justanotheradmin

how old is the child? there used to be Q & A on this website that addressed that issue. Not sure i'm allowed to repost one in full, if not I understand if this comment gets deleted. but here is one from Derrin Watson: "Parent child attribution rules (Posted March 11, 1999) Question 15: If a father owis 100% of one corporation and the son owis 100% of another corporation, are they considered a controlled group? I think the ans11er is yes from /RC 318, but someone else thought that because the son is over 21 that the ans11er is no. Answer: If you had money riding on this one, pay up! One of the most confusing parts of the controlled group, ASG rules is that we ha1.e three different sets of attribution rules to work with. You must apply the proper set of attribution rules to a particular form of entity aggregation. Traditional affiliated service groups are subject to the attribution rules of section 318. Under those rules, as you correctly note, there is absolute attribution between parent and child, regardless of the age of the child. The 318 rules also go1.em determination of whether someone is a 5% owner and a key employee. Controlled groups, on the other hand (as well as groups of trades or businesses under common control) are go1.emed by the attribution rules of IRC 1563. Under those rules: A. There is absolute attribution between parent and child if the child is under age 21. B. If the child is 21 or older, then: 1. The parent is deemed to own the child's shares only if the parent already owns (or is deemed to own) more than 50% of the company. 2. The child is deemed to own the parent's shares only if the child already owns (or is deemed to own) more than 50% of the company. So, suppose I own 75% of company A and my adult son owns the remaining 25%. I am deemed to own my son's stock for controlled group purposes (because I already ha1.e more than 50% ), but he is not deemed to own my stock (because he does not already ha1.e a majority of the company). For affiliated sen.ice group purposes, we are both deemed to own 100% of the other's business. Going to the facts of your case, since neither owns any interest in the other's business, neither is deemed to own the other's stock. So there are no shareholders in common between the two businesses and a controlled group does not exist. Just to make things a little more confusing, there is a third set of attribution rules that are used in dealing with leased employees under 414(n) and management function groups under 414(m)(5). These are the related party rules under IRC 267. Incidentally, those handle parent child attribution in the same manner as IRC 318. Because these rules are so important, I discuss each set in a separate chapter of my book Who's the Employer? Controlled group attribution: Chapter 7 Affiliated sen.ice group attribution: Chapter 14 Related party rules: Chapter 17 Q 14:16 of the book has a table contrasting controlled group attribution and ASG attribution."

There is nothing to transfer since the deposits occurred to the correct source during that year. But 2024 is the year of the correction, so showing it on this year's W-2 would be an appropriate way to do it, given the IRS's wording. EPCRS is generally flexible on these types of correct matters and showing an adjustment for the year of the correction, rather than going back to a prior year, is often a reasonable approach. Then no prior tax years need to be amended. The amount from the prior years, plus any bonus the employer gives to account for the mis-hap would be on the 2024 W-2. Or if they are going the 1099-R route (less ideal) the 1099-R could be issued for 2024.

Paul makes good points, and I do think the IRS's correction methods should be followed. Tacking it on to this year's W-2, which is an allowable method, means the custodian doesn't have to be involved, since in this case the deposits were coded as Roth from the start. So not having to deal with a 1099-R, and keeping the plan's work to a minimum seems best. It was the employer's mistake, so the employer having to do the heavy lifting to fix/udpate/adjust a W-2, seems fair. And the employer is allowed to pay the employee extra to allow for any extra tax liability, to make them whole. Plus, depending on the recordkeeper, or whoever does the 1099-R, their head might explode if they are asked to prepare one but there is no corresponding transaction showing pre-tax amounts being recoded as Roth.

In addition to the standard options provided by the IRS website, what about having the plan issue 1099-R showing the amounts (base amounts) as taxable? as an in-plan Roth conversion Then the recordkeeper also recodes the earnings as Roth as a corrective actions. Advantages: The participant's tax situation is pretty much what it would have been The plan is the position it would have been no need to redo any W-2s. Disadvantages Tax returns might need to be redone depending on what year the 1099-Rs are for it isn't quite the same method the IRS provides

Is there a benefits, rights, and features issue if over time the only people who can really access their money are the HCE?

I am curious to hear how the sponsor will manage automatic enrollment. Automatic enrollment thrives on inertia/inaction. Is someone going to sit down with each person as they become eligible and have them fill out a zero election form? Seems like a lot of work, but maybe the trade off is worth it to them.

1. were deferrals withheld? but not sent in? in that case you have late deposits. See VFCP, and Form 5330, and look up late deposits to retirement plans 2. were deferrals not withheld? but they should have been? In that case you have a missed opportunity to defer. See EPCRS, if there were deferral elections, or no deferral elections, or match or no match, the actual amount will vary, but it all covered in the IRS's EPCRS rev pro. Note: the custodian not being ready isn't a valid excuse. Plans encounter this all the time, and purposely pick a special deferral start date farther out, that is written into the plan document, for this very reason. The give service providers time to get set-up with all the info from the sponsor. Even in the event of an unexpected delay, there is no reason why the deferrals couldn't have started on time, and the plan open up a temporary account, such as brokerage/checking/savings account etc in the name of the plan into which to deposit the deferrals. Then they would be deposited to the trust on time, and then once the regular custodian is ready, the money can be transferred to there.

