pmacduff

I'm not an Accountant, but I believe that an LLC owner or owners can change from W-2 to K-1. Much like our industry however, I don't believe they can switch back and forth.

I can't believe in all my years of administration I've never run into this before, but here's the situation: LLC that had owners with W-2 wages in 2023 (and prior) decided in 2024 to put the owners on K-1 income. This Company traditionally fails the ADP-ACP testing. Accountant gave us preliminary K-1 information so that we can at least run preliminary 2024 testing and determine refunds prior to 03/15. We'll then make adjustments when the final K-1 info is available, and the client will have to pay excise tax on any late refunds. Am I missing anything? I guess because 99% of my K-1 and Sch C clients are safe harbor I haven't run into this ever before. I can't believe it's very common, though, is it? Thoughts?

Have a client with seasonal layoffs this time of year. A participant wants to request a loan but is currently on lay off. Since the loan policy requires repayments be made through payroll deduction, is the Sponsor ok with denying this loan until the participant returns to work? With the nature of this business, the client should address this is in the plan loan policy but at this time has the stock loan policy from the Plan Doc, which does not specifically address this situation.

Yes - plan is with VOYA on VOYA's retirement plan platform.

ok - so a plan filed their 2022 5500 return with an audit because they had over 120 eligible participants. For 2023, they have 180 eligible as of 01/01/2023 but only 34 with balances as of 01/01/2023. I know they don't need an audit for 2023. Can they file a 5500-SF or must they file a 5500 with a Schedule I? I've gotten differing opinions.... Thanks in advance!

Small 401(k) plan with 13 participants. match formula in plan doc is 50% up to 4%. match was set up in payroll incorrectly for some participants who received 100% up to 2%. owner is asking if he can leave the excess match in the participant accounts for those who received too much. (There were 2 participants shorted match that are going to be trued up and 4 that were matched properly. 7 received excess match. all participants who received excess match are NHCEs.) Thoughts?

new plan as of 01/01/2020. Plan set up with auto enrollment features. client wants to remove the auto enroll features from the plan. client currently has 11 active employees. Is this permissible? Thanks in advance.

Client moves plan from national 401(k) vendor #1 to national 401(k) vendor #2. Vendor #1 has a fee they charge when the plan leaves and Vendor #2 reimburses a portion of that fee and puts the $$ in the plan unallocated cash account directing the client that it can be used for reducing employer contributions or to pay fees. If the client paid the initial fee to vendor #1, can the client reimburse the company for the portion that vendor #2 put in the cash account?

Thank you John, much appreciated!

If it's after the fact (i.e. $15k loan was already processed) then I guess you would be stuck with two loans anyway. If it wasn't processed yet you could always send your AF RK rep the 72 (p) code above to backup your assertion that the loan can be $22,500. At least that has worked for me before in some cases! Good luck!

just curious - if this was a NHCE, how on earth did they deposit the additional $1000 without it going through payroll?

Ok - I'll take a crack at it. I don't think you have to apply both limits. Here is the verbiage from 72(p): (A) General ruleParagraph (1) shall not apply to any loan to the extent that such loan (when added to the outstanding balance of all other loans from such plan whether made on, before, or after August 13, 1982), does not exceed the lesser of— (i) or (ii) (i) $50,000, reduced by the excess (if any) of— (I)the highest outstanding balance of loans from the plan during the 1-year period ending on the day before the date on which such loan was made, over (II)the outstanding balance of loans from the plan on the date on which such loan was made, or (ii)the greater of (I) one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan, or (II) $10,000. For purposes of clause (ii), the present value of the nonforfeitable accrued benefit shall be determined without regard to any accumulated deductible employee contributions (as defined in subsection (o)(5)(B)). Since the starting balance is less than $100,000, then (ii) is "the lesser of". In my opinion, the $22,500 is the amount that the participant had available, not the $15,000. This would account for the additional $7,500 that was available on that second day ($15,000 plus $7,500). I was taught that you only need to examine the $50,000 limit when the participant's vested balance is over $100,000. Hope this helps!

Thank you everyone. EMoney - I'm looking for why Relius does not show a YOS for 2022 as the participant was definately over the 500 hours whether you look at employment or plan years, he just isn't 21. David - I'll recheck the specs and see if I can find anything out of the ordinary. As previously mentioned, all other LTPT participants are processing correctly for 2022 LTPT credit and the only difference between them and this employee was his age under 21. edited to add: Apparently it's too close to 10/15 and I'm a little burned out. I played around with this last week and thought it was still off. In checking it this afternoon after I read EMoney and David's posts, it appears all is well and the employee DOES now show with his 1 YOS LTPT credit for 2022. Many thanks again to all who replied!

