thepensionmaven

Clarification, PC with two employees. I don't believe plan has to be funded by 9/30, only signed document.

I'm getting conflicting opinions on this issue. The plan document needs to be signed by 9/30/23, but does an account need to be established by 9/30/23? My client, owner only, wants to do a safe harbor 401(k) for 2023. American Funds is telling him they need at least 30 days to set up an account on their system, and they are telling him it is too late to do a safe harbor 401(k) as they can't set the plan up by 9/30. I believe he would be better served to go with a 401(k)/profit sharing plan, effective 1/1/23, sign the document 9/30/2023, with deferrals to start 10/1/23 and remitted at least on a monthly basis?

The situation has come up before. 5500-SF filed for a sole prop 401K with employees for 2021, extension 10/15. Not knowing at that time, client incorporated in 2021 . 5500 for 2021 filed under sole prop EIN. Form 5558 filed for successor for 2022. Attempting to correct ASAP in order to avoid any IRS love letters, we could amend 2021 under new corp EIN and complete box 4 with info from predecessor plan and move forward to 2022, BUT won’t DOL/IRS look for an extension on the successor sponsor with successor EIN, which had not been file as we were not advised of the error previously??

That's what I thought; I think the accountant needs a little educating! TX

Very informative thread. My client elected S Corp status for 2023, previously an LLC, taxed as C corp, and the TPA told the client she could contribute her deferral plus cstch up by the due date of the LLC tax return. Obviously, the TPA was not correct. For 2022, the client adopted S Corp status. I may be incorrect here, but would not the deferral plus catch up have had to have been made by 12/31/22, as the shareholder of an S Corp is not a sole prop. The fact that the accountant did not code box 12 with a code D tells all.

Geeze, I remember those "good old days", less regulation, etc. I have seen many plan documents with prime +1 lately.

Last few years, was thinking of reallocation, and tell Hancock to reallocate what had already been contributed. At least deduction OK an no one over 415 limit.

We recently took over a safe harbor 401(k)/profit sharing plan, new comparability, grp 1 officers and owners grp 2 all other eligible employees. There are 4 participants: owner (100%), spouse, adult son over 21 and one common law employee. The plan had passed 401(4) only because the son had not been treated as an HCE. Under IRC Section 318, am I off base here, or is not the adult son an HCE as well?

I was saying that the fact an SB was not attached (not even questioning at this pint, whether one was prepared or not), why would an "amended return" be necessary, when the SB is not required to be attached initially?

Pardon my asking, but why is this considered a late return if the SB is not required to be filed; with the suggestion here to file an amended return?

We did a proposal for a CB plan for a sole prop, effective for 2015. Since few if any brokers understand cash balance plans, I insisted on going on the call. Broker refused to have us as TPA attend initial sales call sold plan to a physician 2 NHCEs who have been terminated for years and are fully vested. Physician was told by broker that he could contribute $250k per year. Small wonder why he did not want me on the sales call. The contribution was close to the max in the range, but still short of the max PVAB for plan years prior to 2021. For 2021, plan definitely overfunded. Client on extension for 2022, I quote a $0 as plan definitely overfunded, with a -11% ROR. Client over 70, not sure, but can he rollover a portion of the overfunded to an IRA and possibly make a contribution? Would just kick the can, I realize. Alternatively, freeze the plan and establish a PSP for 2022 as long as the contribution made and the plan dated prior to the due-date of the extension? Of course another alternative is to drop the client entirely, as a waste of my time.

Curious to see how this ends up. We have done this many times, and no problems. My understanding is that you can not use DFVC if you get a DOL letter. File an amended return and check the box DFVC, and pay the $750 as this is much more reasonable than $250 per day. After having many bad experiences as well as time wasted answering numerous IRS letters for the same client (letter, response, letter saying they never received a response, etc, etc), $750 is worth not having to deal with this.

This is nothing new. There have been several 5500s in the past that have asked for the IRS Approval Letter.

