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  1. Our Mom passed away just after receiving two 401k rollover checks made out to a new IRA account FBO her name. My sister and I are named beneficiaries on both accounts. We have the checks in hand. One plan is adamant that because it's a qualified distribution a new check can only be made out to the estate. The other plan is considering reclaiming the check and issuing out proper beneficiary distributions to us but remains to be seen. It's my understanding that the distribution is a plan asset and ERISA, DOL, IRS would urge fiduciaries to work in our favor? I hope there's some more legal guidance on this that I've missed in researching. These aren't uncashed checks because we're missing or mailed to the wrong address. I know there's been a ruling and chatter from the agencies about taxes on uncashed checks and what to do with them if they stay unclaimed but... This should in theory be straightforward to fix and honor. Any thoughts to change their mind?
  2. 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!
  3. Wanted to ask if anyone has any experience with clawbacks of sign on bonuses when the plan has immediate entry and the employee defers from this compensation but it is clawed back at a later date. My understanding is that the impact on employer contributions depends on the definition of compensation in the plan document (one of the safe harbors). It is also my understanding that the 401(k) deferrals, once made are eligible deferrals at the time of deposit so that the clawback would not impact the amount of 401(k) deferrals in the employee's account. The employer contribution, and any adjustment, will depend on whether the clawback occurs in the same tax year or crosses over tax years. Does anyone have a good reference point or other items to consider? Noting here that my recommendation would be to not have these included in eligible compensation to prevent any impact on the 401(k) plan, but many large companies have immediate entry these days. Just looking for others experience. TYIA!
  4. Have a bit of a weird scenario here and unsure how to proceed. We are getting ready to onboard Company X, who will be offering its employees a 401k for the first time. However, Company X acquired Company Y recently in a total stock purchase. Company Y has an existing Safe Harbor plan. Our belief is that Company X is now the sponsor of that plan. Is that correct? It isn't a merger of plans because there was no plan at Company X to merge with. If Company X is in fact now the sponsor of that Company Y plan, how can we get rid of the Safe Harbor provisions (Company X did not want a Safe Harbor plan)? Are Company X's employees eligible for the plan right now if they meet the general eligibility requirements? We believe yes. Can the SECURE Act provisions around Safe Harbor be utilized here for making a midyear change? Thanks in advance for any insight or suggestions!
  5. Hello All: We are talking with a prospective client(s) that we've identified as having a control group problem between two entities (one with a 401k, one without) that they are not aware of yet. Before we recommend they fork out for an ERISA attorney to spell out their options, I'm curious what others have seen in similar situations? Obviously the cleanest option is to bend the knee the file under VCP/VFCP. However, for businesses that don't or didn't otherwise qualify as a QSLOB and had not identified this issue over a period of many years and many employees as in this case, even remediation prior to an audit can be harsh and a business decision might need to be addressed between compliance and continuity. Open to any thoughts or experiences anyone has to share! FYI I am not a TPA, but based on personal experience I am not surprised this issue wasn't addressed over the years by the existing bundled recordkeeper/administrator solution. Thanks in advance for sharing.
  6. 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?
  7. Background: Client purchased a plan with automatic enrollment and safe harbor match, with an effective date of 7/1/2021. The plan went live on our system, census was uploaded and participants were notified of their eligibility to participate, received all the required notices, and should have been automatically enrolled if they did not opt out. Client has now reached out (along with their financial advisor) saying that they never wanted automatic enrollment, didn't understand it, and now wants to "cancel" the plan. They have not done any withholding of ANY elective deferrals at this time, so the plan has not been funded. I am of the opinion that since notices have gone out, accounts have been set up, etc. they have a 401(k) plan, and they cannot just "cancel" it, i.e. pretend it never happened. I know how to correct the failure to automatically enroll participants so that is not the issue. Our main point of contention and one I am having difficulty finding any guidance on is; at what point can we say, "sorry, you officially have a 401(k) plan so you have to fund any required contributions and go through the normal termination process to close it"? I believe the plan is active, and that they need to go through the correction process for the automatic deferral failure and then they can terminate the plan. The client contends that since they have not funded, the plan is not active and we should be able to just "cancel" it. We've already told them that they can remove the automatic enrollment provision, so that is not the issue. If I anyone can point me to some guidance on this topic, it would be much appreciated.
