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Pardon me, but is there a concern about the original question? The correct 1099 process should be very well-known at the TPA level. Shouldn't it?

Luke Bailey’s point is not about whom an ERISA-governed retirement plan pays, but rather about State-law remedies (not involving the retirement plan or its fiduciaries) the decedent’s estate or another potential taker might have against the plan’s distributee (who might have money or other property which equitably belongs to the estate or another potential taker). About a beneficiary who is not the participant’s surviving spouse (or under a plan that need not and does not provide that a participant’s surviving spouse is the participant’s beneficiary), some (but not all) courts in some circumstances find 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. All Federal courts recognize that ERISA preempts States’ laws at least until the plan’s disposition of the plan’s benefit is done. Decisions for the Third, Fourth, Sixth, Eighth, and Eleventh Circuits interpret ERISA as not always precluding a remedy that does not involve the plan or any fiduciary of it, and does not frustrate a surviving spouse’s right. On the other side of a circuit split, a Seventh Circuit decision interpreted ERISA to preempt such a constructive-trust remedy, even if the remedy would ask nothing of the plan or any plan fiduciary. (I express no view about which interpretation is better.) Some States’ court decisions recognize that those who would be takers under law or an agreement external to a retirement plan might have equitable remedies against a plan’s distributee. The situation that most frequently raises issues about whether equitable remedies against a plan’s distributee are available is a participant’s unrevoked beneficiary designation that names the participant’s former spouse. An estate’s personal representative might argue that the former spouse ought not to keep property that the divorce agreement allocated as not that former spouse’s property.

I think you need to get new elections, there is no basis for defaulting to an election made under a plan of another employer that was terminated before it became part of the acquiring company. If they wanted to do something like that, it should have been discussed and determined during due diligence, and could easily have been accomplished by simply merging the acquired company's plan into the acquirer's plan. Why was that not considered? Also, and I could very well be wrong, but I don't think you're prohibited from terminating a 401(k) plan in this instance, it's just that the plan termination is not a distributable event and you must transfer funds to the successor plan. If they were worried about going to employees for new elections, wanting to treat as the same plan for them, then merging or terminating and transferring certainly is consistent with that philosophy. Regardless, those horses are already out of the barn and you need to give them all new saddles (deferral elections). IMHO

Our wonderful Participant Success Manager informed us all that tomorrow, the Friday after Labor Day, is known in the industry as "401(k) Day" - does that make today 401(k) Eve? Just wondering.

It would have been helpful to know that there was a cash balance plan and the problem is the 6% limit (!). As I suspected, the incidental benefit commentary was an unfortunate distraction from the real issue. You have contributions that are not deductible. The first thing you do is take charge and tell them not to do this again - figure out how to pay the premiums from plan assets, not from the company. Then you have to figure out how much is nondeductible - I think it is not as simple as just the excess over 6%; I'll let others opine on that. They can deduct the excess in future years.

On the first issue, I also prefer treating it as an automatic enrollment. I don't know what legal counsel's rationale was for where it hasn't been treated that way. Regarding your second paragraph, the Code tends to tell us what is prohibited for a qualified plan, not what is permitted. Certainly if one treats it as an automatic enrollment, there is text in Treas. Reg. Section 1.401(k)-1 that is broad enough to cover it.

You have deferrals with no plan. Amend the W-2 to show no 401(k). File an amended tax return for 2021. If they filed by April 15, too late to set up PS plan for 2021. If they were on valid extension but filed after 4/15 you could put in PS plan under secure with up to 25% employer contribution. Assuming their W-2 pay was at least $82,000 you could cover the $20,500 as employer contribution and the tax implications would be a wash (I think but I'm not CPA). Make sure he adopts a 2022 401(k) Plan (or amendment to SECURE adopted doc if you can do it) before he makes 2022 401(k) contributions.

As a side issue, don't forget to educate the employer on the upcoming Long Term Part Time rules. Whether they keep eligibility at 1 year or 6 months with 1,000 hours, LTPT will be eligible to defer.

