sdix401k

I am sure we have all read the bill and many articles. I wanted outline three scenarios to make sure I am reading the Act correctly in regards to COVID Loans and the delay of payments. 1) We have a new COVID Loan and the participant delays the payments for 1 year. The max loan period is still 5 years and payments that were supposed to start on 1/1/2021 will start on that date. Payments that were supposed to start on 4/1/2020 - 12/31/2020 will start on 04/01/2021. The loan will need to be re-amortized since interest has been accruing and even if payments were doubled the loan would not be paid off within the 5 year period. 2) There is an existing loan in effect. Participant chooses to delay current payments for 1 year. Let's say it is a 5 year loan and he is in year 2 of the loan. Payments from now until the end of the year are delayed for 1 year. The original loan payments go back into effect on 01/01/2021 and the delayed payments start back up on 04/01/2021. We are now in year three of the loan and that loan needs to be re-amortized to make sure it does not exceed 5 years. 3) Loan is in 5th year and participant wants to delay payments for 1 year. This is allowed and the 5 year rule is disregarded. Payment continue in next year and need the loans needs to be paid off within 6 years. Do I have this correct???

If a plan run by a partnership uses forfeitures to fund a QNEC or really any other employer contribution I would assume that forfeiture amount should not reduce partner compensation up to that amount?? The contribution reduced partner comp in prior years.

Thank you everyone for posting. The issue behind the question is the existing plan has a lot of dollars in the plan and wants to avoid some asset based RK Fees. I understand a solo k is a 401k plan and employees would enter under that plan if not terminated or frozen. The issue with 401king is that this would be a successor plan and assets cannot be distributed. My idea with freezing the plan and starting a new plan would be that the assets could stay where they were and all new monies from everyone come to the new plan 002 with new provisions - using a Non-Standardized document versus the protoype that exists now which is a Schwab Plan. I could amend the current plan and keep it as 001 but now I have a participant that has access to different investment options then the current people at least for prior assets?? I also understand that if I amend the plan now that the owner will be the only one who is 100% vested. So while on the face of it it may not seem to logical the crux of the issue is if I freeze the current plan ( I know still file a Form 5500 each year ) is there an issue with having a new plan 002 that all future money goes into for everyone? I am not sure how 401(a)4 is violated as there are not active employees other than the owner and the plan would be frozen prior to anyone else being hired? Thansks!

I have a new client who has a solo k. They will have a number of new employees in 2020. We want to set up a new plan for the company plan 002. ( Client want's to keep current plan, but will make all contributions for owner and employees to new plan )I am thinking that this will be fine but I need o freeze solo k, Solo K has 100% vesting - new plan would not. Are there any BRF issues if solo l is frozen?I realize I will still need to aggregate for Top Heavy. Any one see any issues here? What it be an issue of the solo k was not frozen?

I am looking for opinions if I have a an affiliated service group. Owner A owns a practice 66%. Client also owns an office building and that company provides rental space to the practice and a few other clients. Rental Company is 100% owned by Owner A. I do not believe so. Would the opinion change if the sole client renting the space was the practice? A follow up to the above is a transaction occurred mid year that reduced his ownership to 66%. I am thinking the determination of a control group or affiliated service group is a snapshot determination date and that Owner A could set up another 401k plan for the leasing - rental company for the current year?

Thanks for all of the input. My concern is also with MOJO as I do not want to rely on any outside document that would require my firm to determine who "the children are" what subsequent hiers those children have. I also agree with Bird - and her comments. I have tried going the route of just naming the trust but no go.

Hello,I have a participant trying to designate their children per stirpes as the primary beneficiary using a non - standardized prototype plan document. Participant specifically writing on form My Children - Per Stirpes same terms and conditions as the XXX Trust Dated XXX Is this allowed? My document simply states that it must be an individual or trust and while the individual is a person how would we determine who those surviving heirs would be? Would that be the executor of the estate? Thoughts?

Thanks. Oh I googled. Found reference to a 401k but not only a 401k. But given purpose of the rule that is what I concluded.

Hello, I am almost 100% positive- but please confirm that a Profit Sharing Plan only is not subject to successor plan rules as there are not 401k and or other qualified contributions in the plan? Thanks!!

Rather be Golfing is correct. The plan did have a prohibited transaction within the last three years. Thanks for the link to the pdf.

We recently help complete VFCP Application for a sponsor. The amount of the excise tax was about $30 an where it has been under $100 we always give it to the plan participants versus IRS. We still complete the Form 5330 but do not file it. The contact at San Francisco EBSA is telling Sponsor to File Form 5330? Thoughts??

Thanks!