Looking for a citation for the following: For a new entrant into the plan who receives the safe harbor contribution for only part of the year, i.e. while a participant, the top heavy contribution should be for the entire year and thus, such a participant would require an additional top heavy contribution. Participant entered in July, but received a safe harbor from date of participation.

I would go with the ERISA Outline book, hands down. The 401(k) answer book, while OK in my opinion is entirely too costly; for around the same price is the EOB online with much more succinct questions, answers, as well as cites, if you want more. Not everyone will agree, but these are my $.03

Tax return was done on extension. Client informed me the tax return was not filed. Ask two different people, get two different answers. Sorry to bother

Email me - steve@thepensionmaven.com I have several I have collected over the years. I'm looking for one for ASGs and just don't have the time to make one.

We have a client who is on extension till 9/15. Accountant filed the tax return recently showing $0 contribution although we advised the client he could have established a new plan, as long as it was set up and funded by the due-date of the corporate tax return. Wouldn't IRS be suspicious of an amended return claiming a deduction after the initial tax return was filed with $0 deduction?

Lastly, all current accounts in 3 plans are classified as "rollovers/transfers from prior plan"; so this was actually done correctly. The LP was purchased by Dentist #1 as part of his rollover from the prior plan. The minimum investment in the LP is $500,000. Since he is the only participant, and since no other participant has more than $150,000 in transfers/rollover from prior plan, none of the other participants would have enough money to invest in this asset. Based on this information, and this is a stretch, an investment by one of the dentist/trustees in the LP would not be a BRF. This investment is solely his, owned by his plan. Is this off-base?

The original plan was terminated and each participant rolled over his share of the plan into the new plans

The original plan was terminated.

All three plans, at the moment, hold only the rollovers from the original plan. Contributions for 2022 will be made to these accounts when the account gives me the W-2s and added to the participant accounts as "employer PS"; rollovers from prior plan are noted as "participant rollover".

Three separate plans, not a spin off. Attorney wanted it that way. In any event, who would be "reamed" (pardon my frankness), the trustee who did this within his own plan or the plan sponsor, who sponsors all 3 plans. The original opinion was the plan and trustee of his plan, not including the other two plans.

First off, an attorney was the one who advised three separate plans, basically so they dentist whose son is an "investment guru" can do his own thing with his own plan and not jeopardize the other plans. Originally one plan with pooled accounts, now segregated out into individual accounts, employees' portion into one plan, each dentists into their own. These are rollover contributions The 2022 contribution has not yet been made; the only money in these plans is the rollover money from the previous plan. I was reading a thread that mentioned there would not be any BRF issues as far as rollovers. The funds are participant directed with about 10-15 funds Nationwide has available. As far as what the plan says regarding investments, Investments L4. Participant Direction Participants may direct the investment of their following Accounts (select one): a. [ ] None b. [X ] All Accounts When you say "Trustee Directed", if the individual participant has discretion within a certain family of funds, how is that "trustee directed" Or, as an example, are you saying that in a plan with 30 participants, in order for a plan not to be "trustee directed" each each participant could theoretically go to a different investment house and pick his own investments? I can just imagine the nightmare here, with participants that do not know how to invest, just doesn't make sense. The dentist with the plan investments he gave his son to invest, is obviously the problem, but that should not effect the other two plans which are invested properly. As far as CuseFan comment, we/re not exactly speaking of investment savvy employee participants, I would seriously doubt they have even heard of a limited partnership. Back in the 80s, we were told to stay away from limited partnerships as a bad investment. One of the trustees is making that choice with his own money, the minimum investment I understand is $500,000. He's most probably going to loe it all nyway, so how prudent is the investment??

Dentist #1, the one I'm questioning, I got the name changed to the correct plan. He took 50% of individual account and gave it to his son to invest in an LP, which of course is a PT. We told him, he does not care. The balance of his account is an individual account with Nationwide. Dentist #2, account with all in an individual account at Nationwide Plan #2 invested all participants with Nationwide and a broker sat with them to determine risk tolerance.