Bri

I can "cite" the 5500 instructions, I suppose, if that helps: Short Years. For a plan year of less than 12 months (short plan year), file the form and applicable schedules by the last day of the 7th calendar month after the short plan year ends or by the extended due date, if filing under an authorized extension of time.

The catchup limit definition in 414(v) has a reference to the "lesser of", such as to keep the maximum at the corresponding earnings amount,, but actual 402(g) doesn't appear to.

My vote is for: 1. Fix the 1099-R from the plan for 2019, as there should be one for the proper rollover amount, and one for the RMD amount due as a taxable payment. 2. The RMD payment was an ineligible rollover contribution to the IRA, so pay that penalty tax due for that, if any, and get it out (as adjusted for earnings) from the IRA.

Fact pattern: In April 2018, sole proprietor sends in $18,000 as a head start on her 401(k) for the 2018 year. After the 2018 taxes are prepared by the CPA, the Schedule C shows a loss from self-employment earnings. In April 2019, a distribution is processed from the plan for the 18,000 plus earnings, as a correction of excess annual additions. No income = no contributions. The CPA doesn't understand why the 18,327.15 is considered taxable income for 2019. (At least, not the 18,000 part.) Should the CPA have reflected the 18,000 as a deduction on the 2018 Form 1040 as self-employed retirement plan contributions? Typically with refunds of excess like this, the amount is taxable in the year of distribution. If there had been an 18,000 deduction on the 2018 return, then the 18,327.15 in income for 2019 make sense - just with the suckiness of her tax rate for 2018 being lower than 2019 will be. That's the typical explanation I'd give for an ADP test refund - the 2019 refund income offsets the deduction for 2018 - but in this case, it's a 415 issue. I'm suspecting the solution is either (1) Review the 2018 return to see if an 18,000 deduction is appropriate, OR (2) Change the taxable amount on the 1099-R issued in January so that only the 327.15 gets listed as the taxable amount. But which is right? (realizing there could also be a door #3) Thanks.... --bri

Shouldn't be too hard to hash out, if you check your trust provisions themselves. There might be language saying the Employer, when announcing the trustees, can assign specific duties within any group of more than one. I can also imagine whoever might direct the affairs over the business (after the owner's death) would then have the authority to name successor trustees to the plan sponsored by that business.

I'd have to think the person's not an HCE in the year they're hired (unless they bought into their new company), so hey, the new sponsor might even LOVE the 57,000 contribution for ACP testing purposes (presuming no carveout)! Of course going back to the 415 issue, she'd have to actually earn 57,000 in wages at her new job. And the standard disclaimer to make sure Plan B doesn't have a % of pay limit on the after-tax.

Ah, indeed - the BPD spells out specifically that 411d6's anti-cutback rules don't apply. Thanks for the tip!

I know governmental plans don't have the typical spousal consent requirement. But if there's a plan that had it, is it considered a cutback to eliminate it? Someone's prior TPA used an ERISA document when they shouldn't have. Anyway it's a closed-to-newbies defined benefit plan with a handful of actives left. The plan offers various term certain annuities as well as SLA, which in ERISA-land would require spousal consent. The sponsor is now getting a governmental-entity-specific adoption agreement and I'm wondering if leaving "spousal consent still applies" blank nevertheless requires me to grandfather it as any sort of protected benefit to the spouse. Thanks. -bri

It's like when people ask what I do for a living. I say I do a little bit of accounting, a little bit of actuarial, a little bit of legal, but I'm not actually any of those. Plus consulting. No licensing needed for that. (I stay away from asset management completely.) I might as well be a transponster.

I suppose a possible issue there would be not knowing if you passed 401a4 until the Schedule C was ready, and then you might have to allocate more to the staff after they'd already cleared out their balances.

So if the minimum funding deadline's been bumped to 1/1/2021 instead of 9/15/2020, how would Schedule SB be prepared for a client who makes their deposit in November? Show $0 made on the 5500 due 10/15 and simply amend the filing when the date's confirmed? (Or are we expecting any sort of ruling providing an extension on just the SB part of the 5500 filing, perhaps?) --bri

The worst part is telling the participant, no, you don't legally NEED a notary, but my bosses won't allow your withdrawal to be processed without it. But hey, that's better than, ""Your spouse didn't actually need to sign this, since the spousal consent rule didn't actually apply."

