Tom

Sch D is needed only when plans invest in MTIAs (master trust investment accounts), GIAs (group insurance arrangements - I assume referring only to welfare benefit plan), CCTs (common or collective trusts), PSAs (pooled separate accounts) and 103-12 investment entities (whatever they are). which along is extremely puzzling. The Wolters Kluwer 5500 Preparer's Manual indicates under the Who Must File Schedule D outlines when Sch D must be filed for investments in the above and indicates their related asset reporting lines on Sch H - 1c(9) through (12). So I assume when those lines have no value, then Schedule D is not needed. Our plans generally have almost all assets reported under (13) for mutual funds. So it seems for plans on Ascensus, Hancock, Empower, Principal, American Funds, etc., generally Schedule D is not needed if the plan assets are held in mutual funds and have no reporting on the Sch H lines mentioned above. Comments are appreciated. And yes I've ready the instructions to Schedule D - still seems clear as mud to me. We only have a handful of long form 5500s fortunately which I'd love to transfer out! Thank you!

Bill we we do that and get it filed immediately. But Lou I will check on that.

We filed From 5558 for a plan sponsor using the EIN it had been using in past years. The sponsor elected S corp status for 2022 and wrongly assumed the EIN would not change. the plan sponsor said the EIN (old one) on the 5500 now to sign is wrong. But if we use the new one - it wil not link with the 5558. I was thinking of filing under the old EIN. That will not raise any red flags. At this point any late filing penalty is small - 10 days which we can eat but I'd rather not go there. It is an EZ by the way. Any suggestions?

Plan has 3-month wait for deferrals and 12-month for safe harbor match plus semi-annual entry-dates. I realize the <1 year deferrals would need to be ADP tested but that is not an issue since can use the statutory exclusion, plus there are never any HCEs in that group. No other employer contribution is made - no regular match nor profit sharing. This plan is not top heavy thankfully but I thought I read something that if this plan were top heavy, the funding-safe-harbor-only top heavy exemption would not apply to those not eligible for the safe harbor match. Does that sound right? Thanks in advance for your comments.

Typically, if the plan allows, deferrals and Roth plus earnings are available for hardship distribution. We have someone asking if they can do a Roth conversion of profit sharing for example. I don't think that then qualifies as a "safe harbor" hardship source - does it? I realize they could amend the plan for in-service on profit sharing at 60 months or 2 years aged deposit.

I met with a new client this week. It is a trustee-directed pooled plan. They are moving to a daily platform with us as TPA. It is a Sept 30 plan year end. They've used an insurance company as record keeper/administrator for many years who did testing, 5500 and an annual statement. The plan sponsor mentioned she wanted a long separated participant out but they had a loan. I ask are they making payments - answer no. I said oh the insurance company did a 1099-R then? She said no they don't do that, she does 1099-Rs. So there is a long delinquent loan. Our engagement letter says we are not responsible for anything prior to our engagement which is Oct 1, 2023. I want to wash my hands of this. Once it transfers to the new record keeper the loan will be on the books unless they can convince this person to take distribution before Oct 1 of which I am hopeful. I'm not that in tune with error corrections. Our clients are generally small and clean. I don't want this loan correction process with the IRS to fall on me. How can you go back years and default a loan with 1099-R? I will ask how long ago has this been going on. I know it is not good to say - pay it off fast and forget the whole thing. Payoff is questionable anyway as it is about $15,000. I is a very successful company with high earning owners - the responsibility for not defaulting falls on them so they could owe the penalty but I'm surprised this insurance company did not say something - they have the record keeping, issued the loan, do the testing, admin and 5500. Comments? Tom

We have a takeover client that has 90-day wait for deferrals and 1 year wait for non-safe harbor match and PS with entry on the first day of the plan year. That is fine. But they want to change to a 1 year of service for deferrals too. I will tell them they have to change to semi-annual entry dates for deferrals. I want to tell them semi-annual for all contributions which is very standard with our clients. I suppose they could still have only one entry date, first day of plan year, for match and PS only since they could require 2 years to enter for those sources, right? I will strongly recommend against one entry date since I believe they or their payroll company will mess up the pay-period match. Comments are appreciated. Tom

