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!

That's what I thought but I started second-guessing myself since top-heavy goes forward! I had tried to talk them out of giving up the safe harbor but they wouldn't listen. They now are facing big refunds plus the TH contribution. I will be having that discussion re: the retro safe harbor shortly. Thank you!

I have a plan that had a 3% SHNEC contribution for 2019. For 2020, they chose NOT to have a Safe Harbor provision. They are top heavy for 2020. Do they need to make a 2020 top heavy contribution for 2020 or are they all set because they were a Safe Harbor in 2019. Thank you!

Is the one that he's 50% ownership of considered part of the controlled group? If not, could he do a 401k for the controlled group then something else for the company that he only owns 50% of?

Hi, I'd like some advice on the following scenario. The DR owns 2 companies – one company will have a Simple IRA (he will not contribute to the SIMPLE) and the other company (he is the only employee) will have a SEP and he will participate in the SEP. He is also 50% owner in a 3rd company which has a 401k – can he contribute to the 401k as well? Can he max out on both the SEP and 401k? Thank you!

Sorry, didn't mean to change tenses. On the payroll system, the compensation was capped at the $285k and the contributions were then being deducted by the payroll system as after-tax contributions.

Hi, The payroll system for this client capped the compensation at the annual of $285,000 for 2020. Instead of contributions stopping because the compensation limit was met, the contributions are still be deducted but as after-tax. Wouldn't the client had to have something in the document allowing for after-tax contributions in order for this to happen? Thankls!

It's been interesting to read all of the comments. Working within a payroll company is a different world. Not only is one doing the admin of new and existing plans but then one has to deal with payroll. Getting employees set up with their deductions. Getting a new plan set up on payroll. One is also uploading contributions for their payroll clients which is a full time job in itself. Any contribution errors come back to you to research. Payroll doesn't always tell you if a change was made.

I work within a payroll company where the main objective is sell as many plans as possible to meet sales goals. Right now we have over 300 plans and more coming in every day.. Including myself there is only 1 other person that knows how to administer the plans. I have only other employee that unfortunately doesn't understand the concepts so his role is minimal. Also, being a payroll company our area uploads the contributions for our payroll clients which is more than a full-time job by itself. How big is a typical caseload for 1 administrator? I am seriously considering resigning after 7 years because I do not feel I can give the quality service that needs to be given to clients. I'm tired of working many long hours and cringe that our busiest season is right around the corner. The stress is beginning to affect my physical and mental well-being but I find myself wondering if I should just suck it up and continue in this situation. I've never resigned from a company before. The only perk is that I can work from home.

Client wants to start a new plan for 2020 then wants to amend to a safe harbor for 2021. Can he amend to have a safe harbor non-elective plan for 2021 this late in the game? Haven't familiarized myself with the new Secure Act provisions yet. Thanks!

Apparently they already have a 401k plan that covers the retail store. They either want to set up a plan for the production company as well or start to include them in store's 401k plan. Thank you all for you comments and recommendations. I'll try reaching out to Kirsten Curry. Sigh...I might have to become one of their customers after all of this!