Jakyasar

Hi Cannot seem to find if for 2020 20% withholding is waived on distributions (not hardship/Covid related, just regular distributions), it is still required, correct?. I am aware of the 10% waiver for 59 1/2. Thank you,

Thank you, will amend the plan prior to termination so that CARES will kick in.

Hi My apologies if this was asked before/missed it. PS plan terminating now. Have a 75 year old participant receiving RMD (none withdrawn for 2020 yet). Because of the plan termination, do they need to receive the RMD or can waive it? Thank you

Thank you Bill, 100% in agreement.

Hi I was asked the following: 401k plan effective 2017 but no deferrals were made nor any other contributions i.e. bunch of participants (owners + rank&file) as of 12/31/17 but no assets. 2018 had deferrals and other contributions. Same for 2019. Client sends data for the first time since inception, last week. They had to file 5500 for 2017, correct? 2018 they did not. DVFC for 2017 and 2018, correct? Thank you,

A follow up question. Now that I have to provide options for RMD that was not provided/calculated, I can only use the AE options available for the initial year of the RMD, correct? The reason I want to check is that I am adding additional options now for the upcoming RMD for the owner nd they can not be available retroactively to the spouse?

In addition, very doubtful, is there a spouse and also spousal consent requirement?

Thank you for your response and I agree. Definitely not my call.

Hi This is a silly question, given the amounts but wanted to see opinions out there. The owner's spouse's RMD for 2019 was $168 in total but $230 was taken out (initially took out $3,200 but refunded $2,970 prior to 12/31/19). What issues are they facing and what are the correction requirement, if any? Thank you

I agree with your skepticism and it is the plan sponsor's burden to prove the validity of prior service. Anyway, my issue was just resolved when they decided to make the DOH effective with the plan year. Good conversation and thank you all.

A qualified replacement plan (QRP) will only work if either participant will be receiving some kind of compensation which requires them to be active again. If they are not working anymore and not receiving any compensation, they are not active employees nor may be able to rollover the excess into the QRP. I have recently did one of these and the document provider informed me that, a terminated/retired participant in the db plan cannot be a participant in the QRP so the participant came out of retirement started getting salaries. Also the amount of the excess can be an issue, can it be distributed with 7 years? I am ok with the partial lump sum as well but that does not solve the over funding issue.

This was not a testing question, simply eligibility and including prior service for additional accrual of benefits.

One more follow up question/confirmation Owner over age 50 2019 w-2 is 20,000 - no other income or employed somewhere else Deferral on the W-2 18,000 Want to maximize PS portion at 5,000 - max at 25% $18,000+5,000 = 23,000 which is 3,000 over the 415c limit Classify 3,000 of the 18,000 as catch-up. So 15,000 deferral+5,000 PS=20,000 - 100% compensation limit Am I correct?

Is my prior TPA forgot to tell me 2 years in a row a reasonable cause - rhetorical question. As the amounts are so minimal, I will discuss with the client and what they want to do. Thank you

I totally agree with you but it bothers me that they will take a deduction for the corporation for a benefit that is generated from the LLC portion. I left it with them anyway. I can only suggest. Thank you for your insight/comment as usual.

Having a discussion with a CPA for 2019 deduction. Owner has a corp and also a partnership sponsoring the plan, it is a controlled group. Salary from corp was 180k and the K-1 income was 500k plus. DB deduction is 200k and DC deduction is 50k. Neither deduction can be achieved just by 180k salary. The so called salary total for 2018 is 280k (thankfully, the k-1 income high enough) and I suggested to split the deductions by using the fraction of 180/280 for the corporation and 100/280 for the LLC. CPA is reluctant to do so and wants the full deduction on the corp books which I do not agree but not my decision. IRS, if I recall correctly, does not have a set rule on this (may be misremembering) but consistency is important i.e. once you start one way, you continue that way. I am aware that there are required contribution requirement/lack of income for the LLC, but this purpose, let's ignore it. Any comments? Thank you

Hi Just took over a db plan with 9/30 year end. For the 9/30/18 year end, the participant (owner's spouse and 75 years old) was 20% vested with a very small AB. Prior TPA did not alert them of the RMD requirements for 2018 and also for 2019. The amounts are very small possibly between a total of $100 to $500 range for each year, may be a bit more for 2019 - did not do the math yet. What is the recommended course of action, send a letter to the IRS and say sorry and forgive me? Is there a threshold on the minimum 50% penalty? Thank you

They are but not always as favorable, all depends on the past salary history, benefits, accumulation and the demography.

Also, is this the first year i.e. you have no theoretical accumulation?

Hi Sorry if I am not seeing it but why age nearest is 62? At 12/31/19, age should be 54? NRA is 65 from what you provided. I concur the calculations all the way to VBRA but cannot back into the 57k figure.

Sorry, also passes 401a4, testing is not issue. Was just concerned if I had to provide any profit sharing for gateway purposes.

Including in coverage was never in question. Passes both ratio and ABPT without them. Thank you both for your comments

Just a follow up on the dc side. She can do full 401k plus 6% of eligible salary so could be up to 17.1k of profit sharing for 2020 and this is all the employer monies she can put in. The profit sharing portion will have to calculated once the schedule c and the defined benefit plan limits are determined. Sorry did not work out the db end but it is over 200k/year. So she can look at, between the 2 plans over 250k/year. Actual calculated numbers will yield more but this is a good start and hope it helps.

Hi Drawing a blank. Looking at a combo plan design which is not the way I do but asked to look at it. DC plan provides ADP SH Match, standard 100% up to 3% + 50% between 3%/5%. PS portion has 1000 hours plus last day rule. 2 participants terminated with 750 hours and prior to EOY however they bot deferred. Employer wants to make a profit sharing contribution (they are aware of the additional cost as they do not have 3% non-elective SH) The plan is also combined with a DB plan so testing together. Let's say the gateway minimum is 7.5%. Top heavy only in the DC plan (5%) and also required last day rule. Assuming that the terminated employees were not excluded in the DB (and not accruing any benefits), do they need to get any profit sharing as gateway? If they are excluded within the DB plan categorically, I do not believe they need to get any PS allocation, correct? Anything else I missed? Thank you

Well, it is confusing to me so thank you for providing some answers. I will look into this further as still not 100% clear on the benefit amount - not worried about the AE that he may elect (getting there though). To answer your question, in my case, spouse of the owner and yes, the biz has been around for 10+ years. They are just starting a new plan. Good question though for ownership determination. Appreciate your time.