Basically

Ahh, I get it now. New ROTH IRAs regardless of where the money comes from have a 5 year rule of their own. Even if the money is ROTH money coming from a pension plan, if the money is going into a new ROTH IRA then it will have it's own 5 year rule. Thank you!

Ok thanks for helping. Two things I want to get clear: 5 year rule - So let's say Sue converts her total employee deferral account to ROTH in the plan. She converts a total of $45,000 on 11/10/2023. Her 5 year rule starts 1/1/2023. On 12/31/2027 she has satisfied her 5 year rule requirement. Any distribution from her ROTH account is tax free. But, if she took a full distribution prior to 12/31/2023, and the total distribution was $60,000 (no additional ROTH deferrals added in) then she would have to pay taxes on the $15,000 earnings. And with regards to rolling her ROTH conversion account over to a ROTH IRA , not taxed because it is a rollover to a IRA BUT if the 5 year requirement was not met in the plan then she needs to start all over with the 5 year rule. -> You aren't saying even if she completed her 5 years in the plan that when she rolls her account out into a ROTH IRA she will have that requirement all again are you? For the 1099-R - Box 1 and 2a will both be the same number. They would be different if it was a rollover out and the 5 years wasn't satisfied. Thanks for your help!

I have never been a part of a Roth Conversion. Have a single member plan who has asked if she can do one. The plan document allows for one and I have done some reading. Have I got the process correct? Is there a script/outline somewhere that someone can point me to? In-plan Roth rollovers/conversions have evolved into being the same. In the beginning you needed to be eligible for a distribution and now anyone can convert as long as the account is 100% vested. Right so far? A 1099-R will need to be prepared for the conversion. No actual taxes are withheld yet the participant will need to declare the rollover as income on their personal 1040. No 10% penalty, no 20% Fed withholding. The 1099-R distribution code will be G for rollover (Box 7). Box 1 and 2a will both be the total amount converted. None of the money has been taxed so it all needs to be declared and is taxable. The rollover needs to be put into a designated Roth account. The 5 Year Rule... The 5 year rule starts at the beginning of the first tax year. Each conversion has it's own 5 year rule. If a distribution is taken before the 5 years is up and the account holder is less than 59-1/2 then the 10% penalty kicks in and the whole distribution is taxable If a distribution is taken before the 5 years is up and the account holder is older than 59-1/2 then the 10% penalty does not kick in but the whole distribution is taxable Do I have it right so far? One question I can't find the answer to or am just missing it is "if the plan closes before the 5 years is up and the ROTH account is rolled over to a ROTH IRA, no penalty? All good? but there is still the remainder of the 5 years to go before distributions can be taken tax free?" Thanks

Just to clarify to ensure I have been doing it right, I instruct my clients to get an EIN for their plan (I facilitate this). When an investment account is opened I have instructed the financial advisor to register the account to the plan and use the EIN assigned to the plan. I tell them to NOT use the business' EIN on the investment accounts. Further, when a distribution occurs the plan's EIN is used on the 1099-R, not the business' EIN Pretty logical. All good?

I agree, and thank you for your posts. One thing I need to learn is to pass on a potential client who comes to me with a mess. That said, helping them clean up a mess can be profitable. I need to keep in mind that building a book of business, establishing yourself doesn't happen overnight. Slow and steady wins the race.

When would the "taxable amount not determined" box be checked on the 1099-R? I have a single member plan (Solo) that came to me asking what is involved to terminate the plan. I asked if ROTH deferrals were made in addition to employer. The answer was yes. I was told that all contributions were deposited into a single investment account. Do we need to go back and calculate the earnings for the ROTH money and the Employer money? As I write this, how can he roll his account over to an IRA? He can't roll it all into a ROTH IRA and at the same time he wouldn't want to roll it all into a traditional IRA and lose the tax benefit of the ROTH deferrals. He is facing a conundrum. That said, all I am tasked to do is prepare a final form 5500 and a 1099-R based on the information provided to me. I can (and will) advise what he should do. What he ultimately does is his choice. So, back to Box 2b, do I prepare one 1099-R and check that box? Prepare a letter covering my butt and be done?

I have always understood that a pension plan must have a business to sponsor it. If the business closes then the plan must close. It's as simple as that, correct? A client want's to keep the plan going so that if by chance down the line he want to take a loan he could. I advised him that if he can't keep the plan if he closes his business.

I have a client who owns 2 businesses. Each single member businesses (one is an insurance company, the other investments). He wants to use income from both businesses to enable himself to max out contributions. I prepared a joinder agreement so both businesses can utilize one plan. Correct so far? If he makes a 10% contribution to the plan from Company A does it stand to reason he must make a 10% contribution from Company B? Let's say he does, do these contributions need to be in separate accounts? or at least accounted for separately? Thanks

Got it.

If an employee terminates and comes back 5 months later they really haven't "terminated" in the eyes of the plan, they simply have a lapse in service. It's not until they have been gone for 1 complete year when they can be considered "terminated" and in essence would have to start all over if they were re-hired. Correct? And the break in service rule is an IRS rule? Not an individual plan rule?

Follow-up Do these types of amendments, ones where the HCE chooses to not receive the full SH, can they be written in such a way that they only count for one year and then the plan automatically goes back to normal?? Or is it, amend the plan to reduce the HCE SH percentage for 2021 and then another amendment to put it back for 2022?

I'm sure the business owner will like that answer better. The nature of the business is such that depending on possible future jobs they will need skilled employees to perform the very specialized work. I think she was being nice allowing him to keep his plan balance in the plan. Now that I think of it, to keep a plan clean there really is no place for just being nice. You need to follow the doc and if they have to go , they have to go.