IMHO I think the plan would still prepare a 1099-R for the outgoing funds as a direct payment distribution (if that's how it went out). It's up to the participant to report it properly and have the backup information when he files his personal tax return that he rolled it into a tax qualified vehicle within 60 days. No matter that he rolled it back into the same plan, that just reports as an incoming rollover to the plan. Again - this is just my opinion on how I would handle this situation. It's ultimately a wash if it all happened in the same plan year but I believe the plan needs to show it as it happened..... my two cents!

seems like we should have a half day today then, eh?😁

Need an EIN. Do not use a SSN. From the instructions to 5500-EZ

I'm guessing there was no WH but that's a different issue (and at this point nothing can be done about it). I agree with the others. What happened the moment it left the plan is what matters, not what happened later.

Agree with Belgarath. The 1099 is issued based on what transaction took place from the plan. What happens after that is irrelevant to the plan.

Many (possibly most, I don't know?) IRS pre-approved plans provide for a consecutive month (not more than 12) with at least (not to exceed 1,000) hour requirement for eligibility. And as Lou suggests, if they don't meet it in the initial eligibility period (of less than 12 consecutive months) they are swept into the 1 Year of Service requirement. I see no problem with a 6-consecutive month/1,000 hour eligibility, as long as you have the "fail-safe." We have a couple of employers who use it.

Not sure I understand the question. Was the lump sum distribution was paid directly to the former employee, with the check issued to the employee? If so, there was a taxable distribution with 20% mandatory withholding, and a 1099-R would be issued accordingly. There's no subsequent 1099-R when the individual then rolls to another IRA, or to another qualified plan. The participant would have to show the rollover on their individual tax return for the year in question. I'm wondering if there s some additional detail that you can provide, if there's something else you are really asking?

RatherBeGolfing, I agree completely with Peter's thorough explanation of the concept. The plan applies Egelhoff and Kennedy, and is out of it. Peter's Circuit survey is undoubtedly correct, but I don't have as much command of that as he does. I can tell you that the cases I have reviewed where a state court did impose a constructive trust on the divorced spouse post-distribution involved an agreement as part of the divorce that the nonparticipant spouse was giving up his or her interest in the plan participant's benefit, but where there was no QDRO, since the nonparticipant spouse was giving up his or her interest. Although the beneficiary designation issue was not specifically addressed in the marital settlement, the court after the participant's death and following the distribution to the divorced spouse inferred that the parties' intent was that the divorced spouse was giving up his or her entire interest, e.g. in favor of the participant's children by an earlier marriage. The court then enforced what it saw as the parties' agreement in the marital settlement that the divorced spouse would not receive anything. In BG5150's hypothetical, I'm extrapolating, but if there were evidence that the sister and brother and the deceased had gotten together with the participant and the participant's lawyer when the will was being drafted (e.g., the unmarried participant was grievously ill in a hospice) and the parties had agreed that the brother would take the plan benefit, e.g. because the sister would get the participant's house, then it would seem to me that this could come close to the no QDRO divorce agreement cases.

I'm almost afraid to ask, but was the letter from IRS or DOL? If from the IRS, oh no, here we go again.

I understand the reasoning of a termination, I just don't agree it's always the best alternative depending on the circumstances and overall benefit plan objectives, which I obviously am not privy to in this instance other than the desire for deferral election continuity, which I believe is a necessary casualty of plan termination. I'm not saying they should have done things differently, but that what they did do is not accommodating to this subsequent desire. My point is that at the time of the plan termination the to-be-acquired company was indeed "another company" with respect to the (not yet) buyer prior to closing the acquisition. At the time of plan termination they were separate companies with separate plans with no relationship to each other, so there is no basis upon which to attribute any elections from the one plan to the other.

Exactly, refer to service agreement, stating that in accordance with whatever section(s) or paragraph(s) thereof you are providing the required notice that you are terminating or resigning from the engagement (again, whatever wording your SA used) effective a specific date. If you have any outstanding deliverables for which you've been contracted and paid, or if there are any outstanding invoices for work already delivered, you can address those situations as well. You need not state a reason, but could say "we have made a business decision..." or something to that effect as the lead in. You never like to do it but sometimes it is better to cut and run. Good luck.

Here’s the 1974 Act, as reprinted in 88 Statutes at Large 829-1035. https://www.govinfo.gov/content/pkg/STATUTE-88/pdf/STATUTE-88-Pg829.pdf And here’s a photograph from the September 2 (Labor Day) signing ceremony.