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Paul I

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Paul I last won the day on October 28

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  1. One would think so, but consider that Peter Thiel turned a $2,000 balance in a Roth IRA into $5,000,000,000 (yes, billion) and it's not taxable when distributed.
  2. Part of your question was is it advisable to purchase another RE investment. If their financial portfolio outside the plan is made up of a variety of other investments, they may well be quite diversified and the investment in RE inside the plan could be a fraction of their total financial situation. Considering solely the assets inside the plan may be myopic.
  3. Whether it is advisable depends upon the owners' overall financial situation. It is permissible in this case because the participants, plan sponsor, and plan administrator (i.e., the owners who fill all of these fiduciary roles) can decide this is a sound investment for themselves. They certainly could diversify if they wish, but are not required to diversify.
  4. Generally, protected benefits are based on eligibility for the benefit, timing, and available sources. Looking at some of the new types of distributions, it seems reasonable to conclude that these are protected: QBAD - Qualified Birth or Adoption Distribution QDRD - Qualified Disaster Relief Distribution (note that some plans are considering provisions that constrain the availability and amounts of these distributions to specific events or to geographic areas) EEW - Emergency Expense Withdrawal DAVD - Domestic Abuse Victim Distribution Not protected are: PLESA - Pension Linked Emergency Savings Accounts (the plan sponsor can amend the plan to eliminate the feature at any time) TIID - Terminal Illness Individual Distribution (TIID is payable if there is an in-service withdrawal available, and that in-service withdrawal would be a protected benefit, but the other features of the TIID are not protected) Hopefully, some of our BL colleagues will offer some insight and perspective to these and any other of the new types of distributions.
  5. Has the plan document been amended or has the plan sponsor made an administrative decision to adopt later the provision to permit a participant to self-certify that a they have a hardship? Does the plan administrator have actual knowledge that the participant's need does not meet any of the hardship conditions? Are you the plan administrator with the fiduciary authority to make the decision to accept or reject the request for a hardship? There has been a significant shift in the role of the plan administrator with respect to responsibility to determine if a participant has access to their accounts due to hardship. You may want to have answers to these questions before making a decision. (If the responses in order are no, yes, yes, then likely it is your call.)
  6. Before focusing on how to report everything on the 5500, consider getting everyone including the plan administrator, recordkeeper and payroll to agree on what will be done to complete the correction. Some questions to which you may want to have answers are: What happened to the money taken out of participant accounts? Was it held at the trust and taken as a credit against another payroll (if yes, keep an audit trail)? Was it returned to the company? What about earnings? Are participant W-2's impacted in any way? Will participant compensation reported for nondiscrimination testing be impacted in any way? What appears in each participant's plan accounting records? How are the corrective transactions labeled? When you have consensus from everyone on how this is being accounted for across payroll, the trust and the recordkeeper, the 5500 reporting should be readily apparent. For example, the 5500 has a line for Other contributions (commonly used for rollovers but not limited to rollovers). Participants who received distributions should be included on the Benefits Paid line. Participants who had amounts removes from their accounts but not paid out may have the contribution included along with other deferrals (if the extra amount was used to offset a subsequent payroll) or this may be included in the Other contributions if it was not used. The earnings could wind up in the Other income line. Document, document, document everything that was done too make the correction and that should protect the plan from anyone not familiar with the circumstances second-guessing what happened. [Edited for clarity]
  7. I have never heard of this situation before, primarily because I have never heard of a financial institution setting up an account in the name of trustees of a plan without the institution having documentation that the trust exists. If the account was not titled in the name of the trustees, then consider making an argument that the plan's trust did not receive the assets. If the account still does not yet have any indication that it is owned by the trust, then this argument would also say the rollover has still not yet been made to the plan. It will be interesting to see others comment on this situation.
  8. Qualified Disaster Relief Distributions QDRDs are not subject to the 10% early distribution penalty. Keep in mind that there is a limit on the amount ($22,000), that a participant can treat it as gross income spread over 3 years, and than the participant can be repay it to the plan or an IRA within 3 years. QDRDs are protected benefits, so be careful in drafting the administrative policy or plan amendment. Similarly to how hardship distribution provisions are drafted, some plan sponsors are considering limiting sources, amount, and even which disasters will be available.
