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Showing results for tags 'correction method'.
Found 5 results
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I am sure this has been asked many times but I do not see anything similar to my challenge. Unfortunately, terminated employee was paid and had 401k withheld. Employee is returning the entire paycheck but due to system processes, our team was advised that we cannot choose which deductions to return - the whole check will be voided to look like it didn’t happen. Enter having to correct with our record keeper - we have advised the compliance way to correct - send over to record keeper for self correction, they will calculate the earrings, and issue 1099-R to offset W-2. If we do not have our record keeper complete there could be an employee loss to make whole or if there are gains, we still have ineligible funds in the Plan. I was basically told to just figure it out make it work. My make itwork way would be to follow our record keepers advice but getting pushback on the business because of their system limitations. how would you go about correcting? How would we be able to calculate earnings or losses on a contribution that has been in the Plan for months? thank you.
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Apologize in advance for the rudimentary questions, have already tried searching previous threads for my answers. In my limited understanding when doing new comp, my goal is to maximize the HCE's total contributions. The remaining gateway to eligible NHCE is the lesser of 5% of comp or 1/3 of the highest allocation percentage of an HCE. Upon 401(a)(b) failure, is it in my best interest to allocate more to the elder NHCE's? If so is there a general formula to achieve the correct amount? In my experience the 401(a)(b) seems really finicky and feels almost arbitrary at times. Once again I'm sorry if this isn't the correct place to ask, my previous resources weren't helpful for me.
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Dangers of individually directed plans with participants being able to select where assets invested: Participant moves money from brokerage to credit union IRA account. (No, she shouldn't have had the power to make the withdrawal or establish a new account without the permission/guidance of the Trustee). Participant starts withdrawing money from the Credit Union Account and essentially empties the account to the tune of $30K. Generally, when this happens, the employer will terminate the employee and the withdrawal would be treated as a distribution. No such luck. The employer does not want to terminate the employee, leaving the conundrum of how to correct the plan. Since the funds were safe-harbor and deferral and the participant was below age 59 1/2, in-service distribution doesn't help. Rev. Proc. 2019-19 6.06 (4)(b) seems to indicate, in this case, that after reasonable attempts to collect are made, there is no requirement for someone to repay the plan if the distribution was made to a participant or beneficiary. Any thoughts on how you would handle? Advice to sponsor?
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We had a new earnings code used for group of associates on our last payroll that was not setup correctly as 401k eligible. It was caught after 1 payroll and will be corrected on the subsequent run. So while everyone who elected a deferral had their deferral calculate on part of their earnings, there were some whose contribution did not calculate on all of their earnings due to this code. For example, base salary $500, new commission code $100, 10% deferral should have been on $600, but we took on $500.00 Proposed correction method is letting everyone who was affected know that they can increase their deferral to make up for any part on their end, and let our match true up catch anyone who missed a match contribution. (safe harbor plan, match contributions every payroll with true up at year end) Comments? We at first thought we had to do QNEC on match, however, would get double match at true up time.
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An error was made in a plan document, which resulted in the omission of a year of service requirement for matching contributions. Client is asking to submit VCP filing asking IRS to approve a retroactive amendment, or to approve the calculations for making up the missed contributions. Can you submit alternative correction methods in one VCP filing for the same error? Essentially, "if not this, then that"? Thanks.
