Leaderboard

While Peter's answer is the right answer. It is my understanding the plan has a burden to keep the records to show this person was paid. Bird's answer is the most practical answer. I find if someone talks the person and points out the notice does say "may" be owed a benefit and the plan's records show they have been paid the person goes away 99.99% of the time. It is only if they don't go away after that you need to really start to go down the road Peter layouts out as a practical matter. Just to be clear have the client look for old records that might show if the person was paid or not. To make sure their benefit wasn't forfeited because they were lost of something like that. If the plan owes them the benefit the plan ought to pay the benefit. This by the way brings me back to a pet peeve of mine. Do those stupid "D" codes on the 8955-SSA. That would solve this. As I tell people all the time: When in doubt D. I have yet to see a D code to come back and bite me. I am asked all the time, "but what happens if we put a D code in and there wasn't an A code?". I have never seen that cause an issue. So when in doubt D. To the point if the client thinks they have old SSAs it might be worth to do a clean up filing this year to make sure anyone paid out and might have never had a D code filed gets one now.

This sounds like an overpayment failure correctable under EPCRS. Under EPCRS the plan does not have to request repayment of amounts less than $100. From Rev Proc 2019-19:

IRS Notice 2020-68 includes guidance about the tax-qualification condition that a § 401(k) plan (but not any § 403(b) or § 457(b) plan) permit an employee to make elective deferrals if the employee has at least 500 hours of service a year in at least three consecutive years and has met the plan’s age requirement (for example, 21) by the end of the three-consecutive-year period. The guidance includes vesting questions mentioned in this thread. https://benefitslink.com/src/irs/n-20-68.pdf See pages 9-12. Thank you to BenefitsLink for always posting these sources so quickly.

So people understand where this is coming from, the IRS told document providers in May of 2020 that discretionary match formulas had to spell out their allocation method, in accordance with the regulation mentioned earlier in this thread. As we discussed the issue with the IRS, this would take away the flexibility, for example, to have different rates of match for different employee groups, or to choose operationally the period used to compute the match. After protests from document providers and the American Retirement Association (and others), the IRS ultimately relented. The settlement required that language appear in the adoption agreement. Originally, that language was to read: To the extent a Discretionary Matching Contribution applies and the Employer makes such matching contribution to the Plan, the Employer must provide the Plan Administrator and Trustee, if applicable, written instructions describing (1) the matching contribution formula, (2) the computation period(s) to which the matching contribution formula applies, and (3) if applicable, a description of each business location or business classification subject to separate Matching Contribution formulas. A summary notice of these written instructions will also be provided to the participants. The instructions and participant notice must be provided no later than the time the Matching Contribution is made to the Plan. This language ended up being modified in early June, allowing for a communication (as opposed to a "notice") to the participants to be delivered no later than 60 days after the date of the last matching contribution. The notice only needs to be given for years the employer actually makes the discretionary matching contribution. There likely is slight modification in each provider's document, but the substance should be similar. The IRS made it clear that this settlement applies to the third restatement cycle. We may see the end of flexible allocation of discretionary contributions in the fourth restatement cycle, but that's down the road. The FIS approach was to offer two different discretionary matching formulas. One, what we called a "flexible discretionary match," is wide open on allocation methodology. You can have tiered matches. You can choose each year the period to be used in computing the match and whether you true it up. You can have different formulas for different groups. But the price of that flexibility is you have to give the notice. The other, what we called a "rigid discretionary match," specifies the computation period and allocates according to a single matching formula applicable to all participants benefiting from the match. You can change the limits on match and the match rate from year to year, but what you choose must apply universally for that year. The rigid match (which is still much more flexible than a fixed match) does not require a communication to participants. To the concern "what's the point of another notice," I understand and sympathize. But the IRS has broad latitude in issuing opinion letters for preapproved plans, and this was their decision. I appreciate their willingness to compromise on this issue. I am writing this as a private attorney, and not as a representative of FIS. The opinions expressed are my own. (That said, I do work as a contractor with FIS and am proud to be a part of their Relius document team. I participated in the design of their documents, including in handling this issue.)

I think we all know the answer to this as long as we include the agent's compensation in the universe of judging "economic benefit".

https://www.napa-net.org/secure-act-tax-credit-qas Technically it was NAPA. But no membership required.

Yes, this is a fiduciary, not a settlor, decision.

Generally, a selection of a broad range of investment alternatives is a fiduciary requirement. So evaluating the advisability of adding a managed account would seem to be a fiduciary decision. I don't know that there is bright line guidance of this and, when faced with that kind of decision, my own instinct is to ask if there is any real harm by having the fiduciary committee weigh in. In terms of liability -- the fiduciaries would be named in any lawsuit involving the managed account.

While we don’t know your situation’s particular facts, the plan’s administrator might consider asking for its lawyer’s advice about using 29 C.F.R. § 2560.503-1 and the plan’s claims procedure. https://www.ecfr.gov/cgi-bin/text-idx?SID=a4695688324f5ce300c2ed273609e32f&mc=true&node=se29.9.2560_1503_61&rgn=div8 If using it, one might follow the many points a carefully designed procedure ought to provide, including: Furnish, and explain, the claims procedure. Invite the claimant to submit evidence showing that a benefit is owing. Search the plan fiduciaries’ records for evidence about the probability (good or bad) that a benefit was paid. That might include evidence showing whether the administrator followed its procedures to direct payment of involuntary distributions, including on-severance cash-outs and minimum distributions. On a denial: Explain carefully the reasoning. Explain that the claimant must exhaust the plan’s claims procedure. Explain the claimant’s opportunities for further review and appeal under the claims procedure. Explain all time limits in the claims procedure. Explain (again, because it should be in the summary plan description), the plan-imposed “statute of limitations” on claims. There are several advantages to following the claims procedure. They include: If the denied claimant complains to the Employee Benefits Security Administration and EBSA opens an inquiry, the plan administrator’s records should show it acted at least in good faith. (In my experience, EBSA closes an inquiry—even if EBSA dislikes the administrator’s decision—if the record shows that the claimant was afforded her procedural rights.) If there is a lawsuit, the defendants might use the plan-administration record to show that the plaintiff’s assertion is so implausible that the judge dismisses the complaint for failure to state a claim. A court should limit its review to the plan administrator’s claims file. A court defers to the plan administrator’s decision unless it could not have resulted from reasoning.

My definition of "consecutive" would be "in a row" but I don't think you can require that, so I agree with your conclusion about when they should come in but suspect the language is a bit "off."

Aaaaaaaaahhhhhhhhhh! ?????

As you've described it, the S Corps seem to have been done correctly. But if the LLC is taxed as a partnership, the partners should not have received w-2 compensation. https://www.irs.gov/businesses/partnerships From the IRS: "Partners are not employees and shouldn't be issued a Form W-2." So, the CPA did it wrong. With that said, you will need to count both amounts from the LLC. Depending on the K-1 amount, the calculation might get tricky.

This was almost an identical set of assumptions that Norm Levinrad presented in one of his sessions at ASPPA. He described it as "indefensible shenanigans" if I remember correctly. WCP

"The agent wants to provide insurance..." You may have inadvertently hit the nail on the head. Bottom line you are correct for all reasons you state and then some. Ask the agent if the insurance co will opine that what is proposed meets the BRF requirements and if the ins co will indemnify the employer should the IRS disagree. Of course they won't. Every policy sold says the ins co is only standing behind the terms of the policy contract, and not any tax treatment.