  8. The 415 test we just performed for plan year 2020 included the sum of the 2020 401(k) deferrals, the lump sum 2020 401(k) match determined and deposited in 2021, [there were no 401(k) forfeiture allocations made in 2020 or in 2021], the 12/31/20 ESOP contribution allocation, and the 12/31/2020 ESOP forfeitures allocation. Under this test let's say there is 415(c) room to do a Mega Backdoor Roth Contribution and for the sake of argument let's say the room is $20,000. I assume that this after-tax $20,000 should have been contributed in 2020, with an immediate Roth 401(k) conversion after each payroll contribution if that's how we do it. What happens if the participant over-contributes, for example, we allowed an after-tax contribution of $22,000 in 2020 vs the finally determined $20,000 that the max should have been. I assume the $2,000 plus earnings could have been returned by April 15, 2021 to avoid double taxes? Is that how a Mega Backdoor Roth is administered? Generally speaking, it always involves a return of excess before April 15? The earnings are taxable in the year of distribution, so no 2020 W-2 needs to be changed, right? Your advice would be appreciated. Thank you!
  9. I work a hotel job where I receive cash tips, which I self report electronically on my paycheck. My employer's 401k program contributions are pre-tax. When I receive my paycheck the 401k deduction amount (20%) from my total gross earnings is not accurate and neither is the employer match. It appears I am being taxed on the full amount of my gross earnings and the 401k deduction amount is coming from what is left over after taxes, often several hundred dollars less than my calculations. After contacting HR about this, they don't have any real answers for me, only that because my tips are cash there is nothing to actually deduct from the paycheck to contribute to the program. Only after reaching out to them on multiple occasions for an explanation, they have now started to send me e-mails post pay period prompting me to write the hotel personal checks to cover the difference in the amount that was deducted and the amount that should have been deducted. This also does not account for the missing portion of the employer match. Am I missing something? I feel like because the 401k program is pre-tax contributions, the deductions should be coming out of my gross earnings, regardless of whether the earnings are self-reported cash tips. It seems as though not only am I getting taxed higher on my full gross earnings, but I am also losing out on money from the inaccurate employer match while also having to come out of pocket to catch up on the contribution amount. Can someone please help me understand this as my HR department has been unhelpful?
  10. Hello, Helping someone who has a Traditional IRA at one company and has a Solo 401k plan with Fidelity (I think its called Keogh Plan but it is a self-employed 401k). He's trying to consolidate accounts at Fidelity who tells him that he can move assets from Traditional IRA to the Keogh Plan as the Keogh Plan is a Qualified Plan. Is that correct? Can he do that? What are the pros and cons of doing this? Thanks
  11. The plan sponsor for a law firm 401k plan is set up as an LLC taxed as a partnership - equally owned (1/3) by three different Affiliated/Participating employers all taxed as an S-corp. The LLC employees a few non-owners, and each of the 3 S-corp partners are 100% owners of his or her respective firm. Since the three affiliated, participating employers (S-Corps) pay their owners W-2 compensation, the W-2 compensations are eligible for deferrals and contributions for the plan. For Pre-tax deferral contributions, payroll deductions are withheld for the owners (W-2 comp) and funded by the individual S-corp. It's a Safe Harbor match plan with a Plan Year/annual determination period for the match. Since the pre-tax deferral contribution will be deducted via payroll and funded from the owners' individual S-corp, does the corresponding Safe Harbor match need to also be funded from the individual S-corp. - or does the match need to be funded by the LLC taxed as a partnership?
  12. I recently quit my job (10/2020) and have a 401k with a 3% non elective safe harbor. Usually, my employer would make the entire 3% contribution mid February the following year (a 1% match contribution was made on a monthly basis). My question is: If I were to make a cash withdrawal of all my vested funds prior to receiving the 3% SHNEC, what happens? Does my former employer open a new/ reopen my old 401k account to deposit the funds? Do I receive a check? Do I get nothing? I don’t think I’m going to have to do this, but I am curious. Below is some additional information. Thanks for the help! -I am not a HCE -I am only expecting about $2000 from the safe harbor -I am only 30 years old -I worked 1,500+ hours this year before resigning
  13. Hoping someone can point me in the right direction here please. There is a controlled group of 2 entities. Both entities have an existing basic solo 401k plan with a brokerage firm. The goal is to restate those plans into one custom solo 401k plan that either entity can contribute to as part of the controlled group. The new plan document lists the original effective dates for both plans, specifies that it is restating a previously-adopted plan and creates a new trust for the plan effective in 2020. The plan administrator/sponsor is the 1st entity. The plan also states that members of a controlled group can contribute to it. I know the new plan will need to file a 5500-EZ for 2020 because the assets will be over $250k. I believe that both entities need to sign a resolution to adopt the plan. Is there anything else that needs to be done? Particularly for the 2nd entity because its own plan is basically going away and merging into the new plan under the name of the 1st entity?
