coleboy

For those that want to know, the year in question, my client did not have any eligible employees! She is quite willing to put in the $54. I was just asking whether it would raise any flags if she chose not to.

Have a plan that covers just the owner who has Sched. C income. The match was done based on what was given for Sched. C income. That was adjusted later on resulting in a match figure that was $54 higher than the original one. Owner did not want to put in the extra $54 for himself. Is this allowable? Can the owner choose to put in less of a match than what meets the formula? Would this raise a flag with the IRS?

I have a participant who wants to take his RMD in an amount more the minimum amount. It's my understanding that a participant can request any amount as long as it's at least the minimum amount. The recordkeeper wants 2 different distribution from done. One for the actual RMD amount and one for the amount over the minimum. I've never encountered this before. The reason I was given was that the RMD is taxed one way and the overage another. Thoughts?

I am going back to the advisor. He just seems to feel we can just back out the money and pretend no plan ever happened!

Hi, A client's advisor convinced her to start a 401k plan. She made 2 contributions to it then decided that she didn't want it. I tried to tell her that it will now have to go through the termination process but she is just demanding that her contributions be returned to her. Am I wrong in telling that as well as she will get taxed and penalized on her distribution? Or is there another way? TIA

Hi, Client's Sched. C reflected a loss. Unfortunately he maxed out his 401k so it will have to be refunded. The accountant came back asking if the non-taxable PPP income that the client received last year could be included. I'm pretty sure I know the answer but wanted something in writing.

Thanks everyone! I feel better now!

Client has a simple 401k new in 2020. There are 2 employees in this company. Neither are owners. My Ft. William system keeps giving me warnings that I should be filing an EZ instead of an SF. When I run the edit checks, I get the error. When I "lock it" to get ready to notify the clients to sign, I get another pre-validation error. Is anyone else running into this?

That's music to my ears! Thank you all for your help and insights. I always thought that this was the case but the system that I was working on kept asking for the TH minimum on a plan that was similar to this. In 2019 that plan was not a SH and tested as TH for 2020. Plan amended to a SH match for 2020 but the system kept asking for a TH contribution. That's when I began to doubt myself.

So BG5150, are you saying that because even though they are Top Heavy for 2021, no TH contribution is owed for 2021? What about the people that won't contribute in 2021. They won't be due anything? This is what I'm trying to verify. The fact that they are TH for 2021 but became a SH plan for 2021 so the TH minimums won't apply.

If everyone contributed to the plan for 2021 then I wouldn't have to worry but there's no way that it will happen. Once she's refunded the money from the correction of the ADP test, the plan would fall below the 60%. Is that distribution counted?

Hi, 2020 was not the first year for the plan. The first year was 2019 and no one contributed anything to the plan. In 2020, the 2 owners started contributing along with 1 or 2 other employees. There was no match for 2020. The owners only put in about 1.5% of pay. Last Fall, they decided to become a safe harbor plan for 2021. As to why it was set up like this? I work for a payroll company. The salespeople don't ask what's in the best interest of the client as to the plan set up. They are just trying to meet their quotas. It comes across my desk at year-end to do the compliance testing and this is the result. Their payroll for 2020 was over $2M. With that 3 month eligibility, most are eligible for the plan so that TH contribution will be significant. I was just desperately looking for some way around it because I am the one that has to deliver tis news.

Hi, This plan was not a safe harbor for 2020. For 2021, plan added a safe harbor match. The ADP test failed and one HCE has to take back $2000 of the $2500 she put in. The plan also is top heavy for 2021. Total plan assets are $7000. $5000 for the key and $2000 for the non-key. If she hadn't put that $2000 in then the plan would've been fine! Eligibility is 3 months of service making about 30 employees eligible. Their TH contribution for 2021 is going to be big ( for them). Any suggestions to lower the cost?

Hi, it was someone in our office. This was the only thing I could find in the Service Agreement.

Hi, The client's plan assets were transferred over to the new recordkeeper back in August 2019. For a couple of participants, their money went into the money market account instead of the same funds it was in under the previous recordkeeper. The person setting up the accounts failed to set up the funds properly when setting up these employees with the new recordkeeper. These participants are now just realizing 18 months later that their money wasn't invested the way they thought it was. My question is...how much responsibility do we as the TPA have in so far as making the accounts good earnings-wise? Should not some of that responsibility fall on the participants for not checking for 18 months to make sure their money was invested the way it needed to be? Thank you!