Lauren0507

Thanks, Paul!

No, sorry Reluctant_Lawyer, they put them in the employee's IRA instead of a plan account.

For 2022-2025, an employer has contributed an employee's 401(k) deferrals into her personal IRA. I'm curious if anyone has seen this situation and how it was corrected and/or suggestions on how to correct.

We received two audit requests for profit sharing plans. Both auditors were probationary employees and were let go, so the IRS canceled. These were pretty simple plans with no obvious issues, so I think they were targeted for training purposes.

We have a client that would like to provide “concierge medical benefits” to all of its employees that have elected any level of medical plan coverage, which is provided under a fully-insured high deductible plan. There are no actual medical benefits being provided via the concierge program. Instead, the client has contracted with two geographically convenient general practitioners that will give “high” or “immediate” scheduling priority to participants, as well as much quicker response to requests for refills, etc. Actual medical expenses associated with the services will be run through the group medical plan as usual (e.g., cost of the visit, medical tests, etc.). From the client’s description, it seems like the concierge service is merely a program to provide priority scheduling and refills. The projected cost for each employee is $2,000/year. I am not sure if there is a different cost if the employee has elected family coverage, but in any event, it will all be employer paid. Our practice is primarily focused on qualified and nonqualified plans, so this is out of the box for us. At first blush, this program does not seem to be a welfare benefit plan, and I am thinking that the cost would be includable in the employee’s income. Hoping someone has some experience with this type of program and can point us in the right direction.

Hi John. Assuming the amounts were withheld from pay and not contributed to the Plan timely, I would recommend correction under the DOL's VFCP. The contributions, and appropriate earnings (I recommend using the VFCP earnings calculator), should be deposited now (or as soon as possible). Once the correction is made, a VFCP application would be submitted to the DOL along with proof of deposits, reconciliation to payroll records, etc. In addition, Form(s) 5330 and the appropriate excise tax must be filed with the IRS.

Thank you, Jill!

Jill R. Can you please give me the name of the one provider set up to file? Thank you!

Hello All, As you know, effective 1/1/2024 most employers are required to file Form 5330 electronically using the IRS Modernized e-File (MeF) System through an Authorized e-file Provider (AEP). The IRS has a listing of AEPs on its website (even though the link says individuals, it’s for individuals and businesses): https://www.irs.gov/e-file-providers/authorized-irs-e-file-providers-for-individuals I've contacted some of those listed and they actually are NOT registered to file Form 5330. I've also contacted some mid-size and large accounting firms and TPA firms we work with as well as Empower and have found that while they are set up to file as an AEP, they are NOT registered for Form 5330. According to Empower, they are ultimately going to be able to file, but there is no ETA at this time. I’m struggling to advise clients how to file electronically other than contacting one of these random providers. I can’t find anything online addressing the practicalities of this or whether the IRS is even really ready to accept these electronically. However, per the 5330 instructions, if a paper return is filed when electronic is required, the return will be considered as not filed by IRS. Right now, I have two clients who need to file, one of which is a $1.7B plan. I can't tell them to go to the nearest H&R Block listed on the IRS website (which probably is not even registered for 5330). What am I missing here? What is everybody else doing? Any help is appreciated!

Leopurrd-401k - Did you ever figure this out. I'm having a tough time. We also use FtWilliam.

Thank you Bill and C.B. for your comments. C.B. that's exactly what I thought. I have reached out to FtWilliam for assistance as well.

A client whose safe harbor match is based on the pay period and funded each pay period would like to make a true-up this year although it is not required. The FtWilliam PPA document contained the following language which appears to allow a discretionary true-up: Notwithstanding the foregoing, after the end of each Plan Year, the Company may make an additional Matching Contribution ("true-up") on behalf of each Participant in the amount of the positive difference, if any, between the Matching Contributions that would have been allocated to his Account had such contributions been determined on the basis of Compensation for the entire Plan Year and the Matching Contributions previously allocated to such Participant's Account. The Cycle 3 document does not contain this language (at least that I can find) and only addresses required true-ups: If the Employer funds Matching Contributions more frequently than the determination period indicated in the Adoption Agreement, a true-up contribution will be made to any Participant who did not receive a Matching Contribution based on Matched Employee Contributions or Plan Compensation for the entire determination period indicated in the Adoption Agreement. Does the absence of language specifically addressing a discretionary true-up preclude the client from making one? Or, can the language in the document be interpreted as the bare minimum an employer must do, but it does not preclude something more? Would like to get your thoughts on this. Thank you.

It is my understanding that the late adoption of the Cycle 3 restatement results in the plan losing its ability to rely on the preapproved document's IRS letter and the plan becomes individually designed beginning 8/1/2022. Further, this can be self-corrected under EPCRS so long as all of the requirements for self-correction are satisfied and the individually designed plan is compliant as an IDP. The employer may then rely on the preapproved document's IRS letter. My question relates to timing. It appears you must first correct any plan document failures then adopt a new Cycle 3 document. Assume the client presents us with a Cycle 3 document effective 1/1/2022 and signed 8/31/2022. We review the prior document and find it is in compliance as an individually designed plan. Besides documenting in a Board resolution the employer's intention to self-correct what additional steps, if any, must be taken? I apprecate your input. Thanks!

I agree with ESOP Guy. Have your attorney file the QDRO with the amount as listed in the divorce decree (60% of his account balance, plus earnings from a specific date and the additional funds). The 401(k) Plan administrator can determine the amount. Your attorney does not need the dollar value to file the QDRO. You also could file the QDRO pro se (without a lawyer).

Yes, the correction was not complete until the earnings posted, so you will file for 2020 and 2021. Keep in mind the tax is cumulative.

We work with a TPA who used McKay Hochman for EGTRRA and PPA. The provision you are looking for was in an amendment to the Basic Plan Document, specifically First Amendment to the McKay Hochman Co., Inc. Prototype Defined Contribution Plan Basic Plan Document #03. It states: “If a Participant completes or has completed a Beneficiary designation in which the Participant designates his or her Spouse as the Beneficiary and the Participant and the Participant’s Spouse are legally divorced subsequent to the date of such designation, the designation of such Spouse as a Beneficiary hereunder will be deemed null and void unless the Participant, subsequent to the legal divorce, reaffirms the designation by completing a new Beneficiary designation form.” I realize you may be working with a different BPD, but hopefully this will help you find the provision in your particular document.

Back in the old days, you could tell them there is a copying charge. Now that everything is electronic, we just email them what they ask for. Does not happen very often.

We handled a similar distribution to a beneficiary a few years ago. We sent distribution forms directly to the inmate. Once he completed them, we contacted the prison and at that time, warden approval was required on prisoner funds in excess of $200. Once approval was received from the warden, the check was made payable to the inmate, mailed to the prison cashier and put in his account at the prison.

Thank you, C.B. That makes perfect sense. Good point, Mr. Bagwell.

EPCRS provides the missed deferral opportunity (MDO) is equal to 50% of the employee's missed deferral. The missed deferral is determined by multiplying the ADP of the employee's group (HCE/NHCE) by the employee's compensation. We have a situation in which 2 HCEs participated in the plan 2014-2018 and during each of those years a NHCE was not given the opportunity to defer. Since there is no NHCE group in the Plan, how is the missed deferral determined?

Thanks so much for the responses. Happy New Year!

A defined contribution plan currently provides that death benefits must be paid out over 5 years generally, but allows for extended payments to a participant's spouse. The client wants to remove extended payments and apply the 5 year rule to all beneficiaries, including the spouse. The plan does not allow annuity distributions. Are the extended payments protected or may they be eliminated as an optional form of benefit?