Jakyasar

Hi A calendar plan has 2 owner HCEs, one non-owner HCE and one non-HCE as participants. All but one owner HCE terminated in June 2021. Doing some testing for 2021 and if I can switch to top-paid group, the testing will be ok. The question is, can the plan be amended now to make the non-owner HCE a non-HCE? Never saw this situation before. Thank you

I am assuming jsample means a “may be” notice which in this case notice is required, as far as I know.

Effen, thank you for the link. Good start. Not clear what to do with certainty. I see CB’s last comments but again still not with certainty. Need to research more as I am not comfortable without solid back up.

Hi Calendar DB plan for 2021. Owner plus 1 rank&file participant. As of 8/31/2021, rank&file participant is paid out, now only owner remains, Applied to PBGC for an exemption from coverage request and got a response stating that the case is not yet assigned to an agent yet. So, no formal exemption determination yet. The owner wants to make full 58k profit sharing plus a rather large DB contribution. Rank&file will receive whatever PS is necessary. When is the DB plan officially considered not covered by PBGC? When is the PS portion is limited to 6%? Thank you.

Bill's explanation is better but one would hope that there is a TFD, at least not that one is provided to me.

Sherpa, what is RFTD?

A CPA approached me. He has a client with Ida extension till end of 2021. Can they still set up a profit sharing plan for 2020 as tax filing has been extended? Thank you

Hi I have a request for a combo proposal and was given base and bonus salaries separately. In general, I do not exclude bonuses but here some bonuses are higher than the base salaries. Never had to deal with 414(s) issues before. Sponsor is a partnership with 2 partners. The other employees are all a mixture of HCE and NHCE. Only the employees have bonuses and partners do not. So, if I exclude the bonuses for all non-owner employees (HCEs and NHCEs), do i have 414(s) issues due to the 2 partners getting just k-1's? Thank you

Hi Can anyone recommend a company that they are happy with, especially with the pricing? Thank you

Ok, here is another troubled case that is on my desk for consultation. I provided them with some information but wanted to check if someone who has experienced the following. This is a new one. Single member LLC filing as sole-prop and has employees for the past 7 years. Sole-prop - Joe has an existing solo 401k plan. Stopped contributing when hired employees. Never informed the custodian of the solo 401k that he hired employees. Never informed the employees about the existing plan. Never filed 5500 forms (assume less than 250k in assets). My take: As all employees are eligible to participate in the 401k plan and are participants, 5500 forms needed to be filed even if the only account balance is for the owner. So possibly missing 5+ years of filings no matter is the account balance All eligible employees should have been provided option to defer and now in violation and therefore need to be provided some kind of missed opportunities. How will the custodian handle the fact that they were never told the plan cannot be a solo plan? Not even sure if the documents are up to date Other than hiring an attorney to fix all this, what else can be done? They want to set up a cash balance plan for 2021 combined with 401k plan. I can amend the 401k plan for 2021 but how about with all missed opportunities etc? Wow.

How can they invalidate any deferrals and employer monies when they want to add a 401k/ps plan together with a cash balance plan? At least there should be some 415c and 402g limits that need to be checked for. Sorry, not familiar with the interaction between the SIMPLE and QP's. What else am I missing here? I usually tell the client, wait till next year and that they need to terminate the SIMPLE by 12/31 of the current year.

Luke et al, thank you all for this interesting and informative discussion.

Hi I am sure this discussed way before so my apologies. I was asked for 2021 combo plan designs but now am told that there is a SIMPLE in existence. As far as I remember , they cannot do any qualified plan for 2021. Is there anything I am missing here i.e. something can be done? Thank you

Luke, are you saying, if they took out 10k and now it 7k in the IRA, they can only return 7k and accept the losses, even though if the monies stayed in the plan they would have been worth 12k?

Bito'money, thank you for comments. I am not saying because what I posted is all the information given to me. All I know/told (as of yesterday) is that now they want to make the plan whole again i.e. fix it one way or another and have all the participants return their monies to the plan. I pointed them to rev proc 2021-30 and it is in their hands now. As an update, I was informed yesterday that not all participants have received their balances and also a termination resolution was put in place in August. In my humble opinion, best approach is to rescind the termination, have everyone return their monies to the plan, the sponsor provide additional earning based on rev proc 2021-30, all to be completed/deposited prior to 12/31/2021.

Thank you for the cite as I was not searching using "overpayment". Section 5.01(3)(c) clearly provides the explanation of what is an overpayment is. Section 6.06(4) provides reference to Appendix B, section 2.04(c)(2) provides reference to Appendix B section 2.04(1)(c) Just confirming the sections. Very clear.

Thank you both your comments. Unfortunately, looking for a solution now and I do not think they will be this lucky. Any other thoughts out there?

I was approached for consulting on the following - never saw this before: Sponsor has a PS plan. Sponsor intended to merge (or terminate the existing plan and join - not clear) with another group of plans and add 401k feature. Sponsor, without taking any formal action, provides distributions to all participants, mostly active employees. All happened in May of 2021 Sponsor decides not to join the other group and continue with his PS plan and also amend for 2022 by adding 401k feature. What can be done here to correct all? Thank you

Hi I have almost no experience with missed funding deadlines - dealt with twice in my life time but both deposited prior to December 31st of the same year, following 9/15 deadline. A brand new cash balance/401k-ps plan combo for 2020. Was told that 401k deferrals and safe harbor match was contributed timely. The issues are the CB deposit and PS deposit. I was approached for advice on the following: As the plan sponsor is totally broke, they can not make the 200k CB deposit (assume it is the minimum required - do not have the report to check), whatever the PS amount due (must make it to pass combo plan testing) or the 10% penalty on missed contributions. It is very unlikely that they will come up with the monies by 12/31/2021 and possibly never - business went south suddenly. Possibly covered by PBGC, not even sure if PBGC was alerted about missing contributions - I believe form 10? All participants were provided statements of benefits for both CB and PS for 2020 They want to send the IRS form 5330 with a letter explaining their situation and ask for any kind of relief. Based on my understanding, they may be late for filing 5330 unless they filed 5558 for a possible 6 month extension, but definitely late for 10% excise tax, correct? From what I read, IRS may impose additional late interest charges. Not even sure if AFTAP was done and/or 101j notice was provided by 10/31/2021. My immediate reaction was to freeze the plan asap but apparently they were told by the actuary, not doable. What??? Given that they may never be able to make any of the contributions, what can they do? If anyone has any experience, would appreciate any comments/suggestions. What a mess.

No you do not for the document. Make sure to put in the fresh start date and the new formula p,us any other requirements that your document may have.

Hi Bill I agree with you and thank you for comment. Hope all is well. Best,

With the owner and spouse dead, who is running the business, does it even exist? 5500 forms have been filed? Documents updated? etc etc etc Usually plan documents would say if no beneficiary, all goes to the estate but this is a very general approach. By the way, what does the document say about the excess at the time of termination. Also, if the plan is sellable, the level of the overfunding may or may not attract the buyers. Just thinking out loud.

Hi An EE hired more 10 years ago and worked 1000+ hours each year. In 2014 becomes part-time but working 750/year. Owner wants to set up combo plans for 2021 and wants to exclude this employee. I think this employee is included in all testing because never terminated and never had a break-in-service, correct? He would be excluded categorically. What if, worked under 501 hours since 2014, still needs to be included? Thank you

Thank you, interesting to know. I convinced the sponsor to contribute by 10/15 so only deduction issue for 2021. Phew.

I agree on that. So not reflected on the form as far as I can tell? It was provided on the 500 initially.