pmacduff

Thanks all for the responses. The participants in question were already over 55 when the Company closed, however aren't yet 59 1/2.

Interesting - Thank you for sharing! I don't have many off calendar plans left, but do still have one with a 02/28 PYE so it's good to know what to do in the event they ever need a 8955-SSA filing.

I believe I'm clear but need reinforcement: Plan termination, qualified plan loan offsets, some participants over age 55 but under 59 1/2 - the IRS Code for the 1099-R forms would be a 2M, is that correct? I know those under 55 get a code 1M and those over 59 1/2 get the 7M code. Edited to add: I should clarify that these participants are also separated from service as the company has closed.

The client would like to exclude the person and compensate him in other ways. The employee will be working remotely - so not physically here in the States at all. Not even for meetings and such, which will all be done via Zoom or other remote methods. Even though the employee will receive a W-2 form, the client tells me that the payroll company will be handling the required reporting on the Canadian side and that the employee will pay tax in Canada on the wages (will not pay U.S. taxes). The plan excludes "non-resident aliens" (see below from the Trust Doc) tying in with what Peter mentioned above. So ultimately I don't think there needs to be a separate category amended to exclude this employee. Agreed? (e) Nonresident aliens. If, in the Adoption Agreement, the Employer elects to exclude nonresident aliens, then Employees who are nonresident aliens (within the meaning of Code §7701(b)(1)(B)) who received no earned income (within the meaning of Code §911(d)(2)) from the Employer which constitutes income from sources within the United States (within the meaning of Code §861(a)(3)) shall not be eligible to participate in this Plan. In addition, this paragraph shall also apply to exclude from participation in the Plan an Employee who is a nonresident alien (within the meaning of Code §7701(b)(1)(B)) but who receives earned income (within the meaning of Code §911(d)(2)) from the Employer that constitutes income from sources within the United States (within the meaning of Code §861(a)(3)), if all of the Employee's earned income from the Employer from sources within the United States is exempt from United States income tax under an applicable income tax convention. The preceding sentence will apply only if all Employees described in the preceding sentence are excluded from the Plan.

Hello All - I have a US based company that may be hiring a Canadian employee. The client tells me that the employee will be paid on a W-2 form and therefore would otherwise be eligible for the client's 401k. Is it possible for the plan to have "Canadian based employees" as an excluded category for eligibility? I wasn't sure if that category would be considered discriminatory in any way or if there is a better way to accomplish what the client wants. This particular client plan will easily pass coverage. Thanks in advance.

Hi Tom, Can I assume you mean the migration over to Phoenix for ASP? If so - we did that last week and initially also had issues logging in. I put in an incident but in the mean time, we were able to get in and now have no issues. Support did finally get back to me and told me to "clear my cache and try again". I was already in at that point so I didn't need to do that but perhaps that will work for you? We found that when logging in to the Phoenix site, the log in information is actually the opposite of what it was before. For example, the old log in was first "infinity\our user name" and then the Windows password. Once in we then had to enter our user name again and our log in password with the RSA token code. On the Phoenix site we have to do it opposite and enter the user name (with no "client\" log in, our password and RSA token code first. Then the next step is "client\user ID" and windows password with no token code. We are able to log in now just fine, we just have to remember that the log ins are opposite of the way we were doing it :)! Not sure if this will help but I thought it was worth mention - good luck!

remember that once you add a discretionary profit share you lose the top heavy free pass. If the safe harbor is the 3% non elective (as opposed to the safe harbor match) then that should cover the top heavy requirement anyway but thought it worth mentioning.

Hi Austin - I found this with a Google search: "Annual Audit, Form 5500 Filing Requirements The DOL issued changes to Form 5500 in December 2021, including an instruction that PEPs must check the MEP box in Part A of Form 5500. Participating employers with 100 or more participants in the PEP will need to provide a qualified independent accountant’s report (often called a “plan audit”) for their portion of the PEP, which must be attached to the PEP’s Form 5500. PEPs are required to undergo an annual audit unless they satisfy the exemption rule. No annual audit is needed if each participating employer has 100 or fewer participants and there are fewer than 1,000 total participants in the plan. The new rules require PEPs to confirm compliance with the Pooled Plan Provider Registration Form (Form PR) requirements. PEPs must also provide the AckID number for its latest Form PR filing, and PEPs with more than 100 employees must file a Form 5500 (they cannot file a Form 5500-SF)." I would think if you are marking the "MEP" box then you would need to do the attachment with the Companies and contributions.

My two cents - addressing the original post - assuming a proper distributable event (and as others said), the funds leaving the plan should be reported by the plan on a 1099-R form. The plan should tell you whether or not it accepts rollovers. There are two different transactions at play year - (1) funds leaving the plan; (2) funds rolling into the plan. It matters not that the original funds came from the same Plan/participant for reporting purposes.

I guess I don't understand the big deal with using only whole percentages? Vendors have done that with contribution enrollments/enrollment forms ("fund selections MUST total 100%"). I suppose, depending on the size of the benefit, 1% could make a difference but seriously how much would you be talking about? There are 3 of us in my famly, my sister and I had our Mom put our brother at 34% because he is the oldest and the only boy 🙂. Then again we have no strife in our family, which I know can cause many issues in others - even for 1%!

