C. B. Zeller

Option 1: If the company is a partnership, make mom a partner. Option 2: Get legally married to mom. Option 3: Get a bond. I will let you decide which of these you like the best

Oh, I agree completely, but for a certain type of client it is easier for them to understand simple instructions like "make your contribution before you file your taxes."

Contributions must be made no later than the sponsor's tax filing deadline (including extensions) in order to be deductible for that tax year. Contributions made no later than 30 days after the tax deadline (including extensions) can be considered annual additions for the plan year. So you can have a situation where, say your tax deadline is March 15, 2019, you make a contribution on March 20, 2019, and count it as an annual addition for the 2019 plan year, but deduct it on your 2020 tax return and apply it against the 2020 deduction limit, which is in turn based on plan year 2020 participant compensation. The safest (and simplest) method, and what I generally tell my clients, is always to have the contributions in before the tax deadline, or better yet before the tax return is filed. If the tax year is different from the plan year, then it gets more complicated.

Thanks Mike and Larry for the input. I spoke with the prior administrator who said that it was in fact a plan account but was labeled as an IRA essentially due to a clerical error. His suggestion if I wanted to fix it (if I felt a fix was necessary, since clearly he felt it was fine as-is) was to do a trustee-to-trustee transfer from the IRA into an account in the name of the plan. I am not sure I buy that argument, if it's labeled an IRA and was not under the control of the trustee then it doesn't have the characteristics of a plan account. If it looks like a duck and quacks like a duck... I would also be concerned that upon examination the IRS would find that the plan contributions were compensation to the employee which should have been taxed, and were also excess IRA contributions. I also spoke with an ERISA attorney who felt that VCP would be the right course of action. He suggested filing anonymously since there is not a prescribed correction for this failure, therefore the outcome would be highly dependent on the agreeableness of the agent assigned. He also recommended that since the participant is currently over age 59.5 (although the failure began prior to age 59.5), not to move the account back in to the plan, but as part of the VCP submission to consider the account to have been distributed when the participant reached age 59.5, and file amended 5500s and a 1099-R.

On a recent takeover, we found that the account for one of the two participants is an IRA. The plan is a profit sharing plan and not a SEP or SIMPLE. Contributions for this participant are being recorded in the IRA as rollovers, however no distributions were reported on the Form 5500 and the value of the IRA was being included in plan assets. The obvious correction is to transfer the IRA assets to an account which is under the trustee's control. Whether this can be self-corrected or needs to be done under VCP would depend on whether the failure is significant, as it has extended well beyond 2 years. It could be considered significant in that it affected 50% of plan participants and a substantial portion of plan assets. It might also be considered insignificant as there was no impact to any participant's financial or tax situation due to the failure. Has anyone ever encountered this type of failure before? How did you handle it?

If the eviction has already occurred, then it can not be prevented, ergo the payment could not be to "prevent eviction or foreclosure." If the plan allows, there is always the "immediate and heavy financial need" facts-and-circumstances determination. Unfortunately the retirement plan may not be the best source of aid for this participant in this situation.

There are only very limited circumstances in which deferrals can be withdrawn - attainment of age 59-1/2, termination of employment, financial hardship, or termination of the plan. If none of those have occurred then you have an operational failure. If the failure is significant (sound like it is to me) then you would have to correct under VCP since it is more than 2 years after the failure. The correction will likely be to have the employees return the overpayments to the plan. For payments that have already been taxed, return of the payment will create after-tax basis in the plan.

Today's BL newsletter included a link to a NAPA article on the subject. https://www.napa-net.org/news-info/daily-news/irs-confirms-review-changes-vcp-enforcement-audit-process It sounds like they won't refer you to audit on day 22, but they want to make sure you know it's on the table if you leave them hanging.

Going off the 404(c) requirements (since as far as I am aware the Code doesn't define "right to direct investments") a participant must have i) the opportunity to exercise control, and ii) the ability to select from a broad menu of investment alternatives. As you mention (ii) is satisfied, however (i) is not until the contribution is actually deposited.

See lines 11b(2) and 38b of the Schedule SB

For a participant-directed plan it clearly would be a problem. The right to direct investments is explicitly named in the regs as an example of a BRF - see 1.401(a)(4)-4(e)(3)(iii)(B). If the HCE gets their contributions on one day and the non-HCE gets theirs some time later, then only the HCE has the right to direct their investments during the intervening period, and current availability would not be satisfied with respect to the right to direct investments if tested on any date during that period. For a pooled account, I think you can argue it is ok, as long as the earnings are allocated in a non-discriminatory way.

I was by an IRS agent a couple of years ago that the annual filing season requirement didn't apply as long as it was only the Form 5500 that was in question. You might want to call the IRS agent and make sure they are ok with it and ask how exactly they want you to complete the 2848.

Try to paste as plain text - this is what your post looks like to me: Unless you were making a joke about IRS guidance being about as clear as Chinese, in which case, carry on...

There is an option on the 2848 for "unenrolled return preparer." Use that option and note that you prepared the Form 5500 under examination.

Form 1120S is the return for an S-corp. S-corp shareholder-employees receive a W-2 from the corporation. Use their earnings on the W-2 and disregard the Schedule K-1.

I like it. We've been using PensionPro for years, not just for data collection, but workflow management, secure file transfers, and there's a Sales Pitch module which I hear from our new business folks is very good.

You can make a Qualified Charitable Distribution from an IRA, but not from a qualified plan. There is nothing stopping the participant from taking the proceeds of their RMD and using it to make a (deductible) charitable contribution.

I asked because the 50% threshold does not apply to S-corps. Since they are C-corps, you might not actually have an ASG, even though it seems like it should be. Here is a section from Who's the Employer, example 14.14.2 seems to be on point:

Whether or not the condition is allowable (without researching it, I am leaning toward not), it is certainly ill-advised. If the plan came under audit, and the auditor asked you why a particular person did not receive a match, how do you demonstrate that they did not give 2 weeks' notice? You can't open their file and pull out the non-notice.

Are these S-corps or C-corps?

Members of a controlled group or affiliated service group are considered a single employer for purposes of the qualification requirements of section 401.

IRC 401(k)(3)(A) says that if an HCE is a participant in more than one 401(k) arrangement, their ADR must be calculated by treating them as a single plan. In other words it specifically contemplates a situation where an employee is a participant in more than one 401(k) plan of the employer and provides rules on how to test it. I don't see any problem with having multiple 401(k) plans covering some of the same employees, satisfaction of coverage, BRFs, etc. notwithstanding.

You wouldn't get a deduction on it now, but it would create after-tax basis in the plan. The amount that you repay now would eventually come out tax-free when you take your distribution.

For purposes of the ABPT I would agree that if you are excluding pre-entry comp, then "entry" would have to be the earliest date of participation in any part of the plan.

There is no official guidance on the matter yet, but my understanding is: They can amend the plan now, or any time up through November 30, 2020, to be a 3% SHNEC for 2020, effective retroactive to 1/1/2020 They can amend the plan any time up through December 31, 2021 to be a 4% SHNEC for 2020 Under either of the above, the plan will be exempt from the ADP test for 2020 The plan will be subject to the ACP test on the match, since the ACP safe harbor still requires a notice before the beginning of the plan year