justanotheradmin

thanks Bird. I did miss that. Does the P.C. shareholder receive a W-2? So the 2017 W-2 box 12 shows more than $18,000? (or 24k if over 50?) - Ignoring the fact that the deposit was probably late if it didn't occur until 2018- the result is a simple - 402(g) excess. Corrective distribution for the excess, plus earnings, plus 1099-R. it gets paid out to the principal. The 1099-R taxable amount counteracts the excess in box 12 on the W-2. Earnings probably taxed current year. Probably needs to happen ASAP (April 15) though to avoid double taxation.

We are a scrivener. As to why the employer is involved - well the loan payments would be processed from pay, and the employer remits the payments to the trust. So the ER is involved every time a payment is made. Some employers are very traditional / paternalistic / conservative and this one clearly wants to discourage loans to the point where I think it is going to end up hurting NHCE. Allowing a provision that ends up hurting plan participants is counterproductive to me.

Assuming there is reasonable compensation, how can a sole proprietor have excess deferral? There is no W-2 to offset a 1099-R corrective distribution of a 402(g) excess. Wouldn't the SP just claim less as deferral, just the 18K on their taxes? Wouldn't the extra just be reclassified as a mis-directed / over deposit? I agree the money should not be removed from the plan, - under the principals of EPCRS once deposited to the trust, absent a specific distributable correction, it should remain in the trust, and be allocated. If the deposits all occurred in 2018, why can't the excess be counted as his personal deferral for 2018? Has he already made the maximum 2018 deferral deposit? As to why making his match deposit before everyone else's - its a discrimination issue - he as the HCE would get the benefit of the investment gains / losses, he could count it if considered an allowable loan, etc. None the NHCE get the same benefit. If anything his match deposit should always be last because his compensation as a SP isn't calculable until after year-end. If his employees receive W-2 based compensation, they could in theory receive the SH Match on a per paycheck basis, and then an annual true-up after year end. (I'm assuming the SHM is on a full year basis since he seems to be depositing things in large lump sums once a year). As to the TH issue - SH NEC is only more favorable if the dentist wants to use a PS to get a higher contribution. If they are satisfied with the SH Match (maybe its a 6%?) and possibly a layer discretionary match (such as an additional 4%), then no PS is needed. Maybe cross-testing doesn't work well, due to ages, comp, whatever. The doc we use (and I would guess many others are similar) provides that a SH MAtch contribution is deemed to satisfy the TH min as long as no other employer contributions are given. It does say an additional Match is also allowed if it is within the ACP SH 4%/6% rule.

I agree with you QDROphile. I guess the last sentence in the original post should have been worded better. I think this is a bad idea - there are plenty of times where I think certain provisions are a bad idea - But unless there is some compliance reason not to allow a provision, we usually help the sponsor amend their plan to work the way they want. But the question still remains - is this a permissible provision? Or is there some discrimination or compliance issue I'm overlooking?

"My understanding is you can self-correct on those loans that are within the three-year statute of limitations by reporting on a 1099-R in the year of the failure." What citation do you have for a three year SOL for loans failures? My understanding is that loan failures have to go through VCP for anything outside of the box, including treating the loan as taxable in a year other than the year of the failure. Specifically, that the IRS is the only entity that can grant tax relief, so any correction that changes the standard taxation of a loan failure can't be done as a Self Correction. From the Revenue Proc. "As part of VCP and Audit CAP, the deemed distribution may be reported on From 1099-R with respect tot he affected participant for the year of correction (instead of the year of failure)." the Rev proc goes on to explain that taxable relief is sometimes available/approved if the loan is corrected in accordance with the Rev proc, AND the failure is submitted to VCP, AND specific relief is requested on the submission to the IRS. Because the type of tax relief you are seeking is only available under VCP, from the IRS, I think the question as to whether these failures are significant or not is moot.

Small (less than 100) 401(k) plan does not presently allow for loans - but would like to add them, subject to the hardship rules. they would like to restrict salary deferrals while a loan is being repaid. Meaning the participant cannot make deferrals until the loan is repaid in full. The thinking is that if the participant has extra cash available to make deferrals, then they should be using that extra cash towards the loan. i don't see anything on the face that would make this provision a problem - except a possible BRF issue. If loans are available only for hardship purposes, probably NHCE will be the primary users. If so, then the deferral restriction will primarily affect NHCE. HCE that do take a loan would likely have more means to repay it quicker. Am I over thinking this? Thoughts? Should this provision be allowed?

https://revenuelaw.floridarevenue.com/LawLibraryDocuments/2000/07/TIP-38278_487282ff-105d-48b9-8df7-4a4d989faa2a.pdf This publication is old, but I'm wondering if any portion has been challenged what the outcome has been in the 18 years since it was published.