Does anyone have a sample notice for the replacement of a SIMPLE IRA plan mid-year with a 401(k) plan? Is there one from the IRS? Anyone have one they have worked up? 1. SIMPLE is being terminated 2. Safe Harbor Notice 3. Pro-rated deferral limits based on the effective date of the termination/replacement? 4. Anything else? I have samples of 1 and 2, but if someone else has a combination sample that includes item 3, I would love to see it.

So the employee thought they had turned in a deferral election? but didn't? It doesn't sound like a plan error. It sounds like the employer needs to decide if they want to do something to make the employee happy. Perhaps give them a bonus and they can turn in a deferral election now to defer most of the bonus. For morale purposes. But not because the plan needs correction. I don't see how a QNEC would be appropriate since there is nothing on the plan side to fix.

your question isn't specific enough. Can a participant take money out of their account and use it to pay alimony? - the participant can take money out of their account if their plan allows it. Usually things like hardship, termination of employment, reaching a specific age. once the participant takes the money out - (they pay tax and penalty, if applicable) what they actually do with the money is up to them. If they use it to pay alimony, that's on them. Does your employer offer a retirement plan? If yes, do they have a service provider you can ask these types of questions? they might be able to help explain these things. understanding your own plan rules will help you understand what might be possible for other plans.

it needs to include enough information that the plan can calculate the benefit. if it gives a formula, then the data for that formula needs to be clear. I don't think the plan administrator cares if 72 months is mentioned about the reason WHY. doesn't matter if 72 months that the marriage lasted or 72 months that spouse A had rainbow hair, or 72 months that spouse B was in grad school etc. whatever the parties decided and is the property agreement is what needs to be clear in the QDRO. If the dates of what those 72 months were is relevant, then including the specific start date and end date, those can be included as well.

The property agreement - however it is decided either by court order, or agreement of the parties - is what it is. If the property agreement awards part of a retirement benefit to someone other than the participant - then the QDRO is simply the means to get that awarded. Why the retirement is split, or awarded one way or the other - doesn't really matter to the plan. Maybe spouse A wanted to keep the house, and agreed that spouse B could have all their retirement accounts. Maybe it was all hashed out in mediation or court and it was decided that everything has to be split directly in half. Maybe one person didn't want to give up anything and the court has to specify who gets what. There are a million different circumstances. For example If the property agreement says the Lexus goes to Spouse A, but its Spouse B that is on the title, registration, etc, there are specific forms that have to be filled out for the actual ownership of the Lexus to get changed. If Spouse B doesn't cooperate and doesn't sign whatever forms are needed, then Spouse A has to go back to court and get additional items so they can get the title to the car updated without the other person's signatures. The QDRO is the mechanism like the forms for the car title change, but for the retirement plan benefits. Sometimes the parties will agree to more up front in lieu of on-going alimony, and if they also agree(or the court decides) that it will be paid via giving one person part of the retirement benefit, then once that agreement (property agreement) is in place, a QDRO is usually started. This is completely different than someone owing alimony after the fact, and one person is trying to come up with money to pay it, and they want to know if they can take money out of their retirement account to pay to the other person.

Unsolicited commentary - so take with a grain of salt It sounds like you are not a lawyer, you are a paralegal who is drafting QDROs on your own? The questions you have been asking make it clear there is a ton you probably don't know, about family law, retirement plans, etc. A lot (most? all?) of these questions are ones your supervising attorney should be answering, or they should provide you training resources ( webinars, reference books, etc) that you can use to increase your knowledge.

QDROs can be done even if there wasn't a marriage. This might be helpful. https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/qdro-overview.pdf

QDROs are not required to have the date of marriage on them. So I would not use either. The plan administrator doesn't care how long the marriage lasted. They care about how clear the order is in describing the amount of benefit to be awarded to the alternate payee.

Sounds correct if it is a retroactive corrective amendment under EPCRS rev proc 2021-30 which does allow correction for early entry via amendment if the correct parameters are met. But there are a lot of ifs there.

There are some custodians that offer brokerage windows within their retirement product offerings. Worth looking into, and then all the participants would still be with XYZ recordkeeper, but could have way more options than just a regular fund line up. and getting year end reporting/ statements/transaction history is SO MUCH EASIER I agree they are terrible for plans. Even though I work on a lot of plans with them. Is the plan going to limit what kind of SBDA? maybe to a single financial institution? or are folks going to be allowed to pick their own, wherever? having all the accounts at schwab is simpler than a dozen accounts a dozen different places. And is each account going to have a different advisor? I don't like it when plans tell participants their personal advisor can be the advisor on their account. Accounts often don't get set up correctly, the plan needs to be the owner, the trustees on there, and the participant is only an FBO so they shouldn't be the one controlling the account anyhow. interested party/duplicate copy statements for the trustees, the TPA etc don't always get set up right. And I don't think I've never seen a good participant fee disclosure from a SDBA financial institution, and I doubt the plans are keeping copies of them. I guess my main question is WHY do they want SDBA as part of the plan? Also - if the owners think the investments in an SDBA are so good for themselves, why wouldn't those investments be good for the rest of the participants? If the owners can take distributions out - I would suggest they do so, and roll the money over to an IRA wherever they want, and leave the plan assets in a proper recordkeeping arrangement.

