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Hi Corey, thank you for taking the time with the explanation and warning but my question was about the technique rather than the available options - they are always presented to the clients. I would never let the client go off too easily on any option other than the term, in the least, and always and strongly advise them to choose J&S, if married or have other beneficiary options. David, yes, I am aware of the 12/31/2024 but I was just providing as an example however, thanks for pointing it out, just in case. I am trying to confirm that it is ok the client can get 12x the payment in one shot rather than monthly withdrawals. It is a fight with them and at the end of the day, they do whatever they want despite my written CYA. All I am looking for is some suggestions/comments on the math technique.

Thank you Brian, that's helpful! I have another question for you, if you don't mind - if the ESRP is being triggered by reporting errors, do you see ALEs including supporting documentation in their response? Or is describing the corrections needed in the ALE's response enough? And if the error was the MEC offer indicator in Part III, column a of the 1094-C (i.e., incorrectly checked "no" to offering MEC to 95% of full-time employees), and supporting documentation is required, what type of supporting documentation is sufficient?

Consider buying into an existing TPA? That is, look for a TPA that has an owner who might be retiring 5 years from now. Get legal advice from attorney with relevant experience.

The last time I looked at it an accidental rollover from a 401(k) to a Roth IRA cannot be reversed or recharacterized. I haven't looked at this recently so the law could have changed but I don't think so. This could be done prior to 2017 or so but the Tax Cuts and Jobs Act of 2017 eliminated the ability to "undo" or recharacterize Roth conversions making this error irrevocable. You must treat the distribution as a taxable event, which will generally be reported on your tax return for the year the rollover occurred. So this will have to be included in gross income for the tax year the transaction took place. Not sure of the Form that should be used to this 4852 or 5498. Also, could be subject to early withdrawal penalty if an exception does not apply. Bottom line is the funds can’t be moved back into the 401(k) or into a traditional IRA. Once the month is in the Roth IRA, under current law, it stays

Husband/wife DB plan 404 limited in 2024 so set up a Profit Sharing plan where they maximized at 25% of pay. W-2 salaries for 2025: $280,000 and $100,000 In 2025 DB 404 limit came to $40,000. Would they be able to do the 25% of pay ($95,000) to the PS for 2025 or have to do something less?

Note that under ERISA a valid QDRO does not require the signatures of both parties. The essential legal requirement is that the order be issued or approved by a court of competent jurisdiction. However, judges normally insist on both signatures to confirm that the document accurately reflects the parties' divorce settlement before they will sign it…. having both signatures is the standard to avoid a contested court hearing but sometimes it is necessary to file a DRO only one signature (e.g., a former spouse refuses to cooperate, so the other spouse petitions the court to issue the order regardless of their lack of consent) but in these cases the judge usually requires that they show that the QDRO aligns with the existing court-ordered property division. If the OP wants to contest the property division, that’s a bigger issue than a QDRO

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As @RatherBeGolfing is alluding to, it depends…if the PS plan already has a 401(k) feature in place, a safe harbor match can only be added at the beginning of a future plan year. If the PS plan does not have a 401(k) feature, the safe harbor feature can be implemented on a prospective basis for 2026 as long as it is in place for at least 3 months of the year. So, if the PS plan doesn’t have a 401(k) feature and is a calendar year plan, it can add the safe harbor match until October 1, 2026. If adding a safe harbor nonelective there is more flexibility, including retroactive options.

It's been 10 years since we sold our TPA shop (started it in 1982) - a lot has changed in the past 10 years. I couldn't tell from your post if you have a book of clients that would follow you (or what problems you might incur if you try to pull those clients). You might want to consider these steps: 1. Do a 5 year financial projection - best case, middle case and worst case. If you can't financially survive, more deliberation is moot. 2, Research other recent TPA startups - you may be able to glean a lot from these. 3. Talk to vendors - TPA software, CRM, investment platforms - they know a LOT! 4. Do a 5 year business plan - how will you acquire and service clients, staffing, etc. 5. Do a SWOT analysis of #1 & #3. 6. Start from scratch or buy a firm? Best of luck

Glad to hear it's working out well for you. In my experience, I've never seen the IRS try to bring the hammer down on someone who was demonstrably making an honest effort to comply. They are pretty lenient with waiving penalties as long as you can show you were trying.

