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Many of you know that BenefitsLink is headquartered in the mountains of North Carolina. Thankfully, we're safe and sound, albeit without cell service and primary internet (thank goodness for StarLink!). Many around us are not. We know that Florida and Georgia experienced significant damage. The mountains of North Carolina and Tennessee took a devastating hit. Over 2' of rain fell in a large swath of the NC mountains; the runoff put rivers at historic flood levels. Power, cell and internet service are all down over a large area, roads are collapsed or otherwise impassable, and many homes and small towns are completely isolated -- or washed away. Two of the four interstate routes in/out of Asheville -- the two that cross the mountains to the west -- have washed out; a third route (to the east) is blocked in several places. The damage is almost unbelievable -- and the affected area is almost the size of Massachusetts. This area is not equipped or prepared for this level of catastrophic destruction. Mountain people are self-reliant survivors, both individually and collectively, but this will be quite a stretch. It will be a long, difficult road forward. Please keep all in this area in your thoughts and prayers. And if any of our BenefitsLink neighbors have been affected, please reach out on this thread - we'll do what we can to help. Lois and Dave

Pre-nup is not relevant. The Plan must follow its own rules for distribution and who is defined to be the beneficiary. Hint: likely, the plan defines beneficiary as "spouse".

Wrong on 5500 or 5558? Either way, I think you’re okay as long as the EIN and PN are correct.

it makes no sense to me that they are not doing an ACAT transfer for the brokerage accounts. Someone might have hundreds of positions in their account. I have never heard of these accounts not transferring in kind. I guess that doesn't help much but I guess would just really push back on that position. If Fidelity is the SDBA provider, they can transfer in kind to Schwab, etc. That happens literally all the time.

100% correct. Executor - you need to listen to David. it is a very common mistake that people think their pre-nup has any bearing on the 401(k). It doesn't. The spouse has to sign the beneficiary form waiving their benefit if the participant wants any portion to go a non-spouse. The spouse has to sign after the marriage occurs. Some basic searching online for court cases will demonstrate this. The plan administrator doesn't care what the pre-nup says. All they can follow and should follow is the terms of the plan and a valid beneficiary form. If the widow received the 401(k) $$ and some other agreement says they shouldn't, well then the estate or whoever typically would take legal action to try to resolve that, against the widow. It isn't an issue for the plan. Any competent estate lawyer would know about this when drafting the pre-nup and explain it to the parties. And that is why a post-marriage checklist exists for a reason. But no one can force people to sign anything. I suggest you contact an experienced family law attorney if you want to pursue it further.

She is subject to the same eligibility conditions as all other employees. Now if you are asking if her unpaid service counts towards the 1000 requirement, that's not an argument I'd like to have with the IRS on audit.

If it's not an annual addition because of their 415 limit being zero, I'd argue those aren't actual deferrals triggering the THM. (As opposed to an ADP refund)

Thank you so much -- this area needs all the help we can get. More info is coming out, and it just looks worse and worse; the toll both in lives and in economic loss is going to be staggering. Samaritan's Purse is on the ground -- distributing food and water, setting up field hospitals, etc. Operation Airdrop has been in the air for two days -- helicopter is the only way to get to many locations The Y'all Squad -- they're buying and installing portable StarLink units; communication (even among first responders) is the biggest struggle right now.

The plans may be optionally (the word in the reg is "permissively") aggregated for coverage and nondiscrimination. If they pass separately, then they do not need to pass combined. If the plans are aggregated for either coverage or nondiscrimination, they must be aggregated for both. In other words, you have to use the same options for both coverage and nondiscrimination. All plans of the employer must be aggregated for the average benefits percentage test. If both plans cover a Key employee, then they are part of a required aggregation group for top heavy purposes.

Yes

Nah, I don't see the point to be honest.

