M Norton

Thanks, Lou S.!

Due to some issues with the plan sponsor, we are just now working on the 2023 contributions and allocations. We discovered that the 2022 Employer Safe Harbor contribution was never deposited to the plan. What options are available to fix this? Thanks.

Thanks, Paul I. Most of our clients have used the IRS forms, not custom adoption agreements. I would expect the IRS to update its forms if a SIMPLE sponsor is required to offer Roth options, but the SECURE 2.0 Act did not indicate whether it was optional.

Secure Act 2.0 contains provisions for Roth contributions to SIMPLE IRAs beginning 2023. Has anyone seen any documents that offer that option? I have looked at the IRS website at forms 5304-SIMPLE (Rev. March 2012) and 5305-SIMPLE (Rev March 2002). Neither has been updated to provide for Roth. Is that really an option if the federal forms don't offer it? I am working on preparing notices to clients that sponsor SIMPLE plans and want to make sure I cover the options available. Thanks.

Employer sponsors a 5304 SIMPLE, wants to change it to a 5305-SIMPLE. There are six employees who are participating in the SIMPLE plan and all want to move to the new investment platform as a group. (By moving as a group they will get a discount on fees, etc.) Does the employer have to wait until January 1, 2024 to make the change? And would he just restate on the 5305-SIMPLE?

Medical practice sponsors 401(k). Doctor/owner (over age 60) deferred $20,500 for 2022, due to miscalculation by office mgr/wife). Can we get him to max by reclassifying part of deferrals to catch-up and allocating match and extra PS to get him to max $67,500? (means we will have to do more for NHCEs, but he is okay with that.) Thanks.

Medical practice with SH 401(k) lists two groups of HCEs - one for the doctor and another for non-physician HCEs (doctor's wife). A third group is for all other continuing employees and a fourth group for terminated employees. Doctor's adult daughter now working for the practice and became eligible for the plan in 2022. Is it possible amend the plan retroactively to put the daughter in a separate group from the doctor's wife? Giving the daughter the same percentage allocation as the wife is killing my non-discrim test. Thanks for any help!

Plan sponsor missed deposits of some 2022 deferrals; they were deposited in early 2023. We have calculated lost earnings and prepared Form 5330 to report and pay the excise tax on the lost earnings. We do the plan administration annually. According to the IRS forum from 3/24/2011 (posted online) they indicate lost earnings have to be calculated for the year in which the deferrals were late, and also for the year in which the lost earnings were deposited. In fact, it uses a pyramid approach, such that you must deposit the lost earnings for the late deferrals plus the lost earnings for the prior plan year. It sounds like you have to file two Forms 5330 for one delinquent deposit if the lost earnings were not deposited in the same year as the late deferrals. How many Forms 5330 can be filed for the same plan in one year? We have a client that is chronically late in making deposits. So for 2022 we will report lost earnings on those late deposits of 2022 deferrals in 2023, then we will calculate lost earnings through the date of deposit in 2023, plus lost earnings on the 2022 lost earnings, plus lost earnings on late 2023 deposits. Do we file a 5330 for the lost 2023 earnings on the 2022 deferrals deposited in 2023, and then another 5330 for lost 2023 earnings on late deposits of 2023 deferrals? Trying to figure how how this is supposed to work. Any help appreciated.

FtWilliam plan document - adoption agreement allows inservice distributions for participants age 59-1/2 and fully vested. Employee with 20+ years service wants to go part-time and take inservice. Plan assets are held in pooled account. Looking for example of procedure that spells out limitations and ordering rules. Any advice appreciated! Thanks!

The plan does include post-severance in the definition of compensation - but that would apply only if the plan was still in operation when the compensation was paid, right? The employees will not be terminated until 12/31/2022. The practice wants to terminate the plan before the end of the year, maybe 12/15/2022. Any compensation paid after that, to physician or employees, including severance, would be paid after plan termination. That compensation is what the plan sponsor wants to exclude. Is that possible?

SH 401(k) - 3% NEC SH, for medical practice. Plan is terminating due to sudden health issues for doctor. He wants to term the plan before the end of 2022. Next-to-last payroll is 12/14/2022, last payroll would be 12/28/2022 which will include severance. Practice does not want to pay 3% NEC on severance, so wants to term before that last payroll, probably 12/16/2022. MD has comp in excess of $305K already. Will term date affect his plan comp?

Client has pension in TIAA, rolling $50,000 to Roth IRA and paying tax on that. He is also required to take an RMD, which is about $15,000. Can the $50,000 coming out of TIAA and going into the Roth cover his RMD requirement? It seems like that would be a 'no' but I am not an expert on this. Thanks.

We are part of a CPA firm. Our department provides TPA services for tax and business clients of the firm as well as for plan sponsors who do not use our firm for non-retirement-plan services. We use an engagement letter specifically for the TPA services. It has been several years since our engagement letter has been modified. If you use an engagement letter for TPA services, would you be willing to share a sample? Thank you!

Small SH 401(k) plan (one MD, six NHCEs) had balance due for 2020 Safe Harbor match. As of mid-2022, the 2020 SH match not deposited to plan (pooled account). What options does the plan sponsor have to correct this? Thanks.

Mr. Bagwell - thanks for the suggestion about plan doc language re participation on re-employment. The plan document does say that if she did not qualify for participation as of Term date and is subsequently reemployed, she is eligible to participate on the later of re-employment or date eligibility is met. So I think she is in. CuseFan - she probably was considered terminated, but no benefits provided - employees can opt to join group health ins plan but not employer-paid. Almost immediately after leaving she offered to work as "fill-in" so not really terminated, just switch to "as needed". I think she will get the TH contribution. Thanks for responses!

