Vlad401k

If a company misses a few matching contributions for one participant (who is NHCE), back in 2019 and it's now more than 12 months after the end of the plan year, what would be the correction method? The participant was able to contribute deferrals for those periods, but just wasn't matched. Would you simply fund the matching contribution to the participant? If so, would you adjust for any potential gains during the period? Thanks,

I have a question regarding processing a distribution for a participant who exceeded the 402(g) limit. Let's say he's $1,000 over the limit and he only has Roth contributions. The distribution has a gain of $200 and it is processed after the end of the year. My understanding is that you need 2 form 1099-Rs - one with code BP (for $1,000) and one with code B8 (for $200, which is the earnings amount). I have 2 questions: 1) Is that the correct approach? 2) If it is, what would you report as the Roth Basis on each of the 1099-R forms? Thanks!

I have a question about 401(k) contribution limit when a someone participates in 2 plans. I understand that you can contribute up to the limit for both plans assuming the companies are no related (there is no affiliate relationship). Does that simply mean that the 2 companies are not in a control group/affiliated service group relationship? Here's the situation: A participant own 100% business of Company A and 25% of Company B. Company A and B are not part of Control Group/Affiliated Service Group. Can he max out contributions with both plans (of course, assuming that he does not go over the 402(g) limit). Thanks!

We have a participant in a 401k plan who is 74 years of age and was terminated in 2020. He will be subject to the RMD in 2021 and he wants to rollover the entire balance to an IRA. He also has a Loan Balance, which will have to be offset. Can the offset be used to satisfy the RMD requirement? Thanks!

For Profit Sharing contributions, a plan has an allocation condition of 1000 hours and employment on last day of the plan year, unless "Participant retires during the plan year". What does "retires during the plan year" mean in this case? My interpretation is that the employee must reach Normal Retirement Age (NRA) before terminating service. Would you agree or is there a more subjective interpretation of retirement? I looked at the plan document and it does not specify what retirement means in this circumstance. Thanks!

Hi, Let's say there is a 401(k) plan for a company that's taxed as a Partnership and has 2 owners (50% ownership each) at the beginning of 2020. In the middle of 2020, the owners leave the company and now there are 2 other owners (also 50% each). How would you calculate the compensation for the owners after the adjustments for FICA and contributions to other participants? We use DATAIR for our testing. The issue that I'm seeing is that if we code each of the 4 owners during the year as 50% owners, the adjusted compensation will not be calculated correctly because the total ownership adds up to more than 100% (4 owners at 50% each = 200%). What would be the correct way to run a plan like this? Thanks!

A company would like to establish a new Safe Harbor 401(k) plan now (in November) that would fund a 5% Safe Harbor Non-Elective contribution. The plan would be effective 1/1/2020, and the compensation that would be considered for all purposes (including the calculation of the 5% Safe Harbor Non-Elective contribution) would be from 1/1/2020 to 12/31/2020. Is that allowed under the new rules? Thanks!

Hi, Which distribution code should be used for the following distribution? The participant exceeded the 402(g) limit for the year and did not distribute the funds by April 15 of the following year. All of the contributions were with the same company, so the distribution must be processed even though it's after April 15. The contributions that the participant put in were Roth. Since the earnings on the excess should be taxable because it's made after April 15, would the Code be "P", "1", and "B", assuming the participant is under 59 1/2? Thanks!

Since Code M was recently implemented, what if the TPA did not use code M for loan offsets (the regular codes 1, 2, and 7 were used instead). Should these 1099-Rs be amended to include Code M? Thank you.

Ok, so this would be a rollover because the amount before the fee is above $1,000?

The plan document specifies that the $1,000 limit for mandatory cash outs and $5,000 limit for mandatory rollovers. What if the participant has about $1,020 in the account and the distribution processing fee is $50 (so the amount after the fee is $970). Would a direct distribution or a rollover be processed?

If the participant has terminated service with the company and has a disability, what would be the correct code for the loan offset? The participant is under 59 1/2. Thank you.

Let's say there is $50 distribution fee charged to participants. Can a participant take out $100,000 (taxable distribution of $99,950 after the distribution fee) or $100,050 (taxable distribution of $100,000 after the fee)? Thanks!

How would you process a Roth direct distribution due to disability? My original thought was that it should be code "B" and "3", but the 1099-R instructions state that code 3 can only be used with one other code ("D"). Thank you.

