Jakyasar Posted March 26, 2023 Posted March 26, 2023 Hi Here is a new one never dealt with before. I found out that the client (over age 50) has an excess situation and not sure how to tackle it The plan has the following features: 401k+NESH (3% mandatory)+PS. The plan is also used as a QRP - qualified replacement plan During 2022, $136,000 was deposited with the following breakdown April 2022 - $6,500 - from biz - 2021 catch up July1 2022 - $58,000 - from QRP - 2021 NESH+PS July2 2022 - $6,500 - from biz - 2022 catch up November 2022 - $65,000 - from biz - towards 2022 NESH+PS The July2 and November deposits created a $4,000 excess deposit during 2022 i.e. over the 415(c) limit. (71,500-67,500 (max 2022 415(c) limit) = 4,000 How is this to be corrected? Any suggestion/pointing to the right direction is appreciated. Thank you
C. B. Zeller Posted March 27, 2023 Posted March 27, 2023 Reallocate to other participants who aren't at their 415 limit. ugueth 1 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co
Jakyasar Posted March 27, 2023 Author Posted March 27, 2023 You mean reallocate the 4k to the others? This is not a pooled account and the excess was done during the year. Can it still be reallocated in 2023 i.e. transfer from 415violation-participant to the others for 2022? Thank you for your comments
Popular Post C. B. Zeller Posted March 27, 2023 Popular Post Posted March 27, 2023 It may not be a pooled account but it is still a single plan, and the contributions are assets of the plan - not of any particular individual - until they are distributed. Yes, reallocate the excess contributions (plus earnings) to other participants. The plan document presumably says that all contributions will be allocated to participants' accounts, with a maximum of the 415(c) limit. You have an operational error since that limit was not applied correctly. You can self-correct the error by undoing the excess (remove those contributions from the participant's account) and then follow the plan document's instructions as to what should have been done with them (allocate according to the plan's formula). David Schultz, ugueth, Belgarath and 2 others 5 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co
Jakyasar Posted March 27, 2023 Author Posted March 27, 2023 Thank you for steering me to the right direction/advise.
mming Posted March 27, 2023 Posted March 27, 2023 Does the QRP still have a suspense account balance? If it does I believe you would have to reallocate it at least ratably over a total of 7 yrs, which would count towards the annual addition limit.
Jakyasar Posted March 28, 2023 Author Posted March 28, 2023 Yes it does and yes, ratably allocated to the rank&file, unfortunately no escape.
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