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I was just reading something and came across a note I had never seen before. Is it true that if the Plan is covered by the PBGC, the 6% limit on employer contributions into the Profit Sharing Plan doesn't apply? We always adhered to the 6% rule, even for PBGC Plans, but what I read seemed to imply that it wasn't the case. So I just wanted to make sure I was reading this right. Thanks in advance

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Can you make an amendment to exclude HCEs from being eligible for a Safe Harbor plan (effective 1/1 and amended at least 30 days before beginning of the year)? These HCEs already met the plan's eligibility requirements. Thanks!

I have always filed using third party software, which produces an AckID for Form 5558 filings. I would still start with EFAST, but be prepared to have to go to the Office of the Chief Accountant.

Thank you all.

For some reason, efast does not give an ack id for extensions? Just a Message that successfully filed. Not sure why.

There have been several similar discussion threads, including when the interest/dividend payment was MUCH later than a few days. As I recall, at least one such discussion involved payment from a litigation settlement, months after the supposed close-out date. Before taking any action, a prudent PA/fiduciary might make sure there is no possibility of another payment.

As someone who's primary job is to process conversions (money only, not addressing plan provisions or payroll), I can tell you that an in-kind transfer is much more difficult than a liquidation and wire. To speak to the comments above, if the money is insurance company separate accounts or omnibus accounts, an in-kind transfer is not possible. You would really only be able to move from one custodian to another where the funds are invested at the plan level. Arranging for an in-kind transfer as of a specific date takes a lot of coordination and agreement between the custodians, recordkeepers and the funds themselves and all must agree to the same schedule, and there will be lots of paperwork involved. Do you have a copy of the conversion records that Guideline originally sent over? You may want to look at those records to see for yourself if they had the information necessary. For example, did the records include the full name, Social Security Number and amount by source and fund by participant that was transferred? Also, did Guideline provide a report by participant with a beginning balance for the year, contributions, distributions, earnings, fees, loan data, and transfer out, etc.? Did they provide any census data? Did you map over the funds, or did they invest as per new enrollment allocations (or QDIA)? Mapping adds another layer of complexity, especially if fund data was not provided at the participant level. There are some recordkeepers who use their own identifiers and don't provide Social Security Numbers, which can make the conversion process difficult. Also, receiving the data for the current year doesn't always happen. I often have to make several requests to get current year data or end up getting several files with pieces of data and have to try to rebuild the year with what data I did receive (which I prefer NOT to do). If you ever do a conversion again, I would ask for sample copies of the records that are going to be sent over and ask to be cc:d in any communications between the recordkeepers so you can see what information is and is not being provided and when. Ultimately, if you are the Plan Fiduciary, all responsibility lands on you, so being very involved it the conversion process would be advisable.

A deferred compensation plan allows a company's directors to elect to defer a portion of their director fees. The deferred amounts are distributed upon the earlier of a 409A change of control or a director's separation from service. At the time of an election to defer, the director can elect to receive payments upon a separation from service either in a lump sum or in annual installments. The plan provides that if installments are elected, the number of annual installments will equal the number of full calendar years the director was a participant in the plan, up to 10 installments. So, for example, if a director has a separation from service after 6 years in the plan, he or she will receive 6 annual installments, and if the director has a separation from service after 12 years in the plan, he or she will receive 10 annual installments. This seems like a violation of the toggle rule because it provides for different times and forms of payment for the same 409A payment event, and I don't believe that any of the exceptions apply, but I'd love to entertain an argument that it's permissible.

Your conclusion is correct. You referenced: Vested balance = $25,000 Existing loan = $25,000 50% vested balance limit 50% * $25,000 = $12,500 Maximum total loan amount allowed across all loans $12,500 - $25,000 = ($12,500) ($12,500) is less than 0. Not eligible for any additional loans. All loans cannot exceed the Maximum statutory limit, which is the lesser of 50% of the vested account balance or $50,000

Oops, no more than half . . . . , or just half.

On Santo Gold’s hypo, isn’t the account balance after the first loan is made still $50,000—that is, $25,000 participant loan receivable + $25,000 other investments? But wouldn’t ERISA § 408(b)(1) and Internal Revenue Code § 72(p)(2)(A) limit the amount for a second loan? Consider 29 C.F.R. § 2550.408b-1(f)(2)(i) https://www.ecfr.gov/current/title-29/section-2550.408b-1. Consider 26 C.F.R. § 1.72(p)-1/Q&A-20 https://www.ecfr.gov/current/title-26/section-1.72(p)-1. Even before applying the tax Code limits, ERISA § 408(b)(1) limits the outstanding balance of all loans to the participant to more than half the participant’s vested account (measured after the origination of each loan). On Santo Gold’s hypo, if the participant when applying for a second loan has not yet repaid anything on the first loan, isn’t the second loan $0?

Your math and logic is all wrong. Read the IRS examples: https://links.us1.defend.egress.com/Warning?crId=6984f4a2c933bcd338c721dd&Domain=oneblueridge.com&Threat=eNpzrShJLcpLzAEADmkDRA%3D%3D&Lang=en&Base64Url=eNrLKCkpKLbS1y9JTcwt1svNTC7KL85PK9FLzs_Vz01NLdE3MrE0s7AwMbe0tDA3M7IvsA21zEsvrfIrzM4M8CrLyvIMzQYALWcXFw%3D%3D&@OriginalLink=teams.microsoft.com

The participant can take a second loan, but there is something wrong if in the above example, they are limited to $25,000 with one loan, but can get $37,500 with 2 loans (or more $$$ with > 2 loans). Is the maximum second loan calculation: [[50% * $25,000 (vested balance)] - $25,000 (current loan balance] = -$12,500. Since this is less than $0, then no second loan is available?

