Jakyasar

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.

It is determined to undo the termination and redesign the benefit formula.

It is not about charging the client, it is about doing the right thing. The 0.02 hit the account as an interest residue. What to do, what to do.

Client told me all assets were distributed by 6/30/2022. Filed an extension on 1/31/2023 till 4/17/2023 Now found out that still 0.02 is in the account and they will close it this week. When is the final 5500 due?

Good point, thank you

Paul, thank you, looks similar to schedule c. Never dealt with a farmer client before.

Hi Sole proprietor, farm owner. CPA is asking if can use schedule for Pension purposes. Never heard of it but someone may have experience with farm owners. Thanks

Agreed and thank you.

Hi Bri Thank you for the input. If this person worked 1000+ hours from 3/15/2021 to 4/1/2022 (sorry did not mention before), would not be statutory exclusion, correct? Given the age, need in the testing i.e. cannot use as OEX, will never pass the test otherwise.

Hi Looking into a proposal, all plans are calendar. DC Plan already exists. Provisions are 401k+NESH+PS Entry is first day of the month following completion 1 YOS Compensation is defined as from DOP CB plan will have 1 year wait, dual entry and full compensation For all purposes, all top heavy. DC plan top heavy provision states last day rule. PS states last day rule+1000 hours EE data for DC plan: DOH 3/15/2021 DOP 4/1/2022 DOT 5/1/2022 2022 w-2 $12,000 Salary from 4/1/2022 to 5/1/2022 - $3,000 From above, never eligible to enter CB plan so top heavy is only 3% and under DC plan only Gateway is 7.5% (3% NESH+4.5% PS) For gateway, $3,000 salary is used and thus $225. Top heavy is based on full salary i.e. $12,000*3% = $360 however, plan has last day rule. What amount is supposed to be allocated? Thank you

Thank you so much for sharing.

Hi Paul I have not yet submitted to PBGC. Just looking for some wording on a notice to be provided to the plan participants about rescinding the termination. It is a good story though

All I need is to unfreeze at this time, will worry about unfreezing later. Any suggestions on what to write on the notice? I do not see any other way of reducing the vesting to 40%. 100% it is.

Yeah, not really. I have a signed certification stating all notices (204h+NOIT) were provided and timely. I am not going to question this.

All termination was done according to PBGC rules so no questions on that. I simply want to unterminate first and then think about unfreezing later. Lost 50% of biz due to war in Ukraine, that is a good reason for terminating the plan. Well documented.

Before allocating to others, one advice would be to have an input from the plan sponsor. You may choose someone because the math favors them but plan sponsor may not be happy about. Be watchful of the BRF issues as well. Also, when you say maximizing HCE's, you meant owners, correct? Bird/Bri and BG have excellent points.

Hi Another new one for me. PBGC covered plan, terminated 12/31/2022 500 is not yet done/filed with PBGC. Sponsor changed their mind, wants to continue. Can a simple notice to the participants stating "we decided not to terminate the plan" would be sufficient? I will amend the plan later to unfreeze the benefits. When terminated all became 100% vested (plan was only 3 years old and all would have been only 40% vested if not terminated). I cannot find any written document of making everyone 40% again with the reversal of termination. Anyone knows if possible? Thank you

Yes it does and yes, ratably allocated to the rank&file, unfortunately no escape.

Thank you for steering me to the right direction/advise.

You mean reallocate the 4k to the others? This is not a pooled account and the excess was done during the year. Can it still be reallocated in 2023 i.e. transfer from 415violation-participant to the others for 2022? Thank you for your comments

Hi Here is a new one never dealt with before. I found out that the client (over age 50) has an excess situation and not sure how to tackle it The plan has the following features: 401k+NESH (3% mandatory)+PS. The plan is also used as a QRP - qualified replacement plan During 2022, $136,000 was deposited with the following breakdown April 2022 - $6,500 - from biz - 2021 catch up July1 2022 - $58,000 - from QRP - 2021 NESH+PS July2 2022 - $6,500 - from biz - 2022 catch up November 2022 - $65,000 - from biz - towards 2022 NESH+PS The July2 and November deposits created a $4,000 excess deposit during 2022 i.e. over the 415(c) limit. (71,500-67,500 (max 2022 415(c) limit) = 4,000 How is this to be corrected? Any suggestion/pointing to the right direction is appreciated. Thank you