Tom

Great question ESOP guy! When you get close to retirement (a year or two) I don't want anything to blow up.

In the past we mailed our forms in several batches of say 50 each, with "return receipt requested" whereby the IRS signs a card and returns. We've never had a problem but I'm rethinking this for the 2023 forms. Do you recommend sending them overnight delivery for example? I'm tempted to send the forms in twice - the old way and also overnight delivery to make sure they are received. Getting them twice should not be an issue I wouldn't think. We have fewer this year - maybe 75 total but I want zero risk that 75 plans would be considered filed late because of no Form 5558. Would be a nightmare! Thank you for any ideas. Heck I'd hand delivery them to the IRS at the federal building if I thought I could. Tom

We unfortunately file 2 WB 5500s for large clients - out of necessity from years ago. They have pretax cafeteria insurances covered under the 5500. We file the 5500 as one filing covering all the benefits. We provided a cafeteria plan document listing the insurance benefits. Their new benefits broker is taking this over (thankfully) and are asking for a wrap document. One does not exist that we can see. There is an Summary that looks like a SPD that someone produced some years ago but they tell me that is not an SPD. It has a summary of each benefit structure, eligibility, benefits, etc. That led us to believe they had a wrap document. The issue now is for them to draft the wrap document now and move on, or amend past 5500s and file for each benefit structure since there was no wrap document. Problem there of course is - filing 5500s as "new" for 3 years ago will be late and DFVC will apply. Going forward without amendment/filing separate they say carries risk of not being in compliance by not having a wrap document. Comments? Thank you.

Sometimes we don't know if there is anyone to report on Form 8955 by July 31 and so we file for extension of 5500 and 8955. Is there a problem if we file for extension and then the IRS does not receive an 8955 filing? I'm wondering if we can file 8955 with no participants listed, but I'm guessing the software might block the filing. Thank you.

Correction to my math. LLC(3) has 6 eligible so 22/28 78%+ coverage assuming LLC(3) does not participate in the plan. Fairly safe coverage ratio.

Dentist Sue owns 100% of LLC(1) and dentist Bill works PT for this LLC. 14 eligible covered employees in Sue's LLC(1) plan. Dentist Sue and Bill purchase a practice about 10 miles away, they form LLC(2) with Sue owning 80% and Bill 19%. I assume they will both see patients at both locations. LLC(2) will co-sponsor Sue's LLC(1) existing 401(k) plan. This will add 8 covered employees for then a total of 22. Dentist Bill also owns 100% of dental practice LLC(3) 15-20 miles away. Sue has no ownership, nor does she work there. LLC(3) has no 401(k) plan. They are asking if they must cover these employees in the plan shared by LLC(1) and (2). The easy answer is 22/30 covered = 73%. Assuming my estimated coverage is correct, LLC(3) need not be covered. I realiz this will have to be carefully reviewed every year. But, does anyone see an ASG here? I don't believe there will be any association of patients between LLC(2) and (3) for dentist Bill. The practices are distant enough, patients won't associate one with the other. Does that seem reasonable? Thank you!

I had actually l read that article the other day which prompted my question. The last sentence of the paragraph below applies to the type of plans in the bolded paragraph heading, not to all plans. That's always been my understanding. But when I read this, I misunderstood the contest of that sentence and made it too broad. Thanks for the clarification. It just seems counterintuitive that a spouse must be the beneficiary (if not waived) but the participant can take distributions without spousal consent for plans without the QJSA/QPSA requirement.

Assume there is a 401(k) that does not provide for QJSA/QPSA as the plan contains no contribution sources requiring such nor does the plan include the annuity options electively. A 401(k) plan primary beneficiary must be the spouse unless the spouse consents to an alternative. Assume the participant wishes to take in in-service distribution. Do TPAs typically look up the beneficiary before approving a distribution to confirm the spouse is the primary beneficiary or that the spouse consented to an alternative? If a non-spouse was named without spousal consent, then that would be in invalid designation and the spouse would remain primary beneficiary. So it would seem distributions can be approved without reviewing beneficiary designations?