  14. has anyone had a situation where the named beneficiary is not a US citizen or resident? I'm not sure what to use for a taxpayer ID number or whether I should be advising this person that they will have to file a US income tax return, as the funds being paid out are coming from a qualified retirement plan (not individual) where the participant lived/worked in the US and had an SSN. unfortunately he passed away unexpectedly following retirement and we didn't have a chance to pay him out directly. now dealing with a family member outside the US who is non-english-speaking and I have no direct contact information other than thru the prior employer.
  15. Background: We have a brand new cross tested plan. For the 401(k) portion, the eligibility requirements are 21/ 1 YOS (1000 hours). However, the owners would like a special participation date for immediate participation for themselves (no employees in either adopter). This is a plan for two new adopting employers, and the business entities were established in 2019 and 2020 respectively. For one owner, he has been performing services and on payroll since 2019. For the other owner, he started performing services on 1/3 and will be on payroll 10/1 of this year. The document has a specified place for special participation dates, but I wasn't sure what the date should be. My question is when can this special participation date be? Does it follow with when they started performing services for the business entity or when they started on payroll? In other words, with an owner who has performed services 1/3, but not on payroll until 10/1, what special participation date would I need to use? Thanks!
  16. Participant X is in two 401(k) plans for 2019. He is less than 50 years old. In plan A he defers $10,000 in 2019. In plan B he defers $10,000 in 2019. In plan A, he is an HCE. The plan fails ADP testing and he is refunded $1,000. Has he violated 402(g) for 2019?
  17. Hi, First let me apologize. I am a newbie to 401K plans and I am just beginning to understand the basics. If this question has been asked already please direct me to the related thread. My scenario: I have a 401K with Wells Fargo through my employer. Employer matches 100% for the first 3% and 50% for the next 2%. 100% of my account balance is allocated to State Street Target Retirement 2050 P. Question: I understand how the contribution part works, but I am confused about the fund (State Street Target Retirement 2050 P SSDLX). Wells Fargo lets me choose which fund to invest in. But I am not sure if I understand the "investing" part. My 401K plan does not give me any dividends so why does it matter which fund I choose? Does my 401K increase or decrease based on the performance of the SSDLX? If yes how and where would I be able to see those earnings or losses in my statement? Is there a minimum balance in my account that is protected no matter how the SSDLX performs? Help & advise is much appreciated.
  18. ICT_Bob

    RMD's

    If a participant has reached their Required Begining Date, is still employed and is not a 5% owner are they still able to request that an RMD be processed for them for the tax year? Extra wrinkle ~ What if the plan does not allow for 59 1/2 Inservice distributions. Thanks for everyone's insights and knowledge on all of the topics that have been posted. It is a great jumping point for extra learning.
  19. We have a client who would like to allocate a Top Heavy contribution to both Key and Non-Key employees. The language in the document regarding Top Heavy allocations is as follows: Each Non-Key Employee who is a Participant, or was eligible to be a participant in the plan year, and is employed by the Employer on the last day of the Plan Year will receive a top-heavy minimum allocation for that Plan Year, irrespective of whether he or she satisfies the Hours of Service condition under the Employer's Adoption Agreement... Based on this language, is it permissible to allocate to Key employees? Any feedback is appreciated! Thank you
  20. I've been researching what is considered a reasonable time for an employer to deposit a 401k contribution/match of an employee’s compensation and was wondering if there are there any exceptions/exemptions for 132(j) types compensation? Some situations I am looking at have 132(j) compensation that is hard to get a number on quickly as they are paid in advance and then, what is not used by the employee, is later refunded. Any guidance would be appreciated. Thanks!
