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Read the plan. You likely need to commence at a minimum the 50% J&S annuity (make sure there is a new annuity starting date for the plan termination distributions and the J&S is not locked in). If the plan has in-service distribution provision then person could elect lump sum, so part RMD and part RO-eligible using account balance method. BUT, if this not done as part of plan termination distributions (i.e., paid earlier) then you may have to satisfy the restricted employee 110% funding threshold requirements. The plan termination wrinkle really isn't the complicating factor, you can continue normal administration, it just potentially accelerates a final distribution. So I suggest you ignore the plan termination for now, administer this as you would an ongoing plan and then do whatever final RMD and RO split you need to do when the termination distributions happen.

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If you have SSN information, we suggest Life Status 360 for an affordable option for address searches. They have an address search, SSN death records search and obituary search options. We like them for our DB plans as we upload a file to them once a year and we receive daily reports of anyone that shows up in a state death report or an obituary. The records are then run through the Social Security Death Index and several other death index databases whenever they are updated. We oftentimes find out that someone is deceased before a family member contacts us. It really helps to keep our DB records up to date. We also use CLEAR from Thompson Reuters, but that is a more expensive option, but allows you to do next of kin searches. However, you don't necessarily need a SSN to search there, but it does help, especially if you have a common name.

Here is my take, assuming the husband and wife companies A & B are a control group: 1) Yes, it's plan assets from all plans of the employer/control group. 2) Plan covers only owners and spouses, so yes, EZ still appropriate for now. In 2024, under new rules they may no longer be a control group and I do not think you can file an EZ for a multiple employer plan, which you would then have. 3) No other schedules or attachments. 4) Filing and extension should not trigger anything because the extension would be the first filing of any kind for the plan, so neither IRS nor DOL would have any knowledge of the plan's prior existence or when its assets exceeded $250,000. So I would file the extension, then get 2021 filed under EZ delinquent filing program and then filed 2022 extended return. Note, if the companies are not a control group - not in community property state, no minor children, no involvement in the other's business - then you have a multiple employer plan and all bets are off and you likely have many more delinquent returns (SFs) to address. Come 12/31/2023, you may want to spin off B into its own separate plan if/when the control group goes away. That way each has their own $250,000 threshold and EZ filing requirement. Assuming you can show less than $250,000 as an ending balance for A at 12/31/2023 and 12/31/2024 it shouldn't trigger a letter for a delinquent 2024 filing.

Thanks Paul. I did refer the auditors back to the vendor for explanation. Apparently it was explained to the auditors' satisfaction because we just got the final copy of the financials for last year and can have the client file ! I consider myself pretty good with math, so another part of this was my wanting to understand how the vendor arrived at the payout & forfeiture amounts. I could not make heads or tails of the amounts, even accounting for the coronavirus distributions.

The provisions of Section 301 of SECURE 2.0 specifically address circumstances in which participants received disbursements in excess of what they were entitled to, not those who hadn't met the conditions that would permit the distribution in the first place. Further, Section 301(5) provides commentary on the "Effect of Culpability." Protecting a participant (or hoping the problem will go away) doesn't apply when the participant bears responsibility for the overpayment. Did the recordkeeper notify the participant that they were eligible for a distribution due to the termination of their employment? Did the participant know they were still employed? Did the participant question the validity of the notification? Beyond that (and the "we need further guidance" observations that accompany most SECURE 2.0 provisions): if the document does not provide for in-service distributions prior to age 59 1/2, you have an operational error that is completely separate from whether or not the distribution was substantial enough to pursue recovery. The terms of the document were not followed. Unless the account is replenished, that's the error that needs to be addressed.

An overpayment happens when the distributed amount exceeds the amount payable to the participant. Assuming a 35-year-old is not eligible to take an in-service distribution except in the event of Hardship, this is an operational error: failure to follow the terms of the plan document in operation. Under EPCRS, a reasonable correction method must be applied to ensure the participant is restored to the same position they would have been in had the distribution not been processed. The first line of action is to approach the participant and work with them to restore the value of their account. If they can't replenish their account, the next line of action is to fire them. Just kidding . . . There are a hand full of ways you can skin this cat with the cooperation of the participant, the recordkeeper, and the plan sponsor, but the bottom line is that this is not what SECURE 2.0 is referencing with regard to a benefit "overpayment."

If this is a plan the employer intends to restrict to a select group (as ERISA sections 201, 301, and 401 describe it), a written plan might state that the employer decides, in its business discretion, who is eligible for deferrals under the plan. Your description of the document you were given suggests your client’s plan might not be so stated. If the document leaves an ambiguity, you might ask the employer for its interpretation.

Thanks to all - the information and discussion is very helpful. If this employer is like most, (of our small employers, anyway) they will drop this whole idea rather than pay attorney fees. We'll see where it goes.

Yes, follow the instructions and next time when an employer adopts a plan that has a retroactive effective date that starts in the prior year, don’t file a Form 5500 for that retroactive year. Keep the executed SB on file though to include it with the first filed Form 5500 (year #2).

Part of the challenge is the remaining 3/4 of the purchase likely is going towards an income-producing investment. The individual will not be able to treat the entire building as a residence when preparing the individual's income taxes. The personal income tax reporting rules may be illustrative in how to determine what is a personal residence and what is an investment property.