We have a plan with 15 +doctors all with broker accounts such as Schwab , TD, Fidelity and other brokerage firms. The self-service ones - TD Ameritrade (now becoming Schwab) and Fidelity were the worst. One of the 2 doctor-trustees was leaving and they asked me to get the Trustee changed on all the accounts. The accounts with financial advisors went well. Honestly with Fidelity, I just had to hunt and peck and get transferred several times. Of course you won't get any specific information relevant to those accounts since you are not the account holder. At some point I was able to get a name and phone number to call back when the doctor was available to tie in on a conference call and we got it worked out. And their office manager asked what the extra time charge was for the following month.

We have a 401(k) that includes no pension source funds nor does it have any annuity distribution options. The plan document in the past required spousal consent to take a loan or distribution. I inquired about this when restating the document and was told the plan sponsor just liked the idea that the spouse would want to know when money was coming out. This was pre-daily platform. Now they are on a daily platform and they want things more automated and no longer want to require spousal consent. I believe since this was something they administratively opted to include in the plan but was not required, it would be fine to remove this requirement. I assume it is not be a protected benefit since it is not a required. Would you agree? Tom

I shouldn't have to ask this question for as long as I've been doing this but here goes. We have a plan sponsor - an S Corp with 2 owners covered by a new plan. There are no other covered participants. I assume they are exempt from the ERISA bond coverage? Most things I read indicate plans covering only a single-owner (and potentially a spouse) or a plan covering only partners of a partnership (and spouses) are exempt. The longer I do this, the more I question myself. 🤔 Thank you, Tom

Thank you - Good advice Lou and Belgarath we'd all like to say that now and then!

A takeover record keeper is asking for the Secure 1.0 amendment. It is not due until 12/31/2025 correct? I tend to doubt myself when institutions ask for things like this and imply that there should be one. We've been providing the Secure and Secure 2.0 good faith amendments for terminating plans only. Thank you Tom

Thanks all and Ed - she maximized 415 so recharacterizing is not an option. I wil tell the CPA they may want to amend the W-2 to get a tax deduction.

A physician (of course) has owned a part of a business in his 401(k) account (yes we've been filing 990-Ts.) Now the partnership has been sold and he is receiving amounts in 3 installments 2023 (already received), 2024, and 2025. He says the plan is now closed since all cash has been paid out but there is an A/R for the other 2 payments. He says the other payments will be made to his Rollover IRA per his broker. I mentioned 5500s for two more years and likely required plan amendments. He sold his practice and so he wants the plan to go away naturally. The other option could be to file a 1099-R for the entire amount including the 2 receivable payments and so to treat the remaining two payments as receivable to the IRA. can an IRA hold an A/R or note? If not would the IRS match the plan 1099-R to the IRA rollover 5498? The other 2 payments might total $80 to $100K. And so our 1099-R woudl be very different than the 5498 filed by the recipient IRA. I know I can advise and he as Trustee and Plan Administrator can provide direction. Comments? Thanks Tom

We have a sole prop client who contributed $20,500 into the plan throughout 2022. At the end of 2022, she was advised to elect S Corp status for 2022. I was told by her CPA firm that she will have no Sch C as the entire 2022 year is being reported under a tax filing for the S corp. (The conversion to S was solely to reduce her Sch C Medicare comp from $1,000,000+ to $200,000 in wages.) There was no 401(k) deferral deduction on her W-2. It seems to me we have no choice but to count her deferral in testing for 2022 - the money is in the plan. But since she has no Sch C I'm not sure she can take a tax deduction on her 1040. But that is not my problem I suppose. I wonder it the IRS would take the position the deferrals are all excess because she did not have deferrals on her W-2 and had no sole prop compensation to support the deferrals. Comments? Thanks. Tom

Thank you all - yes the plan document provides that HCEs do not receive the safe harbor non-elective contribution. And only safe harbor non-elective is funded - no profit sharing. I question because it seems to skirt the intention of the top heavy rule when an HCE is non-key and thus gets nothing from the employer. I questioned this in reviewing a 2022 calculation and went back and looked at 2021 and saw that a couple HCE non-keys did not get top heavy for that year. I must've researched this for 2021 and came to the same conclusion. Tom

