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It's not a "rollover from itself". It's a rollover from a qualified plan. I doubt there is a 1099 question. The Plan prepares the 1099 based on the distribution (eg, direct rollover? cash? combination? based on death/disability?, etc). The Plan never cares what the recipient does with the money afterward. The plan (probably) does not prepare a 1099 to reflect the rollover, but it likely provides the participant with some documentation that it received the rollover; this provides the participant with documentation where the money is as well as compliance with the 60-day rule. Anticipating your next question, if the distribution is $10K consisting of $8K cash + $2K tax withholding, the participant may make a rollover of anything up to $10K. The Plan does not care what financial bucket that money comes from, but the Plan will normally want proof that the rollover does not exceed the total distribution.

This is what the Form 5500-EZ says right above the signature line: So I don't see how a plan administrator could sign a 5500-EZ before the Schedule SB has been signed without perjuring themselves.

pop in my head once and awhile. Nice to see my spreadsheet still gets used. ha. I contributed something to the pension world. Soc sec will also jump sizably. Over 8.5%, for those of us that plan to start collecting within a year or so. Have almost taken out all of my pre-Roth 401k $, and no taxes. one Roth was permitted I deferred everything there. I remember the arguments presented regular deferral vs Roth, and the conclusion leaned towards regular 401k was better because you would most likely be in a lower income tax bracket. but I don't recall any of the arguments saying your soc sec incomes becomes taxable if you have over a certain amount of income, but all of a sudden that kicks in and the so called advantage disappears, at least in my opinion. anyway, as for me...in May 2021 my PSA count shot up to 16.6 (Anything below 4.0 is considered safe) MRI showed spots on the prostate, and the prognosis was probably cancerous. The doctor expected a "4", the biopsy came back a "1" which means everything is benign. The doctor simply shook his head and couldn't understand those results. Had a couple of priests lay hands on me before the biopsy, and many prayers. Results of my annual physical today was PSA of 3.08. Didn't change my diet, didn't take any medication. No real explanation given for such a dramatic drop in the last 15 months. But I believe it was the prayer. God gave me a wonderful gift.

Given that the plan is a 401(k) safe harbor plan, the definition of compensation used to allocation compensation must satisfy Code Section 414(s). This client has a major problem, at least if someone from outside the sales staff can receive commission compensation. A 414(s) definition of compensation, even one that satisfies an arithmetic test instead of a pre-approved definition, must be consistent for all employees. See Treas. Reg. Section 1.414(s)-1(b)(2). I would direct the client to work with legal counsel on this issue.

As Bill notes, I have most often seen the participant's name, an acknowledgement that they entered the plan too early under the regular eligibility rules, and a specific date of entry (but not DOB, DOH, etc.).

I think it matters depending on whether they are intended to be in the plan for the whole or part year. We typically include the "entry" date since that will correspond to when the employer allowed them to defer (for example) and we want that part to be clear.

IRS could have been clearer, but I've always thought that in this sentence they are just saying that you can't NOT amend for law changes that are in effect at the date of termination and use as an excuse that those changes are not yet on the LRM.

Sorry about your Mets after this weekend.... Truing up the match depends on: a) What does the plan document say about the calculation of the match? If THAT says it's a payroll by payroll calculation, then there's no truing up. If the plan says it's an annual calculation, but it just happens that the client funds it ongoing week to week, then a true-up will be necessary. b) Is the person opting to contribute partway through the year someone who was already eligible all year long, or is the midyear point their actual plan entry date? This only matters if the answer to (a) is that you have to true up, and then if so, you'd go back to the later of 1/1 or their actual plan entry date. c) Whether the plan defines compensation as the full year's worth, or just from after the participant's entry date. As for the compensation, it's not unheard of to adjust like that, but you obviously have to run a 414(s) compensation inclusion ratio test. Who, besides sales staff, would have commissions, though? You have to sell something to get a commission

They're talking about Title I of ERISA, meaning it covers actual legal employees rather than only a sole proprietor or partners. This basically means it's under the umbrella of the IRS only, and the IRS's penalty relief program is the "comparable" to the DOL's program for late 5500-SF and 5500 filings (plans covered under Title I, with employee participants). A Title I (or, as you might, "ERISA") plan with missed 5500s has a DOL-run program for missed filings. This IRS version is specifically for the solos, since they're outside the DOL's jurisdiction in this case.

