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Can the required matching contributions to a 401(k) be paid with proceeds from a PPP loan?

As it turns out, his entire amount was rolled to new IRA established by him in 2019. From this account, the correct RMD, which should have eminated from the plan was distributed by the IRA during 2019. Therefore, even though the RMD came from the IRA instead of the Plan, the correct amount was distributed to him in a timely manner. I would think that this would be forgivable by the IRS in the unlikely occurance of an audit.

I have a client that has had a 401(k) Plan and has been taking RMD for several years. He terminated the plan in early 2019 and rolled his account into an IRA. Question: In the year of termination, was he required to take an RMD from both the terminating plan and his IRA? In other words, must he take two RMD's in 2019?

I was a contacted by a CPA that has a recently deceased client with an IRA. There are several beneficiaries for this IRA and they are all foreign nationals. Can these beneficiaries set-up rollover IRA's in the US to avoid having to pay taxes? Are there any other options for these beneficiaries to keep the monies tax-sheltered?

Thanks for the replies - Rick

I have a participant who has terminated from his 401(k) and has maintained his account balances in the plan. He is over 70 1/2 and has started to take RMD's. He now wants to transfer all of his assets into an IRA and use a portion of those assets to make charitable donations. He was told by his accountant that he is not allowed to transfer his entire balance as the amount of his RMD for 2019 would need to be removed first. Everyone agree with this?

The wife is the beneficiary. Mr. Bailey's comment seems reasonable. Thank you both.

A 401(k) plan has about 10 participants in it. There is the owner, the owner's wife (who is terminated) are both 100% vested. Both the owner and wife also have individual IRA's. Here's the question: the owner died several months ago. Is there anyway that his 401(k) account balance, either directly or indirectly, can be rolled into his wife's 401(k) account?

A client just supplied me with their 2018 W-2's showing total employee deferrals of $22,000. When I balanced the assets of the plan from their brokerage statements, the total deferrals amounted to$20,000. I thought that the missing $2,000 was simply a contribution in transit that would show up early in January, 2019. Unfortunately, only $1,000 showed up in January leaving the plan $1,000 short. When I questioned the office manager, she indicated that the November contribution of $1,000 was never deposited and wants to know if she should deposit this amount now. As I see it, there are a few issues: 1) employee deferrals are cash items. Therefore, the remaining $1,000, yet to be deposited, cannot be considered employee deferrals for 2018. 2) If 1) above is true, then the individual W-2's reflect excessive deferrals amounts and need to be re-done. Conceivably, if individual 2018 personal tax returns have been already filed, they may need to be re-filed. 3) Since the $1,000 has been in a corporate account rather than the 401(k) since November, could this be a prohibited transaction? 4) If the adjustments for most (there are only about 6 in the plan) would be relatively small, if there anything that can be legally done to make this mess just go away?

A client just supplied me with their 2018 W-2's showing total employee deferrals of $22,000. When I balanced the assets of the plan from their brokerage statements, the total deferrals amounted to$20,000. I thought that the missing $2,000 was simply a contribution in transit that would show up early in January, 2019. Unfortunately, only $1,000 showed up in January leaving the plan $1,000 short. When I questioned the office manager, she indicated that the November contribution of $1,000 was never deposited and wants to know if she should deposit this amount now. As I see it, there are a few issues: 1) employee deferrals are cash items. Therefore, the remaining $1,000, yet to be deposited, cannot be considered employee deferrals for 2018. 2) If 1) above is true, then the individual W-2's reflect excessive deferrals amounts and need to be re-done. Conceivably, if individual 2018 personal tax returns have been already filed, they may need to be re-filed. 3) Since the $1,000 has been in a corporate account rather than the 401(k) since November, could this be a prohibited transaction? 4) If the adjustments for most (there are only about 6 in the plan) would be relatively small, if there anything that can be legally done to make this mess just go away?

I guess fairness is in the eye of the beholder. Thanks for the quick response.

Suppose that you have a plan with 100 participants. All of the participants were hired and became participants on the effective date of the plan. Let's assume 6 year graded vesting. Two years into the plan, everyone is 20% vested. Early in the 3rd year, the employer fires 25 employees for dishonesty. Questions: 1) assuming the plan population has stayed at 100, is this a partial year termination? In determining the ratio, since these terminations are employer initiated, it would seem like we would have 25 on top and 100 on the bottom. 2) If it is a partial termination, must the plan vest the 25 dishonest former employees 100% in their accrued benefits? If yes, it certainly doesn't seem fair.

I totally agree that if he can't find a decent buyer, he should consider taking a large loss. Unfortunately, he has been exploring this possibility with very little luck. He had a friend that was willing to buy the property for about 60 cents on the dollar, but, changed his mind at the last second. I think that, at this point, he would be willing to accept almost any offer to get out of this problem.

Yes, the former participant is entitled to their account balance. I don't believe that he has any money to spend for anything. He is not even paying my bills. He is an honorable person and I know that I will be paid eventually.

