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If they aren't insurance, I would start with the branch manager. Mention you think the material is first incorrect and second, and more important, misleading. Threaten to take the issue to their state's securities regulator, or maybe even the SEC. Or, you can PM me a copy of the letter and I'll do it. I love stirring up crap for creeps like this.

I really dislike bad actors in our industry. Seems like every couple years or so some guy who thinks he's outsmarted the system starts sending these letters trying to scare up business.

If the plan document, even after a careful reading, does not address this either way, then the plan administrator probably has a choice of interpretation to make, and many factors would be involved. Note that I would definitely review the language for the death benefit to see whether the "if" clause says something like, "If the participant dies before his or her annuity starting date,..." or something else. But even if (as is likely) the "if" clause does refer to the ASD, you need to check for whether the provision for payment of a lump sum indicates that it will be paid on the day that would have otherwise been the ASD if taken in the form of the default annuity, vs. saying it will be paid "on the date as soon as administratively feasible after the election," which would be ambiguous. I have not seen a DB plan that directly and consciously addresses the issue (e.g., "If the participant elected a lump sum, but dies before the ASD, then..."), although I hope they exist, but I have seen plans with a provision that if the participant elected a 100% J&S but died before the ASD the plan sticks with the 100% J&S. If your plan has such a provision it could also guide the analysis on the lump sum issue, since the administrative issue is similar.

Interesting hobby you have there.

Strictly speaking, a retroactive amendment to cure a 401(a)(26) failure is a 1.401(a)(26)-7(c) amendment - however most of the same rules apply as under 1.401(a)(4)-11(g). So no - you can't do a -7(c) amendment to increase only an HCE, because the amendment has to be nondiscriminatory on its own, under the -11(g) rules. If there are no NHCEs that could be added to the plan (including possibly someone who has not yet satisfied age and service requirements), then your options are: 1. VCP (if they even approve it) 2. Retro amendment that increases the one HCE, plus enough NHCEs to satisfy coverage and nondiscrimination on its own All of this is assuming of course that the plan says a 401(a)(26) failure will be corrected by amendment. If the plan document has a fail-safe in place, then you have to apply the fail-safe.

My thoughts are the SF actually provides more information than an EZ, so the incorrect filings shouldn't be an issue. At the same time, if there hasn't been an issue before should we just continue filing the SF for now and figure the status quo is the best way to go?

HCE, there is certainly no specific section of the Code or ERISA that is going to cover this explicitly. There is case law that would tend to support a mechanical interpretation of the plan, but depending on the wording of the plan and other facts and circumstances there might be some room for interpretation of the provisions and the application of common sense and a sense of fairness.

We had a somewhat similar situation in which a client's payroll company rep told him he was paying outrageous fees for his 401(k) plan and pointed to line 8h on his SF form. Needless to say the majority of that number was due to employee distributions, which the rep forgot to mention. We are a tiny little firm and have great clients that, like this one, would reach out to us before reacting, but it made me wonder how easy it would be to lose a client due to something like this and never know why. So I would say this is not hilarious.

I don't care about pollution I'm an air-conditioned gypsy, that's my solution, watch the police and the tax man miss me - I'm mobile!

You might consider what “sometimes”means. If there is a revolving door with enough people going out and back in within short intervals, immediate distribution might be problematic, or at least the optics raise questions. Rather than live a life subject to the whims of circumstances and intent, a change in plan design or reemployment policy may be warranted. Industry standards and practices would be relevant.

I never saw that the spouse had to consent to a contingent beneficiary before. is that common? Plus, it doesn't make sense. If the spouse is the primary beneficiary, then the only time the benefit goes to the contingent bene is if the spouse is deceased. Why would you need spousal consent for in a case where the spouse has no claim to the benefit (he/she is dead!)?

Ugh I loathe this kind of "marketing". I once had a client get one of these where they claimed the sponsor could be in big trouble because per the plan characteristics, the plan didn't use DIA's. It was a pooled profit sharing plan, with no 401k provisions...

Outrage??? Nay, nay, this is hilarious; they have just handed you the greatest marketing tool ever, evidence of their own incompetence!! 1) This firm's EIN is public record and all over any 5500 filing that had to report their fees; feel free to reach out to those Plan Sponsors to sell your own more knowledgeable services!! 2) Are they an insurance company? If so their marketing materials have to pass strict truth/factual metrics; you should report this issue to their home state insurance commission, and your clients state commission, if different! 3) Laugh with your clients; share the good news with them that they've retained you, who knows better than many of your competitors, competitors who were brazen enough to put their own incompetence in writing! BTW, what provider is this so we can all protect any mutual clients we may have with them?

