MGOAdmin

If an active (not a 5% owner) participant is 80 years old and dies during the year, does the beneficiary have to take and RMD? The participant is of RMD age but was not required to take them as they were still actively employed.

Now that SIMPLE plans can allow Roth, can you roll SIMPLE Roth into a 401k Roth? I know regular Roth IRAs cannot be rolled into a 401k plan but couldn't find any rules on SIMPLE plans.

In 2026, if catch-up reclass is required for an ADP test failure, do we need to convert the catch-up to Roth for employees that are HCE due to compensation? What is a plan does not allow for Roth, does the reclassed catch-up get refunded instead?

Thanks for the reply. In your example, it feels like the participant that deferred $15,250 in the first 6 months then deferred $15,250 in the second six months is double dipping when it comes to catch-up. Because he contributed $30,500 for 1/1-12/31, there should be no catch-available to reclass. Just as if he had contributed $30,500 for a plan year 1/1-12/31. Any failing ADP test would result in refunds as no re-class would be available. It seems like the off-calendar plan year is benefiting this participant.

With the new self-certification rules, are there penalties for approving a hardship that is later determined to not be a hardship? Assuming the TPA/Plan Sponsor has no reason to suspect the request doesn't qualify for hardship. It is my understanding that the old rules required the employer to re-deposit the ineligible hardship.

Thanks for the response. My issue is more when the ADP test for the 6/30/24 plan year fails and we have to reclass some of the contributions as catch-up to avoid refunds. Does that reclass decrease the amount that can be contributed for all of 2024? So the maximum for 2024 is $30,000. But if we had to reclass $2,500 of the 1/1/24-6/30/24 as catch-up, wouldn't that mean that $27,500 is the maximum contribution for 2024? Otherwise we would end up with $10,000 of total catch-up for 2024. ($2,500 re-class + $7,500 normal catch-up)

I have a plan that is a 6/30 year end. For this plan, there is 1 participant that always has 401k reclassed as catch-up to avoid refunds. This has not been an issue in prior year, because he never actually contributed catch-up - his 401k for the plan year and calendar year was less than the maximum 401k. For the period 1/1/24 - 6/30/24, he contributed $15,000 and we had to reclass $2,500 as catch-up to avoid refunds. Does this necessarily limit how much we should have limited his 7/1/24-12/31/24 contributions? Is he limited to $12,500 for 7/1/24-12/31/24? If he contributed $15,000, is a refund fo excess deferrals required?

Can a 403b make each participant their own allocation group for non-elective contributions like for 401k plans?

I have conflicting guidance on this issue. So long as a plan allows, can anyone convert all or a portion of their 401k accounts (including all pre-tax sources - deferral, rollover, employer) at anytime? Some suggest that only those eligible for in-service distributions (typically age 59.5) can covert to Roth. Others are suggesting that anyone can convert but only taxes can be withheld for those that are eligible for in-service. This is obviously only an issue for active employees, not terminated employees.

Thanks for the reply. This is what I was thinking but got some pushback from another provider.

As I understand it, if an employee is not offered a 401k plan when they are eligible, as long as their deferrals start within 3 months of entering the plan there are no penalties/QNECs due. What happens if a plan if an employee signs up for a plan but the deferrals don't start until 3 months after signing up. This is dissimilar from the first scenario since the employee is offered and opted in but deferrals did start for a short time. Would a QNEC be due for the employee that signed up but wasn't started for 3 months? The IRS website gives the example of the first scenario where an employee is never offered the plan but I could not find the second scenario.

I am new to 403(b) testing. Can a 403(b) run the ACP test uy excluding all employees that would not have met a Age 21, 1 year with dual entry eligibility? Like we do for 401(k) ADP/ACP testing?

Does a plan have to require self-certification for Hardship distributions? If it is discovered under audit or otherwise that the hardship should not have been permitted (because the employee lied) what is the penalty?

Facts: Company A, owned 100% by Adam has a 401k plan Company B, owned 100% by Bob has a 401k plan Neither company are currently related in any way. They are going to form Company C (33% owners each with a third unrelated owner) starting July 1, 2022. All of Company A clients and employees will move to Company C 95% of clients and employees of Company B will move to Company C. The owner of Company B will be on payroll and Company B & C. The idea is to have Company C take over as plan sponsor of Company A. The question is: 1. Can company B retain their 401k plan and not be related to Company C? The owner would like to keep his assets where they are while all of the employees of B transition to C would roll their money over. 2. Or should Company B terminate 6/30/22 to avoid issues. 3. For Testing purposes, how should this be handled? 1/1-6/30 for A, 1/1-6/30 for B and 7/1-12/31 for C? C do 1/1-12/31 for A employees and 7/1-12/31 for B? any help would be great.

I have a client that is US citizens and lives in the US. He work in the Cayman Island a few weeks a year and picks up the income on his Sch. C of his 1040. Can this income be used towards retirement contributions. I believe it is subject to self employment taxes.

