CuseFan

Confirming - SB gets prepared/signed and provided to plan sponsor but is not filed, and a first and final EZ filing would be required. On the form there are check boxes for first and final as well as a line to disclose the effective date of the plan, so it could very easily be flagged for IRS scrutiny. And if the situation is as described, plan sponsor changed their mind after an initial tax deferral, that is precisely what IRS does not like, as we all know.

OK, so then if the 4/1/2023 consolidated installment was for calendar 2023 RMD then yes, a lump sum of remaining benefit paid by 12/31 would all be rollover eligible.

There are some very limited circumstances when putting life insurance into a pension plan makes sense, but I would say unless such suggestion came from an independent certified financial planner or similar advisor who does not also happen to sell life insurance, I would avoid insurance and the person selling it. Unless you know (and the insurance company doesn't) that you're going to die in the next few years, in which case I say load up!

I think it's the partnership return due date (3/15, which changed from 4/15 a few years back) which can be extended to 9/15.

My understanding is that the loan still exists, it was just taxable as a deemed distribution, which is different than a distribution/offset where the loan is actually "distributed" and no longer in the plan - but I defer to others who deal with this more regularly, as I do not. This all ignores the prudency and possible other concerns lending to someone who recently defaulted. Again, not my area so I'll others argue any issues there.

First distribution calendar year was 2022? If so, then don't you also have a distribution calendar year for 2023? If you continued (consolidated) annuity and paid 12x again next 4/1 then you're OK, but I think a lump sum changes everything. Maybe I'm wrong but I would dig further.

Interesting question, because being in the plan at zero means they are not benefiting for purposes of 410(b) or 401(a)(26), so are they really "covered"? This is different than someone not accruing because they hit some limit. Also, being in a plan with a defined accrual of zero doesn't get you 415 years of participation either, in my opinion. I do sometimes have individuals in at zero, but that's because a classification exclusion doesn't work and I'd rather specify individuals in a benefit formula than an eligible employee/excluded employee definition.

From TH regs, M12 - you just need to provide 3% DC. M–12 Q. What minimum contribution or benefit must be received by a non-key employee who participates in a top-heavy plan? A. In the case of an employer maintaining only one plan, if such plan is a defined benefit plan, each non-key employee covered by that plan must receive the defined benefit minimum. If such plan is a defined contribution plan (including a target benefit plan), each non-key employee covered by the plan must receive the defined contribution minimum. In the case of an employer who maintains more than one plan, employees covered under only the defined benefit plan must receive the defined benefit minimum. Employees covered under only the defined contribution plan must receive the defined contribution minimum. In the case of employees covered under both defined benefit and defined contribution plans, the rules are more complicated. Section 416(f) precludes, in the case of employees covered under both defined benefit and defined contribution plans, either required duplication or inappropriate omission. Therefore, such employees need not receive both the defined benefit and the defined contribution minimums. There are four safe harbor rules a plan may use in determining which minimum must be provided to a non-key employee who is covered by both defined benefit and defined contribution plans. Since the defined benefit minimums are generally more valuable, if each employee covered under both a top-heavy defined benefit plan and a top-heavy defined contribution plan receives the defined benefit minimum, the defined benefit and defined contribution minimums will be satisfied. Another approach that may be used is a floor offset approach (see Rev. Rul. 76–259, 1976–2 C.B. 111) under which the defined benefit minimum is provided in the defined benefit plan and is offset by the benefits provided under the defined contribution plan. Another approach that may be used in the case of employees covered under both defined benefit and defined contribution plans is to prove, using a comparability analysis (see Rev. Rul. 81–202, 1981–2 C.B. 93) that the plans are providing benefits at least equal to the defined benefit minimum. Finally, in order to preclude the cost of providing the defined benefit minimum alone, the complexity of a floor offset plan and the annual fluctuation of a comparability analysis, a safe haven minimum defined contribution is being provided. If the contributions and forfeitures under the defined contribution plan equal 5% of compensation for each plan year the plan is top-heavy, such minimum will be presumed to satisfy the section 416 minimums.

Yes, these situations can be as murky as any, all the facts and circumstances need to be examined and qualified counsel consulted if the situation warrants. Like I said before, if only a small/immaterial population in question, then maybe just take the easy conservative interpretation.

Depends on what the plan says for allocation conditions - it could also include people that terminated during the year. Also, pay attention to timing, when the forfeitures occur and when plan says they are to be allocated. If you're holding forfeitures that should have been allocated at 12/31/2022 and want to allocate them at a plan termination date of 11/30/2023 only those active on such date, that is an issue. Read the plan, follow its terms, and just treat your plan termination date as your latest plan year end and you should find out exactly what you should do or should have done.

If you can somehow get those excess PS reclassified, maybe you're OK, but I would not tell anyone that I think such strategy would hold up under audit. I'd say we can try but you're playing audit roulette for three years on this, at least that's my opinion. In these cases, I'll usually present limiting total deduction to the 31% and then carry forward remaining CB deduction to the next year properly limiting the PS to 6%. Depending on CB contribution and deduction funding cushion, sometimes it even takes a second year to catch up. This just follows the fact pattern, I don't see a legitimate basis for being able to reclassify a contribution that was made as a deductible profit sharing contribution as something different - and certainly not as VAT contribution when no such designation was made when contributed.

