Flyboyjohn

Your reference to "Client" (capital C) makes me wonder if there is a Mr./Mrs. "Big" who really controls the whole show but there are other nominal owners that might keep it from meeting the definition of a controlled group. If in reality "Client" controls the situation and is content with treating it as a controlled group for qualified plan purposes have you considered making it a controlled group through the use of options whereby "Client" is deemed to have the requisite ownership?

See Section 103(a) of the Setting Every Community Up for Retirement Enhancement (SECURE) Act which is Division O of the Further Consolidated Appropriations Act 2020 (FCAA) attached entitled "Limitation of Annual Safe Harbor Notice to Matching Contribution Plans" SECURE_Text.pdf

SECURE permits retroactive adoption of qualified plans during tax return filing period beginning with 2020 tax years. Obviously can't include retroactive 401k deferrals for corporate employees receiving W-2s. But given the long running debate over the "deadline" for self-employed proprietors and partners to make 401k deferrals has anyone considered whether the new provision will allow self-employed to make retroactive 401k deferrals? For example, some practitioners take the position that 401k deferrals can't be elected or deposited until the amount of self employment income has been determined which can be as late as the extended due date for the tax filing. So could a "solo K" be adopted by a proprietor on 10/15/2021 to create a 2020 tax deduction?

Taking care of your children is not a trade or business and your nanny does not have to be covered by your 401k plan. What we see more often is the opposite situation where the business owner puts the nanny, gardener, pool boy/girl on the company payroll in an attempt to get some inappropriate tax deductions.

Ugly IRA excess contribution situation over 18 years and potential $400K excise taxes. Is there a person or department at IRS we could approach to make an anonymous VCP-type application proposing corrective action? Thanks

We've been very successful in reducing/eliminating ESRPs in cases where the ALE made errors in determining and reporting full-time employees on the 1095-Cs or made errors in reporting offers of coverage on the 1094-C. If there's any possibility your client made errors in their reporting feel free to call me at 757-624-3003. If your client simply ignored the employer mandate and the proposed ESRP appears to be correctly calculated your only remaining option is to try the nuclear option (which we haven't had to use yet) of claiming that the ESRP is invalid either for failure to provide the employer with the section 1411 certification or that the entire ACA is unconstitutional per the case pending in the 6th Circuit.

I think the IRS MLR FAQs require a 1099-MISC if the amount is over $600 IRS MLR FAQs 10-07-19_17830395(1).PDF

Luke I agree with your analysis on the income tax impact but now as more examples come in we're seeing situations where the amount of rebate exceeds the amount the individual actually paid (net of the PTC). For example, an individual's actual premium payments were only $1,200 and they received an MLR rebate of $2,500, does this situation change your view on non-taxability of at least the $1,300 excess even if the individual didn't deduct the premiums? I still believe there will be some blow-back with respect to the PTC but can't fathom how that will occur, maybe we'll get some guidance from IRS.

Taxpayer purchased 2018 health insurance policy from ACA Marketplace costing $1,000/month but qualified for advance payment of Premium Tax Credits of $600/month which reduced his actual net premium to only $400/month. Insurance company failed to meet Medical Loss Ratio and sent Taxpayer an MLR rebate of $1,800 (15% of total gross premiums of $12,000). Doesn't seem right that the Taxpayer received 100% of the MLR rebate while he only paid 40% of the premiums. Anybody have an opinion on how this will shake out from a tax/PTC perspective?

For welfare plan 5500s focus on the number of participants in the "Plan", the number of employers/entities is irrelevant. Remember that "participants" for this purpose is the number of employees actually enrolled in coverage (don't count spouses or dependents or employees eligible but not enrolled). So it sounds like you need a 5500 for the 140 participant plan but not the 22 participant plan. I assume you're referring to section 125 cafeteria plan testing on the pre-taxed employee contributions but can't help with that question.

True that this is a high pressure sales tactic but False that it's a legal requirement.

