All Activity

The DoL - EBSA keeps track of 163,000 defined benefit and defined contribution plans. Your client never did anything to consumate the deal between a Plan Sponsor and a Participant or an Alternate Payee. I bet your guy cannot even find the plan documents after the fire. If I set up a C Corportation and never issue stock, open a bank account, apply for an EIN or do any business at all, then I am the tree that fell in the forest and there was nobody there to hear it, so and it didn't make a sound. If my fiancee and I obtain a marriage license from the clerk but never marry, do I sill have to pay her alimony? The client should have a meeting of the Board. Void, vacate, annul, rescind, abrogate, invalidate and declare the Plan Documents null and void nunc pro tunc (now for then). Pax vobiscum

for Pentegra (Remote)View the full text of this job opportunity

5500 EZ's must always be filed in the year the plan is terminated and distributed, so you would be filing both a first return and a final return in one filing

Hmmmmm..... The DOL Online calculator is only used for determining earnings on untimely payment of deferrals to the plan trust that violate the DOL rules on when contributions must be made to the ERISA-governed plan. It can be used for full VFCP and must be used if self-corrected under VFCP. Right or wrong, many employers will correct the untimely payment of deferrals to the plan trust, calculating earnings using the DOL Online calculator, and not file anything under VFCP (but still file a 5330 paying the excise tax). We advise clients to do the self-correction notice or file the VFCP if self-correction is not available. Note though there is no requirement to file through VFCP (the "V" stands for "voluntary"). However, even if not using VFCP, plan sponsors still need to correct the late deposits with earnings and file the Form 5330 to pay applicable excise taxes (though they don’t need to file under VFCP). But like you state, without a VFCP filing, the plan has no authority permitting the use of the DOL Online Calculator to determine the lost earnings. Therefore, earnings should be calculated through an alternative method. Also, like you state, most practitioners advise using the IRS earnings method from EPCRS instead. That said, we have also assisted clients with DOL audits where they self-corrected using the DOL Online Calculator without filing under the VFCP and the DOL did not, after some discussions, have an issue with the corrections (even though there was no VFCP filing). We do NOT recommend using this alternative. At the onset, your post assumes there is an operational failure under the plan. We have found that most of the time there is no operational failure for untimely payment of deferrals to a plan trust because most of the plans we work on do not have any language in the plan stating when the contribution is due (other than they must be paid to the plan by the deadline required for the contributions to be deductible). If a plan does not contain the DOL timing rule or an equivalent, there is no operational failure (i.e., there is a DOL failure but not an IRS failure). If there is no operational failure, then no earnings are required for EPCRS. Assuming your plan has an operational failure, then the DOL Online Calculator might be able to be used for EPCRS corrections but only in certain circumstances. Under EPCRS the options for calculating earnings for late contributions are in order of priority (1) apply the actual earnings. This may be impractical or impossible, so EPCRS permits reasonable estimates which leads to .. (2) use the ROR for the best-performing fund in the plan. The IRS permits this because everybody wins using ROR… except perhaps the plan sponsor--using the highest ROR for the entire period (not separately for each plan year) of failure could prove to be very costly… so it may be more reasonable to…. (3) use the weighted average ROR for the plan as a whole. As reasonable estimates go, the plan’s ROR can be a justifiable approach. In other cases, if you must, you come full circle to ….lastly (4) use the DOL’s Online Calculator. EPCRS will allow the use of the DOL’s Online Calculator if the probable difference between the actual earnings and the DOL Online Calculator earnings is insignificant, and the administrative cost of the actual calculation would significantly exceed the probable difference. This sounds counterintuitive since being able to determine that there is an insignificant difference implies that actual earnings can be calculated. Yet EPCRS allows the use of the DOL Calculator, acknowledging that paying the service provider for a precise computation could outweigh the benefit of a small difference. This could happen when a) plans have self-directed brokerage accounts; b) 403(b) plans having participants with separate individual accounts; c) documents/info is unavailable, e.g., plan sponsor is bankrupt or out of business, natural disasters; and/or d) there are changes in service providers, which can all render it impossible to compute actual returns or even ascertain the best-performing fund. If you get to this point, the plan may use the DOL’s Online Calculator. In every other case which is usually the norm, the plan should use one of the other alternatives for determining earnings.

