Jakyasar

Hi New plan was signed/adopted by 12/31/2020, sponsored by sole-proprietor aka husband. Now they want to add another sole-proprietor aka wife for 2020 as an adopting employer. Can this be done retroactively? Thanks

Thank you for the attached. Here is a question for a DB plan - out of curiosity as was just presented to me a few minutes ago. Plan requires 1000 hours for accrual and vesting. It is EOY val. Date of hire: 12/1/2018 Calendar 2019 worked over 1000 hours Date of participation: 1/1/2020 Date of termination: 3/31/2020 - 750 hours from 1/1/2020 to 3/31/2020 As of 3/31/2020 did not accrue any vesting service i.e. terminated with 0% vesting. Rehired 10/1/2020 and accrued another 500 hours of service for a total service in excess of 1000 hours for 2020. No Break-in-service. Language from the document - the box is not checked [ ] Rule of parity. If an Employee does not have any nonforfeitable right to the Accrued Benefit derived from Employer contributions, exclude eligibility service before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance. [ ] Rule of parity. If an Employee does not have any nonforfeitable right to the account balance derived from Employer contributions, exclude Years of Vesting Service earned before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance. The way I read this (might be totally wrong) since not checked, this participant continues to be active for 2020 and accrues a benefit and also vesting service. Your comments are appreciated.

Ooops, sorry, thank you for the correction. I must stop typing when I am doing 5 things. "Do not exclude key"

Thank you

Sorry if this was asked before: I own an S-Corp and own 100%. My adult son is my employee and participant. 2020 5500-EZ instructions for who can file EZ: 2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC 1372(b), as a partner) 1372(b)2: (b)2-percent shareholder defined For purposes of this section, the term “2-percent shareholder” means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation. So, now I can file an EZ where my son owns my stock by attribution? Thank you for your comments

Not sure about the salaries and the minimum required contribution (MRC) for the db plan but did you look at the 31% rule? If the salaries are at maximum levels and the db plan MRC is not so high and also contributed after 12/31/2020, you may be ok, all facts and circumstances, just a thought.

How about if the plan is top heavy and the top heavy provisions in the plan do not exclude non-key? Grouping or not, unless categorically excluded, both the owner and the son gets 3% (assuming that they are both key). Of course, the contribution basis testing is a given.

Agreed with the 401k provisions being effective 2021.

Thank you both confirming my understanding.

Good morning SECURE Act allows pension plans to be set up in 2021 for 2020. If a corporation, though can set up a 401k/PS plan for 2020 in 2021, the deferral option has to start in 2021 and after the plan is executed. How about for a sole-proprietor and/or partnership where there are no employees? Thank you,

I am getting them to have the paperwork signed and notarized. Thank you for your comments.

Hi Client asked for a loan from the DB plan last December. Sent the paperwork with all instructions. Client signed the form but did not get the spousal consent nor the spousal consent was notarized. Client took the loan out from the DB plan in December. What is the corrective method for this, if any? Thank you

Hi Dealing with an overfunded defined benefit plan (DBP). Plan covers only the owner and spouse and not covered by PBGC. Client asked me if he can pay the following fees from plans assets: 1. He has an independent contractor (IC) working for him on a personal level (family related matters) however sometimes helps gathering annual data for the DBP. The IC is always paid from personal funds. Client wants to know if the fees related to the time spent on the plan related issues can be paid from the plan. 2. The client's CPA for the sponsor also does help with plan related issues and client wants to know if time spent on plan related issues can be paid from the plan's assets to the CPA directly from the plan. 3. Client, as the trustee, wants to get paid from plan assets for his services to the plan as investment advisor. Per my research, possibly not doable but I may have missed something here. I am sure there are some questions I am asking/thinking of. Your comments are appreciated. Thank you

Also must watch how and if it will affect the testing issues, if any. As Sherpa stated, you need to watch for 415 limits and also make sure that at least 1/7th of the db excess is allocated with 95% of the active ex-db participants receive an allocation.

As Lou S said, how long has this been going on? If for a while, no one noticed that the withdrawals were not made when the plan's annual asset reconciliation was done? Also, for the J&S 50%, was beneficiary's date of birth was provided? As others said, possibly no lump sum option?

On the 5500, definitely would not have a break, almost there/done, why complicate it? Billing is up to the TPA discussion with the client. Besides, since the DB plan was terminated in 2020, you still have to do schedule SB anyway so 98% of the work had to be done in the first place. I will let other chime in on the IRS's position. I do not take the position that assets were $0 as of 12/31/2020 as there will be a January statement showing account balance, backdating or not, it is there past 12/31/2020, this is my take. Better play safe now than sorry later.

Hi Ken Excluding prior service for vesting is always a given as long as no prior plan that was terminated within 5 years of 1/1/2020. Up to the sponsor to decide whether to exclude or not. 0% vesting depends on the partial termination issues too. This is something already known in 2021 when you design a plan for 2020 in 2021 thus may affect some of the decisions.

Hi mming I always take the position that if not cashed by end of year, too bad, it is next year's distribution. On risk tolerance, possibly will get many different answers. Mine is none. When you get a statement as of the end of the year, you will see the assets, not a cashed/cancelled check. If want to pay at the last minute, electronic transfer is the way to go. Bird, I have seen checks cut in December, accounts debited and checks "cashed" in early January. I do have mixed feelings about this but when the investments showed the balance deducted in December, I went along with it, only once and many years ago. Not sure what the outcome would have been if audited by IRS. Never did it with any PBGC termination though, always the date cashed, so much easier/cleaner to deal with. FWIW

No, not all employees. The plan document should have some provisions to add for waiving eligibility, like all employees employed on a certain date or work 83.33 hours per month. Must be very careful though on the options and if you want some out of box provisions, always ask the vendor and/or an attorney if they are kosher.

Hello to all This might be a rhetorical/stupid question but have been thinking about it. Let's assume, the plan year=corporate year aka calendar year 2020. SECURE Act now allows pension plans to be set up after corporate fiscal year end and prior to the due date of the 2020 tax return. Let's assume 9/15/2021 is the extended due date. A candidate approaches for a new plan in July 2021 for a new plan effective 2020. Profit sharing combined with cash balance - no can do on the 401k for 2020. I get a census for 2020 and also thru July 2021. I notice that some eligible employees on the 2020 census are no longer there as of July 2021 i.e. terminated sometime during 2021. With this knowledge, I do not see a problem designing the 2020 plan in July 2021 with the events taken place in 2021. This way, I can anticipate any issues for 2021 and take that into consideration for the 2020 design/testing, done in advance. What do you think? Thank you.

I had clients who were successful real estate agents and their valuation of the real estate was nowhere near what I googled so respectfully bad idea not to get an independent third party appraisal. I did question their appraisal and had them reevaluate and obtain an independent appraisal but that is me. FWIW.

Always used an official third party appraisal and never accepted anything else. This is especially important for db plans as any incorrect valuation may result in under contributions or over deductions.

Hi I agree with you and Bill on the 5500, without question. My comment was for the recalculation of the lump sum for the db accrued benefit.

I had a situation where the broker adjusted the 12/31 balance so that the distribution was coded as deducted from the account but the participant did not cash the check until March following the year end. Bird, what would you do in this situation? Just curious.

in addition, if not cashed timely, the amount may also change due to 417e assumptions, got to be careful on how long the participant holds on to the check.