I have a related question - I can start a new topic thread, but since there were some good comments here, I am hoping folks will chime in. PW plan is Top heavy. PW is immediate, but plan also allows deferrals and SH after 1 YOS. SH is offset by PW for those employees who are eligible for SH. Does the PW (particularly to those who are not yet eligible for SH) trigger a minimum TH contribution? If the plan was Def + SH only doc is clear that no TH min is needed (even if say def were immediate and SH was 1 YOS), but it doesn't address TH min with the addition of PW.

Madison71, yes, that's exactly what that means. Full fees apply except in very narrow circumstances (such as an orphan plan that is terminating).

https://www.irs.gov/retirement-plans/voluntary-correction-program-fees

I just noticed this! It stinks. For simple things like a 403(b) failing to have a document, or a 401(k) plan missing a restatement, etc, small plans are out of the loop. Plus, anything we sent to plans in the last month or two is now wrong! Plus submissions sent in over the last week probably require additional fees! I noticed a portion of the fee section isn't effective until February 2, 2018. But the main schedule (on the website) appears to be effective immediately . I even went back through my IRS Employee Plans News to see if I missed an announcement. It feels like the IRS didn't want plans to know such a big change was coming - or I just missed some announcement, which is possible too.

Has anyone tried using the IRS website to request a trust identification number recently? What should be listed for line 7a, and 7b? I would think the "Name of responsible party" would be the Plan Sponsor as the trust grantor, and then the EIN of the Plan Sponsor would be used, but the instructions say to use EIN only if the Name of the responsible party is a government entity. The website will not accept an EIN, and that screen cannot be by passed? Should the instructions for listing a responsible person for the business entity (principal officer, etc) be followed instead? but we aren't applying for an EIN for the business, its for the trust. what have folks been doing?

Just to confirm how frustrating this continues to be - the financial institution has confirmed unequivocally that they will not put someone into pay status - not even to process an RMD - without the participant's consent. So even for participants whose whereabouts are known, if they haven't returned the consent forms, there has been no RMD.

I have read the recent memorandum on missing participants, it doesn't help much because the lost participants isn't the primary issue. The actuary won't even calculate the RMD based on the single life annuity without confirmation from the plan one way or the other that a participant is married, and if so, what their spouse's date of birth it. I agree that participant consent is not needed for RMD - so the fact that the financial institution is insisting on it is a problem. For ones that the actuary will calculate, where marital status is known along with SDOB if applicable, the financial institution should take direction from the plan about RMD payout without regard to participant consent. I also agree that it is the plan's responsibility to comply with the RMD rules, or at least attempt to, even though the failure to do so is borne by the participant. the plan is trying to comply, but at present the actuary (and secondarily the financial institution) seem to be hampering that process. Specifically I'm looking to see if there is any guidance, even if informal, that we can use to push back against the actuary's assertion that martial status and SDOB must be KNOWN to calculate RMD.

I apologize, I don't have as much familiarity with DB plans as I do with DC plans, so if there is another thread that answers my questions, or website, or reference material somewhere, please point me in that direction. Plan Information Traditional DB plan, does not allow distribution prior to NRA, nor does it appear to allow for single lump sums( don't ask me why, its a convoluted individually designed document, I had nothing to do with it, it came to me that way). Normal benefit is regular single life, with 50% JS for married participants. Plan has several participants that need RMD - they can't locate them, or in some instances the participants won't respond. I suspect for some of the participants, if they received their RMD check in the mail, they would just cash it. The question is - the plan does not know the participant's marital status - on what basis do they calculate the annuity, and thus the RMD amount? And before you tell me to check the document, it appears to be silent. As I said it is individually drafted and not a typical one at that. We are getting less than clear answers from the actuaries and financial institution. The actuary isn't willing to calculate any sort of RMD without knowing marital status and Date of birth. The financial institution isn't willing to process any sort of RMD without participant consent, which I think is actually a separate issue that we are addressing, but certainly doesn't help matters. If it was a 401(k) plan and I didn't know the spouse date of birth (or even if there was one) I would just calculate and have the plan payout based solely on the participant's DOB. But the actuary doesn't want to calculate the RMD based on a single life annuity without actually knowing, so I'm a bit at a loss. Surely someone else has figured out a way to handle this?

