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Message Boards Digest

August 9, 2021

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

Jakyasar created a topic in Defined Benefit Plans, Including Cash Balance

DB Plan covering HCE's only - 110% test

"Hi This is first for me and want to check if test is needed. DB plan covering 1 owner HCE and one non-owner HCE. 2021 AFTAP is certified at 165% so no issues there. The non-owner HCE is terminated a month ago and accrued a benefit for 2021. Do I need to check for 110% liability test? I do not think so? If yes, I will add FT to TNC and possibly use 430 rates. Is it ok to use ARPA-21 rates to test, if necessary? Owner is ok with whatever rate that would allow the non-owner HCE to be paid out. Thanks"
8 replies so far   |    Click Here to Add a Reply

thepensionmaven created a topic in Defined Benefit Plans, Including Cash Balance

No Deduction Because No Schedule C Compensation?

"Unbelievable, but accountant is asking for our opinion here! Sole proprietor sponsors a DB plan, compensation obviously Schedule C. Plan is valued beginning of year, i.e., 1/1/2020, with Schedule C based on prior year. The client has an auto withdrawal from his personal account deposited to the plan during the year. He had $0 Schedule C for 2020, but because valuation is beginning of year and using prior year Schedule C, we backed into the contribution and showed on Schedule SB as well as form 5500-EZ. He filed his 1040 in March, no Schedule C; but did receive compensation, included in income for 2020, which the accountant showed on the 1040 and claimed a deduction for the contribution

He gets a tax bill from the IRS for $29,000; they claim since he had no Schedule C, he is not entitled to a deduction. Since he made the contribution, and is shown on the brokerage statements for each month, in order to reconcile included the contribution, since shown on the statements, and was included on Schedule SB and the 5500s.

Since minimum funding and deduction are separate matters, we are thinking of withdrawing just the amount of taxes owed, show as an in-service distribution (client over age 62), give a 1099-R, deposit into his business account; pay the fine; but more importantly, stop the auto withdrawals and make absolutely sure the client that is paying him gives him a Schedule C in the future. Any thoughts, besides advising to find a new accountant?"

2 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in Governmental Plans

Is NY Governor Andrew Cuomo at Risk of Forfeiting His State Pension?

"Does anyone know whether Governor Andrew Cuomo is at risk of forfeiting his New York State pension?"

3 replies so far   |    Click Here to Add a Reply

Jakyasar created a topic in Form 5500

5500 Asset Reporting-- Move from Cash Basis to Accrual Basis?

"Looking at possible takeover of defined contribution plans. They've been filed on a cash basis in the past. I neither like nor believe in cash basis filings because my reports must match my filings -- old habits. As far as I know, consistentcy is crucial when it comes to the filings. Is there any way to switch from cash to accrual method? If so, how?"

3 replies so far   |    Click Here to Add a Reply

Danielle created a topic in Form 5500

Welfare Benefit Plan's Form 5500 Was Filed 2 Days Late

"The client thought they had filed the 5500 for their welfare plan when it was signed on 7/21; however it was not realized until 8/4 that it was never actually filed, so they filed on 8/[4] The deadline of July 31s, fell on a Saturday so the next business day was August [2] So it was filed 2 days late. I know the DOL can assess penalties per day for being late. What's the likelihood the DOL will penalize them?"

11 replies so far   |    Click Here to Add a Reply

Venus created a topic in 409A Issues

Extension of ISO Vested Options Expiration Date

"I would like to understand implications of extending the expiry date of vested ISOPs beyond the plan expiry date for optionee and employer. Optionee had vested options provided by the employer. Employer is a privately held company. Before the options expired, optionee, over email expressed to the CEO, Founder-Chairman, states intention to exercise all the vested options and requested paperwork and guidance on the next steps. CEO emailed back to optionee, stating that optionee's options stand extended for another 5 years and that during this period they will continue to remain vested exercisable. Fast-forward-- 2 year later, optionee continues to be the employee of the company. Founder-Chairman has brought new CEO who is rolling out a new ISOP plan with different terms and conditions than the previous plan. [1] What choices company has to make true to the promise previous CEO made to the optionee? [2] In each of the choices what are the tax implications to the optionee? [3] Optionee's preference is to exercise the options and would like company to issue the stock instead of any cash options. How does company fulfill this?"

No replies yet   |    Click Here to Add a Reply

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