Let's say a participant has $80,000 in their 401k. He also has a $40,000 loan. The participant is terminated due to COVID and would like to take a full distribution. He's under 59 1/2. Since the limit for COVID distribution is $100,000, how would you process this request? The participant chose to have no taxes withheld on the COVID distribution and my understanding is that Code "2" is used for COVID distributions if the participant is under 59 1/2. So, I'm thinking we process the request as follows: The loan Offset of $40,000 is processed under Code 2. $60,000 of the distribution amount is processed under Code 2 (with no Federal Tax withholding) The remaining $20,000 of the distribution amount is processed under Code 1 (with Federal Tax withholding) because the $100,000 limit has been reached. Would you agree?

The brokerage company that we work with rejected a distribution request because the 7.75% MD withholding was lower than the new tax rate for Maryland. However, they were not able to tell us what the new tax rate is.

The Maryland State mandatory tax withholding has been 7.75% as long as I can remember. However, we recently were notified that the mandatory percentage is now higher for 401k withdrawals. Does anyone know what the new state withholding for Maryland is? Thank you.

A participant terminated employment due to COVID at the end of March. She has a loan outstanding and wants to take a full distribution. Once the full distribution is processed, should the loan be offset? I realize that for regular distributions, the loan would be offset once a full distribution is taken. However, can she freeze the loan until 12/31/2020 because she was affected by COVID? Thanks,

Hello, Do you know if the April 15th deadline for Distribution for Excess Deferrals (participant worked at 2 companies during the year and exceeded the Deferral Limit when we look at the total Deferrals) is now July 15th for 2020 due to COVID? It seems like it should be because that's the new tax deadline, but just wanted to make sure. Thanks.

We have a plan that had a partial plan termination in 2019 because 20% or more of the employees were involuntarily terminated. My understanding is that anyone who was terminated in 2019 (whether or not it was involuntarily) should become 100% vested. However, what if there are a few of these affected participants who already took a distribution (that was not 100% vested) from the plan? Should the amounts they forfeited be restored?

With the recent change in provisions for Hardship distributions for 2019, I understand that you now don't have to take a loan before taking a hardship. However, my understanding is that you still have to take an in-service distribution (if it's available) before a hardship. Is that correct? Let's say a plan allows the participant to take an in-service distribution only from the Rollover source. And the hardship is allowed only from the deferral source. Let's say the participant has $10,000 in Rollover source and $50,000 in Deferral source. He would like to take out a hardship distribution for $50,000. Which option do you think would be correct: 1) Process an in-service request for $10,000 and a hardship request for the remaining $40,000 or; 2) Process the hardship request for the entire $50,000 So, if the participant wants to take out more than what's allowed under the in-service conditions, can he just take out the entire amount as a hardship (assuming he has the documentation for a hardship)? Thanks.

We have a plan that has different eligibility for deferral and Profit Sharing Sources. The compensation for both is defined from date of entry. Let's say a participant becomes eligible for deferrals on 1/1/2019 and for the profit sharing source on 7/1/2019. Let's say the compensation from 1/1/2019 to the end of the year is $100,000 and from 7/1/2019 to the end of the year is $50,000. The company allocates 5% to this participant for a Profit Sharing Contribution, so the participant receives $50,000 * .05 = $2,500. However, when performing the General Test, is it the $100,000 compensation that's used or the $50,000? The DATAIR documents have a separate definition of compensation for "Plan Compensation (including for Elective Deferral purposes)" and "Compensation for Non-Elective Contributions" and I'm wondering if Plan Compensation means that it's the compensation used for all testing (including General Test). Thanks.

There is a SH plan and a Non-SH plan in a control group. They both pass coverage on their own, so aggregation for ADP/ACP is not required. However, there is at least 1 key employee in each plan, so they must be aggregated for Top Heavy purposes. The plans are top heavy. My question is this: do the Non-Key employees in the SH plan have to receive the Top Heavy minimum contribution? Since that plan is SH, my thinking is that they don't. Do you agree?

We have a participant who is terminated, wants to take a full distribution and she also has a loan outstanding. However, she does not want the loan to be offset at the time of the distribution. Rather, she wants to send a check to pay off the loan after the distribution is done. Is this allowed? My understanding is that it's not and the loan offset must be done when taking a full distribution. Is that correct? Thanks.

Hi, We have a plan that has late contributions every year for the past 3 years. It is my understanding that we can only rely on the VFCP correction method (and using the VFCP calculator) if late contributions happen at most in 2 of the last 3 years. Is that correct? If that's the case, what happens if the plan used the VFCP method in the previous 2 years (2016 and 2017) and had late contributions again this past year (2018)? Should we use the plan earnings to calculate what the participants are due? What if the plan lost money in 2018? Thank you.