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Assets from suspense account inadvertantly transferred to Employer


Renee H

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One of my clients inadvertently moved money from the suspense account to the Employer operating account instead of re-allocating to participants in 2021.  Are they now subject to the excise tax or can this be self-corrected by moving the funds back to the Employee profit sharing accounts?  If they must pay the excise tax, what is the percentage of the tax?

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I would suggest that the plan administrator remove the expense account funds from the the employer's account (including attributable earnings) and place it back in the expense account.  Reallocate it as earnings to the participants in the 2021 plan year. Refer to the plan document for the allocation method of those funds.  

 

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CPFA, CPC, QPA, QKA, ERPA, APA

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Put the money back in the plan ASAP. It's still a PT and the excise tax is 15% of the lost earnings for each year the failure continues.

Submit a 5330 for the lost earnings for each year (or portion thereof) until the PT is corrected.   

If it's a 415 suspense account my understanding is it must be used ASAP to reduce future employer contributions for the next limitation year (and succeeding limitation years), and that it would not be allocated as earnings for 2021. Technically it's supposed to be used up before they are allowed to make any deductible contributions to the plan for the year.  

Good luck. 

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Thank you.  They will return the money to  the suspense account.  The amount to $5630.  The interest rate on this account is .01% or .56 per year.  Are you saying a 5330 must be filed to report lost earnings of .49?  Am I misunderstanding something here?

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12 hours ago, Renee H said:

Thank you.  They will return the money to  the suspense account.  The amount to $5630.  The interest rate on this account is .01% or .56 per year.  Are you saying a 5330 must be filed to report lost earnings of .49?  Am I misunderstanding something here?

How much did the Employer make in its bank account?

Put back what was taken out, and add the earnings from the Employer's account.  The ER shouldn't get a windfall for having that money when it shouldn't have.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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