bpenfold
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Thanks for the responses. Our TPA partner is a large, reputable firm - and it is not a payroll company. They are sticklers for pension law and they just will not go outside of that and be non-compliant. I was mostly curious how others may have handled a client in similar situations...where a client is pushing for something that goes against the law. The second part of the question was to find out if you are allowed to terminate a plan and start another plan. I did learn there is a 1 year wait period. But the question still remains if he were to NOT terminate the plan but instead convert services to another provider would he be allowed to change to SH? By the responses that I have seen it seems like others would be willing to do that.
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To answer your question - last year when I reviewed the plan options he specifically said he was only starting the plan for the benefit of the employees, not himself - which is always one of my first questions. He also knew he did not want to commit to having to do a SH Match. I definitely go over the 'what if' scenarios and he was still confident about keeping the match discretionary. I don't think that he was expecting to have such a great year and now he is faced with having the extra income ($100k) that he is needing to put somewhere or be taxed on. But setting it up as a SH 'maybe' plan is a very good point. I will be honest I did not realize you could do that. I have definitely learned something so thank you for that!
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In response to anyone saying that we could do it - how could we make all of this happen in a timely manner? Today being Dec 12th, we still need to amend the plan document first, get signatures, process any and all notices....all of this has to go through the proper channels with the TPA which takes time. The TPA is very stringent and they do not waiver on their rules and deadlines. It seems the consensus is it can be done (if we can show and prove the ee's received the SH Notice before 1/1/20) but my hands are tied because if our partner TPA won't do it, I cannot force them. Ugh!
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I have a brand new start-up plan that started 1/1/19. The owner is just now calling me 12/11/2019 wanting to amend the plan to a SH plan because the company did well and he has extra funds to put to work (and not get taxed on). Obviously it is too late for that. And it is too late to change to SH for 2020. BUT... the owner is saying that his accountant, other attorneys and colleagues of his are saying we should be able to back date this and be able change the plan to SH for 1/1/2020 plan year. I can tell you that my Trust Co. and our TPA partner would never go for ever doing something like that. But since the feedback he is getting is that should be okay he thinks there should be no problem doing that, especially if each employee signs off that they received their SH notice. Thoughts/opinions on how to handle? His other question is something I do not know the answer to. He asked if he terminated his plan and went to another company and started a new Safe Harbor plan elsewhere - that would be effective for 2020 - would be allowed to do that??? OR if decided to terminate services with us and convert the plan to a new provider and changing it to a SH Plan - what are the dates and deadlines for that? Could he in fact do that and have it be effective some time in 2020?? Any feedback will helpful! TIA!
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Can real estate be purchased and held in a pension
bpenfold replied to bpenfold's topic in 401(k) Plans
If this is allowed -- then how do we go about processing this transaction? Withdraw the funds to purchase the home and then just list it as an asset of the plan? Do we have to get the home appraised every year to update the asset in the plan? -
I have a client who is wanting to purchase a second home. He wants to make the purchase using his pension and holding the real estate as an asset of the pension. Is that allowed? Or is there anything like this allowed? He is the plan sponsor of his company's retirement plan. He has a traditional with profit sharing, plus he has a cash balance plan as well. Thank you in advance!
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Yes, we manage other retirement plans. We handle distributions, process 1099-R's for the participants and file the 945's.
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As a bank, we pay the taxes on the distributions for the plan. In this case, are we to use the plan's EIN when paying the taxes?
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Quick question: When filing the Form 5500 for a plan AND when paying taxes for the plan; are both instances paid under the company's EIN # or the Plan's EIN #? TIA! :)
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I have some follow-up questions: The plan sponsor is allowing each participant to choose what they want to do with their policies. One guy wants to keep the policy and leave it as is. The three other guys (one being the plan sponsor) want to cancel their policy. I have read some information online that lists the following ways to remove a policy from a plan: 1)TAKE A TAXABLE DISTRIBUTION, 2)PURCHASE THE POLICY, 3)EXCHANGE THE POLICY, 4)TRANSFER TO AN ILIT, OR 5)SURRENDER THE POLICY. What is the difference between #1 (Taking a taxable distrib) and #5 (surrendering the policy) as far being able to do it? If surrendering the policy and moving the funds to the plan - what source would those funds become? PS? If surrendering the policy and moving the funds to the plan - would this be a taxable event to the participant?
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I have a plan that has held a life insurance policy for only 4 participants for many years. They would like to terminate the polices, just get rid of them and take whatever the value is to themselves (they want the cash). Our record-keeper is telling us that in order to cancel the policy they HAVE to deposit the funds into the plan and then follow the plan document as far as being able to actually take the funds themselves. In this case, you have to either terminate employment or be 59 1/2 take a distribution, per their plan doc. However, we were told by the outside insurance agent that they could take the cash and be taxed on it, as normal. I just need guidance on how to get a life insurance policy out of a plan - when the participant is under 59 1/2 and still employed?? It is possible, right?? TIA!
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I think my suggestions will be this: I noticed he has some room to borrow as a loan. Not much - but I will let him know he needs to utilize that amount first. After that he can do a hardship request for the outstanding mortgage payment grossed up for taxes. After that I am not sure. The plan doc doesn't specify the amount of times he can take a hardship so I am not sure where to refer for that question. Anyone else know? Thank you to everyone for their responses so far.
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Yes - that would be a great solution but he has already used up that option in the plan.
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That is also what I gathered from reading the FAQ's on the IRS website. See the sentence that I underlined below: 2. What is the IRS definition of hardship for a 401(k) plan? For a distribution from a 401(k) plan to be on account of hardship, it must be made on account of an immediate and heavy financial need of the employee and the amount must be necessary to satisfy the financial need. The need of the employee includes the need of the employee's spouse or dependent. (Reg. §1.401(k)-1(d)(3)(i)) Under the provisions of the Pension Protection Act of 2006, the need of the employee also may include the need of the employee's non-spouse, non-dependent beneficiary. Whether a need is immediate and heavy depends on the facts and circumstances. Certain expenses are deemed to be immediate and heavy, including: (1) certain medical expenses; (2) costs relating to the purchase of a principal residence; (3) tuition and related educational fees and expenses; (4) payments necessary to prevent eviction from, or foreclosure on, a principal residence; (5) burial or funeral expenses; and (6) certain expenses for the repair of damage to the employee's principal residence. Expenses for the purchase of a boat or television would generally not qualify for a hardship distribution. A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the employee. (Reg. §1.401(k)-1(d)(3)(iii))
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Then would you say his only option is to request a hardship every time he needs it?