There can be reasons for a participant in an employment-based retirement plan to prefer it over an Individual Retirement Account. Among them, opportunities for guarding a retirement asset from some kinds of creditors’ claims might be better with an employment-based plan (even if not ERISA-governed) than an IRA. This might be so not only under bankruptcy law, but also under other laws. As CuseFan suggests, there is no shortcut; one must get into the details of those laws and how they might apply to facts and circumstances the individual plans against. The individual might want not only legal advice but also practical advice across her whole team of advisers, including lawyers (for each topic), certified public accountant, physician, actuary, financial planner, investment adviser, and TPApril. This is not advice to anyone.

IRC 401(k)(2)(B) Also, paragraph 1.401(k)-1(d) of the regulations.

Agreed, the Catch-Up limit for ages 60-63 is $11,250, so the total is $23,500 + $11,250 = $34,750. Note, the unrounded amounts were just a few $ short of the next "bumps" .... would have been $24,000 + $12,000 if September CPI had come in slightly higher. .... Jeff

The CPI-U for September 2024 was published with a value of 315.301. Based on Tom Poje's spreadsheet, the dollar limits for 2025 are projected to be: Almost all increased (NOT Official yet, of course): Deferral limit: $23,500 (up from $23,000) Catchup: $7,500 (unchanged) Compensation Limit: $350,000 (up from $345,000) Annual Addition Limit: $70,000 (up from $69,000) DB Limit: $280,000 (up from $275,000) HCE: $160,000 (up from $155,000) Key Employee: $230,000 (up from $220,000) Just for reference, the unrounded figures are: Catchup: $7,997.50 Deferral limit: $23,993 Compensation Limit: $354,260 Annual Addition Limit: $70,852 DB Limit: $283,408 HCE: $160,072 Key Employee: $230,269

We typically don't see this if the plan has been terminated for a while. Usually when amounts do appear well after the termination and final reporting of the plan, the amounts are attributable to a settlement of litigation. It would be absurd to resurrect the plan, update for recent legislation, pass around some pennies, make payments, amend the prior final 5500, prepare a few more 5500s for the intervening years and file another final 5500, send SAR to participants, ... Let's get real and not overthink it. The trustees or plan sponsor should ask the brokerage firm to close the account and write off the amount. If the brokerage firm adamantly refuses, then one of the former service providers likely will be willing to send an invoice to the brokerage firm to close out the account.

Its plan design. The plan is safe harbor regardless of any actual deferrals and match contributions.

Where I personally land is that we all seem to agree that the law does not say there is a requirement for a sweep. You only have people who are saying it was "probably what they meant." I fail to see how anyone can be faulted for applying what the law actually says. Now if you limited your EACA to anyone whose last name started with a Z I'd be concerned for you.

For all you folks who may be impacted, here's hoping you come through it with minimal effects. Best of luck!!

Don't think so, but also remember that neither spouse can be involved in the other's business for a control group to no longer exist. Sometimes, sponsors and/or their practitioners want there to be a CG and so create some cross-involvement to get there.

A brother-sister controlled group requires 80% or more common control. It doesn't sound like that exists here.

You can’t merge a 401k into a 403b. But I think that’s the least of the issues. seems like the guy is wanting to use a not for profit entity to pay the wages of the people that actually work for his for-profit business. I would have to imagine there are legal issues with that and I would avoid it. If you can insulate yourself by having his CPA and an ERISA atty drive the decisions, then you should be good.