I believe the issue here is the limitation year. You cannot have a limitation year that precedes the date of incorporation, so that first year would be pro rated.

for Ascensus (Remote)View the full text of this job opportunity

Yes. If using rate of return, we always calculate earnings from date deposit should have been made until date deposit was made, and then earnings from date deposit was made until date earnings are deposited (as close as we can, as it's not always possible for the client to deposit on the day we calculate through). Under EPCRS, you must restore the participant to the place they would have been had no failure occurred, which means you must deposit earnings on earnings, or they've just lost that opportunity. Also, the DOL has been VERY clear that the DOL calculator can only be used if a VFCP application is made. However, in a down market, we have occasionally calculated both ways (individual ROR and DOL calculator) and if the calculator amount is higher, we may choose to use that. If you don't submit a VFCP application but you use the DOL calculator, and the DOL audits and finds that the actual ROR was higher, they could require you to make up the difference. I haven't heard of that happening myself, but I don't want to test that.

Safe harbor plan fails compensation ratio test for the match since bonuses are excluded. The plan document does not provide any type of correction method such as use total compensation. Does an 11(g) amendment correct this situation where compensation would be added back? I remember hearing in the past that if a safe harbor plan fails compensation tests it blows the safe harbor, unless the base document has a correction like the AQSC document does. This plan uses a pre-approved document but no correction language has been located. How do we proceed? Thanks!

Meaning, you evaluate the plan as a whole for determining if all the NHCEs got a gateway. Keep in mind if the OEE group itself is not included with the others in testing, then no gateway applies to the OEE group - unless for some very strange reason the OEE group had an HCE getting more as a percent of pay than the younger NHCEs in that OEE group and you cross-tested the OEEs - but I’ve never seen that happen.

Exactly, this is either an owner-only play or may work in a very large plan that otherwise easily passes ACP testing, but is essentially a nonstarter in small plans that cover NHCEs.

Am I understanding this correctly? Yes. Is there any way to bypass the testing for mega roth backdoor after tax contributions? Have zero eligible nonhighly compensated employees, no testing needed. In other words, employing only highly compensated employees who meet the age/service/entry requirements = no testing needed.

Hi, I've worked on 401k plans for a while now, but encountered mega roth backdoor quite recently. I do understand that it has great tax saving for an individual but after digging deeper I read that ACP must be passed for the after tax voluntary contributions even if the plan is safe harbor and passed ADP and ACP for matching. Am I understanding this correctly? Also is there any way to bypass the testing for mega roth backdoor after tax contributions? Thanks!

This has come up before in this forum. My understanding is that if a consolidated return is filed for the control group then the contribution dollars can come from either entity in whatever proportions. If each business filed its own tax return then deduction is based on contributions for each one's respective employees and compensation. Here, you have two disregarded entities that just pass through income to the owner so you certainly have a "consolidated" return - one tax return for the owner, correct? I'm not an accountant and this is not advice, client should confirm with qualified tax accountant.

What is the new comp formula? If it's everyone in their own group, then it's up to the ER who will get a PS and how much (subject to the testing limits, of course). If it's the grouping method, you need to allocate the appropriate amount to everyone in each group. Don't use Chat/gpt. It can point you in the right direction, but the answers are still suspect. We had someone here use it to determine eligibility of a rehire and it got it all wrong.

The SPD is not the Plan Document although care should be taken as not to mislead. I do not think your SPD is misleading but the language could be tightened up. I would suggest adding "to receive any Employer Contribution we may decide to give you." and could add "such as..." Or, at the start of second paragraph, begin "If we decide to make an Employer Contribution for you, ..." I do not think you are obligated to give such people a contribution unless required for TH, which could then trigger gateway. Also, these people are included in coverage and nondiscrimination (as zeroes) regardless of hours or termination because neither condition factors into them getting zero PS. The SPD says "we will inform you" - which could come in a variety of forms (letter, statement, etc.).