We have a plan that excludes HCEs from the 3% non-elective safe harbor. Several HCEs are non-key employees. There is no employer contribution other than the 3% safe harbor. The question is - do the non-key HCEs have to receive a 3% profit sharing contribution since the plan is top heavy? The plan passes coverage on the safe harbor since the only ones excluded are a couple HCEs. Thank you, Tom

We filed an EZ form as final as of Nov 2022 on a 2021 form. We received a Filing Received acknowledgement but with a warning message because of the short year and on a 2021 form I suppose. Is there a way I can confirm the 5500 was filed with the DOL? It isn't searchable on the regular search site of course. But I wonder if there is a help line or other practitioner site. Seems I knew of one at one time. Tom

Thank you. I will tell them in absence of other information or legal opinion, we will include all 14 as Key Employees to be conservative. Fortunately they are far below 60% as some ESOP board members have no 401(k) plan balance. Still, I am going to ask them to take this issue to an ERISA attorney. We have no access to the ESOP agreements or bylaws (nor do we want to.)

I've had related questions in the recent past and so thank you for past comments. But I'd like to make sure I put the whole picture out here. Corporation is 100% owned by an ESOP. Corporation sponsors a 401(k) plan. There are 5 corporate officers. These 5 plus an additional 10 constitute the ESOP Board of Directors. All 15 Board members are 401(k) plan participants, not all have balances. The 401(k) plan is a deferral-only plan with about 250 participants. So the question is who is a key employee? Only 2 of the corporate officers have wages of $200,000. None of the other Board members has wages of $200,000. No one is a >1% or >5% owner of the corporation since it is 100% owned by the ESOP participants. I see past comments that plan balances in an ESOP are not treated as owned by the individual but by the trust. Even if I treat all ESOP Board members as key employees, the plan is far below 60% but obviously I have to get this right. And as for the ADP, we are just looking at compensation for 2021 in the 2022 HCE determination process. There have not been individual owners for about 5 years. Thank you for comments - they are greatly appreciated as top heavy is critical and can be very ugly - 3% for all non-key. Tom

I've been provided names of corporate officers and those who are on the ESOP Board of Directors. The 5 corporate officers are also on the ESOP board of directors plus the ESOP board has another 9 individuals - so potentially 14 "officers." I realize to be a key employee they must have wages of $200,000 for 2022. That will eliminate most of them. I assume both corporate officers and ESOP directors are considered "officers" for top heavy purposes? Top heavy testing for large clients like this (350 employees) who make no employer contribution is always very concerning. They've been a long way from being top heavy but we certainly want to build in the correct data in this determination. I'd normally want to push this client off to another TPA but they came from one of our best referral sources. Thank you for your comments.

These clients are all in Ohio. We've had 6 notices - not matching EFTPS payments with 945 even though same plan EIN on both. IRS is looking for filings and payments under the plan sponsor EIN. Letters have been written to the IRS which include a copy of the IRS assigned EIN confirmation for the plan! No new notices in last 2 weeks so hoping that's it.

Probably a simple question - I don't see where there is family attribution required for officers, only for >5% owners. I need to be 100% sure since top heavy status can be a VERY ugly surprise to a plan sponsor with many employees. Thank you

Ah ok. Almost all our plans are class allocated with no conditions. So that little detail fell off my radar (probably not the only one.). Thanks

Simple real example: Dentist and wife are eligible as are three employees. It is safe harbor match plan. One employee terminated with <501 hours. We are allocating PS only to the doctor and the two ongoing employees to meet 410(b) and in a uniform integrated amount to pass 401(a)(4). The dentist prefers to cover the terminated employee which he can as a class-allocated plan with no allocation conditions and this employee only had $2,000 in wages. This would mean full PS to 2 NHCS and top heavy to the 3rd employee who is still working. The result is significantly less cost. My real question is with the testing software - I thought those who terminated with <501 hours were excluded from testing. That would mean only 2 eligible NHCEs in the testing and only one would have to be covered to pass ratio %, but the testing reports say fail if we only cover one. The employee is coded correctly in the software application with just a few hours and a termination date. Comments? Thanks