Sorry, I did not read the entire monograph. What I did read focuses on an important matter that is not relevant to the question at hand in this thread. The latter part of the monograph may address the question of a specified dollar amount, so my apologies if I have unnecessarily jumped on the first part without acknowledging that the monograph gets around to what is relevant here. The monograph begins by focus on when the alternate payee’s interest is determined, usually as a function of some date relevant to the divorce, such as when the divorce is determined to be final. The examples relate to determining a percentage of the participants account as of that key date. That amount, with the presumption of crediting earnings and losses until the “segregation” date, which I have referred to as the date that the plan actually creates the alternate payees subaccount, needs to be preserved through the interim time before implementation under the plan to be able to give effect to the words of the domestic relations order and the intended economic value of what was awarded. An award of a specified dollar amount is outside of the considerations described in the beginning of the monograph. The specified amount is determined without respect to any particular historical date in our case. The order itself instructs the plan administrator to simply use that specified amount when the administrator establishes the subaccount, and then give credit for earnings and losses after that. That is a clear statement of the intent of the court and the parties, which should be the determining factor in implementation of the order, not some state law legal presumption that involves a determination of amount that is dependent on a particular date rather than a specified amount. And, while abstract notions of fairness would suggest that determining the value as of the divorce date is the “correct” approach, it is rational for the parties to pick a specified amount, that the alternate payee is entitled to receive as of the time the amount is established under the plan, without respect to what the financial markets have done between the date of divorce and the time the plan gets around to establishing the sub account and making the amount available for distribution. The parties may have intended to protect the alternate payee against losses, at the possible expense of foregoing interim gains. That is for the parties to decide or the court to determine if there is some contest. It is certainly improper for a plan fiduciary to try to look into the purposes and intents of a domestic relations order and override the terms of the order (citations omitted, but available, and that’s THE LAW).

Participants may have the ability to make trades in accounts but they aren’t the “owner” of the account, the trustees are. The trustees have the ability to liquidate whatever account they want. If they haven’t done so, it’s on them.

Track it separately and manually adjust whatever reports you get from RK B?

Are you saying that (in your example), the QACA contribution for 2025 has a 2 year vesting schedule and the QACA contribution for 2026 has a separate 2 year vesting schedule? Because if you are, that’s wrong and vesting like that hasn’t been allowed since the 80’s.

You're overthinking it. Nothing in SECURE 2 says that top heavy is "tested separately" and to be honest I don't know where this common misunderstanding is coming from. The top heavy determination is still done based on all participants in the plan. There is no disaggreation for determining the top heavy ratio. What section 310 of SECURE 2 says is that, for plan years starting in 2024 and later, otherwise excludable employees no longer have to receive the defined contribution top heavy minimum. That's it.

"By the way, a lady in a bar told me I had a mistake of face once. No respect!"

If they are employees, they count.

We have them contact their insurance agent.

unless the life insurance policy is owned by one of the entities in the "FROM" column the answer is likely no. https://www.irs.gov/pub/irs-tege/rollover_chart.pdf You own the policy yourself? directly? I don't see why it would be a rollover, its not coming from a tax qualified retirement account. I realize the life insurance feels like a tax qualified account - but it is a very specific kind - upon death. Its not the same as tax deferred or tax qualified retirement account. which is what it needs to be coming from in order to be eligible for rollover into a 401(k) plan.

We would never send out a $0.00 1099-R. Our position is the taxable amount is after the fee. So there wasn't a taxable distribution in this case. I see what is in effect the fees resulting in the person having no balance after the distribution and got no payment on a regular basis where I work. Peter, normally I find your insights valuable. In this case I am going to go on record saying you're over thinking this one. Back to the original question. In the case of the smallest balance you listed every place I know that sets up an IRA would change you more to do so than the balance listed. The choices become keep the money in the plan or pay the person and watch fees eat the whole payment.

I assume the plan has an eligibility fail-safe that says a part-time employee who actually completes 1000 hours in a year will enter the plan. Otherwise you have an illegal service-based eligibility requirement. So, all employees who have completed 1000 hours of service would be eligible for the plan. Therefore, you can use the option to disaggregate the otherwise excludable employees, and as long as there are no HCEs who have never completed 1000 hours, it should pass at 100%.

Truer words wuz never spoke! It'll be ok for many employers, and others will botch it badly. Retirement looks more attractive all the time...