To satisfy the RMD in a DB plan, the participant must commence distribution of their entire accrued benefit no later than the RBD. What does the plan document say about the available forms of benefit? I suspect it offers a few annuity options, with monthly or annual frequency. The participant would need to elect one of the available forms of benefit and commence distribution under the selected form. Conversion of the accrued benefit to the elected optional form must be done according to the plan document's rules. In regard to your questions, consider this: I'm assuming your acccrued benefit numbers are single life annuity amounts. What would happen if the participant commenced distributions as a monthly life annuity on 4/1/2026 at $1,090/month and then died on 4/2/2026? Now compare that to what would happen if they took $9,810 on 4/1/2026 instead. Do you see the problem? As an aside, this is why you should never do RMDs from DB plans as life annuities. Use a term certain only annuity without life contingencies, that way if the participant dies, the undistributed part of their accrued benefit is not forfeited. Alternatively, you can do a lump sum distribution of the entire accrued benefit, use the DC account balance method to calculate the portion that is an RMD, and roll over the rest. Just be aware of 436 restrictions and the 110% funded rule if you go this route.

This is very helpful, thank you!

Hi everyone, No one replied to my OP which is cool, it was a lengthy post, but I decided to provide updates in case anyone has an interest. So, the post-dated check to the IRS is now showing as "pending" in my wife's checking account which is great news. It means my concerns over the clerical error on the date of the check were overblown and (assuming the "pending" status is removed and we see a check image or EFT notification in the account by let's say Monday) the first hurdle is passed. I've also called the Employee Plans center in Ogden Utah a couple of times and they've been quite helpful. You have to ask for an Employee Plans specialist because the first-level phone CSRs aren't necessarily accurate. For example, a couple of them insisted that the penalty relief program for 5500-EZ was handled by DOL which is obviously mistaken. So anyone in this situation who wants to contact IRS needs to ask for an Employee Plans specialist. I'm probably not telling any of you experts anything you don't already know though. Hopefully this helps someone else.

In my experience, auditors typically send a formal Request for Information (RFI) or Prepared By Client (PBC) list, outlining exactly what they need and the expected date of their arrival. The scope depends on the type of audit. Below is what is generally requested in a retirement/benefits environment. Auditors almost always request foundational documents first: Plan document (current and prior versions) Adoption agreement Summary Plan Description (SPD) Trust agreement Service agreements (TPA, recordkeeper, custodian) IRS determination or opinion letter (if applicable) Most recent Form 5500 and schedules Auditors will request detailed census data such as: Employee eligibility dates Compensation used for deferrals Hire/termination dates Date of birth (for testing) Hours worked (if eligibility is hours-based) Ownership status (for controlled group testing) They may ask for other items as they review the files.

Our firm pretty much exclusively has done small / micro plans (90% of our plans are <1M in assets and under 30 participants). As we grow, I know large plans are likely something we'll have to deal with eventually. We have one plan that's getting close enough to the threshold for requiring a large plan audit that we know we need to start thinking about that in the next few years. With our plan demographic, we've never once actually had a large plan audit. What kind of things should we expect? Does the auditing firm just ask us for a bunch of reports, and if so, what kind of information is generally requested? In the case that anything out of place is found, how much leeway is there in terms of them talking to us about correcting it vs reporting failures on an audit? I'd hate for a large plan audit to be the way we find out we're operating something wrong & cause problems for a client. Any guidance as we start to move into plans that may require audits?

I don’t suggest a settlement agreement, when there is one, always is incorporated into a divorce decree or other court order. I’ve seen many domestic-relations orders that did not do that. And my observations are from all 50+ States. (Whether an incorporation-by-reference is a good or a bad thing for a domestic-relations litigant is beyond my scope.) While each plan sponsor, plan administrator, or service provider might have a range of purposes, needs, and interests, I have often suggested a retirement plan’s administrator ought to prefer, and, to the extent applicable law permits, require, a domestic-relations court’s order the administrator can apply with no need to look at—and a preference to avoid seeing—a settlement agreement, a divorce decree, or any writing beyond the single-purpose order a claimant seeks to get recognized as a QDRO. (It might have been better for the Office of Personnel Management to have considered a similar clarity and efficiency when making its part 838 rule.) Your client has a helpful view. I wish you luck in persuading someone at OPM to think.

No. Pastor wants to make gross compensation disapper.

In my view (which is not advice to anyone), a fiduciary ought not to direct paying or reimbursing from plan assets such a penalty if a fiduciary, a service provider, or an employer is responsible for the act or failure to act that results in the penalty. That’s so even if a penalty was administratively addressed to the plan. If an employer paid a penalty but another person was at fault, the employer might get its lawyer’s advice about rights and remedies regarding the other person.

Sorry, misworded, what I meant was, getting the RMD all in one shot rather than as monthly benefit, not lump sum per se.

"...take a lump sum..." implies there is a distributable event. Is there? By the way, the RMD at 4/1/26 is not based on the accrued benefit at 12/31/25, but on the AB at 12/31/24. (Of course, the participant can take more than the RMD.)

