Ahuntingus

Peter.. that is what I thought.. and thank you for sharing.. i was hoping someone had a ruling or procedure from the IRS that maybe i just missed..

So we have a client that missed a 401k deposit for 1/5/2021. The total missed deferrals was $330. The lost earnings was $11.14. The 15% penalty is $1.68. The question i have does the IRS have a deminimis rule for self-corrections like this or do they need to file 5330 and pay the $1.68 penalty. Just looking for some clarification/thoughts on how best to handle.

I have a client that is thinking of starting a 401k plan. Two brothers own 100% of Company A; 50% each. The parents (to both brothers) work for the brothers, receive W2 comp, own 0% of company B and want to make 401k contributions to the 401k plan of Company A. In addition, the parents jointly own 100% of Company B; 50% each and do NOT want to offer a 401k to the employees of company B. The two sons do not own any of company B and they do not work for Company B. So the questions is If the parents contribute to the sons 401k plan as employees of company A and do not offer a plan to the employees of Company B is this is an issue?

just as an addition - here is the language - it does not reference any other forms of potential discrimination.. thoughts? 4) Early Inclusion of Otherwise Eligible Employee Failure. (a) Plan Amendment Correction Method. The Operational Failure of including an otherwise eligible employee in the plan who either (i) has not completed the plan’s minimum age or service requirements, or (ii) has completed the plan’s minimum age or service requirements but became a participant in the plan on a date earlier than the applicable plan entry date, may be corrected by using the plan amendment correction method set forth in this paragraph. The plan is amended retroactively to change the eligibility or entry date provisions to provide for the inclusion of the ineligible employee to reflect the plan’s actual operations. The amendment may change the eligibility or entry date provisions with respect to only those ineligible employees that were wrongly included, and only to those ineligible employees, provided (i) the amendment satisfies § 401(a) at the time it is adopted, (ii) the amendment would have satisfied § 401(a) had the amendment been adopted at the earlier time when it is effective, and (iii) the employees affected by the amendment are predominantly nonhighly compensated employees. For a defined benefit plan, a contribution may have to be made to the plan for a correction that is accomplished through a plan amendment if the plan is subject to the requirements of § 436(c) at the time of the amendment, as described in section 6.02(4)(e)(ii).

Yes, there were other NHCE that were hired before this NHCE that were not given the waiver and several were older than this EE. The only reason he got the waiver was because the client inadvertently let this one NHCE in early and didn't want to refund their money.

We are looking at taking on a new client for 2022. They have an existing 401k plan; non-safe harbor. In reviewing the adoption agreement and plan document, the current TPA drafted an amendment in 2021 that provided a waiver of eligibility for one specific NHCE participant. The reason being is that participant was allowed into the plan before they were eligible (not eligible until 1/1/2022) and made salary deferrals to the plan in 2021. I've never heard of this approach of a waiver for a single NHCE employee; thoughts?

i was just using a rough example.. we don't have plans with after-tax so i'm intrested to see if anyone else offers and if they do how they handle for the ACP test.

i've been getting a lot of inquiries about after-tax contributions from clients. The question I have is this: Do after-tax contributions have to treated as comp to comp as part of the ACP test or can you use new comp for the calculation? For example, owner is 60, makes $200k and puts $20k after tax. This is a 10% contribution. Employee is 30, makes $50,000 and puts in zero. The profit sharing contribution to employee is 10%(ish) or 3.5% (ish)? Thoughts?

Thank you both.. thats exactly what i was looking for..

Client established a safe harbor matching plan in 2020. however no body, owners nor employees made any contributions in 2020. There are eligible employees but beginning and ending balances are $0. Client doesn't believe a 5500 should be filed; i'm of the opinion of course it has to be filed; people were eligible. Just looking for a 2nd opinion here.

thank you for all your help.. i would agree that once that document was signed the dye was cast..

I would tend to agree. One caveat that I forgot to mention; no communication of any kind has been made to the employees. I'm not sure if that changes things but figured i'd add that element to the equation.

That is correct. ABC company bought XYZ as an asset acquisition. XYZ was part of a controlled group and XYZ adopted into that controlled group plan. ABC wanted to waive eligibility criteria so that XYZ employees could join right away. The employees all came on with a DOH of 1/4/2021. The amendment was adopted effective 1/1/2021; signed on 12/30/2020. The prior recordkeeper (this was bundled) does not have a waiver of eligility feature in their document. So the RK drafted the document recognizing for both eligibility and vesting under predecssor employer and client signed. The clients intent was to waive in this group via the acquistion for 3/1/2021 for eligibility only. So the question is can the client rescind the waiver for both eligibility and vesting and redraft the document waiving the employees in on 3/1/2021 for eligbility only?

We have recently been brought in to consult on a 401k plan. Client is ABC Company for our purposes. ABC Company bought a number of businesses that were in foreclosure. Lets call them Company XYZ. the employees of XYZ started for ABC on 1/4/2021. The current recordkeeper redrafted the documents effective for 1/1/2021 to recognize service for Company XYZ. The document now states that ABC Company 401(k) plan recognizes Company XYZ for eligibility and vesting. The client is now saying this was a mistake and they didn't want that those exemptions in the document. No communications have been made to the employees of Company XYZ even though those employees would of been eligible on 1/4/2021. Please note that no deferrals started for those employees and the plan has a 90 day wait and 1st of the month Eligiblity. Can ABC Company have the recordkeeper redraft the documents and remove this since no communication was given to the employees?

we have a client who has passed away earlier this year.. The business is shutdown and we are looking to terminate the 401k plan.. there are 6 employees who are requesting distributions.. there is no other authorized signer or trustee on the plan and the wife who co-owned the business is non-responsive.. first and foremost we'd like to get the employees their dollars.. and then finish up the plan termination.. thoughts on best way to proceed here?

This is a 2 part questions: Prospective client has Life Insurance in his account. Plan was established 1/1/2016 Current Account Value - $137,447 (Zero contributions made in 2020?) Less 2019 Employee Contribution - $25,000 Seasoned Money Estimate - $112,447. Max LI premium for a whole life policy: $56,223.50 Current policy: $26,100 New policy premium limit: $30,123.5 (assuming this is whole life policy subject to 50% cap) Plan rules for LI are in seciton 7.5 (page 57) Do those calcs seem correct? Also, the same client then wants to borrow $50k from the 401(k) plan. Not from the LI policies but the non-LI balances. This shouldn't cause any issues with the 50% limits correct? Any help or insight would be greatly appreciated. 401k PS Plan Volume Submitter DC Plan Document.pdf

great. thankyou.

Scenario: Client terminated plan on 3/1/2020. All assets distributed to the 3 participants by 5/1/2020. Client wants to file final 5500-SF now. Question: Do we use the 2019 5500-SF as there is no 2020 5500-SF yet available?