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We are taking over a client whose TPA messed up the original plan setup and didn't put in the correct provisions for certain things (particularly Normal Retirement Age & Vesting Schedule). The question is, how far back can we go to correct these things (the plan is roughly 2 years old, the client just didn't notice the error until now)? Or can we not do them retroactively and just have to do it moving forward. I'll be honest, this is one I've never encountered so I wanted to be sure we did it correctly.

In that book, in the bio, it mentions some all stars (Mike Preston, Larry Starr, et al). And also the PIX message board. Good times, indeed!

I was straightening some things up around my house this weekend. Part of it involved moving some books from one bookshelf to another. I came across Who's the Employer: A Guide to Employee and Aggregation Issues Affecting Qualified Plans by S. Derrin Watson. I hadn't picked it up in a long while and I was wondering just how old that book is. Turns out, it's a second printing from 1998. My boss gave it to me in like 2000. She had another copy. Maybe the second ed.? I'm wondering how much has changed from 1998 to the current 8th Edition...

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Yeah, at least in the 457 context, the rule is that an employee cannot delay the vesting of a voluntary deferral unless the new vesting date is at least 2 years after they original vesting date and the employee gets at least a 25% premium for delaying the vesting. The theory seems to be that no one would voluntarily defer an amount that they could get right away unless they got something extra for it. And if the delay in vesting were not recognized here, then the short-term deferral rule would not apply and we would need to ensure that the agreement met the 409A conditions. I'm not sure that the assumption that no one would delay vesting really applies here, in the sense that if the person got the money right away, it would be subject to the clawback. But it would seem prudent to comply with 409A. However, I'm not sure how one would comply with 409A. A particular issue in this regard is that Treas. Reg. § 1.409A-2 in general requires a deferral election to be made by December 31 of the year before the compensation is to be earned. There is an exception upon initial participation, but it requires that the election be made in the first 30 days of employment and apply only to compensation earned after that date--which would seem not to work in this case, since the compensation would be earned on the first day. There is another exception for an initial deferral election with respect to certain forfeitable rights, but it would apply only if the IRS were to recognize the delay in vesting (i.e., that the rights were forfeitable).

Regardless, the plan document likely needs to add some interim good-faith language by the end of 2026 to comply with the law in written form. Thus, the written plan would comply with the possibility that an employee could have have deferred a catchup and their prior W-2 Box 3 FICA wages exceeded the limit that would require such catchup be treated as Roth.

We work with an outstanding service provider who services Southeastern Pennsylvania. If you are in this geographic ares, I can send you their contact information. Based on experience, I recommend in making your decision you consider the breadth and depth of a provider's technical support (in particular responsiveness), security (including availability of full encryption of all transmissions of email, data and storage), access to leading state-of-the-art technology, and cross-platform support (including computing, phone service, operating systems and hardware). The cost of these services almost always is higher than one would guess, but that often is because the outstanding providers provide more value for what most people don't even know they need. Consider documenting what services you will be providing to your clients over the next 2-3 months, and seeing if there is a way to deliver those services without compromising the integrity of clients' data, and be prepared to discuss with a successor provider strategies to get support through a transition period. In our business, we have an obligation to protect the information entrusted to us.

You’ve spotted a real issue that calls for attention to § 409A.

Hi folks, Anyone have any recommendation for an IT service provider who excels at Security and can host a virtual TPA practice? Just found out my local service provider is getting out of the business as soon as possible so hoping to make a move by year's end. Thanks to anyone. If more comfortable, can message me direct.

Might a signing bonus not be available until a not-yet employee has signed and become bound by the “separate agreement” California Business and Professions Code § 16608(b)(2)(D)(i) requires to set up a § 16608(b)(2)(D) exception to § 16608(b)(1)? Recognizing that “[t]he worker has an option to defer receipt of the payment to the end of a fully served retention period” [§ 16608(b)(2)(D)(iv)], could the agreement include the not-yet employee’s exercise (or nonexercise) of that option and election, irrevocable, specifying the date or dates of the employer’s payment obligation? If these are so, might the obligee have no legally enforceable right to a signing-bonus payment until its agreed payment date? Might the employer’s obligation be set by the separate agreement?

The California "stay or pay" rule effective January 1, 2026 will in general prohibit clawbacks when an employee leaves employment. However, under limited circumstances, the rule does not apply to a signing bonus. Among the conditions for it not applying is that the employee must have the option to delay the signing bonus until the end of the retention period. Has anyone thought about the taxation of the signing bonus if it is deferred? Presumably, if it is considered "made available," it would be taxed immediately upon hire, even if the employee elected to defer it until the end of the retention period. And a signing bonus that is actually paid is taxed upon payment, even if it has to be returned if the employee doesn't stay until the end of the retention period, so presumably the same rule would apply to a bonus that is made available. In the 409A context, presumably in order to avoid this issue, a deferral is recognized only if it is made within the first 30 days, and only if it relates to compensation earned after the election. But a signing bonus is earned upon signing, so that wouldn't work here. Any thoughts?