1. you can't make it more restrictive retroactively. We are past 2/1/2024 so that ship has sailed. Pick a date in the future. And depending on the circumstances, an amendment can make someone no longer eligible, but that's a whole other conversation. 2. to apply or not apply to existing employees depends on how the amendment and document is written. I've seen it done both ways.

Also - its not as simple as the spouse cashing the check or sending it to their IRA. the estate got a 1099-R showing the gross taxable amount. it needs to be amended. and the check voided, and then a new check issued for the spouse's distribution. It's as if a W-2 was issued to the wrong person. just sending money to the right person and giving the right person a W-2 doesn't fix the tax situation for the wrong person. The IRS is still going to think the estate has those $$ as income and is going to want to see the taxes on it. The Form 945 is only one part of it. and yes, the IRS can send the $80,000 back, but it will go back to the PLAN, not the spouse. That's part of unwinding the incorrect distribution. Also- the plan has a responsibility to make sure the distribution occurred correctly. the estate signing over the (likely stale) check to the spouse or their IRA does not accomplish that at all. Given that the amount involved sounds substantial, the correction should really be handled carefully.

What is your relationship to the plan? Are you the financial advisor? TPA? When a distribution is processed from a retirement plan, the plan files and reports a Form 1099-R. If there are distributions that had withholding the plan also files a Form 945 with the IRS. In this case a Form 1099-R would have been filed with the IRS showing the gross amount as taxable income for the estate. The distribution should be undone - which means the money should be returned, and amended 2023 1099-R and 2023 Form 945 need to be filed. The estate's tax identification number would be on the 1099-R as well. Why did the sponsor decide to pay the estate? Do they have someone who usually helps guide them through distributions? Typically the estate would have needed to request the distribution by completing a distribution form. Someone who is the legal representative of the estate signs that form. Then the plan goes through it's distribution process/checklist. Once the incorrect distribution has been undone - including filing amended tax forms - then the correct distribution can be done. and please get an experienced administration firm or professional to help because there are standard things that are done when distributions are requested. Like having the participant (or in this case default beneficiary) fill out a formal request, disclosures, possible death certificate, etc.

Who decided to pay out to the estate? who signed on behalf of the estate? If the plan administrator doesn't have a beneficiary form, usually one of the first questions for a death distribution is - Is there a surviving spouse? Did someone answer no to that question? The check should be voided(it might be stale anyhow since its more than 4 months old), the plan should get the tax withholding back from the IRS, the form 945 and 1099-R need to be amended for 2023. then the spouse needs to elect a distribution, and the plan needs to do a new check to the spouse's IRA if that's what they are choosing. Step 1. Unwind the incorrect distribution Step 2. Do the correct distribution Step 3. Figure out what went wrong and change processes and procedures so it doesn't happen again Step 4. Document EVERYTHING Review with ERISA counsel every step of the way if there is any uncertainty. EPCRS has standard correction methods for incorrect distributions.

Is the estate going to return the money to the plan? If the plan withheld too much , then an amended Form 945 can be filed and the IRS will issue a refund to overpayment on the tax. then the plan would have the $$ (back from the estate, and the IRS) to do the rollover distribution to the spouse. The plan might have an obligation to the spouse regardless, even if the plan doesn't recover the money from the estate /IRS. What kind of plan was it? Did a death certificate mention a spouse? Why was the estate paid? Usually an estate is only paid (if a qualified retirement plan) as a last resort, or there is an actual beneficiary designation on file that the spouse consented to the estate being the beneficiary.

are you talking about a formula? for example if the CBA says a fixed 10% contribution? Having that written into the plan document seems standard? If that is what the CBA calls for? then all the plan information - such as summary plan description - includes it correctly. Or are you talking about more general CBA language in something like the adoption agreement / basic plan document? If more general language - well then that's a function of the pre-approved plan document provider's choices. There are lots of different ones out there, and each organization that is submitting one can tailor the language in the document to be as simple or encompassing as they like, as long as the IRS accepts it. For example, pre-approved documents designed for use by one person plans are usually much much simpler and shorter than ones drafted to accommodate maximum flexibility in design and larger employers.

sure. be careful if the auto enroll is structured as a QACA as it will impact other areas, but removing auto enroll is allowed. and if the plan is grandfathered under the pre-SECURE 2.0 rules, then having auto enroll is not required period. and the plan will have to let people know, for example if they are deferring due to auto enroll, is the plan going to put them at zero, or leave them at their %. But for 11 people, why not just get everyone to sign a form electing zero if they don't want deferrals taken out? Or are they wanting to remove it because the 3 year tax credit for it is up? and don't want it cluttering up their plan?

I would think they should, but what does the plan document say? If using a pre-approved document usually this type of thing is addressed in the underlying basic plan document, not the adoption agreement.