We were asked to prepare Form 5500 for a long-ago frozen 403(b) plan for a small group of nuns. We filed the 2022 5500 but the 8955 never crossed my mind like it does for all our 401(k) plans. The nuns ran an organic farm. It stopped operations long ago and they are all very elderly. So I supposed they terminated employment and probably would/should have been reported on 8955 some years back. Not knowing if they have been we could report them now for 2023. Thoughts? Thank you

We have a small plan whereby each participant has a separate broker account. We directed the financial advisor to deposit into each person's account their 2022 employer contribution in Sept 2023 and actually again in Feb 2024. It did not get done until May 2024. The contribution was made to the plan on time for tax purposes - deposited into a general fund plan .account. The financial advisor has agreed to deposit lost earnings. The FA is now getting into areas that in my opinion they should not -asking us if Form 5330 is needed and if the 2023 5500 needs to be amended to reflect the earnings receivable. I do not see anyway to report this on Form 5330. The employer did not benefit so it is not a prohibited transaction. As for the 5500, I lean toward just showing the earnings on the 2024 5500 since that is when they will be deposited. I suppose we could split our calculation between Oct 1 and Dec 31, 2023 and show that as a receivable and amend the 5500 but that seems unnecessary. It is filed on an accrual basis since we add in the employer 2023 contribution receivable even though not paid until 2024. Thoughts?

I've never had this come up. Two related employers both with their own 401(k) plans, tested together. Employee terminates with one and starts employment at the other. She is asking about moving her money from one plan to the other or possibly taking a distribution. I see no treason to move from one plan to the other because as soon as she does this, I can see her going back to work for the other company. This brings up another question - if she is considered terminated from one sponsor and has less than $7,000 in that sponsor's plan I suppose she would need to take a distribution or be forced out. Or does the $7,000 rule apply to both plans combined in a controlled group? Thank you.

I had a financial advisor ask me about this today. It's been awhile since I've had any contact with this topic. My recollection is that regular IRAs are exempt from bankruptcy up to $1,000,000 and rollover IRAs (from qualified plans) are unlimited. But is there a difference between federal and state bankruptcy. I think bankruptcy laws are a state thing not federal. The ob/gyn client with $5 mil just retired and wants to keep the K plan open indefinitely. I told him only for a year at most. I told the FA to have the client contact an ERISA attorney. Still - any comments are appreciated.

Employer contribution for 2022 of about $9,000 was paid in Sept 2023 in time for tax deduction purposes. The plan is a dreaded separate brokerage account for each person, granted a small plan. Despite us providing the participant allocation of the money to the broker (more than once - the brokerage firm had personnel changes) they did not implement the allocation so the funds sat in an unallocated account until just now. The broker is asking about makeup earnings. While that seems to be the right thing to do, I'm not certain it is required. It is likely a fiduciary issue. It's just another thing to do, explain to the client, he will ask who should pay (I'm guessing it could be $1,000), and it won't be us but we'll have to go round and round and take a lot of time and we will want to bill for the time. I'd like to ignore it. Thoughts?

Plan sponsor has had 401(k) plan in which a participant is 100% in profit sharing. He wants to adopt a DB plan for 2023 and the employee terminated in 2024. Can years of service be prior to DB adoption be excluded for DB vesting? The plan document says service for vesting must be recognized for a "predecessor" plan. Does predecessor include K plan or only a prior DB plan? Thank you

Looking for a interpretation of the below from the 1099-r instructions. If someone separated from service earlier in 2024 and takes a distribution now but are only age 54. Are they exempt from the 10% early distribution penalty because they will turn 55 later in 2024? Thank you, Tom

We sometimes have to spend significant time getting a Summary of Accounts produced in our admin software. We are able to download financial activity into the software on most plans by far. But there are several record keepers where this does not work well or we just haven't figured it out. My question is - how many of you do not use record keeping software to produce a summary of accounts? The only two benefits of the software record keeper link that I can see are top heavy determination and 5500 participant count. I'd say 90% plus of our plans are either top-heavy already, are safe harbor contribution only plans or are DB combos where the actuary confirms the top-heavy amount. The very few where we need to watch top heavy continue to be linked with the record keeper and just several without a link are done outside in Excel. I have a good Excel solution. It takes some time to get all the adjustments in but the benefit is that you really have to think about what is going into the test. We already have a few clients where their year-end reports are census, contribution summary, all the testing reports and we include the investment company record keeper summary of accounts. Spending time getting our record keeping to match theirs for some clients can be very tedious not to mention the time in setting up a new plan in the admin system. My staff will balk at what I'm suggesting here because when fully in the system, it works very well. But they don't necessarily think about time/billing. Admin software is invaluable in confirming eligibility, contribution calculations, and all the testing, etc. But I questions the value of the summary of accounts updating. We are not daily obviously and are small and work with about 15 record keepers. We have 3 or 4 record keepers with a large number of our plans but then there are the others with just 1-5 plans so we deal with all the different record keeper processes. I imagine most everyone in here does as well. Just thinking here and wondering what others are doing. Thanks

