TPApril

Kristine - so in reference to the initial question, you are saying a plan should never switch from SF to EZ?

Plan year starts with 2 participants. During plan year, Participant #2, who is not a spouse and is already terminated, takes a full distribution. So plan year ends with 1 participant. So, is this the year that the plan switches to 5500EZ? Or wait until the year it starts with 1 Participant? (technically speaking, plan will file SF as one-person plan)

When changing advisors for a 401(k) plan, is it common to have a blackout period, even if the funds are staying at the same recordkeeper?

One-person plan, invested in illiquid assets. There is no cash (annual contribution is paid out annually as RMD). Some kind of payments were due on the real estate holdings (taxes maybe) so Plan Sponsor put money into plan, separate from annual contribution, and then paid the expenses out of the plan. Owner has informed us of this and that she treats the money as a loan to the plan, although no loan documents were ever set up and no interest payments back to owner ever made. Contemplating what to do now.

update - Plan Sponsor has found receipt of mailing in this paper 5500ez on time. Address confirmed correct. So wonder why they were penalized for being late and wondering if anyone else has encountered this?

Thank you david & Bird. Interestingly, the owner is asking (legally) for a residential 30-year loan from the plan. Such rates are lower than short term personal loans outside of the plan. In this case, I'm wondering if going with Prime might be more acceptable than otherwise.

Form 5500-EZ wants to continue mailing in paper forms. Owner says he mailed it in on 7/31/18, it was not extended. He has received a $250 penalty letter for being late (10 days) and cannot find or remember if he mailed it certified. Question: He did extend his Federal taxes. Seeing as he cannot show evidence of mailing it in timely, can he amend as filing under extension to remove the tax penalty? Incidentally I find it odd that if he mailed it in 7/31 as said, that the IRS would mark it 10 days late.

One person plan, never hired anyone, no intention to hire anyone, so he is the only participant in his plan. He would like to take out his first loan. I recommended interest rate of prime as reasonable. He wants to know if he can take the loan with zero interest. Is that possible? If not, I've never used a rate below prime, is there something, ie prime-1?

Although it's 15 years since this thread was discussed, I have a related inquiry. Similar to above, there is a volume submitter PS plan with cross tested plan. This plan clearly allows for waiver of participation prior to eligibility. Although it seems obvious to me, just curious how this affects coverage and nondiscrimination testing. By waiving they do not receive the gateway minimum, but they are included in testing?

New partner to the above mentioned plan wants to start his own plan which will be tested in combination with all the other plans. The staff plan gets safe harbor, but none of the individual partners do although their plans mirror each other. Seeing as it is past 10/1 for a new calendar year plan, can the new partner still start up his plan for current plan year so as to defer 401(k) and receive profit sharing? Or should new partner limit current year to profit sharing and start 401(k) next plan year?

They have (less than enthusiastically) agreed to deposit the lost earnings and understand that this will show up on their 5500.

Mike - I am curious if those 3 cases you refer to in this thread from last year are one-person plans like the plan in question in this thread, and what the errors were in general? I've been presented the case of a one-person plan who was advised to open a solo 401(k) plan but alas she has employees she thought didn't count because they are employed for payroll & benefits through a peo. On first approach there are numerous correction issues to be resolved.

Doctor w/own practice (no control group or ASG issue) uses PEO for all employees. Doctor has own solo 401(k) Plan. Doctor has not adopted the multiple employer plan for the employees from the PEO working for him so it appears they are not covered under any plan. I'm thinking the ee's must be covered under Dr.'s plan, but not sure?

I dont find it unusual for surprises to pop up in how HR depts are running their plans. Things you think don't need to be said, are not so obvious to them. This particular case was bundled now unbundled. At the same time, I continue to find new circumstances that are unexpected yet acceptable, even after a number of years in the industry. These examples don't seem right to me but one never knows.

Under universal eligibility for 403(b) Plans, I understand all employees working at a rate of at least 20 hours per week are eligible to participate, immediately. Say an employee enters the plan due to hiring status as full time. Year later that employee goes part time. Can they be stopped from continuing to make contributions? I did not think so. Alternatively, say they start making contributions, then later in the year it is determined they will not hvae worked 1000 hours during the year, can the plan sponsor refund the contributions and deem them ineligible?

MarkS - that's very interesting. Prior to the audit, did you report the delinquent contributions on the 5500 and did the plan sponsor pay the lost earnings (& excise tax)?

To be specific, based on 7 day safe harbor, the deposits ranged from 2 to 16 business days late

Company was changing recordkeeper for 401k plan. They got locked out of outgoing custodian and new one could not set up in time, so they missed timely deposits for one month. After they were advised the late amount that would show up on their 5500 and the lost earnings deposit due (<$100), they have resisted and they believe due to intention, they are not at fault. Contemplating how to handle

Dealing with a similar situation right now, but not spanning 2 taxable plan years. Full account balance was rolled over to IRA, including the RMD payable. IRA is going to distribute to participant that RMD as an excess contribution. Plan is going to issue 2 1099Rs - 1 for RMD amount and 1 for eligible rollover amount When recipient receives 3 1099Rs, will it be clear that the amount is only taxable once?

ESOP Guy - yes I am, in this case for the one person company, which is a corporation. Payroll is processed monthly at the end of the month. By comparison, in another situation, how about for a large 401(k) plan where the payroll period ends every 15th and last day of month, and they cut they payroll checks on the 5th and 20th following the end of the period - I have seen HR teams that are so anxious about depositing late that they deposit the day they are finalizing payroll, ie the 18th and 28th, ie before the paycheck cut date.

CPA for an Attorney who has her own plan (no employees) has set up payroll for the end of each month, but plans to deposit 401(k) each month prior to the payroll date (ie the 20th). Is that okay?

I noticed many life insurance companies fail to provide participant counts on their Schedule A letters. Sometimes there will be a note indicating that information is on file. Also, some medical carriers will not report covered employee and cobra counts. In our office, our approach is to obtain this info from either the broker or the plan sponsor themselves, but I've noticed some 5500 preparers will instead leave the item blank and check off "Yes" to failure to provide. We've always felt it will make the 5500 stand out less if we can answer No, and it doesn't seem that after all these years of these questions that such carriers have adjusted their reporting. It doesn't seem like a big deal to go back to the Plan Sponsor. I'm curious what is done elsewhere.

Agreed, but, the issue is not the controls being in place which has long been settled, but the wording of the explanation for the 'massive' error.

CPA firm auditing a pension plan of 500 participants has found the goose who lays the golden egg - one participant's data was used in place of another, and they have determined this to be 'major' and necessary to include in their report, even though the effect on the valuation was about 0.75%. We have identified that a staff editing the data made an inadvertent data error. May I throw out there if anyone has provided an acceptable reason to the cpa's for such data errors?

The thread above deals with COBRA notices upon termination, but what about upon enrollment of an employee and spouse? Say the EE receives the notice upon employee orientation. When EE enrolls spouse, does a notice get generated and mailed to spouse's attention?