Just from a provider perspective not sure I hit all your points but, I tried. So this is FINCEN related, broker dealers have to have Customer Identification Programs (CIP) and do Customer Due Diligence (CDD)programs under the financial crimes regulations. There are carve outs for employee benefit plans from these rules, so technically individual participants don't need to be put through those programs, unless it happens to be a SEP or other IRA program. I assume the rationale is employer sponsored retirement plans have a lower incidence of Money Laundering and fraud? The BD would still need to do CIP and CDD for the entity setting up the plan. In my own experience no participant account can be established without enough information for tax-reporting. So essentials for that would be name, address, birthdate, and social security number. Without that an account couldn't be set up. An employer usually has this readily available and could establish accounts on behalf of the participants. Typically SDBA participants have a separate sign-in to validate an account for SDBA i.e. they have to go in and accept terms in order to trade on the platform. These are all e-signatures now, they don't do paper. There is always a money market or other cash equivalent account tied to an SDBA, they have to transfer from in order to trade. I think cash accounts are built in to SDBA programs. At least this is how Schwab and TRowe worked. Also I would note that if an account is created with bad information, and say a duplicate SSN is found and it is discovered, any funds in that account will usually be sent back to plan sponsor f/b/o the participant because the account information for account opening was not in good order. Good order is a condition precedent for opening an account in most contracts I have seen. One of the reasons recordkeepers and B/Ds don't want to open accounts without information is because, they (or their related entities) are often the "payor" for the purposes of the IRC and can be fined if they don't have enough information to withhold and report. The fines can be substantial. In sum, yes, the employer would have all the required information to open the account, and be able to initiate the opening, however, if a participant hasn't validated their account they would not be able to trade on the platform and funds would be held in a cash until they did and that could be forever in some cases.

I dealt with a similar situation earlier this year, perhaps involving the same Russian ETF. The assets could not be transferred to the new recordkeeper via ACAT because they are subject to OFAC blocking sanctions. The fund wasn't available in the new SDBA so they could not be transferred in-kind, and these assets legally cannot be sold or traded so they could not be liquified. We discovered one participant had holdings in the Russian ETF during conversion, and we simply left those holdings at the prior recordkeeper. All other assets were transferred. We will continue to track and include these assets for 5500 purposes etc. until sanctions are lifted and they can be transferred or liquidated, or the underlying companies in the portfolio file bankruptcy and the holding can be written down to $0. The only other option we considered was whether the participant could take an in-service withdrawal and roll those assets into an IRA with the prior recordkeeper. The recordkeeper said they could accommodate this, and the participant was interested in doing it. Unfortunately, in our case the participant wasn't eligible for an in-service withdrawal.

In order to be a safe harbor definition of comp, it has to include 125 deferrals as well as 401(k) deferrals. Box 5 is grossed up for 401(k) deferrals but not for 125 deferrals.

I agree with @Bill Presson as far as credential is concerned, but I am not aware of a requirement to have the prior credential to take the exam. In other words, you can take the exam before you have the QKC designation, but you can't apply for QPA without having met QPC. I took the exams out of order before there was a QKC designation, but this was back in the hunter-gatherer days...

Thank you very much for your response. It seems I need to complete the QKC first. Best regards, John

Exactly, that would be a very plausible reason for final filing to show BOY $0 and EOY $0 as is the now worthless assets. Even if it is scrutinized, nothing to see here, just move along.

Surrender the excess insurance.

That a plan existed before the first day of the reported-on year yet begins the year with assets valued at $0 might not attract unwelcome attention. If you want a practical sense about whether a BoY plan assets of $0 would attract a filing-error message or an edit check, enter the plan’s information and see what message (if any) your software turns out. Consider also that if a one-participant plan never had enough assets that a Form 5500 report was otherwise required (and all years before the final year went unreported), the plan might not be much of an examination target to which the IRS would devote scarce resources.

Yeah, I've never EVER even SEEN a SAR distribution date even questioned. Doubtless I just jinxed myself...

