Belgarath

"1. The two examples apply to the personal income tax returns of residents of the State of New York." I doubt it. It's a little too convenient for both of these to have precisely the same numbers if they are actual returns. These are almost certainly hypothetical examples, which is fine to illustrate a point, but I still want to know the source of the "Tax scandal that will not quit" that you posted. Who wrote it? And when? Blog, newspaper article, whatever? Someone obviously has an axe to grind - maybe legitimate, maybe not. I have no opinion on that. Anyway, what Bill said!

Deleted. I originally didn't look at the title of the forum here, and mistakenly assumed it was 401(k) deferrals, so my comment was inapplicable!

Could you please give a citation for the source of your examples? Assuming it isn't official guidance from the governing tax authority with jurisdiction over NY state income taxation, (and it sure doesn't sound like it is!) I don't see how it is applicable to anything. Could be a completely worthless opinion - just like mine! And FWIW, (nothing) I agree with QDRO and CB's comments. For anyone who is interested, I have copied in below the language from the publication cited in the OP. Sorry, but I couldn't get the formatting to transfer properly. Pensions of New York State, local governments, and the federal government Qualified pension benefits or distributions received by officers and employees of the United States, New York State, and local governments within New York State, are exempt from New York State, New York City, and Yonkers income taxes. This subtraction modification is allowed regardless of the age of the taxpayer or of the form the payment(s) take. 11 Publication 36 (3/15) This subtraction modification is allowed for a pension or distribution amount (to the extent the pension or other distribution was included in your federal adjusted gross income), including a distribution from a pension plan which represents a return of contribution in a year prior to retirement, as an officer, employee, or beneficiary of an officer or an employee of: • The United States, its territories, possessions (or political subdivisions thereof), or any agency, instrumentality of the United States (including the military), or the District of Columbia. • New York State including, the State and City Universities of New York and the New York State Education Department, who belongs to the Optional Retirement Program. (Note: Optional Retirement Program members may only subtract that portion attributable to employment with the State or City University of New York or the New York State Education Department.) • Certain public authorities, including: the Metropolitan Transportation Authority (MTA) Police 20-Year Retirement Program; the Manhattan and Bronx Surface Transit Operating Authority (MABSTOA); and the Long Island Railroad Company (LIRR). • Local governments within the state, including, but not limited to: • New York State (NYS) Teachers’ Retirement System; • New York City (NYC) Teachers’ Retirement System; • NYC Teachers’ Retirement IRC 403(b) plan; • International Union of Operating Engineers Local 891 Annuity Fund (Department of Education of the NYC School District); • NYC Superior Officers’ Council Annuity Trust Fund; • NYC Correction Captains’ Association Annuity Fund; • NYC Detectives’ Endowment Association Annuity Fund; • City University of New York (CUNY) Civil Service Forum Annuity Fund; • Sergeants Benevolent Association of the City of New York Annuity Fund; and • NYC variable supplemental funds (VSF), including: • Transit Police Officers’ VSF, • Transit Police Superior Officers’ VSF, • Housing Police Officers’ VSF, • Housing Police Superior Officers’ VSF, • Police Officers’ VSF, • Police Superior Officers’ VSF, • Firefighters’ VSF, • Fire Officers’ VSF, • Corrections Officers’ VSF, • Corrections Captain and Above VSF.

Thanks John - that's what I was getting out of 2020-86, but I was afraid I was missing something...

I agree with Mojo. In my simplistic viewpoint on this, it is just an overpayment due to an incorrect calculation of vesting percentages. No different from a situation where someone should have been (x)% vested, and instead was incorrectly paid 100%. Same correction. Good luck getting the money repaid from people who weren't rehired. (And even some who were.) Some may, but my experience is that for most employers, the hassle (unless the amounts are really large) is such that after the initial communication, they quickly determine that the amounts cannot be collected without excessive expense or aggravation, and they just pony it up themselves.

I'm not entirely clear on this. Say in 2020, a SH Nonelective plan was amended to remove the SH. Now in 2021, the employer wants to reinstate the SH for 2020. This is ok. But, is the SH now required to be 4% (since it is retroactive to the prior year) or can it be 3%, since it is reinstating the 3% nonelective that already existed but for the prior amendment? edited to remove an inconsistency in original post

Thanks all. Helpful comments.

Thanks Luke.

Kind of a convoluted question, and I don't have full information available. 1.403(b)-5(b)(4)(ii)(B) provides that you can exclude employees who are eligible under a 401(k) plan of the employer. (my emphasis) The Employer sponsors a 403(b) plan which excludes union employees. Now, the union employees can defer into a 401(k) plan. I don't yet have information here, but I don't have much contact with union plans. I'm not sure if the employer is technically the plan sponsor, or if the union is the plan sponsor. Does it really even matter? If the employees are eligible to defer into the 401(k) plan, doesn't the employer have to be a "participating employer" in the union plan in order to even submit deferrals on behalf of the employees? Also, what happens if a collective bargaining agreement excludes union employees, but there ISN'T a 401(k) Plan? This would seem to require e change in the CBA, or the 403(b) plan is in violation of the universal availability requirements. Anyone ever seen such a situation? This question is theoretical, as thankfully I haven't (yet) encountered this.