What does the plan say on allocating forfeitures? Also, remember that forfeitures count as annual additions under 415 and a person without 415 compensation for a given plan year has a 415 limit of zero.

I think a per diem classification exclusion may be possible depending on facts and circumstances. These can be very different, in my opinion, than the typical part-time, seasonal or temporary employee that may be routinely/regularly scheduled to work X hours a week, or X full weeks over a summer, or just for the holiday season. Usually, PDs in my experience are on-call for ad hoc employment assignments as needed to fill in various gaps on an as needed basis, covering sick/disability leaves, maternity leaves, vacations or whatever. A PD on a longer term assignment could even work 1000+ hours, and I've seen others that show up with 8 hours worked and still others that may not work at all for a year or two (but not be terminated in payroll). I think this is very prevalent in larger medical services employers, which do not usually like to extend benefits to this group. Depending the size and scope of your situation, a larger environment may need further analysis of facts and circumstances as well as legal counsel input but a with a smaller company and a less significant PD population it might be easiest and safest to err conservatively and include as LTPT.

I won't go into the could have should have scenarios as it wasn't your client at the time. What we have often done is have the Plan Administrator write a letter to the claimant saying that the letter from Social Security indicates that you may have a benefit due from the plan, not that you do indeed have a benefit due from the plan. Our records indicate that the plan had been terminated (add year) and all remaining benefits due were paid out at termination with no further benefits due. If you did not receive your benefit at that time, you likely elected to receive it earlier or it may have been involuntarily paid as mandated by the plan if it was a small account balance. We have no record of you having a current account in the plan and ask you to review our historical bank, IRA, brokerage and other financial records for your payment. Sometimes this is enough to jog their memory or otherwise make them go away satisfied that they did some time ago get their money. If not, then things can get tedious, trying to secure prior bank records, old 5500's and the like to figure out when the person might have been paid and chasing down the proof it was paid. Good luck, these are not fun to deal with.

agreed - and you cannot do the 401(k) term/SIMPLE start-up in same year.

Sorry, I know managing a huge union fund and population is no walk in the park, and I did not read the article, but as an old timer the connection between teamsters and dead people collecting pensions struck me as humorous. So, to keep it going, I wonder how many of them voted on Tuesday?! I know the real gist of the article was the failings of a government agency, but making fun of that is like shooting fish in barrel.

Wait, teamsters and possible pension fraud? Never would have crossed my mind in a million years, where is Jimmy Hoffa when you need him? If I end up next to him in the next few days you all know who did it - you won't find me, though, but if you a paint imperfection in the NY Giants or Jets logo in the Meadowlands end zone, that's probably where I'll be - LOL!

We've seen clients exceed that limit and run a carryforward balance deductions, or others pay the excess as W2 and currently deduct rather than contribute. This is where you put your consulting hat on as there are other (welfare) benefits where D-B prevailing wage fringe amounts can be directed. We've also done CB to cover a floor of like the first 5% of pay of D-B PW. One of the complicating issues there is if someone's PW is less than the 5% credit they still get the 5%.

If they are Directors and getting paid fees for that but aren't employees, they should be getting 1099 income and could do their own plans off of that.

I think this is a big deal and the first question to be answered. Regardless of how they income reported to them or why it's W2, the fact appears to be that they are not providing ANY services to the employer and so even if you can argue it's plan compensation the IRS would say it doesn't matter because they have 415 compensation of zero. If they can substantiate services of some sort that's a different story and maybe it's untracked hours (or salaried hours or some equivalence) instead of zero hours. Otherwise, they're just on the payroll getting a paycheck for nothing, which if I'm the IRS I'm also questioning whether that is a legitimate deductible business expense. Sorry, seem to be in pessimistic, devil's advocate, argumentative mood this afternoon.

Yeah, I was a little curious on the timing of the question given the 5500 filing deadline had passed (unless not a calendar year plan or disaster area extension) and someone already answered it and filed accordingly - thinking maybe you/they were looking for reassurance on what was already done. If 2022 5500 does not show zero ending assets (and participants) then there is a 2023 final filing due and without extension would have been due 8/31, before an extended 2022 return, talk about a conundrum!

The loan limit applies within a controlled group of employer's retirement plans, so I think he is OK. I know there is some aggregation if the person is the business owner on the 401(k) side because he is also considered the "owner" of his 403(b) but not sure if that is only a 415 issue. If he is an owner I'd dig deeper, otherwise I think he's good to borrow.

Agreed, especially if interns are students - a two-year internship is not "forever" even though maybe longer than the norm, the client's initial phrasing was misleading. Sounds like it's all squared away now.

If the legal documentation said they were merged 12/31, then for that brief time in 2023 you had two trusts but one merged plan, I think you're good.

John, that was my first thought - are they truly interns or is that classification being used to exclude part-time employees who may ultimately work 1000 hours? I guess someone might intern at the same company for their entire college career, or maybe the employer's industry is one where long term internships are normal (but isn't that more apprenticeship?) - and do these "interns" usually get hired into benefit-eligible positions or are they longer term term temporary labor? Probably not the TPA's concern here but certainly a situation I'd call a head-scratcher.