Pammie57

During 2016, a $4000 deferral by the owner of a company was incorrectly put into an old IRA rather than into his 401k account. This error was discovered during year end reconciliation and preparation of the 5500 in early 2017. The error was made by the asset platform/broker's office. However, now to transfer the funds, they want us as the TPA to write a letter saying something like "the plan accepts this rollover". There should not be a rollover, since it never should have been put into the IRA. Has this happened with any of your clients, and how was it resolved? . The asset provider is wanting to prepare a 2017 1099R. Again, they made the initial mistake of putting it into the IRA. Now we are supposed to jump through hoops to cover them. Thoughts?

A client with a 401k plan paid the HCE's bonuses and no deferrals were taken out. Their document does not exclude bonuses from definition of compensation. Do they have to calculate the deferrals? If not, what type of notice/if any would the HCE participants need to sign saying they did not want deferrals taken from bonuses? Should they amend document going forward to exclude bonuses?

In a safe harbor 401k Plan, the plan sponsor failed to withheld deferrals on bonus checks. They realized the error the next week. Since it was caught so early, are they allowed to just let participants make up their missed deferral on the next check. If a participant chooses not to make it UP - do they have to get something in writing and do they still have to fund the match that would have been related to the missed deferral? Need some advice! Thanks

A participant terminated 07/31/2017 with an outstanding loan balance. She wanted to pay it back monthly after her termination. The plan document says it's taxable to her the "day after termination". and does not allow her to continue to pay on the loan "forever".....Question: can she pay a lump sum now, and if so, roll it with the other cash to an IRA? . How long does she have to pay it back and not violate/default on the loan now that she is terminated? and be able to roll it to the IRA? I know usually loan payments are late the last day of the following quarter. I hope this makes sense. Thanks for any feedback.

An employer under calculated and under deposited two participants' deferrals for the entirety of the plan year. When discovered at year end, they put in 25% of the missed (under deposited) deferrals. Do they prepare a 5330? - and do they calculate earnings/amount involved based on the 100% that should have gone in or the 25% that got put in. The employee did not make up any deferrals - just the employer.

Yes the money was sent and then the payroll check was voided later. No additional payroll checks will be issued. He is terminated. I vote for letting him keep it. He is NHCE. The platform is AUL and I argued with them, but they said it's in the service agreement the plan sponsor signed....arrgghhh Thanks all!

A 401k Plan Sponsor sent a payroll file with deferrals for a participant whose check was later voided. So bottom line he had a deferral deposited into the plan assets on money he did not receive. What is the BEST way to handle this as far as correcting the error? It's a small amount - $9.75, but the platform wants $100 to correct it(move it to the administration account).. Feedback please. Thanks

A participant retired in May of this year. She is on Social Security. She sent in a form for only a partial distribution. The Plan document specifically say "lump sum" only and no annuities. She is wanting to take a minimum out each month so that she does not mess up her SS.... What should the Plan Sponsor do? Force her out/rollover to an IRA? Her balance is around $1800.00 Would allowing her to take 4 partial distribution violate the plan terms? Sounds like she is attempting to have her account annuitized. Feedback please. Thanks.

A participant terminated from a qualified plan in 2016. She will NOT be 70 1/2 until December 2017. When she filled out her paperwork to roll her money to an IRA - she ask that they also distribute her RMD. The platform rolled it all to her IRA. The IRA provider is claiming that amount of her RMD (which no one has calculated yet) should not have been rolled and is now an excess distribution that needs to be paid out of the IRA. She still isn't 70 1/2, but will be by year end so does that muddy the waters? If they pay it to her - will it be considered her RMD (I guess they plan to calculate it) and can it be split between her ROTH IRA and regular IRA. There may be more tax issues I haven't though of, but this is enough for starters. Isn't this for the IRA to deal with now that it is out of the plan?

Two participants in the same plan are getting married and plan to purchase their first home. Their plan allows for participant loans. They want to take hardships to use as a down payment on their new home. Do they have to take loans first? I am thinking that most lenders won't take a downpayment of borrowed money. Is there a way around the taking the loan first requirement for this situation? Thanks!

There has been some discussion in my office about how individual contribution amounts should be limited under a cross tested plan PS allocation. The primary question - If the Profit Sharing Contribution in total does not exceed 25% of TOTAL eligible compensation - can an individual participant received more than 25% of their individual compensation? I always thought no, but if I am wrong - I'd be ok with that!!.. I would appreciate feedback please. Thanks!

Thanks - it is defined as the plan year. Nothing was put into the plan during 2016 - so I am wondering if we could amend the document to change the limitation year or even the plan year to allow full compensation and full profit sharing.... or is that treading on treacherous waters? don't want to jeopardize the qualified status of the plan...... I did not set this plan up so I am not sure why they chose 12/1 as the start date unless they were waiting for the set -up at the "platform"......

