Basically

Probably an easy question.... Single member 401(k) plan participant dies suddenly (2023). A 2023 RMD was issued. Participant's wife is the sole beneficiary. All plan assets are rolled out of the plan in April 2024. For 2024 the deceased participant does not need to take an RMD... right? BUT, if the spouse is RMD age, she needed to take an RMD... again, right?

I have the plan design indicating that all this is possible. I second guess myself and feel the need to scour the boards and ask. Thanks

I have a husband wife CPA firm. The plan is designed with a 59-1/2 normal retirement age. They ask if they can take partial distributions from their accounts and roll the money into their IRAs. Neither are RMD age. Anything wrong with that?

That is correct... I didn't think of that part.... the fact that upon distribution in kind withholding on it's value would be required. It's not worth it to me. And even though I spell out the rules, will they (the rules) be followed explicitly? I agree with EBECatty below Thanks for your responses

Coincidentally a single member plan client just asked if RE is an option. I Googled it.... This came up (ASPPA - Real Estate as a Plan Investment). It talked about distributions "in kind". Made me think...🤔 If this client purchased something, never used it herself, nor let any relatives use it and then when she closes the plan took the property in kind... would that work? I ran into an issue years ago where a wealth client was purchasing limited partnerships. The plan was audited and the agent pressed that the LP investments needed to be valued every year. For RE, I am guessing the "assessed" value for tax purposes is not sufficient? Then there is the technical aspect of the purchase and maintenance... the plan technically owns the property, RE taxes must come from the plan, maintenance comes from the plan. Thoughts?

So I have this plan with 4 terminated employees who each have a small residual balance due to interest/dividends. 1¢ $20.03 $8.92 $208.82 For the $208, we will send her the money.... issue a 1099-R. For the rest, send them the money... is a 1099 needed? I'd like to just expense it out. What does everyone do in this case?

Yes, as indicated by checking this option... [ ] I do not wish to have deferrals withheld from my wages and contributed to the Plan.

The client is going to bonus the participant outside the plan. I expressed to him that the plan did nothing wrong. I don't know the employee... maybe they are good at their job. He want's to just keep the peace. My opinion CuseFan, she has gall to go to her boss and say that "HE" messed up. I have had ZERO problems with the office manager or bookkeeping/payroll over the years. They have been thorough to a "T", always providing clear accurate info in a timely manner whenever asked.... and they pay their bill very quickly! This is a lesson for them... they won't let it happen again. Thanks everyone for your help!

Yes! I will point that out to him. I told the employer that the best solution is to fix this "outside" the plan. I also told him to press to this EE that SHE dropped the ball. I know him, he is a super nice guy. He will give her a bonus and let her defer it into the plan to make up for her error. Thanks for the responses!

Thank you both for responding. YES, that is what happened... in a way. She was give the deferral form but never turned it in. And of course the EE feels jipped. The plan sponsor is such a good guy and want's to make it up to her to keep her happy... doesn't want a thorn in his side. It sounds like the plan doesn't need to do any corrective measures. It sounds like the best course of action is to make her whole outside the plan with a bonus and she can turn around and defer it into the plan. Case closed. Sound like a plan?

I received an email from a client over the weekend. An employee thought they were participating in the plan, thought deferrals were being taken and thought they were getting the 5% match. This employee did notice that nothing was being taken from their check... didn't see the deferral on the W2.. and is still crying foul. Paperwork was provided to her be she never completed and returned it. The employer is willing to make her whole in some way. What is the best way to handle this? edit: I read that a QNEC can be made on behalf of the employee. If that is the answer, do I need to go back and issue one each year, amend each year's 5500? OR, can it be done all in one year and only amend the last 5500? Damn, another edit: The IRS link I am looking at states that the correction QNEC would be 50% of the ADP. So I need to determine what the ADP/2 is and that would be the corrective QNEC. It is a SH Match plan we need to make that contribution as well I would think.. right? Thanks

Thanks!!!