I have a client (Company ABC) that is in the processes of purchasing another company (Company XYZ). It is a Stock Sale set to close on 9/30/21 Company XYZ has a plan but they are terminating before the sale. Company ABC has a plan but it excludes HCEs (except for age 50 for catch-up only) due to failing ADP test. Since it is a Stock Sale, are the HCEs of XYZ, HCEs from day one in ABC? I would think yes since it is a Stock Sale, the employees of XYZ are treated as though they were always employees of ABC. Is there some grace period for those employees? The client is wondering if the HCEs of XYZ would be able to participate in the 401k until 12/31/21. Additionally, if the HCEs from XYZ are HCE after the sale, would they be allowed to roll money into the ABC plan even if they are not 50? The plan does permit rollovers for eligible employees or foreseeably eligible employees. Could we draft an amendment that would allow the under 50 HCEs to roll their retirement into the ABC plan?

Company A has a 401k plan (A Plan) with no safe harbor feature. Company B has a Safe Harbor 401k plan (B Plan). Company A purchases (stock purchase) Company B on July 15th, 2021. Company A wishes to get rid of Plan B either through merger or termination. Termination: 1. If they terminate Plan B are the actively employed participants of Plan B required to roll the money into Plan A? 2. Would the rollover have to be accounted for as the original sources (401k, SH, etc.) or would all the money be considered related rollover? 3. Is Company A required to make Safe Harbor contributions based on compensation earned until July 15, or the date of plan termination? Merger: 1. Would the rollover have to be accounted for as the original sources (401k, SH, etc.) or would all the money be considered related rollover? 2. Is Company A required to make Safe Harbor contributions based on compensation earned until July 15, or the date of plan termination? Is there a benefit or requirement that Plan B be terminated or merged?

I have a client that has 5 entities, all owned 100% by Person 1. A-E. The 401k plan is set up under company A. Companies B-E are adopting employers. Companies A-D are being sold on August 1. They will be 100% owned by an unrelated company from Person 1. Person 1 will still own 100% of company E and the sole purpose of Company E will be to perform management functions for companies A-D. Since there is no common ownership as of August 1 between companies A-D and company E, is E still part of the controlled group? Can employees of company E still participate in the plan either for the remainder of the year, until August of next year or must their participation end on August 1?

I have a potential client with the following facts: Person A owns 73.33% Person B owns 16.66% The remaining 10% is owned by a trust. The Trust is an irrevocable trust where Person A is the grantor and Person A's children (ages 25 & 27) are the beneficiaries. Person A's brother is the trustee of the trust. The children are set to receive 1/3 of the benefit at age 30, 1/2 at age 35 and the rest at age 40. I am trying to figure out if the children's benefit in the trust should be attributed to Person A, creating a controlled group with a separate company person A owns 100%. Any help would be greatly appreciated.

If a wife takes a loan from a 401k plan and passes away before it is paid off, can the husband pay off the loan before the end of the quarter following her passing? Or is it automatically defaulted?

A Client's wife inherited an IRA from her mother in 2017. The wife passed in 2020, so now the husband is the beneficiary of the Inherited IRA. Ignoring the waiving of RMDs for 2020 due to the virus, does the SECURE act now apply and does the husband have to take the full balance out within 10 years?

I have a client (under age 59.5) that wants to buy life insurance with his 401k/Profit Sharing account. He has been a participant for 15 years so I don't think there is any issue with "seasoned money" since the plan document also states that after 5 years this is a non issue. Could I be missing something? Can he use any source to buy life insurance or does it have to be employer sourced since he is under age 59.5?

I have a client that recently sold their business (ABC) to a private equity firm (XYZ). Before the sale the two owners Tom & John owned 50% each. As of 10/31/19, they sold the business to the private equity firm, and the private equity firm took over as plan sponsor. How are the following affected: 1. Are the employees deemed to be terminated as of 10/31 from ABC and hired by XYZ on 11/1? Does this create an opportunity for employees to take distributions that are not 59.5? 2. For 2019 is testing based on the whole year or should it be split between 1/1-10/31 and 11/1-12/31? 3.Is anything else affected by the change? 4.Am I am overthinking this, and is it a situation where for plan purposes, it is as if nothing happend?

Can a US citizen working in the UK as a sole trade (their version on sole proprietor) set up a 401k or SEP based on his UK income? Per the US/UK totalization agreement, the income is not subject to Social Security, but is reported on Sch.C of his 1040. I know we only use wages that are subject to social security but this is an odd situation.

New client has outstanding loans with missed payments. Some loans have not been paid on at all going back a year. I was going to give the following options to the client for correcting. Please let me know if there are any issues with these: 1. Catch up loans for all missed payments including interest and start loan payments on next payroll. 2. Re-amortize loans, with new start date but same end date as original loan so it is still paid off within 5 years of the loan origin. If this is allowed, the interest rate of the original plan was higher than the current so I would re-amortize using the current (lower) interest rate. 3. Have participants take out a second loan for the missed payments, and contribute the money back to the plan and start both loans on next payroll. (assuming the plan allows for 2 loans and the second loan does not exceed the limit based on their balance or $50k) 4. Have 59.5 employees take in-service distribution (trued up for taxes) for missed loan payments, and contribute the money back to the plan. Note: none of these loans are for HCEs.