401kSteve
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This plan is very vanilla, no company stock or other assets that would require the 5500, so I think I agree with you, I just find it odd that this question just seems to have not been answered clearly anywhere that I can find. The 2023 5500SF instructions says the plan must: "Be a small plan (i.e., generally have fewer than 100 participants at the beginning of the plan year)" which is exactly the same language that was used in the 2022 instructions. You would think that they would define who a "participant" is, given that the definition is presumably changed for 2023. Am I crazy to think that?
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I have a plan that for the last couple years was required to be audited due to creeping over the 120 eligible participant threshold. They've never had more than 50-60 with a balance in the plan. After filing 5500SFs for several years, the last couple years they've had to perform an audit and file the regular 5500 along with an auditor's report. With the change in regulation counting only participants with a balance and less than 100 participants with a balance, and an audit no longer required, can they just revert back to filing the 5500SF? Is there anything else that needs to be filed? Thanks in advance!
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Background: This just got dropped on me this weekend. Company A has a 401k plan, Company B has a 401k plan. Both plans with same recordkeeper. Ownership and plan features are identical for A and B as of 1/1/23, no issue with protected benefits. Company C is being purchased, has no 401k plan, same ownership. Holding Company D is being formed to own Companies A, B, C, and any future acquisitions. All employees of all companies will be employees of Holding Company D as of 1/1/23. My thought is to keep surviving Company A plan, merge Company B plan into Company A plan, have Holding Company D become the plan sponsor of Company A Plan and add all employees of Company C into the plan as of the closing date of the purchase. I would file a final 5500 for Company B plan (though not terminate the plan) for 2023 (or 2024 if recordkeeper cannot merage assets as of 1/1/24). Continue filing 5500s for Company A Plan (Holding Company as new plan sponsor). On Holding Company 2023 5500 I would list Company A in Part 2 question 4, then on final 5500 for Company B list Holding Company A in Section 7, question 13c. The timing is obviously tight, but am I missing anything in this strategy? Thank you for any input!
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To true-up or not to true-up... that is the question.
401kSteve replied to 401kSteve's topic in Retirement Plans in General
Thank you both. I think I agree with both of you. He can do it, but I don't really like it either. -
Situation - Company has a safe harbor match 401k plan. The owner is self-employed, Schedule C. He has several employees who will defer on a payroll by payroll basis, and he would like to fund safe harbor match is contributed each pay period, and not provide a true up, as that's how his other employer, where he is just a W2 employee, operates. We won't be "paid" via payroll on the business in question, his income would be determined via his schedule C after the year in over. Once he knows his income figure (after year-end), he would like to contribute to the plan based on his Schedule C, self employed income, and deposit his deferrals and the appropriate match after year-end. Is there a way to structure this? If the determination period is "End of Plan Year", then he'd certainly be able to participate as he wants, but would also be required to provide everyone with a true-up. If the doc's determination period is "Each Pay Period" that does not allow for true ups, but would that negate his ability to participate since he's technically not participating on a payroll by payroll basis? Would he technically be providing himself a true-up but not everyone else? Thoughts?
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Small company has a 401k plan, 3% SHNE, pretty straightforward. The company is in the construction business and often works on public projects. The Department of Labor audited a job they had completed about 4 years ago and determined that the company had applied state-level prevailing wage parameters, but apparently there were federal monies included in the project, and as a result, the company should have used federal prevailing wage parameters. The result is that the company will have to pay a few people who worked on that job some restitution, and it's required to be paid via W2 in the current year. Most of these people no longer work for the company, though some were participants in the plan previously. The company does have a 1-year break in service provision, but if those participants are excluded, the plan fails the 410b test in the current year. So, the question is, how should the company should treat the SHNE contributions for these participants. Amend the plan to include them in this year's SHNE? Should they receive lost earnings going back to when the SHNE would have been paid had the earnings fallen in the year in which the original job occurred and thus SHNE would have been paid? Any insight would be helpful. Thank you!
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In-Plan Roth Conversion of Employer SH Match
401kSteve posted a topic in Retirement Plans in General
I'm finding vague references to this and looking for guidance. In-plan Roth conversions are allowed in the plan, but I've never had a participant ask me if they can convert their pre-tax Safe Harbor Match to Roth. Anyone have any insight on this? Thanks in advance! -
I feel like I've debated this several times already, but here goes... A 401k participant became eligible to enter the plan on 1/1, but didn't begin deferring until the next entry date, 7/1. Is the plan sponsor required to true up the SHM for said participant based on his comp from 1/1-12/31? Thanks.
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I have a situation where a company had a 401k plan (less than 5 years ago), terminated the 401k Plan, entered into a PEO-style MEP for a couple years, decided they did not like it and decided to leave the MEP to start up a brand new 401(k) plan. The owners of the company transferred all their money into the MEP years ago (I'm not certain all the employees did as the original plan termination was likely a distributable event). All of the employees rolled their balance from the MEP into the new 401k plan (greater than 60% are owner assets). I'm currently classifying the rollovers into the new 401k plan as Related Rollovers. The issue I'm grappling with is whether or not the plan is Top Heavy on day one of the new 401k plan. I'm looking for advice as to how I should treat this. If I'm leaving out any pertinent details, please let me know. Thanks in advance!
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I have a situation where a company had a 401k plan (less than 5 years ago), terminated the 401k Plan, entered into a PEO-style MEP for a couple years, decided they did not like it and decided to leave the MEP to start up a brand new 401(k) plan. The owners of the company transferred all their money into the MEP years ago (I'm not certain all the employees did as the original plan termination was likely a distributable event). All of the employees rolled their balance from the MEP into the new 401k plan (greater than 60% are owner assets). I'm currently classifying the rollovers into the new 401k plan as Related Rollovers. The issue I'm grappling with is whether or not the plan is Top Heavy on day one of the new 401k plan. I'm looking for advice as to how I should treat this. If I'm leaving out any pertinent details, please let me know. Thanks in advance!
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Thank you both for the feedback. There are no last-day or service requirements required for to receive the match, and the plan does not allow for non-Roth after-tax contributions. This ins't a safe harbor plan, and the match is discretionary. Ironically, this is an odd case where there are exactly zero highly compensated employees participating in the plan, so I'm not sure we could have a 401(b) failure. The issue I think I'm likely to have is that though they are separate entities, they generally share the same management, so qualifying them each as a QSLOB wouldn't work. Not sure if these facts would change your opinions, but I'm all ears! Thanks!
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Umbrella company has several adopting entities included under the same plan. Not a MEP, just a controlled group of related LLCs that all participate in the plan. One of the business units budget has been hit hard due to Coronavirus, while the others are still doing well. Is it possible under these circumstances to suspend the match for 1 entity but not the others?
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Profit Sharing for Terminated Unvested Participant
401kSteve replied to 401kSteve's topic in 401(k) Plans
C.B., thank you for the response. The situation in question is for the calendar 2020 plan year, but we're addressing profit sharing early. This is a small family business that had a windfall in 2020 when they sold off a segment of the business. Its a standard safe harbor match plan, top heavy since inception, but had never made a profit sharing contribution before. The 2 participants in question were terminated mid-year, and would be receiving roughly a 24% profit sharing contribution. The HCE group consists of 2 partners and their wives. The only NHCE's include only the 2 participants that both terminated mid-year. The plan has a last day requirement. The failure is on the non-elective portion of the Ratio Percentage Test. Let me know if there is more info you might need, I appreciate the help!