thepensionmaven

I'm doing the plan document for another TPA, 401(k)/PSP with effective date of 1/1/2023 except there will be no deferrals for 2023, deferrals to start 1/1/24 and the other TPA says to me- leave the effective date 1/1/23, we won't use the 401(k) portion until 2024. I am more inclined to do a 401(k)/PSP effective 1/1/23 for the profit sharing with a "special effective date of 1/1/24 for deferrals, which I think makes more sense. Owner only plan, no employees. Other thoughts?

I have not run across an auditor asking those questions. I don't know if any would go quite this far, either.

Looking further into this, as long as a deferral election is made prior to 12/31/2023, the sole proprietor and/or partner has until tax filing due date plus extension to make elective contribution.

This has probably been asked previously, but I can not locate. This concerns a sole proprietor that maintains a 401(k)/PSP for the benefit of his company. Of the net income derived from the sole proprietorship, stepping aside the calculation of any profit sharing for the non-owners, how can one determine what the owner's deferrals are (if there are any), vs if the contribution is to be considered an employer contribution (profit sharing)? Why am I thinking that unless the sole proprietor makes an election, prior to 12/31, the contribution must be considered an employer contribution?? Any other references or thoughts on this subject?

I was recently informed my client "switched to a PEO in December." I recall this is something like outsourcing. I think the PEO is the "employer" but wouldn't I use the client's EIN? I would assume this is just another way AP or PayChex can "offer" their 401(k) administration to the client.

The only problem is that these are corporate resolutions and each is sponsored by another document vendor. So, you can't pick and choose which one you want to use, as each vendor only uses their particular resolution.

I have seen two different corporate resolutions, each from different document providers - one says "participants eligible for employer safe harbor, match, profit sharing, etc. unless the Sponsor chooses not to provide"; the other document states the exact opposite- "participants are not eligible, the Sponsor must elect to make them eligible." Which is the correct interpretation? I'd hate to switch vendors at this point!

Regarding the three (or two) years period, does this mean any employee that worked PT, aggregate for 2021,2022 and 2023, (now 2022 and 2023) OR anyone hired in either 2021, 2022 or 2023) and worked PT in any of these years, must be given the opportunity to defer? Semantics or stupidity on my part? How can an employee be considered LT with only 2-3 years of service?

Plan A is a 401(k) with a SHNE contribution. Participant A terminated in 2020 and returned to work for the same employer 12/3/2023 and client wants a cite that the SHNE must be made for this individual, who is now a participant as of his date of hire.

From above "That being said, suppose an eligible PT (500-100 hours in the last three years) employee does not elect to contribute, or completes an election for with 0% or $0 deferral. Wouldn't that suffice, assuming the employee had 30 days notice prior to 1/1/24?" Then he/she would not be in the plan, with the 1,000 rule still in effect for the safe harbor/profit sharing potions. OR am I way off base here?

We set up a DB plan for a sole proprietor who is on extension for 2023. Not surprisingly, the accountant is asking whether his client can contribute property instead of cash to fund the pension obligation. I have not run across this question in years, I doubt this can be done without raising a red flag to IRS and am looking for a cite.

I can't think of any employer wanting to offer part-time, barely subsisting employees the "opportunity" to reduce a meager salary and contribute to the company 401(k). That being said, suppose an eligible PT (500-100 hours in the last three years) employee does not elect to contribute, or completes an election for with 0% or $0 deferral. Wouldn't that suffice, assuming the employee had 30 days notice prior to 1/1/24? OR, effective 1/1/24, the Plan Sponsor elects to use Elapsed Time with no hours. One year eligibility, enter the plan on the anniversary date coincident with or next following completion of the 12 months; contribution would be based on the one year of service (12 months) during the plan year (?) Vesting would be based on year of service with no hours. But, wouldn't such an amendment to the plan need to have been signed by 1/1/24 and all (not just LTPT) be notified at least 15 days in advance of 1/1/24. The whole concept of LTPT is mind boggling.

