JustMe

If I have a controlled group where one entity maintains a fully insured plan and another entity maintains a self-insured plan. For 105(h) testing purposes for the self-insured plan, it will consider those benefitting under the fully insured plan as "not benefitting" under the self-insured plan, correct?

Can a cash balance plan have a full calendar year plan (i.e., effective date of 1/1) if the entity only came into existence in the middle of the year?

We recently took over a tribal government plan and the prior TPA has been filing a Form 5500 for the plan since its inception. This plan truly qualifies as a tribal governmental plan and so it is not subject to the Form 5500 requirements. Should we file for the 2020 plan year and mark that it is the Final Form 5500 or not file and, when the IRS sends a letter requesting the filing, respond that the plan is not subject to the Form 5500 filing requirement?

I have a client with a NQDC and the participant has been issued a Form 1099 each year for the investments. This is not correct, is it?? So this should go to the employer to consider on their corporate return??

I wanted to revive this thread as I have a similar question. Any thoughts?

I recently discovered our client is a part of a controlled group (newly established in 2019) and one entity maintains a SIMPLE IRA and the other a 401(k) Plan. Good news, we're still within the exclusive plan transition rule under 408(p). Bad news is we're beyond the 410(b) transition rule. What now? In addition, if the SIMPLE remains and those employees are NOW eligible for the 401(k) plan, does the (k) plan need to be amended to exclude the employees benefitting under the SIMPLE IRA plan or are those employees eligible to participate under both plans if they so desire so long as they don't exceed the 402(b) limit? If the employees could be eligible for both plans, is there a coverage test for the 401(k) plan if all employees are "eligible" under the 401(k) plan? Also, just to confirm, I'm right that if the employees previously employed under the entity who sponsored the SIMPLE IRA plan are now working under another entity within the controlled group, such employees must still be eligible for the SIMPLE IRA (contributions coming from an entity who does not sponsor the SIMPLE IRA) as if the plan sponsor of the SIMPLE IRA were still a separate entity, correct?

Same facts as above, but with a twist. How about if an employee was eligible to contribute during 2020 but didn't and then terminated before the end of the year? The plan "technically" didn't cover this employee, so could the plan file a Form 5500-EZ? Or does the fact that another employee was eligible kick them into Title I coverage?

I have no clue. Not our current client. I'll recommend your suggested path. Thank you!

I have a similar issue with a for-profit entity named as the primary beneficiary for a deceased participant and the "remainder" of the assets to go to the children. In this example, if the funeral home is the beneficiary, who pays the taxes on the distribution? Should the payment be treated as a cash distribution to the deceased participant and the payment be grossed up 20% to allow for a 20% mandatory withholding with 80% paid to the funeral home? The Form 1099-R names the deceased participant as the payee?? Other suggestions?

I understand that a SEP may exclude union employees, but may an employer have a SEP plan for non-union employees and another SEP plan for union employees? How about 2 SEP plans for 2 separate union groups with unique collective bargaining agreements?

The 404a-5 Regs. require that plan participants be notified of any fee changes 30-90 days prior to the effective date of the change. From a practical standpoint, how are TPAs handling this requirement if you takeover a plan and the distribution/loan fees are different from what you charge? Do you make a note in your system not to change the fees until XX date?

We have a NQDC plan and the Plan Sponsor wants to terminate it since no employees are funding to it any further. There is one participant remaining with contributions invested in an annuity. Participant doesn't want to take a distribution so there is no request to accelerate pay out. Can the plan be terminated with an account balance remaining in the plan, or must the assets be distributed upon plan termination? If so, would the suggestion be just to freeze the plan rather than terminate it?

All, Thank you for your support. I was second guessing this response and planned on drafting a new response and then got side tracked. I do not agree that the ESOP ownership is disregarded and was going to look into this further. Correct, the ESOP owns 80% of each company. I have asked if the relationship is a parent-subsidiary relationship and the underlying ownership breakdown of the ESOP in case I need to consider a brother-sister controlled group scenario. @Bill Presson - am I barking up the right tree with my questions?

Thank you!

An ESOP owns 80% of 2 different corporations; ownership is as follows: Company A: 80% ESOP 10% Individual 1 10% Individual 2 Company B: 80% ESOP 20% Individual 3 Based on the 80% ownership, is there a controlled group, or is the ownership interest by the ESOP disregarded for controlled group purposes?

We have two entities owned separately by husband and wife that are under common control due to a minor child. Minor child will be 21 mid-2021. At that point, ASSUMING no other attribution rules apply for the spouses (no ownership in the other entity by either or management/oversight, not in a common law state, etc.), can a plan be opened after the child's 21st birthday with an effective date of 1/1/2021? Must it have a short plan year or fiscal year beginning after the birthday since the entities were under in a controlled group at some point in 2021?

Wonderful, thank you so much!