Incredible. This seems like such a basic calculation they can be programmed into the payroll system. They have the comp and the deferrals. I am really surprised.

None of our clients who have plans with SHMACs use Gusto, but as for the payroll companies they do use (some of which are very large and well known), there are some that do not offer that service. As for the few that do, we usually find inconsistencies on a regular basis, so we have to double check whatever they do - spot checking just a few participants is not recommended. It would seem it's difficult to find a reliable provider, but I would like to be proven wrong.

IRS issued Notice CP1348 assessing penalties regarding a profit sharing plan due to distributions being made to terminated participants without federal tax withholding payments being submitted nor the Form 945 being filed. The Notice was addressed to the plan and stated that the plan's TIN should be written on the penalty payment. The employer paid the penalties, which were over $10,000, from the plan - AI says this is a prohibited transaction - do you agree? The plan has a pooled arrangement, so if the penalties are a valid plan expense, each participant would be dinged an average of about $300, which could become as issue.

Hi A bit confused due to intensive number crunching and brain is fried so need to double check the following and also the client may not be listening to me. Client turned 73 in 2025, so RMD is due 4/1/2026. Already 100% vested Q Part 1 12/31/2025 AB is 1,000/month and AE at 4/1/2026 is 1,090/month (making up the numbers) Starting 4/1/2026, monthly would get 1,090/month till 12/31/2026 (9 payments). Now they want to take the full amount on 4/1/2026 i.e. 9,810 (9*1090) Any problem with this? Q Part 2 Come 1/1/2027, the RMD continues to be 1,090/month till 4/1/2027 but does not take any monthly as he wants to take a lump sum. Say 12/31/2026 AB is now 2,200/month and next payment cycle is 4/1/2027 and the AE at 4/1/2027 is 1,300/month. So starting 4/1/2027, RMD is 1,300/month+1,090/month Clients says I want to take out all in one lump sum on 4/1/2027 i.e. 1,090*12 + 1,300*9 And future years continue with the same cycle. What am I calculating/thinking wrong?

TO: Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Peter: Thanks for your comments. Let me tell you what I have learned from various sources: 1. You and one of my Maryland colleagues, using simple logic (whatever that is) suggested that the Marital Settlement Agreement (MSA), if there is one, is always incorporated into the Judgment of Absolute Divorce (JAD) that you must send to OPM so they will have complete JAD. My grandkids would say something like "DUH?" 2. You and I both discovered 5 C.F.R. § 838.123(a) - https://www.law.cornell.edu/cfr/text/5/838.123 and realized that "other required supporting information" could easily deemed to include the MSA. 3. Everybody said that they had NEVER been contacted by OPM about the MSA and none of us believed they actually read it. 4. Everybody was aware of 5 CFR 838.101(a)(2): "(2) In executing court orders under this part, OPM must honor the clear instructions of the court. Instructions must be specific and unambiguous. OPM will not supply missing provisions, interpret ambiguous language, or clarify the court's intent by researching individual State laws. In carrying out the court's instructions, OPM performs purely ministerial actions in accordance with these regulations. Disagreement between the parties concerning the validity or the provisions of any court order must be resolved by the court." (Emphasis supplied.) 5. My client was concerned about giving so much information to OPM, even if it was heavily redacted, given that in 2015 OPM suffered a data breach that compromised sensitive, personal, and background investigation files of approximately 21.5 to 22.1 million people. 6. One of my colleagues pointed out the DFAS also requires a copy of the MSA in connection a Military Retired Pay Division Order. 7 . Nobody could remember any other ERISA Plan Administrator every asking for a copy of the MSA. See ESBA Advisory Opinion 1999-13A and Blue v. UAL Corp., 160 F.3d 383, 385 (7th Cir. 1998) - https://scholar.google.com/scholar_case?case=10750404539478630173&q=blue+v.+ual&hl=en&as_sdt=20000003 . 8. You alone led me to SF-3119 - Application for Court-Ordered Benefits for Former Spouse, with the following language: "Supporting documentation must be submitted with this application. This includes an original or certified copy of the court order with the judge's signature that meets all requirements for state certification of court orders. Additionally, all documents referenced in the court orders must be included as well as marriage certificates, divorce decrees, and/or death certificates for additional marriages (see Section C). Divorce decrees include, but are not limited to, the Property/Marital Settlement Agreement, Divorce Decree, or Qualified Domestic Relations Order, etc. If you have already submitted a certified copy of the court order, you do not need to submit it again." (Emphasis supplied). I will update is I receive any other information. Thanks. David Goldberg