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Thank you for your response, Paul. The ADP test passes because a good number of HCEs have catch-up contributions.

You only mention the ACP test. It's not often that a plan fails the ACP test but passes the ADP test. Are there also ADP refunds, or is there something funky about the match formula? You are correct to note that under-funding the match for a select group of individuals is not following the plan document. It's important to keep in mind that, even though a plan seemingly indiscriminately discriminate against HCEs, HCEs are participants who rights must be protected. Keep in mind that the amount of refunds to be made from the plan is calculated based on each individual's deferrals and match, but the actual refunds are determined by starting with the highest percentages being refunded first. This second step can shift the refund amount from one HCE to another. This likely is the reason for the TPA's position.

A Treasury rule includes this: Q-13 Does a transaction or accounting methodology involving an employee’s designated Roth account and any other accounts under the plan or plans of an employer that has the effect of transferring value from the other accounts into the designated Roth account violate the separate accounting requirement of section 402A? A-13. (a) Yes. Any transaction or accounting methodology involving an employee’s designated Roth account and any other accounts under the plan or plans of an employer that has the effect of directly or indirectly transferring value from another account into the designated Roth account violates the separate[-]accounting requirement under section 402A. However, any transaction that merely exchanges investments between accounts at fair market value will not violate the separate[-]accounting requirement. 26 C.F.R. § 1.402A-1 https://www.ecfr.gov/current/title-26/section-1.402A-1.

You must have an accounting process that tracks individuals' accounts for different type of contributions. This individual's Roth Catch-up is just one more account type to add to your collection of types of contributions. If this causes a problem with having to alter programs or even spreadsheets, then create an account for a participant named "Owner Roth" and, if needed, the owner's account number/ssn with one digit added or changed.

It sure sounds like the HCE HPI would have an advantage being the only participant with an SDA.

Yeah, I'm not sure you need to separate the funds, since you should be separating the recordkeeping behind the scenes. The gains on the Roth are computed the same way as they are on pre-tax accounts in a pooled setting.

My pooled 401k plans are run on a recordkeeping system, ASC. I have multiple sources, including Roth, while using one pooled investment trust. The recordkeeping system tracks the sources, contributions, and earnings.

Although an employer makes matching contributions during the plan year pursuant to the plan document's formula, they only contribute half of the prescribed amount to the HCEs because the plan usually fails the ACP test and it's how the employer attempts to prevent refunds of the HCEs' match. The ACP test, though, still usually fails, even with such small allocations to the HCEs. Historically, they have corrected the failed test by making refunds just based on the small HCE matches. However, the new TPA is suggesting that the correction method must be based on the HCEs receiving enough additional matching allocations to satisfy the plan's formula before calculating the appropriate refunds. I know it's always a good idea to follow the provisions of the doc, but because this seems somewhat counterintuitive and perhaps may yield different results, I just wanted to double check that what the TPA is saying is the correct way to handle the failed test. What do you all think?

Under 2nd, I meant to remove procedural QRP setup and just give this back to participant upon plan termination. For one person plan you just need to be sure that the total payout is under the 415 limit.

possibly a second "pooled" account invested the same was as the pre-tax pool?

Yuck. The plan is a pooled 401k (yes, they still exist!) and now the owner needs do to Roth catchup deferrals. I really don't want to commingle the pre-tax and Roth in the same account. Is there a discrimination issue if only the HCE HPI has a self-directed account? I have been suggesting that they move to a participant-directed model for years and I was hoping that this would be the thing that clinched the decision... but the owner says that he's retiring in 2-3 years and doesn't want to go through all the changes for a short term, so I'm looking for a different solution. Part of me hopes there isn't one... Any other suggestions (other than "you can't always get what you want, even if you are a doctor")?

Another potential client who screwed up, must be me. This one has employees. CB cover owner/non-HCE where all others are excluded and DC plan. All others are HCEs. Non PBGC covered. As I just found out, client made a deposit during the final plan year without checking with me and also had 20% return. So now have roughly 200k excess over the account balances. Same situation as before, terminated 12/31/2025, excess to be reverted to corporation with administrative procedure stating excess goes to QRP. Simply amending the formula will eat up almost all of the excess as the owner is far away from 415 limits. The problem here is I may have discrimination issues. Let's say I amend the formula just to increase the owner under the new law and test the plans and I pass (it does), is this a BRF/discrimination issue? How about I increase the owner and also provide a small increase to the non-HCE and re-test all plans again, would that be ok and better? Any other solutions that I am not seeing? Never had this issue before.