I assume I did not ask correctly. OK, Roth contributions go into a Roth 401(k) account, obviously. As far a the employer safe harbor match, I have not yet seen any plan that specifies employer safe harbor match go into traditional match account or Roth match account. In fact, there is no plan document I have seen (yet) that gives the participant the option of which account, Roth or traditional and there are no election forms for such. ADP payroll is telling my client that since the employer match is going into the employees' Roth 401(k) account, the employer match is taxable, for the current year? How can that be when the match would not be known if the match is made after the W-2s are available?

I am seeing conflicting answers to this one. A client has established a 401k/PSP for 2024, plan allows Roth deferrals and a Safe Harbor Match. The funding institution has insisted on two accounts for each participant making both traditional as well as Roth contributions. Can the employer SHM be made to each account based on the ratio of contribution to each traditional or Roth - total not to exceed the matching formula in the plan? Getting conflicting answers

Question has arisen, would recommend amending plans to allow 1 year of service and cut out the 1,000 hour requirement.

I just can not fathom a PT worker wanting to contribute to an employer 401(k)- I can't be the only one!! No one has said anything about a LTPT employee doing an election form with either $0 or 0% of pay, which would appear to solve the problem. I would think clients will scream like stuffed pigs if they have to bring in LTPT employees in any event. At least some of mine have. If I change eligibility to 1 YOS and drop the hours requirement, I don't think you can do that for only deferrals as well I don't think software can handle it; and keep the customary age 21/1,000 hours within a 12 month period for the SH and profit sharing contributions, if any are to be made. I would think the other options would either be elapsed time (but this would apply to FT as well) or change eligibility to age 21/500 hours, but that again would apply to all eligible. Then again, and pardon my ignorance, the 500 hours is for entry or entry and contribution, or both? Too many changes to digest - starting to question whether this is worth it.

What is a good source to read up on the mechanics? I have a client that is making voluntary contributions as well as deferrals plus SHNE, all within 415 limits. Broker sold the client on the idea of converting voluntary to Roth and has done nothing. Voluntary just sitting in participant's account. Sounds like broker doesn't know what he's doing!

I've not heard this term. What's the difference, if any, between this "mega" 401(k) and a 401(k) that allows for both Roth deferrals and employee voluntary contributions?

What was his vested accrued benefit at 12/31/22? In the future, why not design a plan on the graded 100% upon completion of 3 years of service, and service is determined from the effective date of the plan.

And who is going to direct the participant accounts, certainly not the trustee. The broker is meeting with each participant to determine their risk tolerance; and if they can't decide the plan will be amended for a QDIA. What's the problem here?

Plan adoption agreement calls for individual accounts and the wording is "the participants MAY direct their own investments. All are individual accounts, I mentioned to client and investment manager (who first brought this up) that each participant should br directing their own investments. Who knows what has gone in the past, perhaps they elected default investments. Since the accounts will remain as is, where they are, I do not believe any blackout is necessary.

I recently took over a plan for 2023. Each participant has his own account, which the trustee directs (?) with MS I convinced him the participants should be directing their own investments, the accounts will remain at MS. Is there a blackout period, or will a notice to each participant that, effective x date, they can have the option to direct the account.

We filed for EFAST credentials back in 2010 for a plan with two Trustees and several employees, credentials under the name of one of the Trustees, who has retired, and since then remain Trustee plus one new partner are the trustees. There are now 3 plans sponsored by the Employer, one for each Trustee, one for the Employees. I believe the credentials go by the Employer/Plan Sponsor. If so, I assume we do not need to refile for EFAST credentials.

Similar, Insurance company refunded contribution for the two principal of an LLC taxed as a partnership, which was on extension. Two deferrals made in one year, one for 2021, the other for 2022. Is it not the case that as long as a deferral election was signed prior to 12/31, the partners have until the due date of the business tax return to make their contribution, this includes deferrals made by the partners? Of course they could claim this contribution was coded incorrectly and should have been coded as a prior year contribution; or else coded as a profit sharing receivable. Or, are we off base here???

OK, that sounds good, but what if the contribution was wired, let's say a contribution for a DB, 9/15, minimum funding applies. The contribution not credited to the individual's account until after 9/15. Is the client stuck with a minimum funding penalty?