rblum50

If a plan participant in a company's 401(k) plan transfers a portion of his account balance into an IRA and gets a divorce: 1. Is the IRA money (which originally emanated from the 401(k) Plan), subject to the QDRO rules or can the split between husband and ex-wife just be subject to a separate agreement? 2. If the plan participant established an individual IRA (not containing any plan monies), how is this handled in a divorce? Does this money need to follow QDRO splitting rules? This participant is currently receiving $15,000/mo. (no survivor benefit) from a company sponsored defined benefit plan. To determine the amount the ex-wife gets: 1. Is the monthly amount she would receive be $15,000 x the marital fraction? What actuarial adjustments need to be made, if any? 2. Could the wife choose whether or not to take an annuity or a lump sum? If a lump sum is taken, what assumptions would be used to determine the lump sum? If the annuity option is chosen, again, what assumptions would need to be used? If anyone has a good internet site detailing how this all works, with examples, please pass it along. Thanks

I have a client with a 401(k) Plan. A prior plan participant is removing their account balance and is taking the money directly. They will receive 80% of their vested balance with the remaining 20% being transferred to the IRS electronically through the EFTPS program. What is the latest date that the plan can transmit the 20% to the IRS? I would assume that the plan has until the date the plan's annual filings, plus extensions, are filed. I just want to make sure of this.

I have acquired a client that has an existing plan participant that took a hardship distribution for $20,000 in calendar year 2023. Rather than paying this participant the net amount after 20% withholding of $16,000, he had the entire gross amount $20,000 distributed to him. When the 1099-R was prepared, It showed that the distribution made to him was the entire $20,000 with all of it being taxable and no taxes being paid in calendar year 2023. What are the implications of distributing the gross amount and not the net amount? Not trying to make excuses, but the participant paid the taxes on the entire amount of $20,000 and it is basically a timing matter.

A client of mine had an employee who requested a loan which was approved for $20,000 The employee received and cashed the check a couple of days after being fired. It is unlikely that the employee could afford to repay the loan to the plan, but, if he could afford it, is there a period of time during which he could repay the loan?

I have a 401(k) plan with a terminated participant who accrued all of her benefits in Florida and has maintained her account in the plan. She has since moved to Virginia and now wants to take distribution of her account balance. Here's the question: when she takes her distribution, her CPA thinks that she will have to pay Virginia State Income Tax on the monies she received from the plan. I don't believe that this is the case. Opinions? Thanks, Rick

I have a terminated 401(k) that I am trying to remove all of the participants monies from before the end of this year. Several of the participants can't be located and/or won't return the distribution paperwork to the plan sponsor. It's my impression that the plan sponsor can establish individual IRA's for each of these individual's so that their monies can be removed from the plan trust and we can terminate the trust before the end of this year. Question: does anyone know of a financial institution that would establish individual IRA's without the participants signature? Thanks

I have a client which has an employee that has been paying back a plan loan with a remaining term of 48 months. The employee is considering leaving the company. My 3 possibilites are: 1. Assuming that the employees leaves their money in the plan, can they continue to repay their loan even though they are not employed there anymore? 2. Assuming they take all of their money, can they continue to repay their loan even though they are not employed there anymore? 3. Is it true that assuming they terminate from the plan, basically, the outstanding loan will forcibly become a deemed distribution at the end of the first quarter following the quarter when the last repayment was due and no further repayments are allowed after DOT. Thank you for the help - Rick

I want to be clear on what you are saying. This client has a SEP-IRA plan, she is the only participant and it was started with a 5305-SEP document. Assuming that no contributions to the plan are made in/for calendar yer 2023, can she establish a 401(k) plan and a cash balance plan in 2023 going forward? In the 401(k) plan she will make the maximum deferral and an employer contribution of 6% of Compensation. If there is no problem with this, she can than make the cash balance contribution without any restriction. Am I correct in all of this? Thanks again for the help.

I have a potential client who has been "maintaining" a SEP for sometime. The owner has always been the only participant in the plan. There have been no contributions to the SEP during 2023. What would be the problems, if any, of starting both a 401(k) plan plus a cash balance plan during this year? I am sensitive to the word "maintaining" with regard to the SEP. If no contributions are made on account of 2023, does this imply the the SEP is not being maintained during 2023 and there should be no problems establishing the other plans? Thanks for the help Rick