  9. As @RatherBeGolfing noted, this topic came up in a few of the presentations at ASPPA National. The consensus response was to apply the plan's eligibility rules and if an employee or LTPTE is eligible to make deferrals on 1/1/2025, then they should be subject to auto-enrollment. The topic of whether all eligible employees should be auto-enrolled or only newly eligible employees could be auto-enrolled often was paired the LTPTE question. The consensus response was, absent explicit guidance, to at least follow the plan rules (or permissible plan rules) where the plan would honor existing affirmative elections that differ from the auto-enrollment minimum, but applying auto-enrollment all eligible employees on 1/1/2025 was an administrative fail-safe approach. It was acknowledged that we are a little more than a month away from the deadline to send to participants annual notices for the 2025 plan year, and this could be an administrative challenge for some plans.
  10. See the IRS advice here https://www.irs.gov/individuals/understanding-your-cp283-notice In particular, they comment "You may want to: You can send a signed statement and request removal of the penalty, if you have an acceptable reason why your return was late or incomplete. You can complete Form 843 PDF and submit it with your signed statement requesting removal of the penalty and a refund of the penalty previously paid, if you previously paid the penalty and feel you have an acceptable reason. Keep this notice in your permanent records." I suggest gathering any and all documentation that shows why they were not aware of the availability of relief (including hiring a new service provider to help them), submitting a filing under the penalty relief program, and filing a Form 843 requesting acceptance of the filing and $500 fee in lieu of the penalty on CP283. There is no guarantee this will work, but generally the IRS likes to work with plans to bring closure where the plan acts in good faith to correct an issue.
  11. You file the EZ on paper and check the box D If this return is for the IRS Late Filer Penalty Relief Program, check this box (Must be filed on a paper Form with the IRS. See instructions) There is no need to file online first.
  12. @Bri's suggestion is simplest. Another approach is to consider clarifying that deferrals will be made from payroll periods beginning before 10/31. Keep in mind that they can amend the termination amendment to document the whatever approach works best as long as they are not taking away anything from participants.
  13. The 404a-5 disclosure also would include other fees that may be charged to the participant such as distribution fees paid to a recordkeeper/TPA. We are a TPA and have several clients where everyone has a brokerage account. We prepare a notice for these plans and have found that the language for each plan commonly doesn't change over time. The plan administrator keeps a copy on hand. We send a reminder to the plan administrator to send out the notice and they take care of distributing it to participants. It really is a minor effort.
  14. Tom, are you saying the plan defines a Vesting Computation Period (VCP) based on anniversary date of hire and no hours requirement, or the plan say vesting is based on elapsed time? If it is elapsed time, then the participant would need to have a 2-year Period of Service to get to 100% vesting. If the plan has a VCP based on anniversary date of hire, consider what would happen if the plan specified 1 hour as the number of hours in a VCP to earn a year of vesting service. Under this scenario, the anyone who worked 1 hours in a VCP would get credit for the full year. Essentially, if the participant was credited with one hour of service on or after 3/1/2024, they would be 100% vested. The question seems to be is there a distinction under the VCP/hours methodology if the required number of hours in a VCP is 0 hours or 1 or more hours? In other words, does 0 hours in a VCP automatically trigger elapsed time rules? Since elapsed time rules in this situation are less favorable to the participant, there is an argument to say elapsed time rules are not triggered by a 0 hours requirement.
  15. As you noted, an IRS Notice CP-406 is from the IRS. You should find this link very helpful in sorting out steps to take in response to the letter: https://www.irs.gov/retirement-plans/irs-filing-notices-for-forms-5500-5500-sf-5500-ez-or-5558 particularly in the section titled Understanding your CP403 or CP406 delinquency notice in subtopic Is there any way to reduce late-filer penalties? Basically, the advice is to file under DFVCP. The DFVCP process is very user-friendly. Only 2022 form is late if the 2023 form was filed on 10/15, so amend the 2022 form and check the DFVCP box. Note that filing an amended form replaces the prior filing in the EFASTs system which should make it unlikely that the DOL will initiate an assessment. You will need to do this before using the DFVCP penalty calculator since it will ask among other things for the EIN, plan number and date the form was filed. The DOL uses this information to cross check the form filing to the form filings listed in the calculator and will expect the 2022 form to have the DFVCP box checked. Both agencies really want us to use these delinquent filer programs and they commonly respond well to a plan taking proactive steps to correct an issue. Good luck!
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