A dentist has maintained a profit sharing plan for himself and one other employee for years. The assets in the plan, at the moment, consist of only a single real estate property. He has retired, stopped his practice and wants to terminate the plan. He can't find a buyer for the property and there aren't any other plan assets to pay out the other participant. He doesn't have the money to deposit into the plan or to pay out the other participant directly. Does he have to maintain the plan until a buyer is found so he can turn this asset into cash? Is this true and, if not, what are his alternatives?

Thanks ESOP Guy, that's a good intuitive explanation.

Where is the offset to this loan at termination?

Let's assume the following: 1. We have a 401(k) plan participant that has $25,000 in his account which is all 100% vested. 2. He decides to take a $5,000 loan. 3. Assume no additional contributions and/or earning to this account. 4. He fails to make the repayments and is issued a 1099-R for the deemed distribution in the amount of $5,000. 5. The loan amount of $5,000 will stay in his account until he either repays it, in which case he will have basis, or the loan is offset by his accrued benefit, in this this case $20,000 once he is eligible to receive a plan distribution. He now terminates from the plan with a $20,000 cash balance and a $5,000 participant loan receivable. At this point, his loan balance is offset by his accrued benefit. How much does he get? $20,000? $15,000? Also how is the final 1099-R handled? How would this offset be reflected on the 5500?

Many of my clients, including me, being in Florida took mild to substantial damage due to Hurricane Irma. Two questions: 1. I have a client located in Brevard County, Florida. Can any one determine if this client would qualify for special relief under Announcement 2017-13 and anything else? 2. Under this announcement, even though special relief is being granted for qualifying for a hardship distribution, does anyone have an opinion on whether or not they would still be required to take a loan from the plan before the hardship distribution could be made? Thanks for the help - Rick

Many of my clients, including me, being in Florida took mild to substantial damage due to Hurricane Irma. Two questions: 1. I have a client located in Brevard County, Florida. Can any one determine if this client would qualify for special relief under Announcement 2017-13 and anything else? 2. Under this announcement, even though special relief is being granted for qualifying for a hardship distribution, does anyone have an opinion on whether or not they would still be required to take a loan from the plan before the hardship distribution could be made? Thanks for the help - Rick

I am aware of this technique, but, this isn't the case here. The participant is a NHC staff person. The accountant is the blame for taking so long in getting me the data. Blame aside, should the participant receive the account balance from 12/31/15 or wait for the 12/31/16 account balance?

Given that balance forward is what they currently have, what would you suggest?

I have a calendar year 401(k) plan that I do administration for. Each year the accountant is very slow in getting me data to do the prior year's admin. For 2015, he didn't get me the data I needed until the first week in September, 2016. I got everything completed and submitted prior to the time the extension ran out. This plan has commingled money. Therefore, the last account balances that I have are as of December 31, 2015. I just had a request for a plan distribution from a prior plan participant. Given that we are halfway through November, I feel awkward paying out a balance that's almost 10 1/2 months old. If the plan has had gains during 2016, the participant won't share in them. Alternatively, if the plan had losses, the Participant is getting more than he deserves, What is the standard practice in a situation like this.

I just acquired a calendar year 401(k) Plan whose Plan Sponsor is an LLC electing to be taxed as a partnership. During 2014, there were two partners, along with staff, in the plan, one of whom (a long time participant in the plan) terminated his employment and partnership interests in June, 2014. For 2014 and before, there were losses in the partnership. It is my understanding that when the earned income of a partner, which is composed of the partnership distributive share of earnings plus guaranteed payments, is negative, the partners cannot defer any amount into the plan nor receive any employer contributions. In this plan, only salary deferrals and a Safe Harbor match have ever been made. Here's the problem: it appears that for years, the income being used for the partners was only their guaranteed payments which was given to them on W-2's. At this point, I don't know if the guaranteed payments were included on their K-1's. For the plan point of view: 1. If the net partnership income is negative, the partners should not have deferred anything and, in turn, should not have received an employer match. 2. If this is the case, the company over-contributed and over-deducted these contributions to the plan. I believe, that this should require a resubmission of the partnership returns for the affected years as well as the personal tax returns for the partners involved. Am I correct on this? 3. To make matters worse, the partner that left in 2014 had most likely made his salary deferral and received matches for some time incorrectly and received his account balance from the plan during 2014. This is obviously a mess. I will be meeting with the CPA and the client next week. The CPA has already dismissed these problems as minor and as "no big deal." As I see it, the plan has operational and/or qualification problems, over-deduction problems, distribution problems, etc., etc. and etc. I am looking for some insights into: 1. Whether or not there might be other concerns that I haven't touched on and 2. how to go about repairing these problems, i.e., EPCRS. Thanks, in advance, for any help.

In reviewing a Schedule SB for 2012 for a CY plan, I noticed that there was a typo on the Valuation Date. It indicated 12/31/2012 when it should have been 01/01/2012. The numbers are all correct, but, it is just that this date was put in incorrectly. Question: Should I amend the 2012 filings and re-submit or just let it go and if the gov't calls me on it, explain that it was just a typo and that would be the end of it?