TPApril

Lump sum distribution is taken, then rolled over. Just curious about the 1099-R for the distribution. I'm thinking that it is marked as nontaxable (ie nontaxable amount = zero). Or alternatively is there a second 1099-R issued where it is rolled over (doesn't make sense to me but just trying to cover all bases)?

Agreed 100%. I did have one client once who refused to allow me to file one. They were a CPA firm and wanted to always rely on their own tax extension.

2 questions, unrelated to each other, but related to use of Automatic Extension: I understand the plan year has to match employer's tax year. How about just the plan year end? ie a short plan year was declared from 7/1-12/31 and the ER's tax year is 12/31. Plan sponsor insists they never use Form 5558 but always rely on their own Automatic Extension of their business tax returns. Do other TPA's have plans that rely on this? We have always taken the approach to file 5558 no matter what, if it needs to be extended.

Yes - this was simply they did not want to sell stocks and mutual funds. Fortunately it's not one of those funny one-person owner plans that have all kinds of messed up investments that you find out after you have signed them on. But that's another story... Ultimately they recognized certain tax challenges and decided to go the traditional, and recommended route of selling the investments.

Just never been asked this. Couldn't seem to find anything related in the BPD. Can a Profit Sharing contribution be deposited 'in kind', ie transferred from a business account to a 401k plan trust? To make it worse, they really want to transfer it from a personal account.

Ever filed a 5558 extension for a one-person plan, and it was then determined that for one reason or another (assets<$250k, or no contribution made by 12/31), that 5500 not needed to be filed. Does the 5558 create an audit problem? This has to do with an unresponsive new plan sponsor. We are thinking, if there is indeed an accrued contribution to ultimately file 5500ez on an accrued basis, even though under $250k. However if they ultimately do not make a contribution, there is nothing to file, but a 5558 would have been filed.

Thank you for your feedback, all interesting. For this particular plan, it's a one-person company so no besides the owner was able to defer.

401(k) Plan was adopted 1/1/20. There have been no deposits through 6/30/22. How long can a plan continue to be a plan without any actual plan activity?

I feel like you could go either way. I called the 5500 IRS help line, which I seldom call. Interestingly, they answered quickly, and after reading to me the instructions, which I didn't need read to me, the first person even transferred me to a second person. Essentially though I got a stock answer - whatever was in effect during the plan year is what you would file. So the implication was to use the information in effect as of 12/31, not as of the signing date.

Plan Sponsor changes its name and its plan's name as of 7/1. 5500 for prior 12/31 has not yet been filed. I'm wondering which is the best set of names to file with - the prior which were in effect as of 12/31, or the current in effect as of signing date?

One-person DB plan, adopted in 2022 for 2021. First contribution deposited in 2022. Say contribution is > $250,000, file 5500 for 2021? Say it is less, no 2021 filing needed. Let's move to 2022: 2022 contribution deposited in 2023, taking net balance over $250,000. File for 2022, or ultimately file first 5500 for 2023?

hmmm...I thought it was sufficient to complete the 5500. Did you also do that for the Trust EIN associated with the plan?

Professional firm, each partner with their own corp. On prior plan document restatements, all of the partners have signed, but for amendments, only the 2 who are designated as Individual Trustees have signed. I'm curious what the standard approach is? I think the partners like to feel involved, but is it really necessary?

So law firm is made up of: Multiple ALC's who share ownership of the law firm Other ALC's who share office space and staffing, but not ownership in the main firm The law firm has its own 401k plan. The other ALC's have their own individual law firm. All of them are tested as an Affiliated Service Group. Now, the other ALC's have completely left the firm. I'm pretty sure there is no ASG anymore.

Fair enough, but is it appropriate in a small plan where the only HCE's are the owners?

While restating a plan document prepared by another service provider, I see a limit on the rate of 401k for HCE's of the current dollar limit divided by the Comp limit. Considering that the ADP test takes into account discrimination issues, what would be the purpose of this limit?

Bill - thanks for the confirmation. Not a safe harbor plan. The professional is moved from one professional firm to another earlier this year. No provisions changing, just want to reference the new ASG.

Say a plan that used calendar year for its plan year chooses to restate its plan as of a different date, also within the current year. Would this create a short plan year, or any other adverse affect? Reason being is they want to reflect a certain change as of that date.

According to the quote, the sentence is preceded by: Benefits not taken into account if employee not employed for last year before determination date. I would say it's still objective. btw, Plan Sponsor is going to have that inactive employee work during current plan year so that the plan will not stay Top Heavy.

Company with multiple doctors, set up so each doctor has their own corporation with its own plan, and then there is one plan for employees. All plans are combined for testing (they also mirror each other). One of the doctors is exiting the firm toward the end of the year and going independent. As such she will exceed 1000 hours while within the Controlled Group, but not after she departs. I think hours are only relevant for Controlled Group testing since she will definitely work 1000+ hours for her own Corp. Since employer contribution requires last day worked, I believe the contribution itself will not be included in the combined testing which will reflect a $0 for her. Just curious if there are any differing thoughts?

The status of non-owner related 'inactive' employees who are not working hours but not terminated on the books has always been a challenge for me. With the ADP test for instance, 5500 employee counts etc.

Thank you for your interest in my question. Participant is non key and has never been key. This calculation is as of determination date 12/31/21 for plan year 2022. They were included in all prior calculations.

Participant has been working part time for years, under 1000 hours. In last plan year they worked zero hours, but they are not formally terminated. My recordkeeping system has excluded them from the Top Heavy Test. But his balance is so large, that it makes a difference whether the plan is top heavy or not. Include or exclude him?

Thank you (again with embarrassment) for setting me straight. I really meant to separate the 'trust' from the 'plan'. Owner of this one-person plan 'simply' wants to convert his trust account at his brokerage without formally selling all assets, distributing/rolling over into an IRA and then rebuying everything. I've just never been involved in such a transaction.

Never had a plan do this before, but plan allows for in-kind distributions. Any particular issues out there for self directed brokerage accounts that would like to basically rename their plan as an IRA and treat the value on that date as the direct rollover? (Edit a few days later: aw fiddlebeans, another terminology error on my part - I meant to type 'trust', not 'plan' in the phrase 'rename their trust'.)