Kac1214

Update to this, when leaving the PEO, the plan is being spun out so the new plan is a continuation of the plan so a QACA should be fine to continue as a single employer plan, is that accurate? Thanks

I have a client leaving a PEO and establishing single ER plan. Within the PEO, they had QACA design and are leaving 11/1. Plan year end is 12/31. Can they continue the QACA in the Single Plan even though it was not adopted until mid year? Thanks

Client tells Paychex they are staying with payroll, just moving the Plan. Paychex releases assets, client fires Paychex. Seems fair to me based on the service typically received from them .

You should also verify that testing still passes and that gateway is met with the larger contribution. Looks like the result is going to be a higher % pay than the initial calculation when comp was $100k

Has anyone looked at the Form 8881 to use for the Start Up Credit? What would you enter into line 6? Line 8 adds 5 and 6 and would seem to double the credit or what am I missing? Thanks 1 Qualified startup costs incurred during the tax year 4,500.00 2 1/2 of the startup costs 2,250.00 3 Enter the number of employees eligible to participate in the pension plan 15 $ 250.00 3,750.00 4 Enter greater of $500 or the amount from line 3 (not to exceed $5,000) 3,750.00 5 Enter the smaller of line 2 or line 4 2,250.00 6 Credit for small employer pension plan startup costs from partnerships and S corporations ??? 7 Reserved for future use 8 Add lines 5 and 6, Partnerships and S corporations, report this amount on Schedule K. All other, $ 2,250.00 report this amount on Form 3800, Part III, line 1j PART II 9 Enter $500 if an auto-enrollment option is provided for retirement savings 10 Small employer auto-enrollment credit from partnerships and S corporations 11 Add lines 9 and 10. Partnerships and S corporations, report this amount on Schedule K. All others, report this amount on Form 3800, Part III, line 1j Form 8881 PDF

Another consideration, if the client is in a state that requires withholding, using the EIN of the employer it can cause tremendous issues. We had a CA client that was audited by the state and it a mess trying to unwind the Plan's withholdings from the Employers obligations. The state was completely unreasonable through this process and fines/penalties were stacking up quarterly. It was a mess. It is easy enough to get a TIN for the Plan so we do for every plan that is not on a recordkeeping platform.

Terminate the Plan, this will cause his trigging event to allow a distribution

C.B. - Thanks for the info. I will have the Admin check the form. All we can figure is they what to self direct the $1400 they have in their account

We have individuals who are claiming to be QI (and would accept their self-certification as such) who want to rollover their account balances. This is one situation that seems to me to be something the Plan Administrator can, or should, deny. Any thoughts? Thanks

If rolled over or recontributed within 3 years but after taxes were paid on the amount for 2020 and possible 2021, would an after-tax basis be created? I am assuming it would but have not found anything definitive. And if after tax basis exists, would that cause the receiving plan to potentially reject the receipt of the funds?

I think this goes back to Ilene Ferenczy's post on her site: https://ferenczylaw.com/flashpoint-surprise-you-are-or-are-not-a-professional-and-you-are-or-are-not-covered-by-the-pbgc/ She does a better job of explaining it that I would in trying to summarize there

Would it work if you made the Plan a Safe Harbor for the year with the $38,500 + catchup, then had year without Safe harbor and no HCE contribution, then turn SH back on. etc. etc? Seems like it would and could be strategy to save money every other year.

If the SEP was drafted using the SEP-5305, are they even allowed to have the DB for 2019? I thought the SEP would have exclusive plan rules.

401(k) Deferral Limit The IRS limits the amount a person can defer into a 401(k) plan each year, including catch-up contributions. Because that limit has implications with respect to each individual’s income taxes, the annual dollar limit is always applied on a calendar year basis regardless of the year on which the plan operates. Consider this example: Audrey is a participant in the Great Northern 401(k) plan that operates on a plan year that runs from July 1st to June 30th. The current 401(k) deferral limit is $18,000 per year, and the catch-up contribution limit for those who are age 50 and older is an additional $6,000 per year. Audrey turns 50 in January of 2017. Audrey’s deferrals for calendar year 2016 are limited to $18,000, but she is able to defer $24,000 for calendar year 2017 ($18,000 in “regular” deferrals + $6,000 in catch-up contributions). That means it is possible for her to defer a total of $42,000 for the plan year without exceeding the limit for either calendar year. (Note - My limits were off, 2017/2018 vs 2018/2019 but point remains)

$19,000 for 7/1/18-7/15/19 is not (necessarily) a 402g excess and should not have been refunded to him. He could have deferred 36,500 for 7/1/2018-6/30/2019 if done right.

I have seen where these payments have been made as special one-time contributions to the Plan. An amendment was written up detailing the amounts by participant that would be made. It did count towards 415 and deduction limits, I believe HCEs were excluded to ensure coverage was not an issue. This was years ago and before new comparability with each in own group was widely used.

Thanks for the responses. Key EEs in both plans so aggregation is required. My thought is to have the 401k provide TH and to amend out of the PS Plan. Since the 401k has the Union people, it is best for that plan to provide it (with the bonus that we won't have to calculate it since it is not our plan) Luckily, the plans are not Top Heavy so it will be have the right design if it becomes so.

We're taking over a PS Plan that is employer directed and not taking over the 401k Plan, employee directed. In reviewing both documents, we found that both Plans provide the TH minimum. The 401k also includes some Union people but otherwise the covered employees are the same. Under the 401k, the PS eligibility is 6 months (never contributed to) while the PS is 21/12/1000. We found that no one had been doing the combined TH Test and luckily, they are not top heavy but we are thinking that only plan should provide the TH and since we are restating the PS, we'd suggest removing it from this Plan. Are we missing anything? If the Plans were TH, would 3% have to be given to both Plans? We have differing opinions in the office. Thanks for any feedback

Took over a plan from a CPA (supposedly) doing admin work so I knew it would be bad but never expected to see contributions deposited just added to the earnings and spread on prior balance. Felt like Quincy, ME doing the forensics to get this corrected.

If the new advisor is recommending changes to the fund lineup and the process of switching the funds takes greater than 3 days, it could trigger the need for a blackout because participants will not be able to complete certain transactions.

We use FT William Document and it has the following G. Hardship 3a. Hardship withdrawals are allowed from the portion of a Participant's Accounts described below. (If "None", questions regarding Hardship withdrawals are disregarded.) Selected Accounts 3a.i. Hardship withdrawal is permitted from Elective Deferral Account Yes / No 3e. If Roth Elective Deferrals are permitted and hardships allowed from Elective Deferral Account, permit hardships from Roth Elective Deferral Account Yes - only if qualified distribution

Read the plan document. It will tell you the sources available and and further state if non-qualified Roth money can be withdrawn.

Can you make the Top Heavy as a QNEC? Also advise client that they are TH in year 2 as well.

Be aware of the 6 months retroactive coverage of Medicare and the impact on HSA contributions: https://www.medicareinteractive.org/get-answers/coordinating-medicare-with-other-types-of-insurance/job-based-insurance-and-medicare/health-savings-accounts-hsas-and-medicare From the link: Finally, if you decide to delay enrolling in Medicare, make sure to stop contributing to your HSA at least six months before you do plan to enroll in Medicare. This is because when you enroll in Medicare Part A, you receive up to six months of retroactive coverage, not going back farther than your initial month of eligibility. If you do not stop HSA contributions at least six months before Medicare enrollment, you may incur a tax penalty.

Great, thank you