Jakyasar

Thank you Lou but none of the options answer my question on a theoretical level. I want to tell the client, there is a problem and you need correct it with the IRS with an approval from them. I am not leaving anything to chance if they want me to take over. I will only take it if corrected properly and safely with no issues. I guess no one had this issue before, hmmmmmm

Ok, a bit of confusion with what I am trying ask and getting a bit out of context. I am aware of all the walk away, it is client's responsibility stuff etc etc etc. Simply, if 2021 SB was not done/signed and will be done today, other than signing it and putting in the file, anything else needs to be done with the IRS so that when/if an audit happens, there are no issues? Hope this is clear now. Thanks

Thank you for all your comments. SB was not done/signed i.e. never provided to the client. Not sure what happened. Still waiting to hear. My question is basically is this a self-correctable issue without any penalties i.e. the val/SB is done now and signed by the actuary now. Any late filing related penalties? Thanks

No reversion in a DC plan.

Hi Looking at a potential takeover for 2022. Although 5500EZ was filed for 2021, no valuation was done and no SB signed. Forget the AFTAP for a sec. Looks like some contribution was made, not sure if satisfies MRC. As I have never seen this before, what are corrective steps to be taken? If anyone has experience with this and can share it, would appreciate it. Thank you

Be careful with the overwrites, they are dangerous especially if you do not document what you do. Good thing about Datair, all the overwrites are in color blue but once updated to the next year, they are no longer blue. Another way approach is to determine what the net salary would be after all deductions and adjustments for 1/2 se tax for the K-1 and make that entity a corporation by making the owner as a salaried employee and test all together, much better than overwriting and less dangerous. Datair has a master test module so you create all entities separately and include them all for testing under one umbrella (assuming all entities are adopting employers). You can also individually check each entities deductions separately. Just my 2 cents. Other great advise, contact Datair, they will help you set it up and/or provide some direction - this is what I would do rather than going crazy with the set up (too late for me)

Cathy/Lou A hypothetical question, thinking too far out on this (in my case the sponsor decided to take the hit and provide everyone else their full benefit in order to avoid any issues with the participants) Sponsor knows the plan is underfunded by 100k and deliberately chooses not to fund it. Would it still be a reasonable thing to do simply prorating the distribution i.e. why should the rank&file (including non-owner HCE)_ should have their portions lowered because the sponsor deliberately not funds the plan? This assumes that they have the money (if they were broke, I can live with it) This might be a far fetched thought but curious what others think. Thanks

Hi This is a first for me. Existing calendar 401k plan with Corp A. Becomes CG in November with Corp B Corp A has a 401k plan with eligibility of age 21/1year of service with 1000 hour requirement Corp B has a 401k plan with eligibility of age 21/3 months of service. When will the 2 plans need to be tested together? How about if each plan passes the 410b and also 401a4 on their own, can they be tested separately? Top heavy issues aside. What else am I not thinking of or not asking? May be something related to 410b6? Thank you.

Not sure I am in agreement about simple proration, got to check this further

Hi I am only asking this for entertainment and second guessing myself in case something I missed/forgot. Non PBGC covered CB plan. Terminated and ready to distribute assets 6 rank&file - very small lump sums (total 30k out of 2M) 1 former owner (terminated 2021) - nowhere near 415 (120k) 2 non-owner HCEs - nowhere near 415 (700k) 1 spouse of an owner - nowhere near 415 (150k) 2 owners - not at 415 limits (1.1M but only 1M remaining - split 50/50) Plan is underfunded by 100k. One of the owners insist that the allocations have to be made prorata as if a terminating PS plan Plan document states "Assets will be allocated in a manner which does not discriminate in favor of Highly Compensated Employees" Checked with document provider and they agree that this is a language corresponding to 4044 or RR 80-229. Other than paying first 3 on the above list and then allocating the rest between the 2 owner and spouse, how else would you allocate theoretically? Thank you for your comments

Gateway is not always 7.5%, it could be less. Having said that, as long as there is room for additional deduction, of course. However allocation for additional amounts will depend on how the plan formula is written under PS portion.

Pay everyone out now (417e rates are very high i.e. payouts will be much lower than if were done in 2022 - assuming that you have stability of plan year and look back pointing to a month prior to 1/1/2023). Then apply to PBGC for exemption from further coverage. Once (and if) you get the exemption, terminate the plan - I would push it closer to the end of the year. Given the facts you provided, unfortunately reversion is unavoidable unless the plan sponsor would want to allocate the excess to the VTs in a non-discriminatory manner (you have to check the plan document for this). All termination related expenses (except for a few exemptions) can be paid from the plan assets e.g. cycle 3 restatement, actuarial valuation, consulting etc. Hopefully by then, the reversion will be minimized. Just thinking out loud and waiting to see what others will say.