Terminated 2 years ago Balance is in excess of $5,000 (30K) So he needs to be 100% vested. Thanks

A client had an employee who was not paid out for a couple of years (she kept him in the plan thinking maybe some work would come up and he would be back in). Over the summer the employee died. The plan states that vesting does not count if someone dies or becomes disabled. The employee died and had a break in service prior to their death. Is the deceased terminated employee 100% vested? Or do I pay him out based on his vested % at the time he terminated? Thanks

A new client was not taken care of in the past. I went back a few years and discovered that in 2020 the 2 HCEs didn't receive the full 3% NEC. The 2 NHCEs did but not the 2 HCEs. During COVID the business didn't make a PS contribution but regardless of that the plan called for a 3% SH NEC so everyone needed to get it, right? I ask, there is no exception is there? Thanks

So I was confused, brain failure. The SEP-IRA only means that the money is invested in IRAs. It's not an IRA, It's a retirement plan which must comply with the 415 limits. I do understand how multiple plans have 1 limit. Sorry for the lack of consciousness.

Financial advisor asked if this client he has can sponsor a SEP IRA with one of his businesses and a 401(k) with the other? There are no employees.

I was paid 1/2 my fee and she parted ways with a snide email. She claimed that the "bigger" TPAs only charge a fee for the doc when the client is new and then every 5+/- ears when required by the IRS, not including an annual doc fee (duh). She is mistaking an interim IRS snap-on amendment for an amendment created due to her needing to change the plan as a result of hiring an employee and tweaking eligibility and vesting, which is charged in addition to the annual doc fee. She went on to say that they would allow her to file the form 5500 herself but if they did it that would only be $375. I'm guessing there is no testing performed or asset reconciliation. Bottom line is that she isn't comparing apples to apples with these fees. If I am mistaken then I am gouging my clients. The case is closed and her folder moved to the deleted clients folder. An eye opening situation that has prompted new agreements to all clients. A good way to clean out the book of business and maybe even slim down a little to better serve the clients who see value in my service. Thanks all for their insight. Always learning, always welcoming advice.

The initial sting has worn off, only a little. I am going to respond to her email today, thought it best to cool down and collect my thoughts, be professional. For future 5500 signatures I think I'll only include the signature page and not the bulk of the return. And updated service agreements will be prepared and sent out. All good advice. Lesson learned.

It is a lesson learned. She responded to my email (where I played like I didn't know the 5500 was filed) and told me that she did not authorize me to file an extension of time for her. I mean sheesh, I hear nothing and the deadline comes and goes. Any good TPA would file the extension, it's not difficult. Had I not filed one and she was relying on me then she would say the opposite. She further goes on that she has lost confidence in my service and had filed the 5500 herself, "it was easy" she said. I'm sure she copied my form and filed it. She went on to tell me that she has hired a new TPA. I'm wondering, while we did not have a signed contract between us, since she paid my fee last year would that be considered a hand shake agreement? And would it be binding year to year until one party terminates the agreement? I'm happy no longer working together, just would like to be compensated for the work performed. I get clients come and go. That's business. Just don't hide behind a lame excuse. I will inform her she can no longer rely upon my document. Just sucks Thanks for your thoughts

A client (husband and wife) that was a single member plan for many years in 2021 became a plan with a rank and file employee. Naturally due to this added employee they are required to have a full administration performed and a form 5500-SF filed electronically. For 2021 the relationship was peachy. Come the 2022 annual administration and the client balks at the price-tag of the annual admin work performed. A back and forth via email ensues where I explain everything. Old emails are used to show that she was accepting of the cost, even offered to pay me more for all the back and forth questions. Yet now she is being cheap. Her excuse? She thought the 2021 fee was only for that year due to the added work. Here is the kicker, my process is to email the client the form 5500 and efile authorization form along with my invoice. The client returns the form signed and upon payment in full I would file the return electronically and then forward on the complete bound report. I hear nothing from this client so I file an extension since the 7/31 filing deadline was approaching. Just now I looked at the DOL website and can see that the return was filed on 7/21. I am guessing she took my completed form and filed the return herself. I'm sorry, WTF! Here is my question, the DOL site says on the form 5500 that the return was "Filed with authorized/valid electronic signature" in the signature space. Is there a way to find out who exactly filed the return? Who's credentials? I'm so angry. You work your @ss off researching, helping someone, holding their hand to get everything the way they want it, you are more than fair to them and then you are taken advantage of. I need to be more cutthroat and business strong. And, to head off the inevitable question, no, a current contract was not executed (my bad). This unfortunate event is making a review of all client contracts a priority. But on that subject, it is in writing that she is ok with the cost quoted and she did pay the first year setting a precedent, right?

I understand that not all plans allow for in-service distributions. And I understand that you must die, become disabled, be terminated or reach retirement age. But all that aside, can a participant request and can a plan make an in-service distribution to an active participant that isn't considered a hardship in-service distribution? Of course the payout would be taxed and coded early. Is this possible?

That's great info. Appreciate the responses!

Showing my naivety - I get appetite for risk. What losses would be "covered"? This plan has individual brokerage accounts. Would the loss be if the financial advisor is incompetent and the participant loses a certain percentage of their account so decides to seek retribution?

This new client came to me and needs to update their ERISA bond coverage. The plan had $800K in 2022... probably less now due to the investment performance. I've attached a copy of the screenshot he sent to me. What do people recommend? Just a stand alone bond or a bond + Fiduciary Liability? or maybe a bond + Fiduciary Liability + Cyber liability. As you can see each option that he was given includes all 3 options. Thanks Bond Coverage Options - Copy.pdf