CuseFan

Any solution that utilizes a qualified plan to direct additional amounts into Roth that would otherwise not be available through Roth IRA or 401(k) can be referred to as a "back-door" Roth. However, use of after-tax voluntary contributions typically works in only two situations: owner or HCE only plans where nondiscrimination testing is not needed or very large corporate plans with generous matching contributions that can satisfy ACP testing.

and if no filings are made, what are the ramifications? the plan sponsor no longer exists so there is no responsible party to go after. not filings 5500's does not DQ the plan and taint the distribution paid to last man standing. I would just walk away and let it go.

So first, I would not use "eligible" in any of the above descriptions because you're excluding these employees from being classified as eligible employees. All are permissible classifications but the second two need some clarification - the $75,000 needs a defined time frame (look-back year?) and further defined - is it $75,000 in compensation, and is it gross, plan, commission income or base pay? Why are you concerned with BRF? You need to satisfy coverage for whatever plans/portions of plans you want this exclusion, and if you can satisfy coverage for that then BRF won't be a problem.

Coverage & Nondiscrimination Test. I interpret consistency from year to year as all years in general but don't know if you must lock it in forever. If you changed methodology to B after using A for say 5 years and then continued with B for a number of years, that might be OK. I don't know how IRS would even monitor as I don't recall them ever asking for the NDT over multiple years. Consistency among all participants and all aggregated plans is required regardless.

From the C&NDT answer book: Apparently either method is valid. It is the position of the IRS that a plan may use attained age (as of last birthday) or age nearest the testing date for purposes of the general test, as long as it is applied in a consistent manner from year to year. If nearest age is used, the equivalent benefit accrual rate (EBAR) for participants born in the first half of the plan year is reduced by one year's worth of interest when compared to using age last.

You are correct - seek and ye shall find!

They can be excluded if they do not benefit by reason of being terminated and having less than 500 hours. If they benefit, or there is not a last day and hours requirement then that exclusion does not apply is my understanding.

Agree with CBZ - reallocate means within the DBP, and you need to first revert to be able to then transfer to a QRP.

CCA also sponsored a webinar in September 2020 on COVID and Retirement Plans. One slide estimated a 25% increase in 2020 mortality (deaths) but then estimated the surviving population would experience 25% lower future mortality as a result of improved health behaviors - survival of the fittest in a sense. However, as we know, this is all unevenly distributed across geography, race, socio-economics and unfortunately with vaccines, politically, so how it truly impacts future mortality for the country and retirement plans in total remains to be seen. Another slide had the following, indicating any COVID impact on lump sum rates would be realized until 2024: Mortality Improvement Scales •MP-2020 scale will include population mortality data through 2018 •COVID experience would first affect scales in 2022 •According to recent process, scales developed in 2022 would affect 417(e) lump sums in 2024 Hope you found this both interesting and helpful.

You could continue looking at hire date anniversaries for the subsequent eligibility computation period, there is no requirement to shift to the plan year.

YES - anything that improves cyber security these days is a positive. The last thing we need is a Russian hacker infiltrating our sacred forum!

Check your plan document as to when specific contributions are allocated to participants to make sure document supports your actions, or at least does not prohibit or contradict them. If it's a matter of cash flow, then using a holding account for PS deposits until year-end might be way to go, but if it's because owners want to invest their PS ASAP then that obviously doesn't work.

Agree with all - if client is unable, unwilling or otherwise problematic in getting you basic required information they should readily have, including census history (at least recent years), the last few valuation reports, and the latest plan document, then I would have little confidence that they'll instantly turn over a new leaf and in the future provide you with everything you need each year on a timely basis. Remember, it's usually 10% of your clients that cause 90% of your problems, so if you can identify and avoid someone likely to be in that 10% (and thereby shrink it), then walking away might be your best course of action unless the size of the engagement is meaningful to your practice.

Definitely not #1. #2 or #3, or combination thereof as the deduction(s) will need to be within the applicable limits for the applicable years. Nor am I, so I also suggest the client discusses with their accountant.

Agree, need to make sure this provision has been adequately communicated.

I have seen many instances over the years where the plan's check writing function passed through the corporate account - not a best practice but in and of itself probably not a compliance problem BUT, maybe an issue if there is any float, especially if checks not cashed timely. If checking account does not pay interest, then I think OK. The important issues are tax withholding and remitting (if/when required) and reporting - running through a corporate account does not change any aspects of those requirements.

