MarZDoates

Thanks everyone!

Plan sponsor switched recordkeepers mid year. During first part of the year, participant took $100,000 covid distribution from recordkeeper before transfer to new recordkeeper. Participant went directly to new recordkeeper and requested $30,000 Covid Distribution. New R/K processed distribution without approval from plan sponsor or TPA. Recordkeeper relied on participant’s self certification. Am I correct that in order for the plan to remain in compliance, the $30,000 adjusted for earnings needs to be returned to the plan by the participant as an “overpayment”? (Participant not otherwise eligible for an in-service distribution. Not term’d. Not 59 ½.) Participant does not have the money to put back into the plan. Who is responsible for returning the money?

Yea, that's what I'm thinking and overthinking too. Thanks!

Plan effective date 1/1/2020. Safe Harbor Non-elective component effective 10/1/20. All employees met eligibility requirements as of 1/1/20. (No mid-year entrants.) Plan document says “Compensation shall include only that compensation which is actually paid to the Participant during that part of the Plan Year the Participant is eligible to participate in the Plan.” Does that mean I use full year comp for Safe Harbor Non-Elective contribution? Or only from 10/1? What if plan sponsor wants to allocate a discretionary Non-Elective contribution in addition to the SHNEC? It would be based on comp for the whole year. Is it a problem if I use two different definitions of comp…whole year for p/s and part year for safe harbor? I've got myself confused....since the employees were participants on 1/1, I'm now thinking I should use comp for the whole year for both. Comments are appreciated!!

My concern is that the 5500 was filed without the box being checked.

Is there a way to check to see if a late 5500 was through DFVCP? I can see on the EFAST website that the filing was accepted (late), but I don't have a record that it was filed through DVFCP confirming payment of the $750 fee.

The plan document permits forfeitures to reduce employer contributions or pay plan expenses. We haven’t issued the certificates yet, but the 2019 certificate will show $0 beginning balance plus $800 contribution = $800 total value, $0 vested value. The assets are in a pooled account with balance forward accounting. The amendment reads: “The accounts of the participants in the Plan shall be 100% vested as of the date of the plan termination.” My initial thought is that they should be fully vested. Then I may be overthinking.

Two participants terminated employment in July, 2019. They are zero% vested. The plan document says if participant’s vested account balance is zero, the participant is deemed to have received a distribution. (Plan allows for “immediate” distribution upon termination of employment.) Document further says that participants receiving a distribution shall forfeit the non-vested portion of their account as soon as administratively feasible after distribution (but no later than end of plan year during which distribution occurred). Plan sponsor decides to make a profit sharing contribution for the 2019 plan year. It’s new comparability with each person in their own class. The goal is to maximize the owner’s contribution. In order to do so, the terminated eligible participations require an allocation to pass non-discrimination. Plan does not have a last day or hours requirement to receive an allocation. Contribution has not been deposited into the plan yet. Under normal circumstances, I would think the contribution needs to be deposited to the plan, but since they term’d with zero vested balance, the amount can be forfeited. Here’s the kicker: Sponsor is terminating the plan in 2020. One thing I read is that anyone with an account balance is fully vested upon plan termination. Do these term’d employees have an “accrued” account balance? The other thing I read says “In General Counsel Memorandum 39310 (1984), the IRS ruled that participants who separate from service and are paid their vested accrued benefits need not become further vested if the plan terminates.” Should the two terminated participants become 100% vested in this instance?

We just heard from the plan sponsor. They did give him the option to elect out. So it was not their error.. Deferrals started in October, 2019 and ended on when he terminated employment in December, 2019. I think he is just trying to cause trouble. He can take a distribution. It's like $100. Thanks

Plan has a traditional automatic contribution arrangement (no EACA or QACA). Eligible participant states that he signed an election form for 0 deferrals, which plan sponsor did not implement. Plan sponsor continued to deduct and remit deferrals. Is there a fix for this? Can the deferrals be distributed to the participant if there has not been a distributable event? I’m not seeing this in EPCRS.

I’m confused. Plan is a safe harbor 401(k) using an automatic contribution arrangement to satisfy the 401(k) safe harbor requirements. Plan sponsor failed to implement an employee’s affirmative election. I’m reading EPCRS. One part says that the plan sponsor has to make a QNEC. Another part says that sponsor does not have to make a QNEC if the failure was corrected within 9 ½ months after the end of the plan year. Does this “special safe harbor correction method” apply to traditional automatic contributions only? Or does it apply to QACA arrangements.

I have a new question that goes along with this thread: More than 5% owner attains 70 ½ in 2019 (first distribution calendar year is 2019). He can defer is first RMD until 4/1/2020. However, the plan is terminating 9/30/19. He wants to roll his balance to an IRA. Wouldn’t he need to take his RMD before rolling to the IRA?

One of our clients received a letter that their extension was granted. We did not extend it. 5500 was filed in May.

Wouldn't that be nice. We have seen two letters come back so far showing the tax period as 2/28/19 (for CALENDAR YEAR plans) and granting extension until 12/15. What's going on with the iRS anyway?

Thanks everyone!

If a plan sponsor has already paid the CPA for their 401K Plan audit, can the plan reimburse the plan sponsor for those costs from the forfeiture account? Or must the fees be paid from the plan's forfeiture account directly to the CPA firm that audited the plan.

Plan sponsor terminated their SIMPLE IRA plan 12/31/18. They started a new 401(k) effective 1/1/19. Employer just now realizing they missed depositing SIMPLE deductions/deferrals for payrolls occurring in December, 2018. Will it violate the exclusive plan rule to deposit the SIMPLE deferrals now (in 2019) along with lost earnings? I'm thinking "no" because we are correcting late deposit of deferrals for 2018. I'm probably overthinking as usual. Any input greatly appreciated!!

Yay. Thanks

Similar question has come up for me. Plan year and plan sponsor tax year end 12/31/2018. Plan makes 3% SHNEC contributions to satisfy ADP/ACP Test Safe Harbor. It is my understanding that in order for the contribution to satisfy the Safe Harbor requirements for 2018, the SHNEC must be deposited by 12/31/19 (12 months following safe harbor year). Plan sponsor won’t get the deduction for 2018 if they wait that long to deposit and they do not want to deduct this on their 2018 tax return. They DO want to deduct it on their 2019 tax return. If I’m reading this thread correctly it sounds like that is permitted. (Assuming their 2018 AND 2019 safe harbor contributions ((plus any other employer contributions for 2019)) combined do not exceed 25% of 2019 comp) Is this correct? Thanks in advance!

Thank you very much!

Suppose a bank or financial institution offers to provide preferred commercial lending rates to a retirement plan sponsor if that sponsor moves their 401(k) plan assets to the financial institution. Can anyone point me to any white papers or articles discussing this topic? Thanks!

I understand that the determination date for top heavy is the last day of the first plan year (for a new plan year). If the plan is top heavy as of 12/31/18, the employer doesn't have to make a minimum contribution until the 2019 plan year, right?

Yea...that's what I was wondering. Thanks for the input

Employer is negotiating with a prospective new hire. Is it possible to amend a prototype document to allow this individual to enter immediately so long as the individual is not or will not become an HCE? It is a safe harbor 401k.

Thanks everyone!