Message Boards Digest

January 25, 2021

Here are the most recently added topics on the BenefitsLink Message Boards:

TPApril created a topic in 401(k) Plans

PPP Second Draw -- 2020 PS Contribution Deposited in 2021 -- Can Include?

"I've been asked if a 2020 year end profit sharing contribution deposited in 2021 can be included in the PPP Second draw application for calculating the loan amount, not for how to use the funds. I believe it's more of a cash basis situation."

0 replies   |    13 views   |    Add Reply

TPApril created a topic in 401(k) Plans

LLC No Pay in 2020 But Wants to Do Profit Sharing Plan

"LLC has owner and one employee. Due to the pandemic, the owner ended up taking $0 in W-2 pay in 2020 while supporting the employee. Owner took draws though. Plan doc defines comp as W-2. Owner files main taxes as S-Corp. Owner now wants to make a profit sharing contribution to both her and employee, and wants to know if there is another way to calculate it for herself. I said no, but she asked me to try to research it."

1 reply   |    44 views   |    Add Reply

BG5150 created a topic in Form 5500

DOL Rejecting 2-Person 5500-SF's?

"Anyone try to file a 5500-SF with 2 participants? Mine keeps getting rejected. I get a warning in Relius saying that if I qualify to use the EZ I now have to use that form. But this is not a 'one participant plan.' It's an owner and an employee. Relius says it's probably a DOL problem, but they didn't seem to know anything about it. A co-worker saw a posting on Datair's forums about a similar issue."

2 replies   |    31 views   |    Add Reply

austin3515 created a topic in Form 5500

Not Understanding This ftwilliam Error Message

"This error message comes up when the plan has a 401k distribution and a cash balance plan distribution: '--> Error: Another payee has the same TIN and Distribution Codes.'"

4 replies   |    42 views   |    Add Reply

Cindy created a topic in Correction of Plan Defects

Filing VCPs for Clients

"With the IRS requirement to file and pay for VCPs at, how are you handling this for your clients? With the new electronic requirement, I was completing the 8950 and 8951 in a .PDF and providing it to my clients so all they had to do was fill in the blanks and submit the fee. Our Forms provider links us to the IRS website and no longer provides a copy of the form. Neither does the IRS. Curious how others are handling."

0 replies   |    34 views   |    Add Reply

shERPA created a topic in Retirement Plans in General

Let's Talk About Discriminatory Timing per Regs. Sec. 1.401(a)(4)-5

"So, how much of a thing is this? An employer used to have a bunch of employees. They changed things up in 2020 and all the employees are now gone, just the married couple owners who are left. In 2021 they want to start a plan. Reading the reg and Example 1 would imply that setting up a plan would be discriminatory timing. So are they just SOL and can't have a plan? Not ever? Assuming they want to do a 401(k)/PS. The former employees have no compensation in 2021, so their 415 limit is zero. How does that work?

Or if they want to do a DB? I suppose a DB could grant benefits to former employees, but with no current year annual additions possible a combo won't work.

And how many former employees and how many years where this is a problem or it goes away? Or is this reg so unworkable as to not really be a thing?"

5 replies   |    57 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Rule of Parity Cheat Sheet

"See the attached. I'm very happy with this. Every time rule of parity would come up I would research for an hour. I finally wrote this down. Let me know what you think! I would incorporate suggestions and reshare."

2 replies   |    36 views   |    Add Reply

EmpbAF created a topic in 401(k) Plans

Access Old IRS 'Retirement News for Employers' Newsletter

"I am trying to prepare a VCP application regarding corrective contributions. I found a relevant summary of the IRS's 'Summer 2011 Retirement News for Employers' newsletter that appears to be prescribe the correction approach, but it's no longer on the IRS website. Any idea how I might access this old guidance?"

2 replies   |    68 views   |    Add Reply

Minnesota planner created a topic in Operating a TPA or Consulting Firm

Selling My TPA Firm

"I am considering selling my TPA firm.I am looking to sell it for 1x annual revenue with a continuation on of the employees. Please let me know if you have any interest."

1 reply   |    42 views   |    Add Reply

Denise, NC CPA created a topic in 401(k) Plans

Exemption from the 10% Early Withdrawal Penalty

"Has anyone heard of any updates to how to file for the 10% early withdrawal penalty? I know there has been much discussion, such as changing box 7 on the Form 1099-R from a 1 to a 2 2, then completing the Form 5329, and I've heard people say leave it a 1, file Form 5329 to claim it as Other, and leave it alone for now and wait for guidance, which I can't find any. When I went to the IRS website for the latest Form 5329, it says it is still a draft, and do not file. Any thoughts or findings?"