The Section 125 cafeteria plan nondiscrimination rules are going to create issues here. A "stipend" in this context would likely have to be a flex credit to meet the §125 requirements and avoid constructive receipt. That flex credit would subject to the same Section 125 nondiscrimination issues as a simple increase to the employer contribution of the premium. In other words, HCPs generally could not have access to flex credit amounts that non-HCPs do not. The main exception would be for regional classes. The workaround here is far more simple. They can pay the affected employees more in wages. If those employees use those additional amounts to pay for the increased cost of coverage on a pre-tax basis through the cafeteria plan, the net result can be the same for both parties. Here's more discussion: https://www.newfront.com/blog/designing-health-plans-with-different-strategies Here's the relevant cite: Prop. Treas. Reg. §1.125-7(c)(2): (2) Benefit availability and benefit election. A cafeteria plan does not discriminate with respect to contributions and benefits if either qualified benefits and total benefits, or employer contributions allocable to statutory nontaxable benefits and employer contributions allocable to total benefits, do not discriminate in favor of highly compensated participants. A cafeteria plan must satisfy this paragraph (c) with respect to both benefit availability and benefit utilization. Thus, a plan must give each similarly situated participant a uniform opportunity to elect qualified benefits, and the actual election of qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect permitted taxable benefits)…A plan must also give each similarly situated participant a uniform election with respect to employer contributions, and the actual election with respect to employer contributions for qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect to receive employer contributions as permitted taxable benefits).Prop. Treas. Reg. §1.125-7(e)(2): (2) Similarly situated. In determining which participants are similarly situated, reasonable differences in plan benefits may be taken into account (for example, variations in plan benefits offered to employees working in different geographical locations or to employees with family coverage versus employee-only coverage). Here's a slide summary: 2024 Newfront Section 125 Cafeteria Plans Guide

Someone 25 years ago introduced the concept of "class year vesting" to newbie me, and already as not allowed.

Is the business continuing and he just doesn't have plans right now to make contributions or is there going to be no business going forward. Because the Plan needs a sponsor. FWIW, I've run one person DC plans in retirement for people where it is clear there are no intended contributions. It usually involves a plan investing in non-traditional assets where the fees to administer the Plan, maintain the document, and file are EZ along with potential for IRA audit are cheaper than if the owner paid a custodian a fee to hold non-traditional assets in an IRA. This can have it's own set of issues but sometimes it works. But you do need either a an on going corp to sponsor the plan or a sole-prop with at least enough periodic income to be considered active to sponsor the plan.

Boy sure would be nice if the IRS had clear guidance on M&A and how it affects plans and testing wouldn't it? I think the approach taken is reasonable and would not be challenged by the IRS assuming A now owns all of B or at least enough for a CG to exist in the testing year. I also think testing them separately would be acceptable as well.

That rule—26 C.F.R. § 1.414(c)-5—refers to an 80% overlap in the governing bodies of exempt organizations, which the rule describes as “an organization that is exempt from tax under [Internal Revenue Code] section 501(a)[.]” https://www.ecfr.gov/current/title-26/section-1.414(c)-5. Although a public-school district is not subject to Federal income tax, that results from law other than I.R.C. § 501(a). Further, even if one were to interpret I.R.C. § 414 to treat a public-school district and a foundation as one employer, that might not necessarily answer questions about whether a governmental plan may cover the foundation’s employees without losing ERISA’s governmental-plan exemption.

My recollection is that the regs regarding non-profit entities (501(c)(3) ?) suggest a controlled group concept involving shared Board members and control by one entity over the other. That's my recollection without looking it up. But Peter is right, Carol is the person to ask and I have worked with her firm in the past.

Work we did on September 11, 2001 and soon after in managing some consequences from that day’s deaths, injuries, casualties, and other harms remains a deep reminder about what matters in every aspect of our lives and faiths.