justanotheradmin

I agree its done a lot more than it should be. How to address it the way Rose proposes isn't something I'm familiar with because I refuse to entertain the idea and whenever it comes up I send it back to the CPA and have them tell me what to use because I refuse to figure that calculation out.

No it doesn't sound familiar because LLCs with pass through SE taxation are not supposed to issue W-2s. Period. The only time I see that is when an existing employee is becoming a partner mid-year. See Revenue Rulings 69-184, 81-300, and 81-301. An individual cannot be both an employee and a partner for employment tax purposes. I would confirm with the CPA that the LLC does not have an S-Corp election. If they confirm then have them tell you want to use as compensation. It's their issue.

how would this be reflected on the Form 5500? The closed MEP files a single form 5500. The participant counts as a whole are all above 120. A schedule H would be required, no? And there is no place on the Schedule H to claim the small plan audit waiver.

Thanks Luke!

What is your relationship to the plan? Are you the TPA? Advisor? Do you provide recordkeeping services? Was your office the one that processed the reversal? Honestly at this point I'd probably resign. The client should have been told about ADP and TH testing (perhaps they were and it just didn't register) and if they are committed to doing it correctly (they can't even bother to take out earnings correctly?) which the money never should have been removed its an issue. and FYI 5500 are often on accrual basis. The schedules even have lines specifically asking about receivables and liabilities.

This is a very common error and falls under "Missed Deferral Opportunity" Typically a QNEC and lost earnings are calculated and deposited, and there is a make-up for any missed match. You will want to read Appendix of Revenue Proc 2021-30 https://www.irs.gov/pub/irs-drop/rp-21-30.pdf More general information about EPCRS is available here: https://www.irs.gov/retirement-plans/epcrs-overview

Closed MEP 401(k) plan. Can an audit be avoided if the individual entities are each below the participant count threshold? The MEP as a whole appears to be over the audit count threshold. I confess my ignorance, I've only had experience with small MEPs, usually former control groups that became not-a-control-group but still worked together. I have seen some MEPs do individual 5500s for each single employer, does anyone have any rules or reading I can do on this topic? Would filing each entity under a separate 5500 alleviate the audit requirement? If there are other threads or reading material on this question specifically, please point me in that direction. I do understand the Form 5500 has an updated MEP attachment, which I think I understand fine. My question isn't related to that. Thanks everyone!

This may have changed recently to be more consistent, but my limited experience the last few years is that whether or not all the interim documents and amendments are needed seems to be up to the discretion of the assigned IRS agent for the VCP review. I have had some just take the updated document and run with it, and other who wanted the plan to adopt everything in between (EGTRRA, GUST, TEFRA etc). In those cases it was much more work to create and provide those intervening restatements.

Unfortunately I can't help with Plan Premier, but I perhaps have a different suggestion? A pivot table in excel, done by someone who has some data scrubbing experience, with some rules thrown in about which dates to use if there is more than one (min, max etc) might get a single coherent census, in a couple of hours. I'm also surprised Relius don't have conditional importing of data points as an option. Something like, import rehire date unless the date in system is older. Or the ability to import and combine for things like compensation, as opposed to overwrite.

Because it's an employer contribution, and all employer contributions are pre-tax. Roth is a specifically made at the election of the employee. You can choose to convert it to Roth (and pay the tax on it). Roth is §402A, completely different section of the tax code than employer contributions. There is no provision under 402A that allows for QNEC.

I figured it out! just took a few minutes!

I think all the major recordkeepers will do that. At least I've never seen one turn it down. Assuming someone else (TPA) is doing the actual admin on the combos. American Funds Recordkeeper Direct, Principal, Nationwide Transamerica, John Hancock, OneAmerica, Lincoln etc The cash balance plan would typically have a single account, its own contract #. The 401(k) would have the regular recordkeeping for each individual participant (if participant directed).

I have been reading through the text, as well as some articles on the credits. My question is specifically about the start-up plan employer contribution credit (not the admin cost credit or auto enroll etc). I understand it creation is through an addition /modification to §45E. One ASPPA article in particular says this: *If the employer maintained a 401(a), 403(a), SIMPLE, or SEP plan in the three taxable years immediately preceding the tax year in which the plan is adopted, the employer cannot take a deduction for the year of adoption, but is eligible for tax credits in the next four tax years. https://www.asppa.org/news/where-credit-due-tax-credits-small-employer-plans-under-secure-20 Can some explain where that reasoning comes from? If I have a SIMPLE for a year, then terminate and switch to a 401(k), wouldn't I be precluded for the first three years of the 401(k)? And is there clarification somewhere about how to apply this credit if I maintained (but discontinued mid-year) a SIMPLE or one of the other types listed in the ASPPA article? Just because I'm in year two of my new 401(k) plan, I would have still had a SIMPLE in the preceding 3 years, so how would I be an 'eligible employer'? I'm sure there is something simple I'm overlooking or understanding. Thank you for your insight!

Is the "non-eligible pay" defined in the plan document? you mention that plan compensation is based on W-2. If the "non-eligible pay" is reported on a W-2, and the document does not exclude it specifically, sounds like you need to include it. More than once I've had employers operate plans by excluding certain types of pay, certain classes of employees, etc, but if those exclusions aren't in the written plan document, and also passing testing, they need to be part of the plan. Just having it in a handbook, or mentioning it upon hiring, etc, or just have it written in HR isn't enough.

