Jakyasar

What is elected on item 9, "entry timing for plan participation"? Sorry not listing here as I am not sure if permitted. Entry dates themselves are not enough to make a determination. IMHO

Hi This is a general question. A DB (one lifer) plan did not fund the 2021 MRC - minimum required contribution - by 9/15/2022. The MRC was 25k as of 9/15/2022. It was not funded by 12/31/2022 either. Let say they want to fund 2021 MRC by 7/1/2023. How is the amount calculated? Using EIR (effective interest rate) for 2021 all thru 7/1/2023 or 2021 EIR until 12/31/2022 plus 2022 EIR? Assuming that there will be room for it under 404, this amount can be deductible for 2022, correct? (assume corporate tax return is on extension) --------------------------------------------- As for excise taxes, from 5330 under 4971, it is very clear. It would be 10% for 2022 plus 100% for 2023. Schedule D. Tax on Failure To Meet Minimum Funding Standards (Section 4971(a)) In the case of a single-employer plan, section 4971(a) imposes a 10% tax on the aggregate unpaid minimum required contributions for all plan years remaining unpaid as of the end of any plan year. Additional tax for failure to correct. For single-employer plans, when an initial tax is imposed under section 4971(a) on any unpaid minimum required contribution and the unpaid minimum required contribution remains unpaid as of the close of the taxable period, an additional tax of 100% of the amount that remains unpaid is imposed under section 4971(b). So is there anyway to have the IRS accept 10% for each year or 2023 has to 100% which is very steep? ----------------------------------- As for penalties for late filing 5330 Penalty for late filing of return. If you do not file a return by the due date, including extensions, you may have to pay a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if you can show that the failure to file on time was due to reasonable cause. If you file late, you may attach a statement to Form 5330 explaining the reasonable cause. Penalty for late payment of tax. If you do not pay the tax when due, you may have to pay a penalty of ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if you can show that the failure to pay on time was due to reasonable cause. Interest and penalties for late filing and late payment will be billed separately after the return is filed. ------------------------------------ So, looks like the penalties are (is the MRC based on 9/15/2022 amount or the date of actual deposit) For late deposits, 10% for 2022 plus 10% to 100% for 2023 plus possibly 25% of MRC for late filing of 5330 plus 25% of MRC for late payment of tax. Any corrections/comments to above? Thanks

Forever as you never know what will come later and bite you in the derrière

In addition, one participant 5500-SF's are not published on EFAST

Any courageous comments?

Hi CB & DC plan combo, DC has 3% NESH 3% Controlled group, 2 schedule c, both entities adopted the plans. Employees, some paid from both and some separately from each entity. Sch X had 500k net c Sch Y had 200k losses There are mandatory CB, SH & PS contributions attributable to both entities. Q1, for all purposes,need to combine the income, correct? Q2, should each entity fund its own portion of contributions? Q3, as to deduction, cannot exceed combined sch s, correct? Anything else I didn’t think of? Thanks

This is a 2 year old plan and how can it have only insurance policies? Did they rollover some other policies into the plan? Something is amiss here, at least for me.

I will ask the vendor for my doc system and see what they will say, now I am even more curious.

Question, will a pre-approved document allow this kind of formulation even if non-discriminatory? Curious.

I always do. If I find/resolve anything, will post.

Late filer is not the solution, IMHO. some may say, Sb not signed is as good as not filed, I heard of that one. There never was a prior SB. Contacting prior actuary not an option, let's leave it at that. Thanks anyway for your time. Cannot believe there is no corrective measures for this. Will continue with the search.

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.