Yes, a participant can generally take multiple 401(k) loans if allowed by the plan; however, care should be taken to ensure that all loans combined do not exceed IRS limits.

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This is too simple, but here goes: Participant has a $50,000 vested 401k account balance. They take a maximum loan of $25,000 and have no other loans at the time A few days later, they realize they need more $$$ and wish to take a second loan (plan allows for this). Lets say the account balance is static and in a few days, the vested account balance is now $25,000 (after the initial loan) and no loan repayments have been made yet. Can the participant take a second loan for $12,500 (50% of $25,000)? I'm sure the answer is "No", but the above makes sense in a weird way. Any comments are appreciated.

The time to negotiate provisions about a recordkeeper’s conversion-out is before the plan’s responsible plan fiduciary makes a service agreement with the recordkeeper the plan later might want to leave. The time to negotiate provisions about a recordkeeper’s conversion-in is before the plan’s responsible plan fiduciary makes the service agreement with the recordkeeper that would, if engaged, process the conversion-in. For many plans, either observation is impractical because a plan might lack bargaining power. Beyond whatever service obligations a plan might get, a transition from one recordkeeper to another calls for not only caring work from every service provider but also strong and sustained oversight and supervision from the plan’s responsible plan fiduciary. Each recordkeeper might, to supplement the plan fiduciary’s attention, appeal to the other recordkeeper’s sense of business decency and fair dealing. A mature recordkeeper might work to get and keep a good reputation as both a graceful loser and an accommodating winner. Bill Presson is right that—at least regarding mutual fund shares, collective trust fund units, and insurance company separate account units (forms of investment designed for redemptions)—a transfer of property other than a payment of money is unusual.

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A few further observations: A service provider’s agreement might provide the accounting method the service provider uses in assembling information into a draft Form 5500 report for the plan administrator’s review. If the agreement specifies cash accounting, a service provider might decline to provide service on a different method. Or, a service provider might offer accrual accounting for an extra fee. Paul I describes a mainstream outlook about a relationship between an adviser and an advisee. But some professionals have a more nuanced outlook, recognizing that one’s client might have its own sensible reason for not following advice. Some don’t object to a client’s informed choice, if the resulting act or failure to act is not a crime. If a service provider’s relationship with a referral source is more important than the relationship with the plan’s sponsor/administrator, a service provider might suggest alternative accounting treatments as a way to appease a referral source. A payer’s Form 1099-R report is on what was paid in the year reported on. Even if Plan 2’s administrator assumes a distribution payable in Plan 2’s Form 5500 report on 2025, Plan 2’s payer would report the $3,500.00 on a 2026 Form 1099-R report. This is not advice to anyone.

Just to add to what Paul said - you will never get an in-kind transfer from one RK to another. All the shares are held in omnibus accounts.

CAFA, are you asking about an incentive to elect against covering one's spouse (what Chaz describes), or about making an employee's spouse ineligible if the spouse is eligible for other health coverage? If it's about making a spouse ineligible, one guesses that Medicare might be treated differently than employment-based group health plan coverage.

Onboarding a plan requires attention to extremely granular detail that is customized to the plan provisions, the deconversion processes of the existing service providers including potentially the recordkeeper, TPA and investment firms, the client's internal administrative support including payroll, HR systems, and funding procedures, and to the you as the new service provider including everything needed to provide continuity of the rights and privileges of all of the plan participants. Coordinating all of this commonly takes 10-12 weeks, and starts with working out a detailed work plan in the first few weeks with all of the parties involved. The time for asking your questions is at the beginning of the conversion process and the people you need to ask are the client and the existing service providers.

Peter lays out the basis for arguing that the plans were closed out in 2025, and makes it clear that this is solely the plan's fiduciaries' (read client's) decision. I expect most practitioners would say don't sweat the $0.50 for Plan 1 and writing off the $0.50 with no adjustment to the 1099R, most would say it is really pushing it where the amount is $3,500 that was not closed out until 31 days after the end of the plan year. From the perspective of a service provider, I would explain to the client that it is their decision to make and their fiduciary responsibility and accountability for the consequences of their decision (unless you are a 3(16) provider). I would let the client know I disagree with the Advisor and I only would be willing to prepare a final filing for 2026 along with a 1099R for the residual payment. If the client chooses to follow the Advisor's "promise", then the Advisor can help the client find someone who is willing to close out everything for 2025. The plans are closing so there is no future work for you on those plans. If your relationship with the client is ongoing, keep in mind that if the client chooses to follow the Advisor's advice over yours, that says something about the relative value of your relationship to the client. This is also true about any relationship you may have with the Advisor.

I believe, off the top of my head, that HHS has informally stated that an opt-out/cash-out incentive does not violate the MSP rules if it is available to Medicare-entitled employees on the same terms as other employees. But my recollection is that the informal guidance was provided many years ago so I recommend checking to see if it has revised its thoughts or has issued more recent guidance.