WCC - thank you for the clarification. Of course, the people that make these rules don't have to communicate all the nuances to plan sponsors/participants!

In my experience, almost all business lawyers suggest bringing in an employee-benefits lawyer—even when working on a micro deal. Often, a client rejects that advice, does not engage an eb lawyer or consultant, and does not authorize the business lawyer to engage an eb lawyer or consultant. Also, some sellers and some buyers keep the deal-making secret from even one’s regular advisers, including some who might bill nothing for useful help. Bad consequences result, but it might not be the fault of a lawyer or other professional.

Entirely unacceptable, whether or not (as @Peter Gulia correctly points out) the transaction was "whole" or "partial". The most obvious issue: if there are unvested $$, the seller should have either (1) amended prior to the sale to provide 100% vesting for all current participants, or (2) included a similar provision in the buy/sell agreement. This issue has been on the radar screen of benefit professionals and attorneys for decades, so omission is unconscionable. There may be other similar issues, e.g., (a) modifying the participation requirement if current (non-participant) employees might be affected; (b) nature and responsibility of employee communication; (c) identifying responsibility for govt filings; (d) are there any non-qualified benefit plans; etc. If a stock sale (implied but not certain in the original post) and the seller was worried about inheriting liability, then the seller's advisors (legal and/or benefit consultant) were asleep at the wheel. Probably also the buyer's advisors.

I hope your seventh book will be the music notation and lyrics of your songs about the law of retirement plans.

Controls about identity or authority might call for different methods when none of the communication is face-to-face.

If the buyer bought shares, LLC interests, or partnership interests of the seller organization such that the buyer now governs the seller organization, the buyer may decide what to do with the seller organization’s retirement plan. If the buyer bought assets from the seller organization (and not shares or other interests of the seller organization), the seller organization, acting by whoever has power to act for it, decides what to with its retirement plan. This is not advice to anyone.

for MVP Plan Administrators, Inc. (Remote)View the full text of this job opportunity

Thank you! I thought we didn't have to include it, but then I started second guessing myself. Very much appreciated

for Nova 401(k) Associates (Remote)View the full text of this job opportunity

If the documents governing the plan provide no more than is needed to meet § 401(a)(9): “The account balance is increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. For this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year after the valuation date, but that are not actually made during the valuation calendar year, may be excluded.” 26 C.F.R. § 1.401(a)(9)-5(b)(2)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(b)(2)(i).

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If the key reason your client is thinking of dissolving a company is so the company and other business organizations are not treated as one § 414 employer, your client might reevaluate. In 2001, Congress recognized that an employer’s contribution to a retirement plan for a household employee is nondeductible if the contribution is not made for a trade or business. See Internal Revenue Code of 1986 (26 U.S.C.) § 4972(c)(6)(B) https://www.govinfo.gov/content/pkg/USCODE-2023-title26/pdf/USCODE-2023-title26-subtitleD-chap43-sec4972.pdf. I.R.C. § 414(c) refers to “employees of trades or businesses (whether or not incorporated) which are under common control[.]” If the LLC and its household employee do no work for a trade or business, there might be no need to treat the LLC as a part of the same employer as the businesses the owner controls. Consider whether the LLC might establish a § 408(k) SEP or a § 408(p) SIMPLE for its household employee. As always, get one’s lawyers’ advice. This is not advice to anyone.

Not a CG on the face of it. But there could be other factors, like options to purchase the stock, etc., so recommend that they check with their attorney.

Hi, I have a question about a Controlled Group relationship. A sponsor owns two companies: A and B. For company A, she has a 401(k) Plan and there is no 401(k) Plan for company B. Company B is currently an LLC (that she also owns 100% of) where she has 1 household employee. She is thinking of dissolving the LLC to avoid the 2 companies being in a Controlled Group relationship. According to the plan sponsor, the household employee (at Company B) is not part of a trade or business (and their payroll and any 401k contributions would not be tax deductible) so they believe the household employee would not need to be covered by the Company A's 401(k) Plan if the LLC is dissolved. "Reading from IRC 414: (c)Employees of partnerships, proprietorships, etc., which are under common control (1)In general Except as provided in paragraph (2), for purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416, under regulations prescribed by the Secretary, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer." Is this still a Controlled Group relationship and would the household employee from Company B need to be covered by Company A's 401(k) Plan.