The moral of this story is: Folks make sure your beneficiary elections are complete and up to date as you aren't doing your heirs any favors if you don't. I can't tell you how many times I have said that sentence to someone of the job.

Here's my two cents on the OP's question. Taking into account the facts @Santo Gold has provided and assuming they are accurate, the plan administrator may want to do the following: Wait for a claim to be filed (see @Peter Gulia) or a request for information is made. If a potential beneficiary or estate representative makes a claim or requests information, the plan should provide them the information required for them to make a viable claim. Here, the proper question is being asked in the OP. The company must take care regarding who is actually entitled to receive communications or information about the benefit. Under the terms of the plan as quoted above (assuming the Adoption Agreement does not have a specific provision), the plan can only provide information to the decedent’s spouse, child, or estate representative. The plan must ensure that it gets any and all necessary documentation to identify that it is providing any detailed benefit information to a person who is authorized under the plan to receive that information. Perhaps, the first thing that should be requested from a person who states they are going to make a claim is for them to provide the plan a copy of the decedent’s death certificate. Usually if that person is a spouse, child, or estate representative, they should have access to the decedent’s death certificate. If they cannot provide one, we have advised plans to simply provide them the Plan’s SPD and point them to the provisions as to how to make a claim. Then tell them that to make a claim they need to provide a copy of the death certificate and documents supporting their status as a beneficiary (i.e., under the OP’s plan: the spouse—marriage certificate with decedent as spouse, child—birth certificate with decedent as parent, estate rep—letters testamentary, of administration, or of authority, depending on state law, etc.). If using a small estate affidavit, we would require an original notarized affidavit, certified by the clerk of court of the decedent’s last county/parish of primary residence, certified or long-form death certificate, government-issued photo ID, and proof of relationship (the plan would then request their attorney determine if the affidavit meet's applicable state law). In conjunction with these actions, the plan administrator, at a minimum, should check its other plan records for helpful information (e.g., group term life plans, welfare plans etc. for dependent or beneficiary info, if any) and have someone obtain a copy of the decedent’s obituary, which normally is available online and would list the decedent’s living relatives, if any. If there is a question concerning whether a spouse exists or an individual is the legal spouse, the plan administrator could also do a search of the marriage and divorce records in the county or parish in which the decedent had their primary residence. The clerk of court in that county or parish usually has a digital database that can be searched or procedures to request certified copies of these records. In some states, state vital records offices can provide one or both of the certificates. Also some states have services such as VitalChek, which partners with state and local government agencies to provide these documents. Searches for potential children are more complex and might be impractical. If the plan receives any information indicating there may be multiple beneficiaries or conflicting claims, it may want to notify the other potential beneficiary(ies) that a claim has been made for these benefits and they may wish to file a claim. They might not… we have had instances where a beneficiary did not make a claim for benefits for which they were the rightful recipient, attempting to bypass the tax consequences (e.g., a spouse did not want the benefit but wanted it to go to their children (a disclaimer in that instance would not have achieved that effect)) and the plan could not make the distribution based on the children’s claim for benefits (first, it had actual knowledge there was a spouse and, second, even if the spouse was considered deceased, the benefit would have went to the estate and not the children). Once the proper recipient of the plan account balance has been determined, the plan would notify the individual (or the executor, if it’s the estate) that they have the right to the benefit and give them the information they would need to apply for benefits to commence (copy of SPD and/or distribution forms) or detailing their abilities to leave money in the plan and when the latest date they can take a distribution. Depending on who is determined to be the proper recipient, the plan should request Social Security numbers and/or IRS Form W-9. Caution--Any distributions paid to the executor of an estate should be made payable to “[Name of Executor], as Executor of Estate of [Name of Employee]” or simply to “Estate of [Name of Employee]” (or a similar variation or a variation required by your plan recordkeeper). Any distributions paid to the deceased’s heirs under a small estate affidavit should be divided among the named heirs and paid directly to each of them. While the IRS rules normally allow beneficiaries to elect to rollover a qualified plan death benefit to an IRA (to avoid withholding taxes on the distribution), neither an estate nor the heirs listed in a small estate affidavit can elect a rollover distribution. The key legal proposition here is that ERISA Section 514(a) explicitly preempts state laws that “relate to” an employee benefit plan that is subject to ERISA, with limited exceptions for certain insurance, banking, and securities laws. Courts have interpreted this preemption language to mean that any state law that refers directly to an employee benefit plan, or that bears indirectly on an employee benefit plan, is not enforceable against an ERISA-governed employee benefit plan. See Egelhoff v. Egelhoff (essence--terms of the plan govern). The only state law that should be consulted is the law that supports the claimant’s status as spouse, child or executor/administrator/estate rep. FWIW, if a plan that has an order of precedence for designating beneficiaries as set forth in the TSP as noted above were presented to us by a client, we would vehemently recommend immediately amending that provision. Our view is that in no way should a plan take on the responsibility of making legal decisions under any state law. If the question is of immediate concern, like here, and we would not amend the provision to cover the instant decision, we would try to find a way to throw this into court and/or make someone else make the legal determination. (Note that the determination of who should receive these amounts under the laws of descent and distribution is the executor of the decedent’s estate.) Also, the plan administrator should ensure that they checked the plan terms to see if any employer contribution (matching, profit sharing, or other non-elective contribution) is due to the employee for the year of death. Some plans require that an employee normally be employed on December 31 or have completed 1,000 hours of service during the year to receive an employer contribution, but often those requirements are waived if the employee dies while employed. Also, confirm that the account uses the proper vesting as death often accelerates vesting. Not advice, just my two cents (does this idiom still have meaning as the penny is no longer being minted?)

