be made. Plan calls for both HCE and NHCE to get TH, which is provided in the PS. DB has been funded for 2019 and has terminated 2/28/2020. Can the owners waive the SH contribution to the PSP if money is an issue?

Company that sponsors the plan is an LLC, taxed as a partnership. The owners get W-2s in addition to K-1; they own two other companies where they just get W-2s. Accountant now asking why the K-1 income was not included as compensation for the contribution calculation and is trying to tell me that guaranteed payments should be considered as "salary".

Three companies are owned by husband and wife, two s corps and an LLC. One plan. The owners get a W-2 in each company, also K-1s in the third company. Irregardless of which entity sponsors the plan, K-1 income can not be used for pension purposes??

Plan allows for two loans at a time. Participant has one loan outstanding and qualifies under COVID to both suspend on the existing as well as take out a new loan, the total of the two not to exceed $100K. Is the $100K offset by the outstanding balance of the existing loan?

This was my way of thinking, as well. As you know, clients have and will continue to complain if not already that they still need contribute SHNE for NHCEs. Thanks all, I thought zi may have missed something here.

We know this applies to SHNE for HCEs, I do not see any mention of suspension for NHCEs, such that ADP/ACP need be met the customary way and HCEs need go through the reductions anyway, through levelling, returning , etc and the 3% top heavy need be for the full plan year. This may seem a dumb question, but how does this help the sponsor that can't afford the SHNE for NHCEs? Especially for 2019- many sponsors wait until end of year or accrue the contribution.

Thanks all.

We're looking to takeover a 401(k), currently the employer is in a MEP with Tri-Net; and set up a cash balance defined benefit for the same employer. Does the employer "terminate" participation in the MEP? Would Tri-Net consider this a plan termination (should probably ask them) and the prospect install a 401(k) SHNE as well as the cash balance plan for 2020 minus any deferrals made in 2020 and using full year's W-2 with the Employer as the Sponsor. Apparently this is an employee-only plan. Any help is appreciated.

That is the impression I got, never hurts to get second opinion.

Unclear as to whether the Suspended Loan Repayment Provision would apply to a new loan taken out currently.

For any terminated participants who have not been paid out by the termination date and have not incurred five consecutive breaks in service, we have always vested 100%. Of course, the client doesn't like it!

That's what I thought, thanks for the confirmation.

We have a situation where the client has an overfunded DB which is just sitting in an investment account; client wants to set up a profit sharing plan, with a 25%, no 401K. Client is self employed with employees, not a PBGC. Is this doable? Usually, we would set up a combination DB and a 6% profit sharing plan. Not sure how this would work with an overfunded plan when no contributions can be made.

Thanks... I had been looking for something in the compliance questions.

Senior moment - where on Form 5500-SF, if at all, would you report a defaulted loan?

Can I ask which one.

Mike, here's the link. https://www.bpas.com/blog/cares-act-2020-paycheck-protection-loans-funding-defined-benefit-pension-plans-sponsored-small-businesses/

My client (P.C.) was reading an article that mentions utilizing the PPP loan to fund defined benefit pension contribution "CARES Act 2020: Paycheck Protection Loans as Funding for Defined Benefit Pension Plans Sponsored by Small Businesses" I don't see anything either in CARES Act or PPP Information Sheet that would lead someone to come to this conclusion

Agree with Luke Bailey. We had a client a few years ago that received an IRS Notice and a bill for $15,000 because he forgot to file. We filed for him under DFVC and client paid the fee. We presented to IRS and the $15,000 came right off. As long as you file prior to receiving any correspondence from DOL, you're OK.

I had a similar situation whereby a client mentioned he switched accountants and the previous accountant was going charging him a fee to release any paperwork and the new accountant cited Circular 230. I assume that was just to scare the guy off.