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The answer is yes. The issue is under the DOL rules. The no-later-than-30-days deadline really doesn't apply in the eyes of the DOL, the key phrase is "as soon as they can be reasonably segregated." You should review the rules under the DOL Voluntary Fiduciary Compliance Program (VFCP). The DOL VCFP website states: The latest iteration under the DOL rules can be accessed at Federal Register :: Voluntary Fiduciary Correction Program. For older versions see https://www.federalregister.gov/citation/67-FR-15062; https://www.federalregister.gov/citation/70-FR-17516; https://www.federalregister.gov/citation/71-FR-20262. The VFCP general website can be accessed at Voluntary Fiduciary Correction Program | U.S. Department of Labor. The correction might be fairly complex if as your post states this issue has been occurring for perhaps every payroll period in the last 6 years. Also, though there is a 7-day safe harbor, when correcting under VFCP, earnings are to be calculated from the date the deferrals were actually withheld from the affected employees' wages (not the end of the 7-day safe-harbor period).

Thank you. We are using our Adoption Agreement so there is no issue with the structure. We just wanted to confirm that one document for the Adopting entities would be fine and there is no need for 2 documents / 2 separate plans.

They are likely a control group so one plan with each LLC adopting should be fine. Even if not a CG they could do that as a multiple employer plan. However, if the desire is to use a vendor's solo-k product, need to make sure it accommodates whatever structure/LLC relationship you have.

Wife has an LLC with no employees. Husband has an LLC with no employees. Both own 100% of their own LLCs. The Wife's LLC pays the Husband's LLC. It is not clear if the Husband has any other source of income in his LLC. They both would like to set up a solo 401k plan. Do they need 2 separate plans or could both LLCs adopt the plan and only set up one plan?

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The employer and the plan’s administrator (whether these are the same person or distinct persons) might—after considering each’s lawyer’s, certified public accountant’s, or enrolled agent’s advice—consider whether to check the facts of what happened, including what deferral election the participant properly made, made invalidly, or made not at all. Might the “off-cycle” not have been compensation from which an actual and proper deferral could be made? Do the documents governing the plan grant the administrator authority to refuse a participant contribution because it would exceed a deferral limit? Does a salary-reduction agreement or other form state that the employer will or may interpret a deferral election as limited to the lesser of the amount specified or the largest amount that would not exceed an applicable deferral limit? Even if not expressly stated in any writing, might the plan administrator’s interpretation of that kind be a prudent interpretation of the documents governing the plan? To the extent a participant contribution was not sent to the plan’s trust and was not a proper deferral, might the employer make its Form W-2 wage report follow that truth? Is there time to find the law, plan provisions, and facts with time for the employer to do its wage report by next Monday? This is not advice to anyone.

The IRS on its website says you can file electronically or file on paper. All of the IRS rules about counting 10 forms to get to mandatory electronic filing apply to filing payroll forms (W2s, 1099s...) and to filing a Form 5500EZ. Here is another link https://accountably.com/irs-forms/f5558/ that does a good job talking about 5558s in plain English.

Thanks Paul. I looked at the instructions before I originally posted, and noted they're silent on any e file requirement. Out of curiosity I looked just now at the 1099-NEC instructions and they do specifically cite the e file requirement. I realize we can't rely on IRS instructions as being law. There are several public commentators (CPA firms for example) that are stating e file is mandatory for Form 5558. I realize they don't necessarily know the law either. I understand the IRS would prefer e file, I'm just hoping to find some verification that Form 5558 e file is actually not mandatory. The concern is would the IRS (or DOL) possibly reject a paper filed Form 5558 for a Plan Sponsor that had issued more than 10 W-2's, 1099's, etc for any given tax year.

Beyond Internal Revenue Code § 105(h), one might consider whether what each plan provides or omits, or what each combination of the § 414(b)-(c)-(m)-(n)-(o) employer’s plans provide or omit, discriminates by race, color, religion, sex, national origin, or another applicable civil-rights factor. An employee-benefits lawyer might want to coordinate with one’s firm’s labor and employment practice.

Consider: Plans limiting pre-tax catch-up contributions for employees not subject to section 414(v)(7). The rules of [26 C.F.R. § 1.414(v)-2(b)(3)(i)] also apply to a plan that includes a qualified Roth contribution program and, in accordance with an optional plan term providing for aggregation of wages under [26 C.F.R.] § 1.414(v)-2(b)(4)(ii), (b)(4)(iii), or (b)(4)(iv)(A), does not permit pre-tax catch-up contributions for one or more employees who are not subject to section 414(v)(7). 26 C.F.R. § 1.414(v)-2(b)(3)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.414(v)-2#p-1.414(v)-2(b)(3)(ii).

It is not exempt since the CODA was effective after 12/31/2022. Must be an EACA. https://www.irs.gov/pub/irs-drop/n-24-02.pdf Q. A-1: When is a qualified CODA established for purposes of determining whether the qualified CODA is excepted under section 414A(c)(2)(A)(i) of the Code from the requirements related to automatic enrollment (that is, whether the qualified CODA is a pre-enactment qualified CODA)? A. A-1: For purposes of section 414A(c)(2)(A)(i), a qualified CODA is established on the date plan terms providing for the CODA are adopted initially. This is the case even if the plan terms providing for the CODA are effective after the adoption date. For example, if an employer adopted a plan that included a qualified CODA on October 3, 2022, with an effective date of January 1, 2023, then the qualified CODA would have been established on October 3, 2022 (that is, before December 29, 2022), even though the qualified CODA was not effective until after December 29, 2022.