We have a client selling June 30. Employee payroll will stop at that point. The plan amendment may say the termination date is Dec 31, 2024. Owner wages after June 30 would be eligible for plan contributions and the 415 limit would not be prorated. However if they amend to freeze contributions June 30, I assume the 415 limit is cut in half even though the plan will have a full 12-month 5500 filing assuming the plan is not liquidated until December which is likely. Also this is a safe harbor nonelective plan. I believe a change in the business such as this allows safe harbor treatment for the final short year? Thank you for your comments.

Thank you - I couldn't think of the document term offhand.

We are now working with a similar situation. We are working with a platform and Schwab to get the broker account feature initiated under the platform record keeping umbrella. It hasn't been easy so far. Both parties seem to be pointing fingers at each other and we are in the middle. Fortunately, there are only about a dozen broker accounts and just 2 brokerage custodians - Schwab and one other. The other 300 participants are all on the platform. It's an audited plan so accounting reports have to pull it all together with detail. And the payroll upload file process is not fully automated. Even with just these few broker accounts, the plan has become very difficult, reconciling, periodic employer contributions, check writing to the accounts, etc. The client leadership is on board with getting it all under the record keeper and is willing to eliminate broker accounts if the transition becomes unduly difficult. About half of the account holders are 59 1/2 and can roll out. And we are considering liberalizing in-service to a much lower age for rollover or profit sharing and regular match. They (and we) are lucky the broker account option has not exploded in utilization.

A large investment company plan/record keeper initiated a forfeiture in Feb 2024 for a participant who terminated in 2018. This participant never took a distribution from her account and was 20% vested in her profit sharing source. The record keeper initiated an 80% forfeiture of her profit sharing. I know a plan can have a provision to forfeit a zero % vested terminated participant. This participant also has elective deferral and safe harbor match sources. I did limited research within the plan's basic document but didn't see anything right off. I assume there is some such provision to allow for this as I highly doubt this record keeper would not do this correctly. Thank you for any comments

We had one where we sent paper copy to plan sponsor to sign, file and send check. It was for $109. They would have over 10 e-filings with W-2s if you count every one. We might wait to see what FIS has in June/July and then e-file at that time even though it will have been paper-filed already. The amount is so small, we figured what is the worst thing that can happen? (Don't tell me it's some large daily accumulating penalty for not e-filing when the amount of the penalty is de minimis!)

Excellent - thank you.

Plan has 6-month waiting period for deferrals with entry on the first of the following month. I know I can exclude those with less than a 12-month wait but I am wondering about the entry date. The plan has monthly entry date for deferrals and match (no SH nor PS). I'd like to apply the semi-annual date which would remove lots of zero NHCEs. I know it would be more conservative to use semi-annual. Thoughts? Thank you

Thanks Lou - so the ADP corrective distribution is $644 without earnings (low because recharacterization as catchup solved most of the issue.) However the ACP refund is $4888. So you are saying they need to make a QNEC of those 2 together and allocate to all eligible, a group with $10,600,000 in wages. So about $13 for a person making $30,000. There are 245 NHCEs and probably 200 have no plan balance. This will throw them into an audit requirement. No other easy solution? I'm just going to hand the testing results back to the large payroll company and tell them to issue the refund and do the self-correction. Thanks

We've been asked to provide testing services for a payroll company bundled plan. The payroll company did not perform the ADP/ACP tests for 2022. I don't recall why it was not done or why they would not agree to do it now. So we agree do it for a healthy fee (they are a client for other purposes, just not TPA.) Testing fails and refunds are due for ADP and ACP, not 401(a) on the match.) Now that is April 2024 and this is a 2022 plan year. I believe the last I read was this can be corrected without risk of disqualification by end of second year. I will tell the payroll company to do the earnings calculation and hopefully their tax advisors will do the 5330. Am I missing anything. I'm not filing under a correction program. If someone says that is needed, I tell the plan sponsor to get someone else for that. Thanks.