I know the company you're talking about. I work for a TPA firm and we have had clients receive the same emails targeting the same 5500 information. It is definitely a shady business practice and your outrage is justified. Employing this kind of fear tactic would be - I believe - an ethics violation for those of us with ASPPA credentials (I would think NIPA as well) so it's disappointing to see such a large, "reputable" company take this route.

Dobber, I'm kind of with Dare Johnson on this one (except that ESOP stock has no holding period requirement to get LTCG) and I was not aware you could split NUA as it was my thought that every share of stock had a cost basis that was inexorably linked to each share. If you could please share your PLR references, that would be helpful. As to your specific question rollover vs. transfer which should happen first, I'd say it would not matter what goes first if you can split the NUA like you say.

No. There is a requirement under Title I of ERISA to file the 5500, but that only applies to plans which are subject to Title I. Plans which cover only the 100% owner of a business, or partners in a partnership, are exempt from Title I. The reason the 5500-EZ exists is for those plans to provide a report to the IRS, since the DOL reporting requirements don't apply. For the most part, a plan which can file 5500-EZ is the same thing as a plan which is exempt from Title I. That line has become a little blurred recently, but there is coordination between the IRS and the DOL here. A plan administrator is only required to file either the 5500-EZ or the 5500(-SF) for any given year.

Your question intrigued me and I went down a rabbit hole. I'm not sure if this is still accurate but an article on Benefits Link from 2002 (man this place has been a great resource for a long time) came up https://benefitslink.com/articles/tarpley020313.html It seems to hinge on §402(h) and §404(h). I don't know if those sections have been updated since 2002, I honestly can't tell from the current code sections and I haven't dug into the regulations. But that appears to be where the 25% cap is coming from. Both the 5305A-SEP (Rev June 2006) the latest version I've been able to find and the FAQs on the IRS website both reference the overall 25% limit. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-sarseps Honestly I thought they mirrored the qualified plan rules in many ways and "assumed" the 100% 415 limit and 25% employer limit were applicable but it appears at least at one point, and possibly still that the limit is 25% of pay limited for each employee and included both employer and employee contributions. It seems a kind of nutty result but not much nuttier than ending SARSEPs in 1996 but grandfathering existing ones. Personally I haven't come across one in quite some time but maybe this will get you where you need to be and can figure out if it's been updated since that article.

I think the participant is a little confused about the distribution of stock with NUA. The participant distributes the stock and pays tax on the cost basis of the shares - $10,000 in this case (this is the plan's cost basis, not his tax basis). As long as the participant hold the stock for 1 year plus 1 day, any stock sale will be at LTCG rates with a $10,000 tax basis. The 1099-R will list a taxable amount of $10,000 and NUA of $90,000. Is the stock publicly traded? If not, the participant will hold in his personal name. I don't think there is any issue on timing of stock distribution vs. rollover to IRA.

I recall hearing in the past that if you filed a 5500-SF in prior years (whether you had to or not), then when you switch to 5500-EZ you will almost always get a letter from the IRS (or DOL?) asking for the 5500-SF filing for the year you switched to and filed the 5500-EZ. No big deal as is totally explainable, but still gotta go through the process... never a fun exercise. Note that this was when 5500-EZ filings were paper, so no connection between prior year and current year filings. Maybe with everything electronic now, this is no longer an issue.

Thank you for sharing Chief Judge Hall’s opinion. On your who’s-responsible question, there were plenty of people with plenty of opportunities to avoid unwelcome results. Among those, the multiemployer plan’s sponsor—the joint board of trustees, which decides the plan’s provisions arguably as a nonfiduciary creator, could have much more carefully stated the plan’s provisions. It is unclear (some might say doubtful) whether the plan provisions Judge Hall found were the provisions the plan’s sponsor intended. Further, even if one assumes only Judge Hall’s fact findings (which are incomplete), other possible interpretations of the plan (and of the plan’s application to each of the disputed beneficiary designations) are at least permissible and might be persuasive. The opinion suggests little or nothing about whether the plan’s administrator breached its responsibility because the opinion describes no analysis on such an issue. Further, it seems likely none of the interpleaded claimants presented a fiduciary-breach counterclaim or crossclaim. If there is an appeal, the appeals judges should defer to the trial judge’s findings of fact (unless clearly wrong), and might defer to the trial judge’s interpretations of the governing plan document, the summary plan description, and the plan’s form for making a beneficiary designation. If so, there might be little or nothing left in public law issues on which appeals judges would do a fresh analysis.