  21. Group: Clients 401k has been audited and the TEGE Dept had found 3 errors of the 401k plan. The irs is still in process of issuing its sanctions amount. Q: As the 401k Audit itself only related to tax years 2017 to present, isn't there a SOL for any sanctions outside of the 3 year SOL? Assume no consents to extend were signed Q: If the errors are solely with the 401k plan administrator and outside of the control of the owners themselves, is there a way to determine how the IRS will determine sanctions? One determination is that a participant was never issued RMD's over a period of 3 years. In your experience what amount of sanctions does the IRS usually assess? Thoughts and comments appreciated. Thank you
  22. My mom had a Pension. A QJSA. She divorced in 2006 and retired in 2011. In her divorce they each retained their own retirement acts. Free and clear from any claims of one another. Through her employer I was her beneficiary on her life ,ad&d, 401k while she was working. She has passed and the company said the beneficiary had been notified without another word spoken to me. Her attorney said that state law (Ohio) predeceases the ex in retirement plans with decree which she thought all would go to me (pension and other acts) I am her only child. Now, her employer said I was not the beneficiary although I showed them paperwork that I was, which was done at her retirement in 2011. EVEN THOUGH THEY NOW SAY, after 5 months of back and forth, that I’m not the beneficiary they want me to send in her death certificate? It does not make any sense. Not only am I dealing with the death of my best friend but her employer is making me feel like crap to be honest. It’s all so very sad and don’t know what to do at this point. Do I just give up? Do I let it go? My mom did not want him to have anything because he had his own and it was always her intentions for me to have her acts. I was also her power of attorney and we had bank acts together. I have taken a full notebook of notes with the conversations I have had with her benefits center and Human Resources. Any insight would be appreciated. Thank you so much! Quinan
  23. FACTS: CA employer sponsor Safe Harbor 401k plan Eligibility waiting period is 1 Year of Service (12 mos, 1000 hrs) Plan Entry Dates: 1/1 and 7/1 coincident with/following waiting period Employee "A" is hired 3/15/2019 on full-time basis. Projected Entry Date is 7/1/2020 On approximately 1/15/2020 "A" apparently moves and does not show up for work, without any notice to CA employer/plan sponsor. Sometime thereafter the CA employer learns "A" claims to have become disabled since moving and has filed for state (and/or Federal) Disability; "A's" request is denied apparently due to failure to satisfy Disability requirements. "A" did work > 1000 hours from Date of Hire (3/15/2019) to the last day "A" reported for work (approx 1/15/2020). To date, "A" has not been in contact with the CA employer/plan sponsor. The CA employer does not want to send a termination notice in as it fears "A" may try to sue, claiming terminated due to disability. The CA employer/plan sponsor wants to know if "A" must be provided with enrollment materials at this time (based on 7/1/2020 entry date). They would prefer not to reach out if it is not necessary. The Plan provides: 1.63 "Period of Severance" means a continuous period of time during which an Employee is not employed by the Employer. Such period begins on the date the Employee retires, quits or is discharged, or if earlier, the twelve (12) month anniversary of the date on which the Employee was otherwise first absent from service. QUESTIONS: At what point is "A" no longer an employee of the employer? If "A" is still an employee, albeit an "inactive" employee, when is the employer obligated to provide Enrollment Materials? If "A" is still an employee, albeit an "inactive" employee, what determines termination/severance from employment? Does CA employment law provide a standard for this situation, or, any federal guidelines? It seems worst case scenario is "A" continues to be an employee, and, since "A" has 1000+ hrs and more than 12 mos have elapsed since DOH, "A" is eligible with an entry date of 7/1 - or is it the date "A" returns to service if later? Failure of employer to provide Enrollment Materials at this time (or later if eligibility entry date is later date) can be corrected... but if "A" earns zero the correction will result in $0 contributions due. Any help and/or insight is appreciated. Thank you.
  24. My former employer has a pooled 401k account which issues an annual statement in early Spring. I retired at end of last year and had planned to rollover my money into an IRA in January but discovered that I could not request a distribution until the annual statements were issued. By the time I was allowed to request the distribution the market had tanked and my request was denied. Now I'm told that the company will be doing an interim valuation for all participant accounts including mine. Is this legit?
  25. 401k Plan Sponsor is depositing amounts to participant brokerage accounts to cover annual maintenance fees. All participants have individual brokerage accounts. Deposit per participant does not agree to exact Annual Account Maintenance Fee. I understand there is probably many potential problems with this scenario, but my question relates to whether it is "not allowed" for an employer to reimburse participant plan fees this way? They are truly making individual deposits per person for a flat dollar amount. It has always been my understanding that if an Employer pays ANY money into a plan that it must be allocated as plan contributions based on the plan document. Has anything surrounding this topic changed in the last few years? Thanks!
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