XYZ CPA is a small CPA firm that employed Bob, Sue and Dick. Bob and Sue are husband and wife, Dick is just the other partner. No rank and file employees. Dick decided to retire so XYZ is changing to Bob & Sue CPAs LLC. B & S CPAs has its own EIN. Questions: - I'm pretty sure that I don't need to terminate the old plan... I can just amend it to change the plan sponsor... correct? - On the 5500-EZ, would I make the necessary changes and file? (put in the new sponsor and EIN?) Thanks

Yup! Thanks for your help. I know all this but don't deal with it every day. Tend to second guess myself. With time it will become second nature with experience.

Circling back to this plan... And I appreciate everyone's help immensely. Here it is... full disclosure: 8 employees comprised of: Owner (100%) - earns 500K+ Daughter 1 - earns 60K Daughter 2 - earns 30K HCE 1 - earns 500K+ HCE 2 - earns 500K+ HCE 3 - earns 500K+ HCE 4 - earns 500K+ NHCE 5 - earns 30K First... ownership attribution is lineal... Dad is the owner so each daughter owns what he owns (100%). That makes them HCEs, correct? Second... HCE 1-4 all earn 500K+ which makes them also HCEs, correct? Third... NHCE 5, if she works 1,000 hours or more will be the only one who will be required to get a contribution in the Xtest allocation. That is to say, if Owner decides to give himself an NEC, she will be the only one who must get a NEC. Forth... Once the plan is TH then all HCE EEs will need to get the 3% TH allocation Am I making sense? Is this a no-brainer? Works out pretty good for the owner

Well... but if it is setup today then they would have until 9/15 to fund. It can be done. That's great! Thanks

Does this hold true for DB plans... all plans? Tax Status Adoption Deadline Extended Deadline S-Corporation (or LLC taxed as S-Corp) March 15 September 15 Partnership (or LLC taxed as a partnership) March 15 September 15 C-Corporation (or LLC taxed as C-Corp) April 15 October 15 Sole Proprietorship (or LLC taxed as sole prop) April 15 October 15

Yes. But I am being told that for 2024 they (IDK how many) will probably go over the 1,000 hour mark. And that would mean that any who do would enter 1/1/2025 so for 2024 the NHCEs would not be eligible.

That's great! So the owner can discriminate against the other big shot high earners who are not key employees. But when the plan becomes TH (which it will) he has to give them (the HCEs) a 3% minimum if he makes an NEC for himself. In the end he is saving 2% because there are no NHCEs. Make sense?

Yes. The plan was established in 2023 and so far only deferrals have been made. So far the plan is 39% top heavy Big question... IF the plan is solely HCE employees and we only allocate an NEC for the owner, will that pass? Does that work? (and I get, once the plan is TH which will be the following year probably we will need to give all eligible EEs a 3% TH minimum

I will in the end... I just happened to do it this way to see what might happen True, and the plan will most likely become TH eventually. IN that case, the non-key HCEs would only need to get the 3% TH minimum... no 5% gateway test, right?

Doing a proposal: I have this plan... all of the EEs are HCEs except for a couple of NHCEs that don't work more than 1,000 hours (at this point) I put the owner in group 1, the other HCEs in group 2 and the NHCEs in group 3. (Remember, Group 3 typically don't work 1000 hours so they aren't eligible for the NEC) I made the owner max out, gave the other HCEs nothing and as I said, the NHCEs just aren't eligible (at this time). Ran the general test and it passed. Great huh.... or am I missing something? If I'm not missing anything then all I need to worry about in the future is if an NHCE works more than 1,000 hours they need to get a contribution Thanks

Title says it all... the first year of the plan the only employee with 1,000 hours is the owner. File a form 5500-EZ and then the following year switch to a 5500-SF?

Thank you. The employer reached out to me and said to hold on, they were going to bonus the employee some $$ to help him out.

As my mom always said to me... Tough Beans. Got it. Thanks