Relius is not showing him with the 1 LTPT year of service credit that I think he should have for the 2022 plan year as he worked over 500 hours. (it shows 0) If I start crediting for the first year he worked over 500 hours, then shouldn't he be showing 1 year of LTPT service? I understand the plan can apply the age 21, so he can't enter until 2026 anyway, just trying to determine how the LTPT YOS are counted for him.

Thanks Lou that was my thought as well. Relius did not give him LTPT credit for 2022 and I'm trying to ascertain why because the other LTPT people in the plan appear to be receiving the correct credit. The only difference with him was that he isn't 21 yet. I know I can hard code the LTPT YOS for him but I don't like to do that.

Regular plan eligibility is 1 YOS, 12 months over 1000 hours, age 21, quarterly entry dates. Assume the January 1 entry date for LTPT and plan year counting of hours. Employee born 01/2005, hired on 10/04/2021. Works less than 500 hours in 2021. Works 784 hours in 2022. Do the LTPT credit years start for him in 2022 even though he is not yet 21? Or - do you start counting when he is age 19 (2024) that would make him LTPT eligible in 2026 when he is 21 provided he works more than 500 in 2024 and 2025? Or do you start counting when he turns 21 in 2026 and he would be eligible in 2028? Thanks in advance.....

Thanks all. I too have had this same situation and never had objections from the buyer's side. As everyone mentions, the buyer has nothing to do with the plan at this point. This may be in the "a little knowledge can be a dangerous thing" category on someone's part...

A dental practice was sold in an asset sale. Original plan is terminated however the seller has outstanding employer contributions to be made including a profit share determined on payroll information up to the sale/termination date. The new entity is telling the seller that they cannot make any more contributions to the terminated plan since the participants are now all active in the new entity plan. Can anyone assist with cites that support the notion that outstanding Employer contributions can most certainly be made to the seller's terminated plan? The client will be asking the new entity for cites as well. Thanks in advance.

Pooled investment fund profit sharing plan that used to allow installment payments. The plan has related rollover funds from an old money purchase plan subject to QJSA rules. Anyway - participant was receiving monthly payments directly from the plan until 2017 when he passed away. QJSA and pre-retirement survivor annuity option was waived with proper consent by both participant and spouse. He was over 70 1/2 and the installment payments more than covered the RMD amount each year. After he passed away the plan began paying the monthly installment payments to his spouse as beneficiary. She is also over 70 1/2. How long can she receive those payments from the plan? Is there a limited amount of time before the account must be completely distributed out to her as beneficiary? This is in the Basic Trust Doc - see item (3): (g) Alternative forms of distribution. Death benefits may be paid to a Participant's Beneficiary in one of the following optional forms of benefits subject to the rules specified in Section 6.8 and the elections made in the Adoption Agreement. Such optional forms of distributions may be elected by the Participant in the event there is an election to waive the Pre‑Retirement Survivor Annuity, and for any death benefits in excess of the Pre‑Retirement Survivor Annuity. However, if no optional form of distribution was elected by the Participant prior to death, then the Participant's Beneficiary may elect the form of distribution. (1) One lump‑sum payment in cash or in property that is allocated to the Accounts of the Participant at the time of the distribution. (2) Partial withdrawals. (3) Payment in monthly, quarterly, semi‑annual, or annual cash installments over a period to be determined by the Participant or the Participant's Beneficiary. In order to provide such installment payments, the Administrator may (A) segregate the aggregate amount thereof in a separate, federally insured savings account, certificate of deposit in a bank or savings and loan association, money market certificate or other liquid short‑term security or (B) purchase a nontransferable annuity Contract for a term certain (with no life contingencies) providing for such payment. After periodic installments commence, the Beneficiary shall have the right to reduce the period over which such periodic installments shall be made, and the cash amount of such periodic installments shall be adjusted accordingly. Any thoughts appreciated.

I understood the safe harbor/top heavy rules to state that if there is ANY Employer non-elective contribution in a safe harbor match plan that the top heavy rules apply. If I recall you could even be just reallocating forfeitures and that would cause top heavy rules to kick in for a SH Plan.

why is the ADP test required for the <1 year group in a safe harbor plan? I didn't think the differing eligibility changed anything except for losing the top heavy exemption.

I "third" that motion...transfer to forfeiture account!

On another note Peter - (not that a TPA wouldn't anyway) - but we found that most of the big 401(k) vendors (i.e. American Funds, VOYA, Empower, John Hancock, etc.) required us as TPA to have E&O insurance or we couldn't service plans on their platform. That's been the case for quite some time. We are a small non-selling TPA.

Question was for key/top heavy determination. Son is HCE by his comp - so that isn't a question for those purposes.

Thanks to everyone for their input/observations. I believe we can verify/confirm the actual date is 12/01/1988. The concern is the 10 year difference between the dates and how the DOL/IRS might react to a change of the effective date on the 5500-SF form.