IMHO I think the plan would still prepare a 1099-R for the outgoing funds as a direct payment distribution (if that's how it went out). It's up to the participant to report it properly and have the backup information when he files his personal tax return that he rolled it into a tax qualified vehicle within 60 days. No matter that he rolled it back into the same plan, that just reports as an incoming rollover to the plan. Again - this is just my opinion on how I would handle this situation. It's ultimately a wash if it all happened in the same plan year but I believe the plan needs to show it as it happened..... my two cents!

seems like we should have a half day today then, eh?😁

to echo what ESOP Guy said - stay away from the service spanning rules - they can be a nightmare! Quite a few years back we had a construction company using 6 consecutive months of service for eligibility & age 21, (no hours of service requriement). IRS audit came along and had to check everyone due to the service spanning rules. Took a LONG time, many hours between the client, me and the auditor. When everything shook out it ended up costing the client ~$15k in contributions/earnings for a bunch of employees who were constantly leaving and returning. (edited for spelling error!)

plus they are so easy to file, why not?

I assume it makes a difference whether or not the Employer pursues criminal/civil action(s) against said former employee? I would think if you fire someone for that reason but do not pursue either or both of those avenues then the Employer would have to not only make the contribution due but also pay the balance out to the former employee. I'm curious more than anything because we had a rash of these types of embezzlements in our area many years ago. (Employees embezzling from their small employer.) All different types of employers where some pursued action against the former employee but some did not due to the expenses involved.

Bill is 100% correct of course - however this is such a common misconception that I must comment too. What would you do if the market goes way down and the participant no longer has 50% of the loan amount that was security? They can certainly take the hardship if the plan allows and they meet the criteria.

Interesting...I always thought attribution was lineal ascendents and descendents. Since there's no double attribution, that would follow for the "not from grandparent to grandchild" but doesn't make sense for "grandchild to grandparent" causing attribution should the grandchild have ownership. Anyone know the logic behind that?!?!

Yes - here is the definition in the AA: "Age/participation. The later of the date a Participant attains age 59 1/2 (see Note below) or the 5 (not to exceed 5th) anniversary of the first day of the Plan Year in which participation in the Plan commenced. NOTE: A Participant's age specified above may not exceed 65 and, if this Plan includes transferred pension assets, may not be less than age 62 unless the Employer has evidence that the representative typical retirement age for the adopting Employer's industry is a lower age, but may be no less than age 55." This participant entered the plan on 04/01/2018. So his Normal Retirement Date would be 01/01/2023 ("1st day of the plan year...."). He would then vest 100% as of 01/01/2023 (again regardless of hours worked)?

Plan defines normal retirement as "the later of 59 1/2 or 5 years of plan participation". 100% vesting occurs at that point per the Plan. Plan defines a "year of service" as "1000 hours during the plan year" for vesting. Plan does not separately define a year of participation. Participant was hired in 2017 at age 66. Termed as of 02/05/2021 (but had no hours or comp in 2021). Participant had 4 years over 1000 hours (2017, 2018, 2019 and 2020). Employer match has 2/20 vesting. Participant is 60% vested in the match upon termination on 02/05/2021) because he had not yet reached his NRD. So far so good. Participant is rehired as of 05/17/2022 working approx 16 hours per week. Reenters plan on rehire per plan provisions. Participant needs another 2 years of participation to reach normal retirement under the plan definition. If he ends up working over 1000 hours he will become 100% vested by the vesting anyway however since he is only scheduled for 16/wk he probably won't make 1000 hours. Where I'm getting hung up is trying to figure out if this participant will fully vest upon attainment of the plan's normal retirement definition regardless of his hours worked in the next two years?

Lou is correct - according to the 2021 945 instructions: "If the total amount of tax for 2021 is less than $2,500, you’re not required to make deposits during the year." You will be able to get a voucher for 2022 when the 2022 945 forms are release later this year. Hope this is helpful.

True but at some point they must link up because how otherwise would the EBSA know that a valid extension was filed for a return that comes in after July 31st for a calendar year plan?

thank you - I did think of that (filing two extensions) - except that the new name, EIN and plan name are not yet on the EBSA system. I don't know if their system would kick that one back out because they have no record or if it would work to eventually link them up! I'll post the final outcome and results.....

Not sure if I started a firestorm!?!? Anyway reading Item 4 on the first page of the 5500-SF it reads pretty straight-forward: "If the name and/or EIN of the plan sponsor or the plan name has changed since the last return/report filed for this plan, enter the plan sponsor's name EIN, the plan name and the plan number from the last return/report." We've never had issues when we have reported it in this section with these types of changes. However none of the prior filings for those "name change" clients were extended or needed to be extended. Therein lies my dilemma with the extension filing. I would like to think the connection will be made but I have my concerns.........😬

Hi Tom - There's got to be a sad song in there somewhere, eh? Or didn't Elton John already write/perform one (hee hee)? I'm not too far behind you but I do have a few years before I'll need to worry about applying. Perhaps I should start worrying now! Keep smiling 🙃!

We use Relius and similar to Bri can do it if we assign each participant to a "division" and then test by "division". I usually do something like "cross-tested group 1" and cross tested-group 2" for the divisions. We are in the small plan market so it's a relatively easy thing to do (add division to each person). I also can use a DER and import divisions when I do the census import.