I have a client composed of husband and wife doctors and 4 employees. The assets in their defined benefit plan as of 1/1/22 were about $5,260,000. Due to investment losses, the 12/31/22 balance dropped to about $4,500,000. In 2021, there was a surplus in the plan of about $235,000. In order to bring the surplus down, no contribution was made into the plan for Plan Year 2021. Given that the plan is going to be terminated early in 2025, we were hoping that this would lower the surplus. Due to the large investment losses in 2022, not only did the surplus disappear, but, a minimum contribution of almost $100,000 was generated. At this point, the medical practice is not generating very much income and coming up with the $100,000 for the contribution is a problem. To avoid having a potentially large contribution in 2023, the plan is being frozen before anyone accrues a benefit for 2023. My question is, what are their alternatives for getting the money to make the required contribution of almost $100,000? Potential alternatives: 1. Have the doctors personally lend the money to the PA and then have the PA make the contribution. What are the tax consequences if the PA can't pay the loan to them back? Are there other tax concerns to be aware of? 2. Amend the plan to allow for in-service distributions. This would seem like there could be double taxation. Again, what other tax concerns could crop up? 3. What if the contribution is not made by 9/15? Aside from paying the 10% penalty, is there any advantage to this? I would appreciate any advice on this.

Any recommendations for an IRA custodian that will accept Real Estate from a 401(k) Plan?

I think that this is exactly what I was referring to. I found it in the Code under 401(k)(3)(E). Thanks for the help.

I have a potential client that is possibly looking to establish a 401(k) Plan before the end of this year. It is too late to make this a Safe Harbor Plan as we are past October 1st. Some time ago I recall reading about a method to maximize deferrals in the initial year using what I think was called the "popcorn" method. Has anyone ever heard of this? You would use this method in the initial year of the plan and then amend the plan the beginning of the following year making it a Safe Harbor. I might be totally off base on this one, but, I thought that I would ask. Either way, Happy Holidays to everyone.

I have a 401(k) plan with an plan participant who retired from the plan and needs to take an RMD for Plan Year 2022. She has not taken any of her account balance out of the plan to date. My question is who is responsible (liable) to make sure she received her distribuition in a timely manner: 1. The Plan Sponsor or 2. the Plan Participant In other words, if she does not get paid out, who was responsible for getting her paid out? Rick

Given the eligibility requirements, he won't start participation until January 2024. Yes, there are about a dozen other employees, none highly compensated except owners wife.

I have a client (100% owner) who maintains both a 40(k) plan and a defined benefit plan. He will be having an associate age 59 joining the company later on this year earning >300,000 with no ownership in the company. The owner (age 49) wants to minimize the amount the company would have to put in either plan for this associate. Here are a couple of alternatives: 1) As a highly compensated employee, exclude him from both plans. 2) Exclude him from the DB plan. Include him in the 401(k) (comparability plan). The plan currently allows for a discretionary contribution, salary deferrals and a Safe Harbor match. We can zero out his discretionary contribution, preclude him (agreement outside the plan) from making any salary deferrals which, in turn, would negate any safe harbor match. Let's us assume that in both cases discrimination requirements are met. Then In both cases, there would be no employer contributions for him. Comments.

The required contributions consist of a 3% Safe Harbor and a matching contribution.

I have a 401(k) Plan that had a required contribution of about $55,000 for Plan Year 2020. This required contribution didn't get deposited until 4/22/22. Given the pandemic and a downturn in business, even though the client wanted to make this contribution in a timely manner, the soonest they were able to make the deposit was late this past April. I would like to hear from someone who has had a client in the same situation (as I am sure that this has got to be a somewhat common situation) and what they did about it. Also, if the IRS got involved, what relief were they willing to give. Thanks for the help

I didn't think that he could. The two organizations are totally separate. How about some kind of loan from the original PA to the LLC? Would that make any sense at all?

I have a medical practice as a client maintaining a 401(k) plan. One of the doctors owns 100% of the practice. Another doctor, age 33 and not an owner just an employee, is also participating in the plan. This 2nd doctor has a W-2 in excess of 3.3 million dollars. He also maintains an LLC which does medical consulting (totally separate from the original medical practice) that generates about $100,000 @ year. He would like to shelter more money than he is currently doing. Question: Is there anyway that he can shift some of his earnings from the original practice, where he is an employee, to the LLC that he owns 100%?

I totally agree, my mistake for even bringing it up.

Where do you indicate a deemed distribution due to loan default on 2020 Form 5500- Schedule H? Would it appear on line 2e(2) or line 2e(1)?

Simple question, a 401(k) Plan only allows for salary deferrals and a 401(k) ADP Safe Harbor Match. If eligible and assuming no outstanding loans and the total amount in his account meets the amount of his financial need, can the participant take a hardship distribution of 100% of each account?

I just picked up a 401(k) Plan effective January 1, 2018. The Plan Sponsor has never requested the tax credit for startup costs. As of its effective date forward, it met all of the criteria to receive this credit. How far back, if at all, can the plan request and receive this credit?

I was contacted by a CPA with this question concerning one of his clients: Client is a retired judge getting a pension from the Florida State Retirement System. Since 2017, he has been taking his retirement payments and transferring them into a Roth IRA for himself and his wife. The transfer to his wife's IRA is totally inappropriate, but, with regard to the husband, what penalties will be assessed on him for doing what he is doing?