Sounds like you would not be filing "corrected" forms but instead would be filing "correct" forms late which will only serve to totally confuse the IRS 1094-C/1095-C processing systems. Best to wait for the inquiry from IRS and be ready to promptly respond with the "correct" forms and highly likely IRS will abate any non-filing or late filing penalties.

There are 2 flavors of SIMPLE IRAs, those using a "Designated Financial Institution" or DFI (see IRS Form 5305-SIMPLE) and those not using a DFI (see IRS Form 5304-SIMPLE). When the financial institution (ML in your example) agrees to be a DFI then the employer can require that all contributions must go to ML SIMPLE IRA accounts which obviously avoids the hassle of the having to send contributions to multiple institutions. However, when the investment institution won't agree to be the DFI (most won't accept the extra obligations imposed on DFIs) then the employees have the absolute right to open their SIMPLE IRA investment account anywhere they want. This "right" is never mentioned during the enrollment process and as a practical matter the EEs are led to believe that if they want to participate they must open their accounts with the advisor doing the enrollment. Even where a DFI exists and all contributions initially go into the accounts with the DFI the EEs also have the right to transfer the amounts to a different SIMPLE IRA at any time and "without any cost or penalty to the participant".

Thanks Luke and I agree under the mandatory disaggregation rules I can do what I'm trying to accomplish within a single plan.

Can I allow union employees to make elective deferrals but exclude them from the safe harbor match or do I have to set up a separate plan for them?

Are you sure the 410(b)(6) transition rule applies when you're not dealing with 2 qualified plans? Also note that the 408(p)(10) transition rule for SIMPLE IRAs provides a longer transition period (end of 2nd calendar year after calendar year in which the offending transaction occurs)

If there were over 100 eligibles on the first day of the 2018 plan year I'd love to see the CPA audit report for the zero activity 5500.

Disagree, with no assets (including accruals) for 2018 the Trust didn't legally exist in 2018 and without a Trust there was no valid Plan so I would skip 2018 and reflect 1/1/2019 as the true effective date on the 2019 initial 5500 filing.

Filed one on May 8 and rec'd compliance statement June 16, amazingly fast but it was a SIMPLE IRA issue so maybe the folks handling SIMPLEs aren't real busy.

Definitely recreate plan documents and submit under VCP, done all the time with usually rubber stamp acceptance.

An employer can only contribute for its own employees and a contribution for an employee of another employer would violate the exclusive benefit rule. To be tax deductible plan contributions must be an "ordinary and necessary" business expense of that taxpayer and a contribution for a non-employee can't meet the O&N standard. However, in the H&W situation you posit I might document the contribution as a loan from W's corp to H's corp and take the deduction on the H corp tax return.

If you've corrected the employer SIMPLE IRA eligibility failure by stopping contributions and making the required VCP filing then I believe there's no problem establishing the 401(k) effective for 2019 so long as you take into account the SIMPLE deferrals in your 402(g) testing.

So if amounts contributed during an employer eligibility failure (if within legal limits) are NOT excess amounts then the only adverse ramification is the IRS user fee and the cost of preparing the VCP application. This could be particularly helpful in a situation where the employer wants to change from a SIMPLE IRA to a 401(k) mid-year since the cost of "blowing up" the SIMPLE IRA is relatively modest.

I've discovered hiding in plain sight a VCP correction for a SIMPLE IRA maintained by an employer who became an ineligible employer by exceeding the 100 employee limit in 2 prior years. The correction appears to allow the contributions to stay in the SIMPLE IRA accounts but also appears to require an additional sanction of at least 10% of the "excess amounts" plus loss of the employer deduction for the "excess amounts." My question is what are the "excess amounts"? If none of the contributions exceeded the employee deferral limits or the employer contribution limits does that mean we have no "excess amounts" and no additional sanction?

To be deductible, retirement plan contributions must be "ordinary and necessary" business expenses under IRC 162. So IMHO the contributions for the self-employed owners must be deducted on the tax return for the entity that produced their self-employment income (or split proportionally if they received SE income from both entities).