As an initial response, PBGC requires assets to be distributed within a prescribed period of time and final 501 to be filed. IRS also states all assets to be distributed within 1 year of termination, assuming no pending determination letter for plan termination. So, how do you plan to get extensions on these? Just thinking out loud.

If you are asking me, yes it does but I am not 100% sure always correct due to various scenarios. As I mentioned before this is a reminder exercise.

Hi Someone I work with where I provided a combo plan proposal forwarded the following they received from the 401k recordkeeper (no name will be mentioned). Background, brand new plan, effective 1/1/2023, signed 3/31/2023 with the following: 401k deferral and NESH (3%), eligibility - age 21 and 6 months service with entry 1st day of the month after completion of 6 months - no hour requirement PS, eligibility - age 21 and 1 year service (1000 hours service required) with entry 1st day of month after completion of 12 months Additionally, as special provision, all employed on or before 1/1/2023 enter the plan without regards to the above eligibility This is what they received from the recordkeeper as forwarded by the client: "I received the feedback below from Compliance: This is a Safe Harbor plan, so we cannot make this plan more restrictive by adding 1000 hours service requirement for PS in the middle of the plan year.* Please let us know if you want to make these changes effective 1/1/2024" What am I missing here? Thanks

Agreed with all above and thank you for your comments. This was a reminder exercise, need it from time to time. Thanks for this group of experts.

According the doc provider, one for the db is coming

Not for SECURE 2.0 as they do not exist yet, I checked with my doc provider. I will have the plan sponsor adopt it when available. They also told me that as long as assets are distributed prior to 3/31/2025, no need for restatement. Will see how it goes.

I am sure this will be a hot topic to discuss in the future. Plan DOT 12/31/2022 Restatement period started 4/1/2023 Possible asset distribution 6/1/2023. Do I need to restate?

Hi Revisiting with a few scenarios: Scenario 1: 401k with basic match and PS provisions (everyone in their own group) Participant does not defer thus no match and gets $0 ps allocation, is this participant's salary included in overall deduction limit? Scenario 2: 401k with NESH 3% and PS provisions (everyone in their own group) Participant does not defer, gets 3% NESH and gets $0 ps allocation, is this participant's salary included in overall deduction limit? Scenario 3: For either above scenarios, participant is categorically excluded from PS portion, is the salary excluded for deduction purposes? Any other scenarios where salary needs to be excluded for deduction (other than being categorically excluded)? Thanks

Not a SIMPLE person, asking for a friend: "My employer started a SIMPLE IRA plan for all employees in April of 2022 with the required 3% match. I contributed the maximum of $14,000 over the course of the remainder of the year. My salary is $200,000 per year, so I believe that the 3% should be based on my compensation over the whole year totaling $6,000. My employer’s accounting firm only deposited $4,500 as the employer match instead of the $6,000 that would equal 3% of my yearly salary and says that they only owe me 3/4 of the total 3% because the plan only existed for 3/4 of the year. This does not seem to correlate to the IRS language regarding SIMPLE IRAs, which states that the percentage is based on the employees’ compensation for the “entire year”, although I cannot find anywhere that says that this language applies even to plans started mid year. What is the correct interpretation?" Any comments/suggestions are appreciated. Thank you.

Bri, you presented a few "if" related scenarios here. I will go back and re-re-re-read the 11-g language in the regs. I think Bird's point is a valid one. I am making noise here and try to understand/learn one additional use of 11-g that is not a corrective action. I never used it for this purpose and for a good reason (at least for me).

Trying to visualize this concept, best with couple questions. Ok, let's say in BG's question, wants to increase one HCE to 8% and provide an 11-g amendment today saying Joe HCE will get an additional 3% of PS allocation where all other HCEs in that group will stay at 5%. Same with the NHCEs. Mary NHCE and George NHCE will get additional 3.75% where the other 4 NHCE will stay with 5%. In both cases above, you are increasing the amount of PS allocation but not allocating ratably, possibly per document language. How do you justify the additional deduction after 2 1/2 months (remember this is a voluntary addition and not mandatory) or will deduct in the current year? You have a grouping with certain allocation language within each group and now with a discretionary 11-g amendment (not mandatory) you are arbitrarily changing the terms of allocation within each group (the way the allocation within each groupings are usually on a prorata basis and different than each participant who are in their own group). Sorry for being dense here but I am trying to understand how this can be accomplished without violating anything. I am sure I am missing something here. May be I will learn something new today.

April 2nd joke. Yes, 2 cents

Agree with CuseFan and Paul I. There is nothing to amend/correct here. Simply a desire in providing an HCE additional allocation. The way the groupings are defined, the way I see it and assume, if you increase for one HCE, you must increase for all HCEs as allocations within the group would be done on a prorata basis (usually standard language would dictate that). Now if you increase for all HCEs and then fail the testings, time for an 11-g amendment unless you increase the allocation for all NHCE globally.