The instructions for the 5558 don' say anything about being mandatory but do say: What’s New Beginning January 1, 2025, Form 5558 can be filed electronically through EFAST2 or can be filed with the IRS on paper. and the IRS website also says so: https://www.irs.gov/retirement-plans/form-5500-corner

I am finding conflicting advice as to whether Form 5558 e file is mandatory, if the Plan Sponsor otherwise has 10+ W-2's, 1099's etc that they file. I realize that e file capability became a reality last year. My question is, is e file mandatory when the Plan Sponsor has 10+ information returns that it files. Thank you.

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If CODA provisions are added at this time to a large profit sharing plan that was originally effective in 2021, does it have to be an EACA or is it exempt from this requirement because the plan was initially effective prior to 2022? Thanks in advance for any assistance.

Ordinarily, the 5-year rule is the 12/31 of the year containing the 5th anniversary of the participant's death. If death was x/x/2020 then 5th anniversary is x/x/2025 and entire benefit should have been distributed by 12/31/2025. However, and this comes from the IRS website where you can essentially treat 2020 as if it never existed. The excerpt below says inherited IRAs but earlier language also refers to retirement plans and I can't see them saying 2020 disappears only for IRAs. https://www.irs.gov/newsroom/coronavirus-relief-for-retirement-plans-and-iras Distributions from inherited IRAs are not required in 2020. If you were required to take a distribution within 5 years following the year of the account holder’s death, 2020 does not count toward the 5 years. So, you would essentially have six years, instead of five, to distribute the inherited IRA. Also, if the account holder died in 2019, you would normally be required to begin taking distributions by the end of 2020 to be able to take distributions over your lifetime. Since 2020 does not count, you have until the end of 2021 to begin taking distributions over your lifetime.

You've got it. Forget the CG and just think 2 HCEs and 2 NHCEs where you cover 1 of each. Yes, if the covered NHCE leaves then you would need to add the other ER and its NHCE.

That is my understanding.

As one TPA to another, it is another designation, and one that is obviously rare since there are so few, and sets us apart from other TPAs. (IMHO) As well, for non-attorneys and non CPAs, we can represent clients in front of IRS and audits, this giving us the advantage of levying a higher fee. After all, you get what you pay for, right???

I listened to a webinar today presented by a well-known industry expert. He made a comment about SECURE 2.0 Section 603 that surprised me. He made the comment that to simplify the administration of Roth catch-ups, a plan sponsor could amend the plan to only allow catch-ups in the form of Roth for everyone. I thought I must have misunderstood him because to me the proposed regs and final regs seem very clear that this is not allowed. However, when questioned, he commented that he believes the IRS will allow this and the third party document providers are preparing for this. Does he know something that no one else knows? Has anyone else heard rumors of the IRS taking this stance? Thanks

Hi Sami, Austin's response pasted from ERISApedia may prove helpful for your reference: My (unresearched) gut thought would be that the distributing Plan would determine the share attributable to earnings/basis of any In-Service distribution of Roth funds in the same manner it normally would (I imagine possibly by multiplying the ratio of earnings/basis against the amount of the Roth account being distributed), not by calculating in the manner that you normally would for a 402(g) refund (considering the earnings only since the contribution date). However, this would seem to provide an advantage to the Participant by allowing the gains on this 402(g) excess to have accumulated tax-advantaged. I wouldn't think the IRS would intend an individual gaining an advantage by circumventing the regs., but that is how I read the ERISApedia citation (specifically "Second, for tax purposes, undistributed excess deferrals are treated as if they were proper elective deferrals when contributed").

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Hi all, On reviewing a Plan Sponsor's payroll records/W-2s, I've identified that the owner's W-2 reflects total deferrals of $24.5k for 2025 (not catch-up eligible). Normally a 402(g) Excess distributions would be relatively straightforward, but in this case, the 'excess deferrals' weren't actually deposited in the Plan trust (to the tune of $5k, $19.5k actually deposited), which is why our system didn't flag the 402(g) Excess (as it would have on receipt). Let's say this was due to a missed off-cycle processed by the Plan Sponsor just for the owner to contribute these amounts. Another complicating factor, is their payroll report indicates that they added back a positive after-tax deduction of $1k, labeled appearing to be in order to correct this, so the funds appear to have not actually been withheld from his paycheck, but the W-2 does reflect them as withheld. In order to correct this, is the only acceptable method to fund the late deposit of the $5k EE deferrals then distribute them with accompanying 1099-R from the Plan Trust? Is there any other permissible solutions that don't include funding the excess amount, such as correcting the W-2 or issuing a 1099-R (no accompanying payment) reporting the $1k excess as taxable for a pre-4/15 402(g) correction? If the funds weren't actually withheld and the $1k excess was, in fact, paid to the individual, does any correction (other than possibly the W-2) need to take place at all?