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Personally, I would say, "don't over think it". No one is really watching this, so if the plan has sufficient assets to terminate, recommend to the sponsor that they terminate. If they don't move to terminate, keep telling them they are out of compliance every year and that they should either terminate or restart accruals. I see this topic talked about a lot on message boards, but have never seen the IRS raise the issue in practice. Not saying they don't, not saying it isn't a legitimate concern, just don't overthink it and try to get the sponsor to move at a reasonable pace to terminate the plan once it is overfunded on a termination basis.

This depends on how the document is written. The document will tell you if the match is based on the pay period (no true up) or plan year (true up) or some other method like quarterly, but that is more rare with our clients. If the document says the match is based on the plan year, then yes, you have to true up based on annual compensation and deferrals. This statement is not adding up, maybe I am misunderstanding the way you use "safe harbor". But a 3% match does not qualify as a safe harbor match in terms of ADP/ACP safe harbor.

What's the actual deemed distribution date? Anything received after that is basis for later.

Don't know whether this changes the analysis or not, but I think the OP meant to say "not TopHeavy".

Assuming this is a PBGC covered plan and if the plan is underfunded, you can have a substantial owner waive their benefit (not for valuation purposes, only for payout purposes) or you can do a 4044 allocation, just in theory, thinking out loud without knowing any specifics. Also, by terminating the plan early in the year, you may have a pro-rated amortization schedule that may reduce the required contribution level substantially. The longer you wait, the more compliance issues the plan may encounter. All facts & circumstances.

Qualified Plan Roth money is subject to RMD rules, so yes RMD required. Assuming he meets the 5 year rule it's a qualified distribution so no taxable (and not eligible for rollover) but it needs to leave the Plan. If he has less than 5 years then the gains would be taxable but basis not. Unlike IRAs it's not first in first out, it's ratable. To avoid future RMDs, roll the ROTH potion from the Qualified Plan to the ROTH IRA (after taking this year's RMD) and before December 31.

I'm guessing LLC is disregarded entity and Joe is considered owner and so you have an exempt owner/spouse plan, but interested in what others more knowledgeable in these intricacies think.

Exactly - employer contribution and income thereon gets forfeited. Plan document usually tells you what to do if an employee is mistakenly included or excluded.

Hi Termination or not, isn't a "top heavy and underfunded and PBGC covered plan" exempt from 401a26 testing?

Sorry, but I have no idea what you are asking. Are you asking about the exemption from 401(a)(26)? If so, I don't think there is any hard and fast rule, but I would look at it on a termination basis.

Many of us are asked to advise only on the retirement plan’s administration. For equitable remedies regarding a plan’s distributee who is not the participant’s surviving spouse (or regarding money or other property distributed from a plan that need not and did not provide that a participant’s surviving spouse is the participant’s beneficiary), ERISA might not preempt a State court’s order—made after the ERISA plan has paid or delivered the plan’s benefit—that does not involve the plan or any fiduciary of it (and does not seek to interfere with a surviving spouse’s enjoyment of a survivor annuity or other ERISA § 205 benefit). For example, Estate of Kensinger v. URL Pharma, Inc., 674 F.3d 131, 52 Empl. Benefits Cas. (BL) 2514 (3d Cir. 2012); Andochick v. Byrd, 709 F.3d 296, 56 Empl. Benefits Cas. (BL) 2865 (4th Cir. 2013); Metlife Life & Annuity Co. of Connecticut v. Akpele, 886 F.3d 998, 63 Empl. Benefits Cas. (BL) 2024 (11th Cir. 2018). But see Melton v. Melton, 324 F.3d 941, 943–945 (7th Cir. 2003) (ERISA preempts a State-law constructive-trust remedy); Reliastar Life Ins. Co. v. Keddell, No. 09-c-1195, 2011 U.S. Dist. LEXIS 3164, 2011 WL 111733, at *3 (E.D. Wis. Jan. 12, 2011) (“A constructive trust would violate ERISA’s preemptive force even if it applied after the funds from the [plan] were actually distributed.”); Ragan v. Ragan, 2021 COA 75, 494 P.3d 664, 666 [¶ 5] (Colo. App. 2021) (“ERISA preemption extends to post-distribution lawsuits [even regarding a benefit for which ERISA § 205 does not apply, and recognizing that the plan provided the benefit to the participant’s former spouse].”) (distinguishing between after-distribution lawsuits to enforce an express waiver and lawsuits to apply a revocation-on-divorce statute). I have seen no Federal court decision that legitimates a State court’s order that imposes a constructive trust or other equitable remedy for a surviving spouse to pay over a benefit the plan provided under ERISA § 205. At least one State court’s decision recognized after-distribution remedies against a surviving spouse. Moore v. Moore, 297 So. 3d 359 (Ala. 2019). However, that court did not consider whether ERISA preempts State law to preclude an after-distribution remedy that would interfere with a surviving spouse’s enjoyment of a benefit a plan provides under ERISA § 205. See Boggs v. Boggs, 520 U.S. 833, 841-844 (1997) (rejecting an argument that a State-law claim, which affected only an after-distribution disposition of proceeds, did not implicate ERISA: “The statutory object of the qualified joint and survivor annuity provisions . . . is to ensure a stream of income to surviving spouses[.] ERISA’s solicitude for the economic security of surviving spouses would be undermined by allowing a predeceasing spouse’s heirs and legatees to have a community property interest in the survivor’s annuity. It would undermine the purpose of ERISA’s mandated survivor’s annuity to allow Dorothy, the predeceasing spouse, by her testamentary transfer to defeat in part Sandra’s entitlement to the annuity [§ 205] guarantees her as the surviving spouse. This cannot be. States are not free to change ERISA’s structure and balance.”); Carmona v. Carmona, 603 F.3d 1041, 1061 (9th Cir. 2008) (“state law doctrines (including constructive trusts) may not be invoked to assign benefits to parties other than those designated as beneficiaries under ERISA.” Allowing a constructive trust to redirect a survivor annuity from the participant’s former spouse to his current spouse “would allow for an end-run around ERISA’s rules and Congress’s policy objective of providing for certain beneficiaries, thereby greatly weakening, if not entirely abrogating, ERISA’s broad preemption provision.”); see also Hillman v. Maretta, 569 U.S. 483 (June 3, 2013) (Federal law preempts State law not only about providing and paying a benefit under the Federal Employees’ Group Life Insurance Act of 1954 but also to preempt a State law that could make a payee liable to pay over a benefit she would not be entitled to if State law were not preempted.). That Alabama case also illustrates a difficulty of after-distribution remedies. The participant’s brother/beneficiary/executor filed his lawsuit the same day he learned that the plan had (eight days before) paid the surviving spouse. The court granted a temporary restraining order about 3½ weeks later. Despite that and other courts’ orders, he “recover[ed] approximately half of the funds that [the plan] disbursed to [the surviving spouse who breached her prenuptial agreement].” Moore v. NCR Corp. Plan Admin. Comm., Civil Action No. 1:20-CV-4140-CC (N.D. Ga. Aug. 30, 2021) (finding no standing in Federal court because the plaintiff lacked even a colorable claim to challenge the administrator’s and its service provider’s conduct). Whatever happens outside the retirement plan’s administration is (mostly) not the administrator’s worry.

