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Or tell them it seems wrong and ask for their legal or CPA back up. The time to make it right is now, not after it happens.

Hi Bill The plan's effective date is prior to SS4 but execution date is after the TIN was obtained. It is not a concern to change the plan name, just seems odd. Take care and happy Thanksgiving

I agree with Bill's post above. I was wrong before. The IRS regulation (thanks, Bill, for quoting it) contrary to my recollection does depend on what the plan's provisions are. The regulation states that all five requirements must be met. (iii) is not met. Therefore, we can't use the "exclude terminated employees with < 501 hours of service rule" from (v). Strongly consider switching to using a last day of the plan year snapshot date testing method to circumvent the testing difficulty.

Are you certain the stock repurchase will generate W-2 income? Generally it's a capital transaction if the employee is selling stock he/she owns outright (unless the employer's repurchase is at a significant premium or is otherwise some form of disguised compensation).

On reading the instructions again, it seems as though we ahve until March 2021 to file and pay the tax.

I'm probably on the short side of this one - but to answer the OP's question, it is *NOT* a problem for the employer to have all of those terminated participant's accounts in the plan. Indeed, the employer might not have a choice in the matter. Second, these are *NOT* "orphaned" accounts. Most people are fully aware of their balances in the plan (at least if it's substantial) and choose to leave it there. I for one have money in my current employer's plan, and three previous employer plans. I do it for several reasons - including 1) I like the investment options offered; 2) I like that those investments are "institutional class shares" priced at a level that I can't match in a retail IRA account (and one of my former employer's, who shall remain nameless, but the Chairman use to advertise that you can "talk" to him) makes about 5 times as much on an IRA as they do on money in a plan (and they, as a financial services company that provides services to retirement plan is in the business SOLEY to attempt to capture rollovers); and 3) for competitive intelligence purposes (I get to see the new bells and whistles others roll out!). J/K on the last one (but I do compare). In my experience, some (many?) employers actually take a paternalistic view on this and try to keep money in the plan. It might benefit the plan (more purchasing power), and provided they are well above the audit threshold number, it isn't too problematic. Fees can be past through to terminate participants (only) if they so choose, and you may have a problem with missing participants - but otherwise, not a problem.

Sounds like we use the same auto-rollover provider Larry does. They also accept auto-rollovers of less than $1,000. All of our plans that auto-roll apply it to all balances under $5,000. That takes care of the problem of terminated participants with a small balance who disappear.

At plan termination is when the problem of lost participants go away. Because at plan termination, we can do a mandatory rollover for participants who cannot be found, regardless of the amount. Our plans have that language and yours probably do too. Our rollover company get the SS number and LAST KNOWN ADDRESS; they are experts at finding people, and even if we don't have last known addresses, they will work with just the SS number and still most likely find the person. More importantly, it ain't our problem any more when the funds have been sent off to the IRA provider.

We've had situations where the employee just calls the employer one day and says that he is "quitting"... and never shows up again. Others just don't show up for work... with no contact with the employer. No valid addresses in either case. And, terminated employees that "move on" with no current addresses and become "lost" is a major problem if and when the plan terminates.

One often overlooked advantage from the participant's perspective to doing a direct rollover is the ability to take partial withdrawals if/as possibly needed, and to do so without 20% mandatory withholding. Few smaller plans permit partial withdrawals (all or nothing). Your plan's investment advisor should be a help in communicating the distribution options to terminees, and many institutional recordkeepers provide a free rollover service (to their own IRA, of course). Millenium Trust and PenChecks are two independent companies that offer solutions for lost inactives (i.e. terminated participants with vested balances) and returned or uncashed distribution checks.

Shuo, if you are thinking of starting up a plan for your new business, there are some things you will want to consider with respect to this issue of terminated employees leaving money in the plan. 1. You can write the plan to say that if the terminated employee's account is less than $5,000, then if they do not affirmatively elect to withdraw their money, the plan will force out the account. It will be paid to the employee in cash if it is less than $1,000 or rolled over to an IRA if over $1,000. 2. When the employee terminates, immediately give him the necessary paperwork/forms to request a withdrawal. Make it as easy as possible for him to process the payment. You can also make a point of sending distribution reminders to terminated employees each year. The benefit of having the terminated employee remove the money from the plan is that the company may be paying fees on those people, to the recordkeeper or the TPA, which you can reduce by getting those accounts out of the plan. The biggest issue I see with having terminated accounts sit in the plan is that over time, as people move, the employer no longer has valid addresses for those employees and they become "lost" and as the plan sponsor you have a responsibility to be sending certain required notices to those employees, which you are unable to fulfill because you don't have a good address for them. So I think you do want to try to encourage them to move their money once they terminate. But, legally, to the extent that the account is over $5,000, you cannot force them to withdraw the money until retirement age. Some employees will choose to leave their money in the plan because the investment fees may be lower for them there than what they would pay on the open market. Just be very diligent in keeping up-to-date address info for terminated employees who do choose to leave their money in the plan.

Huh??? I am not sure what scenario you are thinking of for this. Vanguard itself is owned by the Vanguard mutual funds (it is a mutual, mutual fund company), and the Vanguard mutual funds are owned by the shareholders of the funds. The investments of the mutual funds are really well diversified, so I am not sure how "Vanguard" could go under. Maybe it's possible, but it seems like they would have to purposely try to go under. Also, I think you are also mixing up provider bankruptcy versus personal bankruptcy. Creditors could get IRA assets pre-BAPCPA of 2005, but no longer.