lisabroc

Thank you very much, Larry!

Is there any possibility that SIMPLE IRA deductions can be reversed in January so that it can be replaced by 401(k) for 2020? I know the rule that both can't be maintained the same year. However, does the employer really need to wait another year to put in a plan with higher contribution benefits? Is there a fix or way to correct? Seems like it could still be done this early in the year.

Thanks very much, Flyboyjohn. I took Mr. Starr's answer to mean it is not too late:).

Thank you for the PDF link.

Is it too late to add safe harbor match provisions to an existing 401(k) plan for 2019?

We recently discovered that a client who had a SIMPLE IRA previously sent the January 2017 contribution deposit in error to the SIMPLE plan instead of to the new 401(k) plan that was set up for 2017. However, the W-2's are correct and the funds were withheld as 401(k) deductions. Any ideas how to correct and remove contribution from SIMPLE IRA and transfer to the 401(k)? Don't think 1099-R is appropriate since tax reporting is correct on payroll side.

We are working with a new 401(k) client and in reviewing the ownership structure, we see a number of IRA's listed as owners in the C-Corp. Is this permitted? The IRA's belong to employees (mostly with little or no ownership %). However, one of the IRA's belongs to an officer/co-founder/employee who has 5% ownership in the company. Could this pose prohibited transaction violations?

Thanks for your comments. Valic is the only 401(k) provider that I have come across who handles loans this way. In your experience, did Valic hold back just the loan balance or did they retain additional collateral that they released after the loan was paid off?

We have a client who is converting their 401(k) plan from Valic that is invested in an annuity platform contract. The contract provisions do not permit loans to transfer to the new recordkeeper and instead requires the collateral to remain in a security reserve account. The loans are made by Valic to the participant and must be paid back in full in order to transfer from the security reserve account. Has anyone dealt with this issue on 401(k) plans? It seems more common for 403(b) structures. The loans are assets of the plan and should be allowed to be transferred along with the other assets in my mind. Valic is treating them as policy loans which doesn't follow 401(k) loan procedures. Any insight is appreciated.

That's a very good point as to how it was set up to begin with and that may be part of the problem. Most broker/dealer firms require a Trustee Certification Form in lieu of the actual plan and trust document which clearly spells out the rights and powers of the trustee. At most, they should require a call from the plan trustee to initiate the sell orders. Will see how this plays out.

Thanks very much for the comments! That's the problem when brokerage firms treat plan accounts the same as retail accounts. They don't understand ERISA rules and their compliance department isn't any better. I will relay these points. They are getting hung up on only accepting sell orders from the participant and not the trustee.

We have a 401(k) client that is in the process of converting the participant-directed individual brokerage accounts held by a large wirehouse firm to a retirement plan recordkeeper/investment provider. The trustee provided a letter authorizing the liquidation of all of the assets in the accounts but the firm is insisting that the participants call to authorize the liquidation of their investments. According to the brokerage firm, it is a FINRA rule. However, the trustee made the decision to liquidate and transfer the plan assets another provider and provided the required black out notice and it should not be up to the participant to initiate the trades of the stocks/bonds held in the accounts. Has anyone encountered anything like this in their experience?

Thanks for the comments. Most of our plans are self-trusteed with the owner acting as trustee in most cases. Is it more prudent to apply for a separate trust tax ID number in that situation even if it is never used?

From a practical standpoint, it doesn't seem to be necessary to have a separate plan tax ID number when the assets are held with an investment provider/recordkeeper (i.e. John Hancock, American Funds, etc) who uses their own tax payor ID for tax reporting and distribution purposes. That being said, is there a legal precedent for applying for a separate plan tax ID number in this type of situation? We always apply for a separate number with assets in brokerage accounts or other arrangements that need it for tax reporting purposes. Some practitioners take the approach that it is needed to separate employer assets from plan assets in all situations. Not sure how this has been dealt with in the legal arena or how the IRS views this issue. Looking for some further guidance on this topic.

Thanks for the comments. I would agree that it is not a refinance to conform to the employer payroll frequency. In addition, I have requested a copy of the loan paperwork in the meantime to review the terms of the loan.