2019 was the last year you could file a one-participant plan on SF. Starting in 2020 you could file the EZ electronically. If there is a non-owner participant in the plan, even if they are not active, then you can not file 5500-EZ.

I'm confused. The seller is selling their assets but continuing it's business? Who will the employees of the seller be after the sale? Whether selling corp and acquiring corp are a controlled group after the sale will be determined by both companies ownership structure. If they are a controlled group after the sale and selling corp adopts acquiring corp plan you have a single employer controlled group plan. If they are not a controlled group and selling corp adopts acquiring corp plan you have a multiple employer plan. What are the goals in terminating the plan? Typically the terminations are done effective the day of or day before the asset sale, often contingent on the sale happening. Does the seller still have a plan? Is the compensation for services to the seller? But like Bill I'm confused as to what the goals are in both the original and and clarifying post. If, how, and when seller plan is terminated would likely determined what distribution options participants in seller's plan may or may not have. Also if seller is terminating plan and it's a 401(k) plan that might affects it's ability to adopt acquires plan for 12 months after final distribution under the successor plan rules. A lot to unpack here.

Technically it still can be filed on the SF (because we put the participant account). On the EFAST website it just gives the following warning: "Warning: If you have a one-participant (owners/partners and their spouses) retirement plan, file the Form 5500-EZ instead of the Form 5500-SF. Review 'Who Must File Form 5500-EZ' in the Form 5500-EZ instructions to determine whether you should file the Form 5500-EZ. Note that the Form 5500-SF generally is subject to public disclosure on DOL's website while the 5500-EZ is not." So I guess that gives the advice to change to the EZ? Does that sound right?

My thoughts (and not a lawyer) is leave the SFs that have been filed as is. File EZ going forward. And Bri brings up a good point, until recently you could file SF-1partcipant plan. Though my memory is bad on just how recently.

Well, you used to be able to file one-participant plans on an SF, though. Checking the "one-participant plan" box was supposed to prevent it from showing up on the public disclosure site. In which case maybe the plans shouldn't be viewable, but probably that doesn't rise to a real "issue". Under penalties of perjury, the sponsor didn't say it was a one-participant plan on the return. Gasp!

I've had a few plans that used to have common law employee and became owner only and switched to EZ without issue. I don't know if it was always supposed to be EZ but was filed as SF if you'd have an issue which is your case and different set of facts. I'm pretty sure if you switched to the correct form the current filing year you won't have a problem with that particular filing. The question is what about the prior filings? I don't know what the correct answer is on the prior filings and I think I've seen some conflicting guidance in posts on this site related to similar issue. A few options - -File the old EZ under the IRS late flier program under the theory that a valid return hasn't been previously filed. -File amended EZs for the years that SFs were originally filed under the theory that the returns were timely filed but on the wrong form. -leave the SFs alone under the theory that information returns contained all the correct information and were timely filed but are open to public inspection as an SF and would not have been had an EZ been filed. Again I don't know what the correct answer is but those are the most reasonable choices as I see them. Good luck with whatever decision you chose.

You're going to have to clarify all your comments. I can't tell what is happening, especially with this bold part.

Typically, you might find the plan sponsor of the ESOP to provide for a portion of the terminated ESOP vested account balances to be distributed (perhaps 50% to 70%) with the remaining vested account balances to be distributed following the receipt of the determination letter approving the termination. Yes, check the transaction documents to see if there are any escrows or retention funds being held for some time period.

You would have to comply with the mental health parity rules under the MHPAEA. Here's an overview: https://www.newfront.com/blog/the-caa-mental-health-parity-comparative-analysis-requirement

Has there been any consideration of any possible escrows at the closing of the sale of the company? It isn't uncommon for part of the sales proceeds to be held in escrow pending certain metrics being hit after that sale. So it is very possible the plan will not have 100% of the cash from the sale quickly after the sale. This is mostly an issue of communication as that means there will be a future distribution form the plan. The plan can't be fully terminated until that any such payments are made. This can really slow down the termination of an ESOP. I have had a few make 3 or 4 payments and keep the process going for years. This might be another reason to wait to get the D Letter to start payments. If there is going to be a delay to pay everyone anyway might as well as get the D Letter. Otherwise, I don't find ESOP terminations that different than PSP terminations. Like all things ESOPs they tend to just move slower.

For DBPs, when we file a 5310 we typically suggest the plan sponsor wait to distribute until after the IRS D-letter is received. I don't know if there are any "iffy issues" on which you may want to wait for a D-letter or if the sponsor believes their plan is squeaky clean and no need to wait. This should be the plan sponsor's call with input from their legal counsel and maybe service providers.