If a participant takes an in-service distribution (not hardship nor RMD) of property from a 401(k) plan, how is the 20% mandatory withholding handled? Does the participant have to also take a cash distribution equal to 20% of the property value so that can be withheld 100% for taxes?

Does anyone know what the repercussions are for failing to include a Schedule SB? Is it similar to failing to include an auditor's report on an audited plan and the client will receive a letter from the DOL providing 45 days for the client to correct the filing?

We have a Davis Bacon plan that excludes HCEs but the owner's children received Davis Bacon contributions within the plan. We have 2 issues, the plan sponsor did not follow the terms of the plan document and, if these contributions are to stay in the plan, the plan will fail 401(a)(4) testing. If Davis Bacon contributions are irrevocable, can we even remove these ineligible contributions from the plan? Or must the plan go through VCP to retroactively correct the plan to include these HCEs for the Davis Bacon contributions? The plan allows for cross-testing using individual rate groups. Assuming the contributions need to remain in the plan, could the plan fund a rather large contribution percentage to a select group of lower-paid NHCEs to pass the test? Although this isn't an 11g amendment, if the benefit is not meaningful under a cross-tested plan, could it be construed as a scheme or abuse by the IRS?

Just an FYI - I spoke directly to the DOL and they confirmed, so long as a client has not received a notice to assess a penalty from the DOL, the plan is still eligible for DFVC.

That's why I love this platform. You are absolutely correct, at the time of THIS filing, the plan was a "soloK" plan required to file a Form 5500-EZ and the client received a CP-283 letter. Yikes, this penalty is steep for this little plan. Thank you!

Sorry, but I was somewhat trying to reignite this question to see how others have experienced success with going through DFVC once the IRS has issued a penalty. When the IRS issued the penalty, the client's attorney requested abatement of fees and the request was denied. Does the client still have access to DFVC or is the IRS penalty what is required?

Is it not true that a plan is still eligible for DFVC even if the plan sponsor receives a letter from the IRS or has that changed? This will reduce the penalty significantly. Q12. May plans participate in the DFVCP if they have already received correspondence from the Department or the IRS? Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the Department of a failure to file a timely annual report under Title I of ERISA. An IRS late-filer letter will not disqualify a plan from participating in the DFVCP. A Department of Labor Notice of Intent to Assess a Penalty will always disqualify a plan. https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/dfvcp.pdf Anyone else agree? Disagree?

We have a client that failed to sign their DB restatement prior to 7/31/2020 - despite numerous requests from us to do so. Am I reading the IRS website correctly that, since this failure occurred after April 19, 2019 (EPCRS Rev. Proc. 2019-19 update) and will be corrected within the SCP 2-year timing, that correction for this failure is eligible under SCP? An article I've read seem to interpret this expansion to exclude restatements since, due to the late restatement, the plan sponsor may no longer rely on the prior restatement period opinion letter, but that does not appear to be how the IRS is describing correction here. Assuming the plan is eligible for SCP, should the document be dated as of the current date with a notation that the adoption is late but the plan is taking advantage of the correction method under SCP?? https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-you-havent-updated-your-plan-document-within-the-past-few-years-to-reflect-recent-law-changes From article (my highlighting added): Correction programs available: Self-Correction Program: Some, plan document failures may be corrected on or after April 19, 2019 under SCP if certain conditions are met. The conditions are: Plan document failures must be corrected within the two-year correction period specified in Rev. Proc. 2019-19, section 9. The failure begins in the plan year that includes the end of the applicable remedial amendment period. Plan must have a favorable letter as defined in Rev. Proc. 2019-19, section 5.01. SCP is not available to correct a failure to timely adopt an initial IRC 401(a) plan document. Corrective amendments to resolve demographic failures that were not timely adopted are not eligible for SCP and must be resolved under VCP or Audit CAP. The late adoption of discretionary amendments is not considered a plan document failure. Refer to Rev. Proc. 2019-19, sections 4.01, 4.03, 4.04 and 4.05 for program eligibility requirements. Example 1: The Carrot Stick Company has sponsored a 401(k) plan since 1997. They use a pre-approved plan document. On May 3, 2019 the plan sponsor realized that they failed to timely amend their plan for EGTRAA by the April 30, 2010 deadline and for PPA by the April 30, 2016 deadline respectively. The EGTRRA document was adopted on June 30, 2015 and the PPA document was adopted on December 5, 2018. Can these failures be considered resolved under SCP per Rev. Proc. 2019-19? The answer is no. The failures can’t be resolved under SCP. The correction of the failures occurred before April 19, 2019, the effective date of the revenue procedure. Prior to 4/19/19 the correction of these failures needed to be accomplished via VCP or Audit CAP. Even if the failures had been uncorrected they would still be ineligible for SCP under Rev. Proc. 2019-19 because correction would be occurring after the end of the 2 year period for correcting significant failures under SCP. That period would have ended on 12/31/12 for the EGTRRA failure and 12/31/18 for the PPA failure.