All of the above information has been very helpful. I have a bit of a twist on the scenario... An employer sponsors a self-funded health plan with certain benefits paid from a VEBA trust and other benefits paid through the general assets of the employer. Where assets are VEBA trust payable, the employer first pays the claim through its general assets and then seeks reimbursement from the VEBA trust. This is accomplished through an interest free "loan" by the employer to the trust. The question that has arisen: Must the employer account for employee contributions made through a Section 125 plan when seeking reimbursement from the VEBA (considering the employee contributions to be a plan asset rather than a general asset of the employer), or may the employer seek reimbursement from the VEBA for the entire amount of eligible claims/expenses under the VEBA, regardless of such employee contributions? My initial thought was that such employee contributions would be considered plan assets, rather than general assets of the employer, and would reduce the amount eligible for reimbursement from the VEBA. However, upon review of the information above and DOL Technical Release 92-01, it appears that the employee contributions would be considered general assets of the employer, and that the employer could reimburse the full amount paid. The VEBA in question is quite overfunded, which would make this an ideal outcome for the employer. Note that the employee premiums are not held in any trust. I do not have full clarity on how employee premiums are held, though I suspect they are held in a separate account in the employer's name. Additional thoughts or considerations are appreciated!

for The Angell Pension Group, Inc. (Remote)View the full text of this job opportunity

Even if there is no doubt that the signature on the plan documents is true, was a plan ever established? If one assumes a plan was established, and if the plan sponsor’s written act provides the plan’s discontinuation, termination, and final distribution, would anything preclude delivering to the one participant a certificate of the distributee’s rights under the plan? Might the plan’s administrator or trustee in good faith find that the value of that distribution is $0.00? Might a Form 1099-R tax-information report state the amount distributed as $0.00? If a plan was established, always was a one-participant plan, and always had plan assets no more than $250,000, might a Form 5500 report and return have been excused for all years other than the plan-termination year? Might the plan’s administrator file a zeroes Form 5500-EZ return for the year that includes the distribution of the participant’s rights? After considering the expense of those or other steps, might the plan’s sponsor or administrator reconsider one’s analysis about whether a plan was established? If a third-party administrator believes the plan sponsor’s analysis is incorrect, might that not matter because the TPA might not be associated with any tax return that includes an incorrect position? (And the TPA won’t have provided incorrect advice.) This is not advice to anyone.

for Accelefund, Inc. (Remote / Lenexa KS)View the full text of this job opportunity

The gateway may not be tested using component plans. See 1.401(a)(4)-9(c)(3)(ii)

Thank you!!

Absolutely. My guess is that somewhere in the doc it would address self employed individuals, but not certain

So, every day I find something that I thought I knew and now question my entire life. Most of our safe harbor plans we write with no hours or last day requirement for the new comparability profit sharing to allow for flexibility (they have to get the gateway anyway for SHNEC). I am now questioning a safe harbor match plan with new comparability PS. We sometimes don't give the PS to HCEs (spouses, non-owners) and terminated employees. As long as it passes, we figure it's ok. I went down a rabbit hole today with chatgpt and he/she/it told me that if the SPD is explicit in saying they will receive a PS, then they have to receive it. This is what the SPD says: Discretionary Employer Contribution formula. We will decide each year how much, if any, we will contribute to the Plan. Since this Employer Contribution is discretionary, we may decide not to make an Employer Contribution for a given year. We may decide to give a different contribution to each eligible participant under the Plan. The Employer Contribution may be determined as a percentage of compensation or as a dollar amount. We will inform you of the amount of your Employer Contribution once we determine how much we will be contributing for the year. Employer Contributions. Under the Plan, as amended, you do not have to satisfy any additional allocation conditions under the Plan. Thus, you will be entitled to share in any Employer Contributions we make to the Plan if you satisfy the eligibility conditions applicable to Employer Contributions regardless of how many hours you work during the year or whether you terminate employment during the year. If this is a SHM plan - do we have to give a PS to terminated participants OR HCEs as long as we pass the required testing (401(a)(4), 410(b), TH)? I Thanks!

Many if not all of our clients that utilize this are self employed, so there's no pay to be withheld from. But that is something I had never thought of. Thanks for bringing that up.

I believe it's because they don't need or want the tax deduction for the company. They make the deposit and then immediately convert it to Roth and it doesn't affect their W-2/Sched C or K-1. On a few of these it was because their wages were enough to go up to the max 415 limit but not enough to fully take advantage of the 404 limit. So, they do the max def, PS and then the rest is after tax. For example, comp is $80,000 - then they can only have $20,000 in employer and wouldn't be able to max out the 415 limit. But they could do $31,000 in def, $20,000 PS and $19,500 after tax to get to $77,500. We have a few that are using the employer designated Roth but again if their wages are not enough, then they can't max. So, going back to your comment above, if there were no deferrals - could the after tax be funded for the full 415 limit PLUS catch-up or because there is no pretax/roth, it's limited to $70,000 for 2025?