I have only set up a QRP when the owner is limited by 415 on plan termination and cannot be allocated the excess. Most plan documents allow for the allocation of assets in a non discriminatory manner on plan termination. Whether you need an amendment to allow for the maximum deductible contribution made prior to December 31, 2025 depends on whether the amount contributed during the year is less than the allowable maximum or not.

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I'm not so sure about that. For a one-participant plan, it should be very easy to increase the benefit (it's not already in pay-status, is it?). The increase does not have to absorb the entire amount of the excess funding; just do an amendment that increases the benefit by 5%, or 8% or whatever percent gets about 90% (for example) of the excess. Since 415 limit appears to be irrelevant, choose whatever increase you want. Assuming a lump sum payment that is rolled into participant's IRA, that "protects" more of the total dollars. Alternatively, if you put all the excess in QRP, the same protection does not apply, because it's not yet allocated, and might not be fully allocated for a few years. What happens if the participant dies six months after the transfer to QRP? Have I overlooked something?

Notice of Adverse Interest - Claim - Cover Letter 02-12-2026.docxNotice of Adverse Claim-Interest - DSG edits 12-08-2025.docxResponse to blguest. I am not sure that you are not conflating the rights of a beneficiary who is named, vel non, to receive the balance in a defined contribution account and the rights of an Alternate Payee whose benefit is defined by a QDRO and may equal all or a portion of the funds in the account. In the case of an ERISA qualified Plan the Pension Protection Act of 2006 permits a post mortem (posthumous) QDRO to be entered and implemented. See paragraph "(c)"- https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-D/part-2530/subpart-C/section-2530.206#p-2530.206(a) This is also true of some state plans including the Maryland State Retirement and Pension System. So you would think that you would have a conflict between the beneficiary (however identified) and the prospective Alternate Payee, but I have never found that to be the case. The Alternate Payee seems to win in all PPA of 2006 cases, even if the QDRO is pending (not signed by the Court, not submitted to the Plan Administrator, not qualified by the Plan Administrator). Maybe I didn't get the Memo. If there is authority addressing such a conflict I would love to see it. Note to the attorney for a prospective Alternate Payee to send a Notice of Adverse Claim/Interest to the Plan Administrators of every Plan in play with copies filed with the Court. Will it do any good? I don't know. It makes them nervous. See attached. See Thomas v. Sutherland at https://scholar.google.com/scholar_case?case=1601430218420084129&q=Thomas+v.+Sutherland+&hl=en&as_sdt=20006 Yale-New Haven Hospital v. Nicholls, 788 F.3d 79, 85 (2d Cir. 2015) Miletello v. R M R Mechanical Inc., 921 F.3d 493 (USCA 5th Cir. 2019) cited Yale-New Haven Hospital v. Nicholls, supra. Griffin v. Griffin, 62 Va. App. 736, 753 S.E.2d 574 (2014) - https://scholar.google.com/scholar_case?case=5601932368354380870&q=griffin+v.+griffin&hl=en&as_sdt=4,47. Rivera v. Lew, District of Columbia Court of Appeals, On Certification from the United States Court of Appeals for the District of Columbia Circuit, Case No. 14-SP-117, 99 A.3d 269 (2014), AND Crosby v. Crosby, 986 F. 2d 79 - Court of Appeals, 4th Circuit 1993 David