Nate S, in this situation the junior partner, as you call them, would not be able to have his or her own plan. You don't even have to get into the A group affiliated service group rules (which would otherwise apply), because being a partner in a partnership is not a separate trade or business, and the only earned income that the junior partner could use to fund a plan would be the earned income from the partnership, and the partnership is therefore the only trade or business that could sponsor a plan covering the junior partner. The trick with the leased owner situation that the leased owner rule is/was trying to solve is that if you are an independent contractor to a business, even if you own 5% or more of it, then your being an independent contractor is in most situations going to be a separate trade or business that could sponsor a plan for you, plus if the business you are providing your independent contractor services to is not a service business (which would be the only time you would want to do this), the affiliated service group rules would not apply. That's a decent loophole, which is why the IRS left that one part of the 414(o) regs out there as still proposed, even though it withdrew the rest. Of course, the IRS could also challenge whether the services are really those of an independent contractor, as opposed to employee services, although probably in a lot of cases the types of services provided by the leased owner to the business that they own 5% or more of would legitimately be independent contractor services. Also, to make this work the leased owner would have to have other streams of income for their sole proprietorship, otherwise they would probably be in a 414(m)(5) management services group with the service recipient. There are no regulations, even proposed, under 414(m)(5) (the regs that were proposed were withdrawn long ago), but 414(m)(5) is currently in effect through just its statutory language.

I do agree, but 2 things come to mind. 1. What is the point of company C? The only one benefitting from that arrangement is the 50% unrelated owner of company C. 2. Heavy stuff for a retired person.

I'd say it all goes to suspense, contributions and earnings. Company already contributed it, just mis-allocated it.

A premarital agreement itself cannot waive survivor-annuity rights. ERISA § 205(c)(2)(A)(i); 26 C.F.R. § 1.401(a)-20, Q&A 28. Among several reasons, the spouse’s consent to a participant’s qualified election must be made by the spouse, and a person making a premarital agreement is not yet a spouse. Recognizing the 1984 statute and the 1988 rule, especially after a few early 1990s court decisions followed it, a prenuptial agreement might include an obligation for each contractor to execute, promptly after the marriage is made, waivers and consents to implement the arrangements made in their agreement. But such an agreement should have no effect in an ERISA-governed plan’s administration. Rather, a plan’s administrator waits for a participant’s qualified election supported by the spouse’s consent, with witnessing and in a form the administrator finds meets ERISA § 205’s and the plan’s provisions. Even if a State court’s order might command a prenuptial agreement’s contractor to sign a consent, such an order, without more, is not a qualified domestic relations order, and absent personal jurisdiction of the plan’s administrator, should have no effect in the plan’s administration. Rather, a spouse decides whether to meet or breach an obligation under a prenuptial agreement, or obey or disobey a court’s command. Whatever dissension there might be between a participant and a spouse is for them to sort out. An ERISA-governed pension plan’s administrator administers the plan according to its provisions and ERISA. ERISA § 404(a)(1)(D). If the participant submits a State court’s order, the plan’s administrator should follow ERISA § 206(d)(3) and the plan’s QDRO procedure. If the participant submits anything that might be a claim, the plan’s administrator should following ERISA § 503 and the plan’s claims procedure.

Facts: married couple, they contractually agreed to waive each other as death benefit beneficiaries and to consent to the other's waiver as required under ERISA. The only concern of each plan is that the proper QPSA or (DC) similar election forms and consents are validly executed. It's up to the blissfully (?) married couple to fulfill their contractual obligations to each other. If one has to go to court to secure compliance from his/her spouse, so be it. One thing I know for sure is that I would not want to be living next to this couple!