A glitch caused one participant's deferral to be missed for one payroll cycle. The issue was caught within 30 days. Under the new rules client issues notice to employee with no corrective contribution. The plan does not offer match so no missed match. The question is in regards to missed earnings - do we have to determine or track if the employee decides to make a catchup contribution for the missed deferral? Then provide missed earnings. The amount is very small, but the issue in my mind is how would you determine if that the change of salary deferral is a catch up or just a move to save more?? How are other handling this?

If an employer is apart of an affiliated service group and maintains two identical retirement plans would the allocation of QMACS to one group of plan employees but not the other group in the other plan be considered to be targeting? I understand the plans would have to be aggregated to pass testing. I am thinking that this would not be considered targeting, for example if all NHCE's of Company B got the same % QMAC in plan B.

Additional Thoughts - The loan policy does state that the loan shall be repaid through salary deduction. I am not sure if that failure would cause the entire loan to be in default??

This was a concern I had as well. It really depends on how you look at it but in the end the employer was making a loan payment to the participants account. They were not putting in a contribution to the plan prior to a paydate or some un-categorized amount of funds.

I was thinking the same as Mojo. The loan payments need to be counted as income to the participant and the company needs to re-classify their accounting. I agree this is not the correct way to handle a loan repayment. The funds were used to cover payroll not accumulate any benefits. It still should not have been done this way. A general purpose loan can be used for any purpose that the participant chooses assuming the trustee has signed off on the loan. As any loan default should become taxable to the participant that took the loan. Not sure what that point is??

Hello, I have a plan where an owner borrowed money from the 401k Plan to help cover business expenses. They were given instructions to deduct the loan payment from the employee and make regular payments. What actually happened was the company was making the loan repayments on the loan. This has been going on for a year. In need advice in correction: Thought 1) The plan has been made whole, but source of loan repayments were incorrect. Have the company have all loan repayments run them as income to participant and participant can amend taxes and company can amend taxes. Thought 2) Since this was not allowed reverse all loan payments plus gains-losses to company and default the loan for missed payments.

So I have a situation where Company B will be doing an asset purchase of all of Company A's employees. Company B is new structure of Company A. So an assumption of the plan is presumed to be fine. The issue is that the new Company B will actually consist of Company B and C with employees going to different companies both B and C. There is no issue in setting up another plan with the same provisions as the assumed plan for Company C. My question is does there need to be corporate event- transaction to do a asset transfer or trust to trust transfer of some of the participant accounts from the assumed plan to a new plan for Company C after the asset sale is done? Should this be done during the asset sale. It just does not make sense to me to have an assumption and at the same time split the plan assets. It seems to me there should be an order to follow. Step 1 - Assume the plan by the buyer Step 2 - Trust to Trust Transfer for those employees of Company C The other option would be to do an asset transfer from the Company A Plan to new Plans set up for Company B and C. ( All three plans would be exactly the same. Plan is 100% vested already.) In this scenario we would have to terminate Company A's plan after transfer. Other than Board Resolutions and language needed in the asset sale agreement I do not think a 5310-a is needed. Any thoughts on either scenario?

Thanks Lou.

This is a two part question. Does the fail safe language in a document cover a situation where the plan has an hours requirement and or EOY provision and in order to pass 401a4 test I need to increase a participants allocation. My example would be plan is Safe Harbor PS 3% with EOY provision and Employer discretionary. Employee gets 3% and we want to max other people so we need to give another 2% to pass gateway test but since employee terminated he/she would normally not get. Can I just give additional 2% without any resolution or retroactive amendment or is this not a fail safe language issue. Fail Safe refers to coverage and 410b. What actions should be taken to give employee additional 2% if it is not covered under fail safe language. Is this something that an 11(g) corrective amendment should be used for? Thanks in advance

In response to ERISA TOOL KIT I have read text that if a person is a shareholder and not an employee of the company than they are not a Key employee.

I have the situation below: I have determined this is an Affiliated Service Group. Company A Company B Employee 1 Employee 1 Employee 2 Employee 2 Employee 3 Employee 3 Employee 2 owns 0% of Company A and owns 10% of Company B. He is not an officer of company A and is not an employee of company B. Because of required aggregation for Top Heavy is he a Key Employee? I have seen in the regs that a person must be an employee to be a key and therefore he is not a key. I have also seen some language that says ownership will transfer to company A making him a key?? Thoughts?

Thank you. It is definitely only involuntary terminations to determine partial plan terminations. I keep seeing references to all participants so I guess there is no exclusion of otherwise excludable.

Hello, I know this is generally facts and circumstances and the 20% number is based on all active participants as of the beginning of the year plus eligible during the plan year. Can we exclude otherwise excludable from that calculation? I also understand that based on recent comments that not only those participants that terminated in-voluntary but all participants that terminated during a year that is determined to have a partial plan termination are to be given all benefits. Thanks