C. B. Zeller

I believe you would just need to file an amended 5330. There is a section in the instructions for "Claim for Refund or Credit/Amended Return."

The 6% limit only applies if the DB plan is exempt from PBGC coverage. If your business is a sole proprietorship (not a corporation) and you are not in the business of professional services, then you might not be exempt. If you are not exempt then you are probably past due on a 2020 PBGC premium, but you would be able to get the full 25% deduction on the profit sharing plan.

https://apps.irs.gov/app/picklist/list/priorFormPublication.html?value=1099-R&criteria=formNumber&submitSearch=Find You can also get to this link from the IRS's "About Form 1099-R" page by clicking the link for "All revisions for Form 1099-R and instructions"

Since you took the distribution in 2020, if you meet the definition of a qualified individual (impacted in certain ways by COVID), then you should be able to treat the distribution as a coronovirus-related distribution, which a) lets you spread the income tax out over 3 years, and b) lets you recontribute it back to an IRA or qualified plan within 3 years, without regard to any rollover or contribution limits. More info on coronavirus-related distributions here: https://www.irs.gov/newsroom/coronavirus-relief-for-retirement-plans-and-iras

I am not aware of any "reasonableness" requirement on the definition of compensation for deferral election (not testing) purposes. The plan can generally place a maximum limit on the amount of compensation that can be deferred so I don't see any issue with carving out certain pieces of compensation for deferral election purposes. However, see 1.401(k)-1(a)(4)(iv)(B) for rules regarding nondiscriminatory availability of benefits, rights and features that can be an issue when using an alternative definition of compensation.

I think the fact that Example 1 talks about a defined benefit plan makes it irrelevant in this situation. As you pointed out @shERPA the 415(c) limit means any former employees would not be eligible to receive an allocation under a new DC plan. In profit sharing plans (including 401(k) plans) benefits are always determined on a year-to-year basis. I can't see any rationale for taking former employees into account. If we were talking about a defined benefit plan, then maybe there is an argument to be made but I think it's still a stretch. Especially if it's a cash balance plan where benefits are not typically based on past service. All in all, I think this reg exists to give the IRS a way to go after people who engage in abusive transactions; as long as there is a legitimate business reason for the changes in employee population and plan benefits, I doubt you would have much to worry about.

I have always interpreted this reg as meaning that the plan must satisfy 401(a)(4) and 410(b) both with and without the QNEC. In your situation, the QNEC is at least equal to the gateway minimum and all rate group pass, so the plan passes with the QNEC. You didn't mention if coverage is an issue treating the participants who only receive a QNEC as not benefiting, so I will assume coverage passes, and all rate groups still pass, so the plan passes without the QNEC. Therefore I think the test passes overall and you are good.

I assume we're talking about COVID distributions under the CARES Act? Notice 2020-50 addresses both the reporting on the 1099-R and how the participant treats it on their 2020 tax return.

This is still running it through payroll. The owner in this case is just giving themselves an extra paycheck that is large enough to cover the entire year's deferral in one shot. As you mentioned it still gets included on the W-2. It is also subject to withholding for FICA and other taxes. And it's still a prohibited transaction if it's deposited late. A one-participant plan is not exempt from IRC 4975. Can you share any of the materials you feel are ambiguous?

I assume the PA is being sold in an asset sale? I don't think it would be a problem for the person who served as Plan Administrator to continue signing off on distributions and the final 5500 even after the business is no longer technically running. If they are really worried about it though, keep $1 in the company's bank account until everything is wrapped up. Why is there a star next to this thread's title?

Well, I don't think Vanguard has branches, but I'm sure the participant could call Vanguard's customer service line and get someone to help them with the paperwork.

Plenty of banks would be falling over themselves to get more of their clients' money. If the participant brings the rollover request form into the local branch of their regular retail bank I'm sure they could find someone to help them fill out the paperwork.

In order for a mapping to preserve protections under 404(c), the new investments must have reasonably similar characteristics, including risk and rate of return, to the old investments. If you think your target date fund will meet that standard, then go for it, but I think that's unlikely in most cases. If you can't map them to like funds then you will have to get a new investment election from the affected participants.

Here is a followup question: given that the change in the law that precipitated the update to the instructions was actually effective 1/1/2007, could it have applied to to any 5500s filed between 2007 and 2019? More concretely, if you were now (in 2021) preparing a delinquent filing for, let's say 2016, for a plan that covered only the 100% owner of an S-corp, the owner's spouse and their child, would you submit under DFVCP with a 5500-SF, or under Rev Proc 2015-32 with a 5500-EZ?

