shERPA

Do you enjoy......

Yes, you are quite right!

I think you're right. But the cynic in me says to capture that screen for posterity and not point it out to them. Could come in handy if I ever have a client who was a bit short on their TH minimum.

Or Read The Fantastic Document. Bill's mind is in the gutter!!! 😆

Bill your time for consulting on this, it will be a lot more than $54!

First thing would be to RTFD to see what it says. there probably isn't any special language that helps, but it should be checked. But this one screams for consultation and advice under attorney-client privilege. IRS, DOL and/or participants could all cause trouble for this employer.

I would not advise a client to do this. From the PTE: IBM stock ≠ cash. When I get questions from clients about in-kind transactions (typically contributions), upon questioning I find that the motivation is a mistaken belief that they can avoid reporting a gain on the asset. When I tell them even if permitted, it is treated as a taxable sale and the gain will be taxed, they lose interest. Refer him to legal counsel.

Well SIMPLEs have a transition rule for employers that are on the ~100 ee bubble, so they might be fine with a SIMPLE in 2022. But if they want a 4k in 2022, it seems to me they can go ahead and establish it. The code doesn't say they can't adopt a qualified plan, it just says the SIMPLE is no longer a qualified salary reduction arrangement if ees benefit in a qualified plan. The best time to do this is as of 1/1 before any contributions are remitted to the SIMPLE for the calendar year, to avoid the whole issue of what to do with them, how to communicate it to ees and how to report on payroll, W-2, etc.

Yes, SIMPLEs have to have a termination notice by 11/2 for the next year, so if someone has a SIMPLE they are apparently stuck with it, at least if they don't adopt a qualified plan for 2022. But if they do adopt a qualified plan, the SIMPLE is no longer valid, termination notice or not. Section 408(p)(2)(D) says: It DOESN'T say the employer cannot adopt a qualified plan, it just says the SIMPLE won't be a qualified salary reduction arrangement. So it may or may not be terminated if a timely notice wasn't given, but regardless, it is still invalidated for the year.

They CAN, but in all likelihood, they WON'T. They will tell you it is CSV, over and over again. Even if you send them RP 2005-25. If only TPAs could bill the true value of their time spent messing around with this stuff...

FMV ≠ CSV. See Rev Proc 2005-25.

Yes, daughter's direct stock would attribute to her husband. If stock >5%, then HCE. A word of advice, don't try to apply "sense" to these rules. They might make sense in one situation and seem completely absurd in another. They just are, and you have to know them, sensical or not. 🙂

S-I-L is not attributed ownership. No double family attribution. Dad's stock attributed to daughter. End of the line.

Maybe 15 years ago we had a client wash his hands of the plan. We advised him about filing requirements, fiduciary duty to participants, etc. but he just walked away. About two years later he called up and said something to the effect of "the Department of Labor just called me and said I need to re-hire you to help me wrap up this plan or I am going to jail".

1. Practitioner sanctions if the TPA is covered under Circular 230. 2. Being named in the subsequent lawsuit. Which could come from participants, not just the employer. See https://casetext.com/case/csa-401k-plan-v-pension-pro-inc . Even though the TPA prevailed in court, just getting involved makes them a loser.

I understand your desire for a "solution". But as Mike points out you put your firm at great risk. Not worth it. "Won't pay" vs. "can't pay" are two entirely different things, and more frequently in these situations it is the former. But currently it's not your problem, and you not obligated to make it your problem. The only solution for you to present is referral to legal counsel. It is as much for his benefit as yours, as ERISA provides for both criminal and civil penalties, so he needs legal guidance with the benefit of attorney-client privilege to keep himself out of jail. Your taking it on without legal counsel is actually doing the client a disservice since all of your correspondence and work product could serve as evidence to lock him up.

If the TPA is enrolled in some manner covered by Circular 230 he/she/they cannot prepare the form with knowingly false information without risking enrollment and other sanctions as outlined, you can read it for yourself. Even if not formally covered by 230, it's a good guideline for standards of practice. If the TPA has already been paid to prepare the 5500, they should do so with correct information as they understand it and send it to the client, client can choose to file it or not. Alternatively resign and possibly refund any pre-paid fee. If the TPA hasn't been paid and the client doesn't have money to pay the TPA, best just to resign. There is just not enough profit in any one administration engagement to justify a TPA knowingly preparing an incorrect return. If/when the SHTF the client will come back and blame the TPA for doing so.

Did the trustee not want it processed? Does the "TPA" also hold the plan assets? If not, how did the money get paid out by the recordkeeper/custodian? Is the TPA an authorized signer on the account? If so presumably the trustee approved this? If not, it shouldn't have been processed by the RK. Why did that happen? Too many unknowns to opine. Assuming TPA isn't engaged to do this, they need to tighten up procedures to prevent it from happening again and TPA should not allow itself to be an authorized signer on the account.

Yes.

I try to ask some general questions about ownership, spouse ownership, about services and relationships to other businesses, about employees paid via a staffing company, and such. Keep them simple and non-technical. If any of these questions gets a positive response, the next step is a phone call. Just too many variables to reduce to a checklist. And even if it were reduced to a checklist, it would be too extensive and clients' eyes would glaze over.

Partners getting W-2s, shareholders getting 1099s from their own corps, S-corps using K-1 income as plan comp, sole props deducting plan contributions in excess of SE income, SEP contributions for owners only, not covering employees, partner PC in an ASG sponsoring a plan just for the PC. All this stuff goes on all the time, apparently with little to no enforcement. Bringing it up is usually met with the reply “I’ve been doing this for years with all my clients, we’ve been thru audits, no problem”. Whatever.

I'd consider providing valid reporting info as part of the plan's claims procedures. It's gonna be a heckuva lot easier and cheaper for him to file a form and get a TIN than it is to hire a lawyer.

Insist on him getting a TIN now that it is known the SSN is invalid. Period. For some reason IRS comes down like a ton of bricks on 1099-R payors reporting distributions with invalid SSNs, this after years of accepting payroll returns, tax withholding and W-2 filings using those same SSNs. IRS first assesses fines on the payors, and it takes a couple of years to get them waived, so they payors routinely have at least two or three pending assessments open with IRS. Basis for penalty abatement is the payors have no way knowing the SSNs were invalid, but that's not the case here.

I remember this from I think The Patton Papers, I read the book maybe 40-50 years ago. General Patton received a letter from someone with most of the alphabet listed after his name in the signature. He responded by addressing the letter to "Mr. John Smith, SOB".

You should clarify your role with the former client as it may affect the advice you provide. Do they want you to look at everything, soup to nuts? Review the plan "termination", the "merger" or transfer, the receivable issue and anything else related? To give proper advice you should tell them this is what you need to do and what it will cost. OTOH, if they are just asking you if they can deposit the receivable to the surviving plan without reviewing anything else, you should caveat your response that it is not based on a complete review of the situation and might not be correct. That said, can they do it? Probably, as Bird notes, under a merger it should be OK, but even if it was terminated and transferred, under the principles of self correction it's probably good enough (but IRS could take a different view under exam). There may be some make-up earnings due as well, but unless they want to engage you to figure out if so and how much, i'd just point this out. And presumably Company A adopted the surviving plan? As Bill says there's a good chance something was done wrong, you can be helpful, but just be clear on the limitations of your assistance.