Short Answer: Yes, a mid-year change to the safe harbor generally requires 30 days notice, and accrues through that date. In addition to the amendment (which would be accomplished with the update onto the restated doc). Long Answer: what provisions are unnecessary? Is the Safe Harbor NHCE only? Are you wanting to change the EACA and cross-testing as well? He has a solok. The fact that it has provisions he might not use doesn't make it not a solo k . If the only two people eligible are him and his spouse, that's a owner only plan. Doesn't matter what the document is marketed as. Solo K is a marketing term, not a technical term. How is everything max out already based on 25% of W-2? Most people don't have final W-2 wages until December? are they at 415 limits for the year? Individual grouping (the cross testing) is super handy if the deposits don't occur exactly pro-rata. As long as testing passes they can be differing %. I'm guessing the EACA was put in for the tax credit, even if its never used. Hopefully the service requirement is 1 year, I've seen way too many employers think they will never hire someone and they do and that person is immediately eligible because that's how the plan is written. Having safe harbor to NHCE only also tends to help with this just in case it happens.

The IQPA audit is completely separate from the IRS audit. The IQPA audit is performed by CPAs that the plan hires. Its not the same as the audit being done by the IRS. What plan year is the 5500 rejection letter for? What year is the IRS auditing? I agree with Lou S. - if the IQPA isn't being released because those auditors want to see the IRS audit resolved first, I suppose that's possible. But I don't see how that is going to speed things up with the IRS. Their stance would probably be along the line of "well the IQPA audit should have been done months ago before our audit even started, not our problem"

What does the plan document say? if the plan is a preapproved document there would almost certainly be a section (perhaps in a basic plan document) that governs. But generally yes, it ends up being cashed out to the Estate, and then it goes to whoever takes the estate. It is not eligible for rollover to any inherited IRA in that circumstance.

Thanks Lou. I'll see if a letter with that language (and the plan name and participant name etc) appeases the gods of the distribution services center

oh, I completely agree. but I don't see how arguing with an entry level customer service at Fidelity or anywhere else is productive. And since it seems to be coming up more frequently lately if there was some insight someone would have to help me appease the checklist that the receiving plan provider is using, I'm happy to try to do it. If they want a hand-drawn picture of a unicorn from a kindergartener and that's the only thing that would do, I would start volunteering at a local school to see who can draw a unicorn lol

Several times recently, distributions have been requested where the receiving retirement plan or IRA has requested a "qualification letter" from the sending plan. Sometimes the receiving plan is appeased with a copy of the IRS opinion letter, other times there is pushback. There is one right now where Fidelity is insisting the Opinion Letter is not what they want (the sending plan is not audit sized, so there is no audit statement, and while the assets are held with a custodian that does recordkeeping, not all plans pay extra for a certified trust statement either). What do they mean when they say they want a qualification letter? The receiving plan provider can't seem to articulate it, and it is holding up distributions. I don't think the sponsor (who is the named Plan Administrator) minds writing a letter saying they believe the plan to be qualified. They would be happy to. But is that what they want? At one point a receiving plan was saying the letter had to cover the qualification of the plan for this year (they didn't like the date on the opinion letter I guess, among other things). Anyone have a good resource or article or something that can help me understand?

I would think the match formula would have to retroactive to the beginning of the plan year (Jan 1 if calendar year), and on a full year basis. The removal of the auto enroll would have to be prospective (July 1 in your example) I would think. it does not address the auto enroll question you have, but example 2 speaks to the match increase. https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-plans-or-safe-harbor-notices I am undecided on the auto enroll part, which of course is linked to the match when its a QACA. I hope brighter minds give you their take.

tacking on to the funeral example: What say all you wonderful people? Facts: Funeral was 12/1/2022 Funeral expenses were paid via check (don't know who) on 12/19/2022 Participant is presenting now (two weeks ago, early May 2023) request for hardship. I know its facts and circumstances - Some possible analysis: 1. Its within 12 months so its okay to approve? 2. it was paid in cash so the credit card example doesn't apply, and since they were able to come up with the cash, there is no financial need and it should be denied? 3. Even if the participant gave a self-certification that the plan would typically accept (if following the update in SECURE 2.0) the plan admin has actual knowledge (see item 2) that there is no immediate and heavy need, so it should be denied 4. If the participant gives the full self-certification under SECURE 2.0 the plan admin should just call it good and approve 5. Something else?

A couple of thoughts - how many of the HCE are presently maxing out on Roth Deferrals? Are there employer contributions (match, nonelective ) made each year? If so, are the HCE converting those amount each year? The employees that are already taking full advantage of the existing provisions are the ones likely to utilize the after-tax contribution --> roth conversion option. It has not passed, but there have been proposals around doing away with the ability to convert voluntary after-tax dollars to Roth dollars, so while I don't know the likelihood of any of those gaining traction, I wonder if if it worth adding the provision if folks think it might go away in a few years. FWIW - I often see these types of provisions in owner-only plans where ACP testing is a non-issue. So not only for large plans. And personal pet peeve: I hate the term "mega backdoor Roth conversion" I know you didn't make it up, so not directed at you. It's 100% a marketing term and just an in-plan Roth Conversion.

Why was the 401(k) plan frozen and not terminated outright at that time?

I just recently (last month) had a very routine VCP submission resolved that was submitted in January of 2022. As far as I know it wasn't looked at until February of 2023. So I think they are working through the backlog, but it will take some time.