How are you planning on reversing the transaction if the amounts were already distributed? Also who is "we" in this question - are you the plan sponsor, the TPA, or someone else? If the recordkeeper decided on their own to allocate the forfeitures then they may have become a fiduciary, and therefore could have legal liability for their actions. However fiduciaries don't have a duty to reduce costs to the plan sponsor. The only way I can think that they could get in trouble for this would be if the plan sponsor decided to charge the plan-related expenses against the participants' accounts, and a participant sued over those fees. The plan sponsor might want to have their lawyer send the recordkeeper a little love letter - hopefully dropping the "f word" on them might get them to take it seriously. However, the plan sponsor should also carefully review their service agreement with the recordkeeper, and their plan document, especially if the plan document was prepared by the recordkeeper, before doing anything else. There could be a provision that says that any forfeitures remaining in the plan after X period of time will be allocated to participant accounts. If that is the case then the recordkeeper would have been performing a purely ministerial function by allocating forfeitures in accordance with the plan document, or the written agreement of the plan sponsor.

@Jakyasar remember that while partners and sole proprietors can deposit their deferrals after the end of the year, they still have to make a deferral election in writing before the end of the year. If the plan did not exist in 2020 then I don't see how they could have made a deferral election in 2020.

A plan might be required by its document to use a particular method, such as the method under 1.401(m)-2(b)(2)(iv)(C), for calculating allocable income. In that case you may have allocable income regardless of the timing of the deposits. If the plan document allows allocable income to be determined in any reasonable manner, then I agree that it could be disregarded in the case of deposits not yet made.

Here is a userscript that will send you straight to the first unread comment in a thread. You can add this to the Greasemonkey addon in Firefox or the Tampermonkey addon in Chrome or Safari and it should work automatically. I am not sure if there is a way to run this on mobile currently - Greasemonkey used to work on Android but I think they broke it last year. I have no idea about iOS, sorry. // ==UserScript== // @name BenefitsLink Go to Unread // @description Click on a thread title jump to the first unread post // @version 1 // @namespace localhost // @include https://benefitslink.com/boards/* // ==/UserScript== var titles = document.evaluate('//li[contains(@class,"ipsDataItem_unread")]/div[@class="ipsDataItem_main"]/h4/span/a',document,null,XPathResult.ORDERED_NODE_SNAPSHOT_TYPE,null); for (var i=0; i<titles.snapshotLength; i++) { var a = titles.snapshotItem(i).href; if (a.indexOf("do=getNewComment") < 0) { titles.snapshotItem(i).href = a + "&do=getNewComment"; } }

The key takeaway is that attribution is now taken into account when determining who is an owner of an S-corp for 5500 filing purposes. If everyone covered under the plan is deemed to own at least more than 2% of the S-corp sponsoring the plan, then the plan is considered a one-participant plan and should file Form 5500-EZ. This only applies for S-corps and not any other types of organizations.

Thank you for the history lesson, and for your part in getting the instructions updated.

Was it though? Nothing changed in Title I of ERISA. The same plans that were subject to sec. 104 in 2019 should still be subject to it in 2020 (changes in the covered employee population notwithstanding). I would have to guess that this change in the instructions reflects an evolution in the IRS's and the DOL's interpretation of the law. I have to wonder about those plans that cover just the 100% owner of an S-corp and their child(ren) and were filing 5500-SF as a single employer plan for years - should they just switch over to 5500-EZ going forward? And can we read from this that such a plan is now, and has always been, exempt from all the requirements of Title I? Did you mean if the child had no ownership interest? A plan that covered only the 100% owner and their spouse was always considered a one-participant plan.

No need, unless there is something in the plan document that says self-employed individuals are excluded. And if that is the case, it's probably easier to amend the plan document than to set up a new entity.

Are you over age 72? How small is small - less than $200? There is no penalty on you if the plan fails to withhold, but it jeopardizes the plan. Worst case, the plan could get disqualified and your contributions would no longer be eligible for rollover. That's an extreme result though, and rarely used. Most likely, as long as all taxes are eventually paid, the IRS will not bother anyone about it.

If you'd asked me a week ago I would have agreed with BG. But the 2020 Form 5500-EZ was recently published and here is what the updated instructions say: The bit about 2% S-corp shareholders is new. Following the reference to 1372(b): Note the parenthetical - section 318 contains the attribution rules we are all familiar with for HCEs, key employees, etc. So I think you could read this to mean that a plan which covers only S-corp shareholders, their spouses, children, parents, and grandparents would be a one-participant plan eligible to file Form 5500-EZ.

If the partner were being treated as a W-2 employee, it is almost certain that their compensation was being calculated wrong. Even if their net earnings from self employment happened to be exactly equal to their guaranteed payments, that amount still needs to be adjusted for 1/2 self-employment tax and employer contributions made on behalf of the partner in order to obtain compensation for plan purposes.