KEM
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To add a question to this thread a little late -- for the excess deferral for the year of deferral, assuming the employer found out about it late and the deferrals arose under two unrelated plans (as discussed above) -- the employer still doesn't touch the W-2 for that year, correct? The Form 1099-R is still appropriate is my understanding - just filed at the later point of actual distribution, since no corrective distributions are being immediately made for the excess deferral (so the employer leaves the W-2 alone, holds on to the excess until distributions are otherwise eligible, and then issues the Form 1099-R at that later point of distribution)?
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Thanks all!
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With the understanding that the entity sponsoring the plan is usually the employer, this question arose in connection with a transaction where we just found out the seller, and plan sponsor, is a trust. Forgive me if there is an obvious answer, but wondering if, as a technical matter, a trust can be the plan sponsor of a 401(k) plan? Thanks!
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Self-directed IRA / Prohibited Services to Plan Asset
KEM replied to KEM's topic in IRAs and Roth IRAs
Thanks, JOH. Super helpful confirmation. The research I came across also indicated this, although there was no unequivocal statement (99% involve real estate situations), so really appreciate the sanity check. -
Self-directed IRA / Prohibited Services to Plan Asset
KEM replied to KEM's topic in IRAs and Roth IRAs
Thanks, I'm helping his main team with some research - I'm not leading the project, just asking for others' thoughts regarding the one point I'm looking into. In case helpful, it's a self-directed IRA that set up a foreign blocker and it's the foreign blocker that bought 100% of the operating business. His primary tax team advised in connection with this process. He is not involved in operating or managing the business - was just curious if he could extend advice to it, and it seems the prudent response is no due to the PT/contributions considerations noted above. If others disagreed, I'd be curious as to why - but we are not advising he undertake a PT, and otherwise erring on the side of caution. -
Self-directed IRA / Prohibited Services to Plan Asset
KEM replied to KEM's topic in IRAs and Roth IRAs
Of the company - 100% (recent acquisition); but if the question is how much value does the IRA own, well into the 9 figures. Not sure about owner/manager currently - can follow up, but is there a distinction made there? I was under the impression, as owner, he's a disqualified person so can't furnish services. Additionally, if he's deemed to contribute value, it could be a contributions issue under 408 (in addition to prohibited transaction issue). -
Say an individual's self-directed IRA owns a business, and the individual is curious which (if any) services he can provide to the business (ex. offer consulting services). Question is, does this run afoul of the prohibited transaction rules? I'm thinking yes, with respect to Code Sec. 4975(c)(1)(C) - because it would involve a disqualified person furnishing services to a plan asset (akin to the individual being prohibited from providing free labor/repairs to an investment property owned by the self directed IRS). Curious if others agree, or have other thoughts.
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Thanks! We ended up at the same conclusion, so helpful confirmation - post-tax, keep it out of their direct accounts, exclude from eligibility any medical expenses or any other benefits otherwise reimbursed under another company program (like tuition assistance).
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Wondering if others have dealt with this idea or can anticipate any hurdles -- Say a company had a standard dependent care FSA program, no pre-tax employer contributions to the employee accounts. Company now wants to establish a fund for employer contributions but subject to taxes, for participating DC FSA employees but not directly to their DC FSA accounts (so to avoid any pre-tax issues plus to avoid being considered towards the employees' $5k/$2.5k contributions limit). Fund would be fixed per year at $xx total (decided at the beginning of the year or end of prior year), and then allocated between participants based on the # of participants in the prior plan year (as if it's a pool to be divvied up based on prior year participation). Eligible participants include anyone who participated in the prior plan year and is still employed at the beginning of the applicable year. Anyone seen this before, or something similar? So long as it's post-tax and not directly to their accounts, any hurdles?
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Thank you!
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@Mike Preston - thanks, we're working on the amendment now, so not bound to anything yet. The current plan doc allows for both. We're going to freeze participation and employee contributions. So assuming we draft the amendment in a way that doesn't alter the existing loan/hardship withdrawal provisions, those would remain in effect and be permissible following the freeze to contributions/participations, correct?
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I think this is correct, but as a sanity check since it seems harder than expect to find authority on this - if a 401(k) plan is frozen, it's still permissible for participants to take out new loans and hardship withdrawals, correct?