Thanks My 2 Cents and RatherBeGolfing. I agree its better to try to address now. We are working on contacting the IRS and seeing if we can get something proactively. I am an ASPPA member, so I will pass along to Craig what happened. I'm thinking it was just a fluke, but its hard to tell, especially with the IRS.

Has anyone else had this problem this year? We sent a batch of Form 5558 to the IRS - timely, properly addressed, via certified mail. The IRS signed, and opened the envelope. They then resealed the envelope, and included a letter stating that the extensions weren't properly addressed and that they were being returned. I can't find any error. The other batches we sent have not been returned. I'm hoping they were processed just fine. As with other occasional issues, we've documented everything and have a letter drafted to resubmit the extensions, as well as one to use when the IRS says the 5500s are filed late. But it is just a pain. In case this was part of some larger widespread issue this year I wanted to check.

Money purchase plan, going through Audit CAP. Plan Sponsor thought the plan was frozen, auditor says no, --> large make up contributions required. The plan sponsor doesn't mind putting the money in, just wants to know if it is deductible as a business expense. It far exceeds the regular deduction limit. All of the make up money is for 2014 and earlier. there is a bit of lost earnings as well that the auditor is requiring. I realize the lost earnings may not be deductible at all. this is all separate from the sanction, which is minimal and the employer isn't concerned amount. I'm not gleaning any special insight from Rev Proc 2012-13, Nor Treas. Reg 1.404. Perhaps I'm not reading them close enough. Rev. Proc 2012-13 "(b) A corrective allocation to a participant's account because of a failure to make a required allocation in prior limitation year is not considered an annual addition respect to the participant for the limitation year in which the correction is made,but is considered in an annual addition for the limitation year to which the corrective allocation relates. However, the normal rules for §404, regarding deductions, apply." I don't care about annual additions, those are fine. Just about the deduction. Since the deposit is occurring right now, and it is required under §412(a) I feel like it should be deductible but I have nothing specific on point? Can anyone help?

Please ignore my post! I answered my own question!

Assuming the plan document allows - can a 401(k) plan force out terminated participants, who have attained normal retirement age, and have a vested balance over $5,000 (no rollover) ? If it can be done, I'm sure it would be to an IRA (or annuity if that is the plan's default payout form), not as cash. Mind you - this would not be part of a plan termination in any way. It would strictly be due to age. I had never heard of such a thing outside the context of a plan with annuities. but today, as part of John Hancock's webinar series, Kimberly Martin's presentation on distributions seemed to have stated exactly that. From part of her slide: Terminated at age 65 (NRA) $100,000 Deferral $50,000 Match $150,000 Balance --> No consent required -->Default form Is she talking strictly about plans with an annuity as the default form of payment? Most of the 401(k) plans I work with have no annuity provisions. For a plan with no annuity provisions, and the force out would be to an IRA, is the force out still possible? (assuming of course all of this is in the plan's doc) Anyone have a regulation? other citation?

Extremely small plan sponsor (maybe a dozen participants) - with the owner going through a divorce. The TPA received a subpoena demanding copies of all information about the owner as an individual, as well as all information regarding the business, on paper no less. No mention of the retirement plan whatsoever. Of course all the TPA records on that plan relate to the owner and the business, how could they not? Overly broad, no? Thoughts?

I have this circumstance, and the plan did apply for and receive an EIN for the trust - anyone have a different answer?

I know this would probably be better under the continuing education board, but I think it will be seen more here. does anyone have any prior year DC-1 and DC-2 books for sale? These are the defined contribution textbooks for the first two ASPPA proctored exams. I have several friends who want to take the exams, but don't have a lot of money to spend. Considering the topics covered are fairly basic and haven't changed much using a book that is a year or two out of date really shouldn't be a problem. Even if they are marked up / highlighted etc. I'm interested if people are willing to sell. I'm looking for up to 4 of each. And if anyone has DC-3 as well, I think one of those might be good too.

Fiduciary Guidance Counsel and jpod, thanks for the insight, and jpod, I totally agree about the liability issues. I actually have no expectation that there will be any sort of correction, or that they will consult an attorney, even though we will tell them to. The advisor thinks the money is 100% the owner's (claims everyone else has been paid out) and now refuses to acknowledge it as plan assets. The advisor seems to be treating it as part of the owner's IRA. There may be a new trustee soon, so I wonder if that person will want to fix this. We don't do the investments, just some year end accounting. And when there were ginormous losses, it thought for sure there was a typo or unreported withdrawal. No such luck.

https://www.irs.gov/pub/irs-drop/rr02-45.pdf Found it. Or if not it, something exactly on point.