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I know they're trying to save some money. But don't let their problem become your problem. Unless you're an attorney, don't try to create a DRO.

The plan asset regulations depend on whether the money is held in the trust, not whether it has been invested according to a participant's investment direction. If you have not violated the plan document, then you don't have a compliance problem. Note that the trustee repeatedly investing money in cash for a few days each payroll period will not comply with ERISA 404(c), so it may lead to employer liability.

Without a QDRO, is there any other sort of distributable event allowing the participant's distribution to be paid from the plan (and now we're talking PAID rather than TRANSFERRED to the alternate payee) ?

Nuclear war is a concern that never use forfeiture account. Huh? 🤪 Seriously though, if your concern is a plan never using its forfeiture account, then I bet it's failing to follow the terms of its written document. The document should say when/how to use them. (Including an emphasis on when.) So yes, there should be concerns - if the plan was supposed to allocate its forfeitures, then numerous participants don't have the full amount in their accounts as they should. Or perhaps the company took a deduction for a contribution which was supposed to be offset by the forfeitures. Anything they didn't do right is something the IRS certainly would scrutinize upon examination.

and look at the time periods - as each could cover the specific periods of marriage, 50% of those 25 years thru 2015 and 50% for however long the second marriage lasted.

I don't believe this would be a prohibited transaction (requiring deposit of lost earnings and payment of excise tax under sec. 4975) since the employer is not getting any use of the plan assets, like they would if they had held on to the actual contributions. Instead it sounds like the participants' investment selections are not being honored. What happens in that case is I think you have an ERISA 404(c) failure, the consequence of which is that the fiduciary is no longer insulated from the participants' investment choices. Potentially the participants could sue the trustee if they had a loss caused by failing to follow their investment instructions.

I concur - please note the new vesting schedule will apply to all those who have not entered the plan yet - and not to only post 1/1/2023 hires. If the objective is different, tweak the amendment language to accommodate.

Amend the plan before those people enter on 1/1, and those folks can be subject to the new schedule.

Also, the IRS' view (not codified in regulations) is that the nature of a defined contribution plan is that there shouldn't be unauthorized accounts (i.e. pots of money) not allocated to participants. Therefore, if there is a separate forfeiture account (rather than nonvested money recordkept in participants' accounts), it needs to be depleted as of the end of each plan year.

You both are correct. I tend to want to help out too much. I'll pass along that a QDRO is needed otherwise there isn't a distributable event. Thanks for the sound advice.

I ended up convincing the FA that the SoloK would be the best option. At first he didn't feel comfortable. I explained that the business with 3 partners could be a Solo and would be eligible to file an EZ. I cut and pasted the EZ rules from the instructions and he came around. Thanks for chiming in!

call your attorney.

"HCEs and Former HCEs" seems a reasonable classification to define excluded employees.

I think the PCs' not adopting the plan is a bigger problem than the fact that the partnership funded the contributions. I would view the partnership's funding of the contributions, which presumably means that the partnership withheld the amount from distributions going to the PCs, as if the money had been paid to the PCs and then contributed back to the partnership. But of course, for the portion of the year that the PCs were the partners, contribution formulas and 415 would need to be applied based on the owner-employees' W-2s from the PCs, not on the draw going to the PCs, even if the PCs had properly adopted the plan. I doubt if the PCs' failure to adopt the plan could be fixed in EPCRS, but you can call the IRS and arrange a pre-submission conference and ask them. If they were individual partners for a portion of 2021, you might be able to work with that.

I would not forfeit and correct through payroll. It is not the correct method and a forfeiture from a salary deferral account throws up a red flag. Also, the excess is required to be adjusted for investment experience as Lou noted.

Totally agree with first part of your answer, CuseFan, but my guess is that most plans don't address at all what happens if beneficiary dies before taking out all funds. Would then go into beneficiary's estate.

In my opinion, you need to have more to go on than "the market was down." Have the client or investment institution provide you with the rate of interest those participants would have received had the matching contributions been invested in their accounts (assuming participants give investment direction, those rates would likely be different for each participant). It's possible (although maybe not likely) that one participant was invested in a very conservative investment vehicle and had a small positive return. If all of those accounts had investment losses, the safest thing to do may be to not allocate interest on the late matching contributions (rather than reducing the matching contributions for the loss, although there may be validity to that argument). There's no requirement to allocate interest if there is none. We have done a few corrections where we did not include interest because of negative returns during the period of failure. We always document an EPCRS correction with a memo to the file that describes the failure; gives a detailed description of what we did to correct the failure, including the process, calculations, and other considerations, if any; and recites which sections of EPCRS we relied on in making the correction. And we attach any pertinent calculations or documentation (such as something showing what the interest rates were for each person). This is very helpful for the client to have in case of audit so they can show that they appropriately fixed an operational failure. It's also helpful in cases where there are personnel changes in a company and the new people are trying to figure out what their predecessors did.

What advantage would a SIMPLE 401(k) have over a regular 401(k)?

What does the plan say?

Are there any concerns that never use forfeiture account? big balance? some investments are volatile?