1. Sure, why not? Unless the plan sponsor has already been contacted by the IRS. 2. If the prior service provider didn't do something as basic as file a 5500, who knows what else they might have done wrong? I would start by making sure the plan document is up to date with all required restatements and amendments. It also couldn't hurt to ask about any current or former employees, controlled group or affiliated service group issues, other plans, etc. etc. etc.

Supplement to the reference to interpretation of the plan document: The appropriate fiduciary (usually the plan administrator) will be in a stronger position if the plan’s written QDRO procedures specifically address the issue before the order is submitted. Not that purveyors of domestic relations advice or documents always read the plan documents, but plan provisions that pre-empt what the plan believes to be an inappropriate action (informed by ERISA principles) involving plan assets may also affect initiation of those actions.

david rigby, good chance, but I don't know. If there is, it might be old. I did an article on this topic 25 or so years ago. It lost some of its currency when the world went from profit sharing plans to 401(k), because now there's a much lower probability of a plan going without any contributions for a long srretch.

Might this come down to whether or not the formerly-eligible person continues to maintain a balance from before the transfer to per diem?

https://www.aon.com/getmedia/f57621bb-9f2c-44f9-a088-7bb29a38da20/Schwallie-Defined-Benefit-Plan-Termination-Exorcising-the-Excise-Tax-on-Reversion-JPPC-Summer-2020.aspx Here is a detailed article. It looks like the excise tax is 20%.

CuseFan, if you're referring to the reg, it's 1.401-6, which is pre-ERISA. I think it's anyone with a balance, just like you have with a termination. The complexity that comes up is, if you have, say, 5 years with no contributions, and the employer says it had an intent to contribute in the early part of that period, but just didn't have the money, and in year 5 wants to freeze the plan, and reports that it had not had an intent to contribute for the last 3 years, really, when do you declare full vesting? 5 years ago because there were no contributions? 3 years ago because that's when they should have frozen the plan? Now, because that's the most practical? It's a facts and circumstances determination and I don't recall there being any clear guidance.

When (in the 1990s) I last had any observation about this point, the IRS’s hang-up was about currency tips a server collected from the diner’s table. I do not remember any discussion about tip pooling, or even whether any of that client’s restaurant chains or franchisees used such a business practice. The AmLaw 200 lawyer told me he presented possible reasonings of the kind Luke Bailey describes. This was before the Treasury adopted, or even proposed, the § 401(k) regulation, which some might argue could support different interpretations. About payment-card tips, perhaps one or more of the lawsuits (the complaint I hyperlinked above is not the only one) will survive a motion to dismiss for failure to state a fiduciary-breach claim, and result in some information about the facts (or even about private Internal Revenue Service determinations).

Maybe not. Your comments lead me to believe you are making the same error as the OP in the cited thread and you've fixated on compensation definitions. Go instead to the deferral section of your document and search for non-payable income treatment for items including imputed, fringe benefits, and tips.

I think I see this differently. The 5500 instructions defines "active participant" as follows: ******************* 1. Active participants (i.e., any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan). This includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under the plan. ******************* Only reference is to employee service and not dependent on having benefits in the plan. So a profit sharing plan where a participant never got a contribution allocation is a participant for 5500 purposes. I've been doing it this way.

Peter, does this apply only to the tips that the employee him- or herself picks up from the table and is allowed to keep, without the cash ever physically coming into the possession of any other employee of the employer, or also to tips that the employees in general are required to pool if there is a rule that all tips for the shift are pooled and shared? It would seem to me that in the latter case the employee has not received the income but is acting as the employer's agent. And even in the former case, in addition to the policy argument, did you make the case that the waiter or waitress or other tipped individual, to the extent of his or her deferral amount, was, just the employer's agent to the extent of his or her deferral? Also, if the patron pays the entire bill in cash, the waiter or waitress may need to have a non-tipped employee of the employer break large bills in order to received the tipped portion, and in such a case it would seem to me that the employer is receiving the tips and then paying them to the employee. Obviously, the facts of any particular workplace could be very complicated. Also, we're agreed that in any case it's good 415(c) compensation, right, if reported on W-2? So the only problem would be where everything is taken by the employee off the table in cash, so there is literally not enough cash in the employer's hands to cover the deferral amount over some period, e.g. monthly? And we're also clear that the fact that they are tipped is no basis for an exclusion for purposes of 410(b) or 401(k) ADP or matching, right? So all these folks would go into the various tests as eligible but no- or low-deferrers? I don't see how an employer could cash out credit card tips (e.g., that evening) and collect the info to put the amount on the W-2, but then say it didn't go through payroll. I get the issue, I think, for tips that the employee picks up off the table and keeps, i.e., arguably it's too late to defer those, even though they are 415(c) comp, because it is compensation that has been paid to the employee in cash. But cashing out the credit card tips, even if done the evening of the work and at the local level still means the money moves from the customer to the employer and then from the employer to the employee, which seems to me like "payroll." Maybe 20 years ago it would have been impossible to accomplish withholding in such a situation, but today the same systems that allow the waiter or waitress to tap pictures of the food and beverages you're ordering on a tablet and have that instantly sent wirelessly to the kitchen staff should make it possible for the employer to know how much to hold back from tips for the employee's 401(k) on a shift-by-shift basis.