The 1 part of the 1099-r code indicates no known exception to the penalty for an early withdrawal exists.

The 1099 indicates the tax liability due. Repaying the loan afterwards creates basis, though, so they won't owe taxes again on the amount when it's later distributed out of the plan in some future year.

Well, since it's too late for SCP (and way too late for an 11g), you might be stuck with VCP. But then the issue is what the plan sponsor wants. Refunding the deferrals gets you out of the top heavy issue because the guy is never supposed to be in the plan. And it gets you out of the 5500 issue. Can't imagine the plan sponsor would want to provide a THM AND any ADP test QNEC AND have to file late 5500s to a guy who left. At that point you're then hoping the agent reviewing the submission doesn't think poorly of the fact pattern and not accept the submission to just Code-E the guy's refund!

ha. I basically have this: "Suspense accounts. The Plan’s investment procedures also may provide for special valuation procedures for suspense accounts that are properly established under the Plan."

I'm sure someone will know this of the top of their head - my EOB is on site in the office, and I am most definitely not. Sponsor deposits 100,000 early for 2020 to a "pre-allocation account" with a well known recordkeeper. That 100,000 then grows to 105,000 by the time it ends up being allocated the following January. For 415 purposes, is an individual limited to 57,000 as of the date it's allocated? Or can he get 57,000 plus 5% for his share of the earnings? Or 57,000 plus only the earnings after December 31, the plan's actual allocation date for contributions? And the similar question if the 100,000 drops to 95,000 by the time it's allocated....("Hey, favored employee, we'll max you out! Oops, we invested some of that for you early and lost you a chunk of it.") Thanks --bri

Of course, if you've got an adoption agreement, there might be separate options to exclude bonuses AND exclude taxable fringe benefits. Which would imply some attorney indicated (with IRS approval) they are indeed distinct items, no?

In a DC plan you can't self-annuitize, so as Andy mentions, the insurer you prudently choose gets to control those factors.

If I recall, one of the provisions of the SECURE Act was that plan sponsors could adopt a new 2020 plan up through the date of their tax filing deadline next year. (presume calendar year for the plan and client's tax filing, please) Some sponsors may want to freeze their plans now ahead of folks getting into 1000-hour range for benefit accrual. If there was no plan, I'd think the sponsor could start a new plan up at some point in 2021. But that's not the exact same fact pattern as the sponsor un-freezing an existing plan in 2021 for the 2020 year before their tax deadline. I wouldn't have to get a decision from clients by 12/31 to un-freeze, would I? (I hope the alternative isn't to adopt a new plan and merge them.) Thanks....

My guess is that document systems spit out an SMM relatively easily. Letters, not so much.

So if you stay disaggregated, then you have: Nonexcludable "plan": (18/24) divided by (4/5) for a coverage ratio of 94% Excludable "plan": (1/24) divided by (1/5) for a coverage ratio of like 21% that fails all the harbors and midpoints. Since the new HCE had zero-wait eligibility, then that's the lowest you can use and nobody can be ignored from the coverage tests for being recently hired. So I think you actually have to aggregate, unless you want to make QNECs to ineligible 2019 hires. With the usual caveat, if you aggregate for coverage you have to do so for nondiscrimination.

Yeah, this got confusing when you mentioned there were 25 other people. And to be clear, you're worried about passing 410b specifically, rather than your ADP/ACP tests. So you're not carving anyone out like you can for ADP. So basically, who do you have in your non-excludable group, and who's in your group of "statutory exclusions"? The statutory exclusion group sounds like 1 HCE out of 4 or 5 total HCEs now? In other words, who's in the plan? And who's in the plan ONLY because of the liberal eligibility? I think those give you the answers. Also, late-2018 hires should also be excludable, since 410(a) lets them stay ineligible until 1/1/2020.

I would have the date in the 204(h) notice reflect the date benefits are frozen as per the plan amendment. Is that really January 1, or is it March 15? With the only difference being nobody accrued anything additional between 1/1 and 3/15. I'd expect the amendment to have turned off benefits as of a FUTURE date, not retroactively applied to an earlier date even though no benefits accrued in that interim.

Right, no change there.