Seems ok, but smells funny. Medical practice hires a new Doctor, NOT as an owner or partner. Plan has 1-year eligibility for everything but they want to let this Doctor in immediately. Amends plan to credit service with prior employer so that Doctor enters immediately. This Doctor will not be a HCE for 2021, as there is no lookback year comp, so it doesn't technically seem discriminatory. Thoughts?

Interesting question! Purely based upon my personal IRA, there was no such requirement. But there are 49 other states, and thousands of investment vehicles/funding companies for IRA's, so I'll be interested to hear what others have to say.

I'm with Bill, since I'm a coward at heart with regard to disclosures. Although there is no civil penalty for failure to provide, there are (last time I looked) possible criminal penalties for WILLFUL failure to provide. Although most would disagree, I think I'm too pretty to spend time in prison... All kidding aside, I think any potential for trouble isn't work the risk, for what would generally be a limited number of former participants in this situation. And putting myself in the Participant's shoes, it isn't IMPOSSIBLE (although quite unlikely, since participants neither read nor understand this stuff) that there might be something there that might bring into question something about the distribution. All that said, I'd have to say that the "risk" of not providing it is pretty small.

Perhaps administrative sanity? A relatively small school system (small by national standards) - without some limitation, might have to have payroll slots/deductions for for dozens and dozens of companies (my sister-in-law is in the business and I want to invest with her). Then information sharing agreements, the inevitable problems with calls from participants who SHOULD be talking to the investment company, but always call the School's HR people, the problem with no one wanting to certify a QDRO, etc., etc., etc. I can see why an employer would want to limit the choices to a "reasonable" number.

So, plan termination date is 9/30/2020. They will now be restating to the new Cycle 3 document, to keep everything clean. What date would you use as the restatement date? 9/30/2020? Other? I'm not really sure on this. Ultimately may not matter that much...

Wow, that's a blast from the past. Family aggravation (er, aggregation) - was that for HCE status? Although I have flushed this from my memory, clinging shards seem to remind me that this was for maximum contribution levels - I don't necessarily recall that it was for attribution for HCE purposes. But I'm working with a pretty dim bulb on that. Thankfully, all I really care about is that it is long gone!!

Yes, sorry, I got my 48 and 38 backwards! So yes, possibly an underpayment. I see C.B. already provided you a much more complete answer!

I think he meant to say "do not exclude Key" - perhaps?

All remarks here are off the top of my head with no further research, so take it with a healthy dose of skepticism... First, I believe the "less than 10 years younger" is referring to calculation of Required Minimum Distributions, not the calculation of a J & S payment of a defined benefit. Yes, I believe it is possible that it could affect the amount of payments. Now, it is possible that the amount was correctly calculated, and the payment is actually correct, but they just have a wrong DOB in their records somehow. But it it is also possible that the amount was incorrectly calculated based on the incorrect DOB, and that your father was overpaid for 30 years. The plan may attempt to recoup overpaid amounts by reducing future payments, for example. I'll defer to some of the DB experts (I am NOT one) and attorneys to flesh this out more with additional details and more informed opinions.

Again, speak to a local TPA. These boards are helpful, but are no substitute for a qualified professional actually looking at your document, etc., and making informed recommendations.

You certainly can establish a profit sharing plan and just exclude owners. You can, if you wish, make it a 401(k) plan so that your employees also have an opportunity to defer. Talk to a local TPA, who can guide through the best options. Yes, you can contribute to the SEP and withdraw, but there may be fees/loads for doing so. I do cringe when I hear things like "old unused Keogh plan." Does this plan have money in it? Have you kept it up to date with document amendments and restatements, etc.? Are you filing 5500 forms if applicable? I just mention this as an item you should be aware of, and make sure all is ok. Again, I recommend you speak to a local TPA. Your situation doesn't sound complicated.

Such a good point! This gets missed a lot - gets pretty tricky sometimes, which is one of the many reasons why we always refer them to ERISA counsel.

Looks that way, although it still feels strange. Perhaps if the IRS issues an updated Rev. Proc. for EPCRS they will address this a bit more specifically.

They can't terminate, distribute the deferrals, and establish a new plan without satisfying the successor plan rules under IRC 401(k)(10)(A). I agree with Bill - what they want to do is silly. Possible their current document, being a "solo k" document (that term drives me crazy) may not have the provisions they need, so the solution is NOT to terminate the plan, but to amend (or restate, if necessary) their EXISTING 401(k) plan. P.S. - the regulation may be rather more illuminating. 1.401(k)-1(d)(4).

I'm just speaking off the cuff here without looking into it further - if your pan has this "fail safe language" then I think you are stuck. But if it doesn't have such limiting language, it seems to me that 11(g) doesn't limit you in such a manner. Perhaps the corrective amendment (which would most likely be nondiscriminatory - I assume you are talking generally about NHCE's) could say you will remove the allocation conditions for all participants who worked more than (x) hours - or something along those lines. Don't know if others will agree - again, this is without any investigation on my part. Caveat Emptor!

So you want to know how NESE can be less than guaranteed payments? 'Cause earned income also takes into account the partner's distributable share of partnership income that ISN'T attributable to guaranteed payments. This could be a loss. Also adjustments mentioned by C.B. above. Is this common? Not in my experience. But it happens.