I would make sure the document is written to define compensation this way and you do need to run a 414(s) test on compensation as Bri points out.

Personally, I'd prefer to have all force-outs go to a default IRA. Cash-outs are notorious for going uncashed, which creates the headache of stale checks, withheld taxes, and so on. For purposes of this discussion I'm not going to go into the constructive receipt issue. It is very simple to select a default IRA provider these days, and they do most of the heavy lifting for you. It's also often at no cost to the sponsor. @Peter Gulia is the client concerned about liability for selecting and monitoring the default IRA provider? Or is there another reason for wanting to stay away from them?

I've thought of this from time to time myself. Surprised there is not guidance on it, but to the best of my knowledge, there is not. My guess at what the rule should be is that if the account is under the applicable threshold at a point in time, you can distribute even if above the amount is over the threshold at the date of distribution, as long as the distribution occurs as soon as administratively feasible (probably within a few days, right?) of the date when the decision to distribute is made. IOW, if it's under the threshold and you initiate distribution, the fact that the amount transferred, or the check, is slightly higher is probably not a problem, as long as the increase occurs after the employer or its agent has taken the appropriate action to initiate the distribution, such that it will occur thereafter without any further action on the part of the plan administrator. That's my guess at the right rule. I have no doubt that even a somewhat longer, but reasonable, delay, as in the case that chc93 recounts, will typically work in an exam reviewing an individual situation.

The only issue with not making substantial and recurring contributions to a PS plan is vesting, IMO. You do not have to amend/freeze.

Here’s the Treasury department’s 1960 interpretation. 26 C.F.R. § 1.401-1(b)(2)-(3) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401-1#p-1.401-1(b)(2). One might interpret this interpretation, including by considering coverage, nondiscrimination, and top-heavy rules as they apply for the years involved.

I agree with Peter. It was always my understanding that the plan was not "terminated" until all assets were distributed.

I agree with Lou S. We have often had clients adopt interim amendments after the plans were terminated (if they were still adopted before the amendment deadline). In most cases, it was because we didn't yet have all the guidance we needed or wanted to adequately draft the interim amendment at the time of termination. I'm talking within the same year as the termination. (We would not terminate a plan and then adopt an interim amendment two years later.) We always make sure to warn the plan sponsor that they must adopt the amendment and that it will be after the termination date so that they understand the importance of signing the amendment when we send it later. If you submit a termination application to IRS, they may require the plan sponsor to adopt an amendment post-termination to bring it up to date with current law provisions that they don't think have been included so clearly a plan can be amended after the termination date. I do not think a VCP application is necessary.

My thoughts are adopt the conforming interim amendments now and be done with it, assuming you are talking about interim amendment deadlines that haven't already passed like SECURE and CARES here not say Hardship Interim amendments.

Consider whether, even if not all tax-qualifying amendments were done by the date of the resolution that discontinued the plan, it might be good enough that the amendments are done before the plan terminates by paying or delivering its final distributions. Understand that the Treasury department’s remedial-amendment concept might provide no relief concerning ERISA §§ 402-404. On a few of many related points: Has the plan’s administrator yet communicated to participants, beneficiaries, and alternate payees that the plan is ended and will pay a final distribution? If that communication has happened, would the not-yet-done amendment affect anything that was communicated, or affect any choice available to a distributee? If so, the plan’s administrator might evaluate whether a further communication is needed or appropriate. Also, if any to-be-amended provision was not explained in a previous summary plan description or summary of material modifications, the plan’s administrator might evaluate whether it must or should write and furnish a revised SPD or SMM.