2 replies   |    34 views   |    Add Reply

Michael TPA created a topic in Operating a TPA or Consulting Firm

TPA Partnership for Lucrative Ethnic Market

"I am a financial advisor and my partner is a CPA with her own practice. We are both located in Southern California and service only Asian business owners. After spending most of our careers in the Asian market we have concluded that there is a huge demand and supply gap for a TPA firm to service small business, high income real estate agents, dental practices and other high income 1099 professionals in this market. The current market is dominated by a couple TPAs and we believe there is room for another to thrive. We are looking to start offering TPA service catering to this market. Neither of us have any experience nor interest in becoming a TPA ourselves and would rather partner with a establish TPA who can design and administering qualified retirement plans. I am writing to see if anyone would be interested in exploring a partnership model. Our job will be to acquire clients and client liaison, we will have our own staff that helps communicate between you and the clients including translations. You will be in charge of all the plan designing and administration work and all other TPA functions. The TPA does not need to be in Southern California but would help if there is not a huge time zone difference. Please message me if anyone wants to explore this partnership and we can work out the details."

0 replies   |    39 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Lost Participant / Address Changes?

"I been doing some research on e-signatures, and came across a method of identifying that an individual is who they say they are: -- which sounds awfully important, especially when some terminated employee comes back 10 years later for his or her money, having moved 3 times, etc. Anyone ever used something like this?"

1 reply   |    29 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Cross-Tested Plan with QNEC to Pass ADP Testing

"Plan allocates 5% profit sharing to all eligibles, but everyone is in a separate allocation group. Plan is not a safe harbor 401k. Plan is failing ADP but if I do a bottom-up QNEC of 5% to both of the lowest paid employees, my ADP testing is passed. If I run a(4) testing with QNEC's I can get it to pass because with QNECs they pass the GWM. If I run without QNEC's, they are not getting ANY nonelective and thus require no gateway minimum. Is my logic here correct? The plan passes rate group testing with the two bottom people treated as not benefitting."

8 replies   |    57 views   |    Add Reply

Robin Wilson created a topic in 401(k) Plans

Adding Profit Sharing Provisions

"Inquiring if regs allow the addition of profit sharing provisions as follows: During the 2020 calendar year, a client starts/sponsors a new Plan, with elective deferral provisions only, effective 01/01/2020. Plan executed 02/01/2020. During the 2021 calendar year, the client wishes to add profit sharing beginning 2020 (as of the original effective date of the Plan). Because the client has until their tax filing to make a Profit Sharing Contribution, is it fair/accurate to say that the client may add PS as of 01/01/2020 as long as the amendment is executed by their tax filing?"

3 replies   |    58 views   |    Add Reply

Maryalice created a topic in 403(b) Plans, Accounts or Annuities

Annuity Option When Withdrawal from 401(a) Thrift Savings Plan. Is This a Distribution?

"The federal Thrift Savings Plan allows retirees to direct the TSP to purchase an annuity from an insurance company (either the entire or partial balance of the participant) when participant retires. IRS Publication 721 says the participant is not taxed until the annuity payments are paid to the participant. What Internal Revenue Code section allows the transfer of the purchased annuity from the TSP to the insurance company to be considered a nontaxable event? Is the annuity considered part of the TSP plan even though the insurance company is now in charge of the payments and issues the tax documents each year? Most plans require direct transfers or rollovers to remain tax-free."

1 reply   |    24 views   |    Add Reply

Steamboat created a topic in 401(k) Plans

OK to Auto-Escalate at Mid-Year?

"We want to time auto-escalate at the same time as annual salary increase to help/encourage employees to increase 401(k) plan contributions up to our 6% match. Is that OK to do mid-year? June 1 is the salary increase date."

0 replies   |    10 views   |    Add Reply

Logan401 created a topic in 401(k) Plans

Where Do Forfeitures Go under a MEP?

"A client is an adopting employer in an MEP, and has only one employee. This employee will be terminating soon, and is 0% vested in his employer source. If the company does not hire a replacement for this employee, what happens to the forfeited employer money?"

5 replies   |    38 views   |    Add Reply

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