SH 401(k) plan (SH NEC), two entry dates (Jan-July), eligibility is age 21, 1,000 hours; plan is top heavy. Employee hired 6/8/2020, worked 986 hours in 2020. Employee worked 300 hours in 2021 before stopping full-time work 5/21/2021 (so over 1,000 hours in first 11 months). Employee was then available on as-needed basis. Employee worked 156 hours between 8/5/21 and end of year. (total hours worked in 2021 was 456 hours) Did this employee enter the plan? She had 1,000 hours in first 12 months but was not there on the entry date although she was available "as needed". Is she entitled to any contribution for 2021 (such as SH)? What about top heavy? Thanks!

4 companies (S-corps) are part of a controlled group and sponsor/participate in a safe harbor 401(k) PSP with 1 year eligibility and monthly entry dates. Effective January 1, 2021, one of the companies changed ownership and is no longer part of that controlled group of companies. Their employees that were participants as of 1/1/2021 are still participating in the plan. They actively deferred in 2021 and have received a match. The plan's profit sharing allocation has not yet been deposited. The company that changed ownership, Company A (S-corp), identifies with business code 484120 (general freight trucking long distance). There are 5 owners - 3 of which own 26% each and the other 2 each own 11%. This same 5 owners also have identical ownership in another company (partnership), Company B, that identifies with the same business code. Company B has a SIMPLE Plan effective July 1, 2020 with full eligibility and the 3% match election. Does the existing 401(k) plan need an amendment to add Company A as an unrelated participating employer effective 1/1/2021 effectively making it a MEP? Do Company A and Company B form a new control group? If yes, then how do they sort out the 401(k) plan that Company A currently has and the SIMPLE plan Company B currently has for both 2021 and now 2022? Thanks!

Thank you all so much! You have been a great help!

Thank you for all the replies. Sorry for my tardy response but my computer crashed and I lost a lot of files. The 401(k) plan allows for full or partial loan prepayment, but does not allow for refinancing. The $20,000 was paid into the plan and is not sitting in limbo. We are trying to understand if that amount can be used to satisfy the payments that were missed due to no paychecks issued for the shareholder for 10 of the 24 pay periods. The $20,000 will more than cover those missed payments. (In fact, it would more than cover the payments for the entire year.) For the other loan payments that were deducted from shareholder's biweekly paychecks, the first two were remitted timely. The other 12 were remitted as a lump sum (loan payment per amortization x 12) the first week in January. My preference would be to run a new amortization using the same interest rate, plug in the payments as they were made (including the $20,000 amount), and set the remainder to be paid bi-weekly in the original payment amount beginning in January 2022. The loan will just pay off earlier when I rerun the amortization. Because of the $20,000, I am hoping I would not have a default on the loan. I like BG150's idea of correcting under EPCRS and his item 'c' - a combination of applying the $20,000 and other loan payments and reamortizing with payments at the same amount as previously calculated. Does that sound reasonable and correct?

Thanks BG5150 - Thanks for your response. I understand your point about the prohibited transaction issues related to failure to timely remit loan payments withheld from paycheck, but my bigger concern has to do with missed loan payments due to no paycheck issued and what needs to be done (if anything) to fix that.

S-Corp sponsors a SH 401(k) plan, which allows for deferrals, SH match and discretionary PS contributions, and plan loans. 100% shareholder in S-Corp took out a $50,000 plan loan in late 2019, with payments from bi-weekly payroll beginning January 2020. All loan payments were deducted from shareholder’s pay in 2020. In 2021, due to cash flow problems, shareholder did not receive several paychecks. He missed paychecks for ten of 26 pay periods in the year. For the pay periods in which the shareholder did not get paid, no loan payments were withheld for those pay periods. (There was at least one loan payment withheld from his pay in each calendar quarter.) In addition, due to cash flow problems, the S-Corp did not remit any withheld loan payments to the retirement plan after January 2021. (All 14 loan payments withheld in 2020 but not previously remitted were remitted to the plan in January 2022. ) In March, 2021, the shareholder sent a personal check for $20,000 payment on the loan. The plan is on FtWilliam document and allows for such additional payments although it does not allow for refinancing. What are the options to fix this situation? Can the $20,000 be used to satisfy the loan payments that were missed because no paycheck was issued? Is it possible to avoid a deemed distribution? What are other issues that need to be addressed (other than educating the shareholder about missing loan payments)? Thanks!

Thanks, Lou S!

Audited 401(k) - auditors found missed deposit of deferrals. TPA is calculating lost earnings, and plan sponsor will deposit missed deferrals plus lost earnings. Client will file Form 5330. But - when Form 5558 was prepared and filed, the problem had not been discovered so the 5330 was not extended. Will the Form 5330 be rejected?

Will the Lifetime Income Illustration disclosures be required only for pension plans, or also for defined contribution plans?

401(k) plan, husband and wife only participants - both over age 50, both deferred $25,500 (not $26,000) for 2020; ER contribution is $75,000 (as deducted on 1120S return) plan document (McKay Hochman) says allocate PS pro rata; husband's W-2 wages more than wife's W-2 wages, due to SH health added to his comp When I allocate $75K pro rata between the two of them, then add his regular deferrals of $19,500, he is over $57,000 annual addition limit. Can $500 of his deferrals be recharacterized as catch-up (making his total catch-up $6,500) to reduce the excess? Then reduce his PS allocation by enough to get him down to $57,000 + $6,500 catchup? The wife's original PS contribution plus deferrals, plus the excess from spouse, will still be under the 415 limit. Or do you skip the part where $500 of his deferrals are recharacterized, which makes his excess $500 higher and the give all the excess to her? There is room to do that, also. Which is the preferred or prescribed method? Thanks.