We have a plan that started in 2016. The first year is a short plan year - 12/1/2016 - 12/31/2016. It is my understanding that both compensation and 415 limits must be prorated to 1/12 or compensation limit is $22083.33 and the max the HCE can put in is $4416.67 (which encompasses both deferrals and any employer contributions). he is not age 50, so no catch up. They want to put $30000 into the plan between the owner and his spouse. He makes over 265,000 and she makes 45000. I don't see any way to do that for 2016. The most I figure is around 8833. Just want some feedback and any guidance on what I may be missing here. Thanks

We have a plan that failed ADP (deferrals only). The HCE is due a corrective distribution as it stands of $7376.78 plus earnings. They are also Top=heavy and the amount due for TH is $23,300.05. The QNEC required to pass the ADP is $27101.19 IF they want to put in the $27101.19 - as long as it is vested 100% - can this count for both TH and meeting ADP test and avoid the corrective distribution? Would LOVE feedback!!!!

Plan started 07/01/2016; they are using the current year testing method for the ADP test. (per the document)....they have failed the ADP test based on current year actual data. Is there any way to use the assumption that the average ADP for NHCE is 3% and pass? Or is that reserved only for plans that use the prior year method for ADP non-discrimination testing? Thanks

A participant terminated in 2012; she had a defaulted loan at that time. from looking back at records, no 1099R was done for the loan. She got a cash distribution in 2016. Could a 1099R be done for 2016 and include both the cash distribution and defaulted loan? Or should a 1099R be done for 2012 & 2016? If just 2016, can the total of cash and loan be on one 1099R Thanks

We have a client who terminated their 401k qualified retirement plan in 2014. However, they did not pay out funds until January 2015. Their funds were with a brokerage account. Unfortunately the 1099R's were never done for all 9 participants. This was strictly an oversight since the TPA at the time and the brokerage house thought someone was preparing those (along with the 1096 and form 945) Is there any way to get penalties for non-filing abated? Has anyone every had this happen in their practice? How did you resolve? I assume we need to do the late 1099rs, etc and send those out asap. This means that all affected may have to file amended 1040's. This is a mess. Thanks for any comments/helpful suggestions on how to fix this asap

I got a call from a broker today - we service a mutual retirement plan client. The client is a Subchapter S. The owners deferred throughout the year weekly on compensation they received. Now they are asking if they can max out. He deferred 13,372.87 through the year and she deferred 12,980.70, so they obviously did not reach the 18,000. They are not 50 yet. His comp was 222,000 and hers was about 40,000. Is there a way to get more deferrals in for them? Are there normally any K-1s for the owners of Sub S Corp. I get a little confused on whether they can draw a salary and receive a K-1 in addition. They can do a cross tested profit sharing contribution per their document. Any input would be appreciated. Thanks!

We have mostly plans on platforms where distributions and withholding are taken care of for the client. However, I have one client who is with a broker, who does none of that for him. He recently had a terminated participant request a cash distribution. I instructed them to withhold the 20% - now he is asking me what he does with it. Am I correct in telling him to go to a bank, get a deposit coupon and mark 945 on the coupon and make the deposit (much like a 941 deposit). Thanks for input.

A 401k client has Paychex do their payroll. Their plan document does not exclude bonuses or any irregular pay from withholding deferrals. A participant got a small bonus check of about $30 - Paychex withheld his medical insurance premium first - and this resulted in a zero net check. (the premium is obviously more than $30) Should they have withheld his deferral first and deducted the remainder for insurance premium? Is this something the employer can dictate? Paychex told them that was how their system did it. If the check has been large enough to deduct both - then that would have happened. Is there a pecking order by law? Thoughts? Thanks!

I am trying to find out who the 25% owner is, and I am also trying to find out if the 75% owner is actively involved or is this is just an investment..... If it is just passive investment - then can they give him a paycheck (as an employee)? I don't think so, but that is what somebody advised them to do to help with ADP testing (if he defers nothing) This whole scenario is confusing to me....

the entity is a LLC operating as a partnership.......

We have a 401k Plan where the owner of the company has never received a payroll check or been listed as an employee in any census records. He has owned the company for over 10 years. They always fail ADP testing. They want to know if he starts getting a payroll check in the last quarter of 2016 and does not defer, can his compensation for 2016 be counted in the HCE group to help with passing the ADP testing. My first question is what is his real hire date? Their plan has a six month wait; no age requirement, and monthly entry. Second question, is when is he really eligible to participate in the plan? 2016 or 2017 after he meets 6 month eligibility.? Any comments would be welcome.

Can someone tell me whether this IPS is required or just suggested? If required, who prepares it normally, and is there a generic version with some fill-in the blanks or is each plan's IPS custom? Does anyone have a sample? Thanks