If a Key EE has a CB benefit and a DC account, yes. The Q&A below are from a Wolters Kluwer (ftwilliam) webinar on top heavy in 2013. Also, it looks like they are of the opinion that a non-key in both the frozen DB and the DC needs 5% for TH. Looking at the regulations, they say "covered" by a defined benefit plan, not "benefiting" in a plan, so it does look like it's 5% for non-keys who are in both plans. If some were excluded from the CB (like maybe non-owner/non-key HCEs) they would only be entitled to 3%. Q. How are frozen plans treated for purposes of the top-heavy rules? A. For purposes of section 416, a frozen plan is one in which benefit accruals have ceased but all assets have not been distributed to participants or their beneficiaries. Such plans are treated, for purposes of the top-heavy rules, as any non-frozen plan. That is, such plans must provide minimum contributions or benefit accruals, limit the amount of compensation which can be taken into account in providing benefits, and provide top-heavy vesting. Note that a frozen defined contribution plan may not be required to provide additional contributions because of the rule in section 416(c)(2)(B). Q. An employer sponsors both a DB and DC Plan and the TH minimum is provided in the DC Plan. If the DB Plan accruals are frozen, what is the TH minimum % required in the DC Plan? A. Frozen plans continue to be subject to the top-heavy rules (typically, top heavy minimum of 5% of compensation is provided by the defined contribution plan - see slide 35).

2nd is much easier to implement

Would we still test the plans combined?

Either of those sound pretty good.

You're spot on, actually. Failure to follow the plan document, for starters....

One lifer DB plan. Plan frozen/terminated 12/31/2025 with perfect funding with excess, if any, going to qualified replacement plan (QRP). Client did not tell me about additional contributions made during 2025, simply forgot. Big amount too. Now have quite an excess but lumpsum still under 415 limit. Solutions for retroactive amendments? Amend to have a retroactive benefit increase Amend from QRP allocation to participant allocation Any thoughts? Thanks

A situation that can become an infinite loop when a claim is in the wings but is not ripe to be made. For example, a QDRO-in-waiting that has not yet been submitted for qualification because a sponsor/participant's estate (which has already submitted letters testamentary to the TPA and stands in the shoes of the deceased sponsor/participant), cannot get the TPA to provide a current account statement. I have a client with that very issue right now (you may recall I'm a QDRO lawyer). Trustee sponsor/participant of very small plan dies after the court enters a property settlement, scant paper records in the decedent's estate, no copy of an executed beneficiary form; estate counsel pretty much ERISA-clueless. Sponsor company has a DC plan TPA'd by one firm, and a cash balance plan administered by another TPA. The cash balance TPA won't pony up a current account statement to the estate administrator/PR, so neither the estate nor the alternate payee for that plan can ascertain what exactly is there that is divisible between the estate and the alternate payee. Then, instead of providing a current account statement and their QDRO procedures document, the TPA decides, unbidden, to retain its own counsel to write a QDRO for the alternate payee (!), which, shocker, does not allocate the full components of the benefit, though nothing in the plan document prevents full allocation. (Of course, I would not allow my client to sign such an abomination.) Additionally, the cash balance TPA's benefit statement from several years ago (the only statement the estate has), is labeled for the sponsor's DC plan (the one administered by a different TPA), includes a single line item for the cash balance plan without identifying that plan as distinct from the entire rest of the statement. This is not a small-estate matter and there is likely 500k+ in the participant's hypothetical account. In 30 years of practice, I have never seen a TPA screw up this badly. I'm counting the misrepresentations, fiduciary breaches, and prohibited transactions, and wondering when they'll stop shooting themselves in the foot before I sue their pants off, as they're not listening to reason. Thank the stars original poster Santo Gold has the wits to ask their learned colleagues here for their thoughts when unsure.