Message Boards Digest

August 25, 2021

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

metsfan026 created a topic in Defined Benefit Plans, Including Cash Balance

One-Person 401(k)/Cash Balance Combo

"I have a one-person 401(k) plan that's looking to put in a Cash Balance Plan as well. If the owner makes $165k, the maximum profit sharing contribution would be 6%, correct? So they could do $19,500 in 401(k) + 6% of comp + $108k into Cash Balance (he's 42-years old)? Is there any way to get the contribution to the PS to be more than 6%?"

2 replies so far   |    Click Here to Add a Reply

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thepensionmaven created a topic in Form 5500

TE Compliance Unit Sends Letter to a 1-participant plan

"Our client, a sole proprietor, took on a partner and formed an LLC in late 2017. We did a resolution of the LLC changing the sponsorship of the plan to the LLC from the SP, as a sole proprietorship never dissolves. We faxed a letter to Ogden informing them of the change. A Form 5500-SF was filed for 2017 under the SP EIN; we filed a 2018 5500-SF under the LLC and used the LLC EIN, noting the change in sponsorship in item 4. 

Our client receives a letter from the TE Compliance Unit inquiring as to why the 2018 Form 5500-SF for the sole proprietorship had not filed a 5500-SF. The Notice mentioned that this was not an audit, just a compliance check.

I spoke at length with the IRS person that wrote the letter and explained the circumstances (without a POA at that!) -- she said she would note the file and that we should call main IRS number; and they would be able to make the change, but we must make one of the two selections: a. either file the two plans as a merger, which makes no sense at all; or b. file the sole proprietor plan as a 'final return' and $0 at the end of 2017; show the LLC plan as a 'new' plan and show the money transferred from the sole prop plan in 2018.

Neither of these choices really make any sense, but the IRS employee only mentioned that 'this is the way they told us to handle.' Usually when we receive an IRS Letter or Notice, we attach an explanation and receive about 4 or 5 love letters before the matter is resolved. I'm inclined to go with option b., if, as they say 'this is the only way to handle.' "

6 replies so far   |    Click Here to Add a Reply

thepensionmaven created a topic in 401(k) Plans

5500 Reporting of Elective Deferrals by a Sole Proprietor

"Because a sole proprietor reports all contributions (including any electives), what triggers the reporting of elective contributions on a Form 5500?"

2 replies so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

CARES Act Distributions Still Permitted?

"Can participants still take CARES distribution? I thought they expired in June 2021."

3 replies so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

Must a Terminating 403(b) Plan File a Final Form 5500?

"When a 403(b) plan is terminating, is there an exception to filing a Form 5500? For example, if the plan was set up in 2005 and has only 1 participant, would a 5500 be required when the plan goes to zero?"

2 replies so far   |    Click Here to Add a Reply

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

Cash Balance Plan Want to Change Rule for Crediting Interest

"A plan wants to amend its rule for crediting interest to folks taking a lump sum (before: pro rata credit up through payment date, after: no such partial year credit). Is that deemed a cutback even if done only prospectively on future distributions? I could argue that my annuity value drops if I won't get that extra interest credit from January 1 of the year I turn 65 up through the actual NRA and take my dough. But if anyone knows of an exception or if there's been any IRS guidance, that'd be cool to learn."

2 replies so far   |    Click Here to Add a Reply

Old Reliable created a topic in SEP, SARSEP and SIMPLE Plans

DB Plan Adopted Retroactive to 2020 But Employer Had Already Contributed to SEP for 2020

"Client adopted new DB plan under SECURE retroactive to 2020, but already contributed $30k to his owner-only SEP for 2020. He really is only allowed to contribute to a DC 6% x $285k, which is $17,100. The SEP is with Schwab, and so is the new DB. I doubt they will transfer the contribution directly from SEP to DB unless classified as a rollover (which it isn't!). Is the only solution to ask Schwab to return the contribution as a contribution made in error? Do we ask for a return of the erroneous non-deductible excess ($30,000 - $17,100 = $12,900), or the full $30k?"

2 replies so far   |    Click Here to Add a Reply

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