Anything you do that increases benefits will have to satisfy nondiscrimination. You don't describe any of the circumstances that we would consider in dealing with this - amount/percentage of over funded status, number and ages of owners, if owner benefits are tracking at 415 limits, the relative number of employees/participants, how mature the plan is and whether the plan is aggregated with a DCP to pass testing or you have combined plan deduction limits that apply. A joint discussion with the plan sponsor and investment advisor is warranted because a 21% return sounds great but at what risk and, if owner benefits are at or near 415, why construct the portfolio in that manner? This is a much different discussion if you have a $10M plan that just created $1.5M in excess versus a $1M plan that created $150,000 in excess. Again, depending on particular circumstances, we usually recommend a number of alternatives, sometimes individually and sometimes in combination, including reducing future contributions, amending to increase benefits (usually a one-time balance increase, and possibly reducing contribution to CBP to offset additional PS contributions that are often needed to satisfy testing), paying eligible plan expenses from plan assets, and retaining a cushion for various reasons such as the 110% threshold to pay HCE lump sums or protecting against a down year in the business or the market (although ROR ICR does that for most part). This is a good problem to have but the key is to not let the over funded position get out of control - but what constitutes out of control depends on the particulars surrounding the plan. Good luck.

No doubt, and these departments always seem to be understaffed - so my derision is cast not at the people, but at the institution, LOL! But where a well-staffed IRS might mean quicker turnaround on VCP and d-letter submissions, it could also mean an uptick in audit activity, so I'm OK with them running on a skeleton crew!

The footnote to the ERISA regulation noted here is the language that follows it: 29 CFR § 2530.203-3 - Suspension of pension benefits upon employment. (Approved by the Office of Management and Budget under control number 1210-0048) [46 FR 8903, Jan. 27, 1981, as amended at 46 FR 59245, Dec. 4, 1981; 46 FR 60572, Dec. 11, 1981; 49 FR 18295, Apr. 30, 1984] As you can see, this goes back to the 80's. I seem to recall that pension plans could cease accruals after NRA and that either TEFRA, DEFRA or REA outlawed that and in conjunction required SOBs or actuarial increases. I started my career in 1984 (dang! where does the time go?) and remember there were a lot of pension legislation changes as the protections of a then-young ERISA were built upon in addition to using pension legislation as a tool to shape federal tax policy. The more things change, the more they stay the same!

Same story here - they got my current ERPA renewal and asked for proof of the prior cycle, so I emailed prior cycle form and gov.pay receipt and was then told I'm renewed for the next cycle and my renewal should come in the mail within the next 14 business days. We are now 25 business days and nothing received, so just sent an email. We'll see.

The date to determine here is the annuity starting date, which for a lump sum is the date by which all actions/events necessary to pay the lump sum have been completed, i.e., QJSA notice, valid benefit election and spousal consent (if applicable). This does not have to be the date of cutting the check or transferring funds as you are allowed reasonable administrative delay. Typically, for a 5/1 ASD and lump sum valued as of such date, we'll want everything completed and returned before such date if possible (or completed before such date and returned not long after) such that the lump sum can be physically paid before 6/1. For a plan termination, we would value benefits as a proposed/estimated distribution date of 5/1 and then make sure benefits were all paid in early May, but if it didn't happen until 5/4, not a problem. (14th and 17th in your case) If you have some excess because of market value changes, allocate if required/possible or use for expenses - but assets should have been in cash so a couple of days' interest would be minimal, and if they weren't, that's another discussion.

1. Yes as there is no requirement that the plan year and the fiscal year be the same. This could be continued indefinitely. That said, if you also have a DC plan and need to aggregate the DBP with the DCP to satisfy coverage and nondiscrimination testing, then those plans MUST have the same plan years. 2. If I remember correctly, and someone will correct me if I'm wrong, but I thought you had three options (1) deduct the PY contribution in the tax year in which the PY ends (so $275k for PYE 7/31/2020 would be deducted on 2020 return), (2) deduct the PY contribution in the tax year in which the PY begins (so $275k for PYB 8/1/2019 would be deducted on 2019 return, presumably the short 2019 tax year), or (3) a proration. I also thought that you had to apply whichever methodology consistently from year to year. I don't know how the short fiscal year affects this. Unless you had a aggregated plan testing need, I don't think you can do a DFVCP or EPCRS filing for what amounts to forgetting a discretionary amendment to make administration easier.

If SEP is on IRS model Form 5305-SEP, that document precludes having any other retirement plan, so he might also have the headache of finding and paying for a provider's SEP document in addition to a 401(k) document. Seems like a lot of hassle to avoid a very easy/minimal 5500-EZ (until such time as the final return is needed).

That is correct - every non-key employee who is in the plan for some portion/money-type and is employed at year-end must get at least 3% of annual 2020 compensation from employer contributions to satisfy top-heavy.

Of course that assumes those individuals were truly independent contractors. If nothing in the relationship changed except the employer "flipped a switch" and presto chango now everyone is magically an employee, then there is certainly some risk that IRS could retroactively reclassify them as employees from the start. Absent one or more of these individuals pursuing/inquiring about this directly with IRS or DOL, the chances of such are probably slim but something of which the employer should be aware I would think.