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The sections Peter refers to were added by SECURE 2.0 section 301, titled "Recovery of Retirement Plan Overpayments." The gist of this section is that plans do not generally have to seek recoupment of inadvertent overpayments. One of the exceptions however is that this does not entitle a plan to violate IRC 415. If the participant died in 2022, then presumably they had no compensation for 2023 and consequently their annual additions limit for 2023 would be zero. Thus any amounts allocated to their account for 2023 would violate 415 for 2023, and would not be eligible for the treatment afforded under 414(aa).

jsample, that's the tip of the iceberg. No one reconciled W2s to deferrals. No one reconciled match to deposits. No one noticed current contribution amounts to a deceased participant. The tax return for the business likely is messed up with invalid deductions. Where was the recordkeeper? the bookkeeper? the tax preparer?

You forgot the State of Denial, not to be confused with the one in the Egypt, the State of De Nile.

An employer/administrator might further interpret Internal Revenue Code § 414(v)(7) by observing that the statute assumes a participant’s wages for the preceding year is knowable. A self-employed individual’s self-employment income for a calendar year might not be determined until the business organization has completed its tax returns and related tax-information reports for that year, perhaps by September or October of the next year. If there are different possible interpretations of § 414(v)(7) (and I don’t admit that idea), a sensible interpreter might prefer an interpretation that is reasonable to administer.

The provision in the act specifies that a High Paid person is an individual whose 3121(a) wages in the prior year were over $145,000. That specific reference does not describe compensation earned by self-employed individuals such as sole proprietors and partners. Since the statute specified 3121(a) wages, it is not clear if the IRS has a path to extend the definition of High Paid to self-employed individuals without literally without an act of Congress.

Probably no issue unless you run into a BRF issue with respect to timing if HCEs got their 3% earlier than NHCEs. As long as everyone gets what they are supposed to in the end, you should be fine.

To be very nitpicky, the 415 limit is based on the calendar year limit in which the limitation year ends, right?

Not a lot of information to go on here. Perform the testing that should have been done. If everything passes, you shouldn't have to do anything (assuming all other disclosures, 5500's amendments, etc., etc. were done correctly). If there are errors, correct under EPCRS and/or specific document provisions, possibly taking into account the more "relaxed" standards potentially available under SECURE 2.0. I might also recommend you discuss with your supervisor/mentor - whoever. A lot depends upon specific results/problems. Good luck.

Luke Bailey is right that EBSA and IRS enforcement about ROBS transactions is almost none. In each of the unwinds I worked on, the participant and the corporation had already been advised that the prospect of government enforcement is zero. Rather, the businessperson’s motivator is an opportunity to use an unwind of a not conceded but arguable nonexempt prohibited transaction as a way to get ownership of the growing business out of the retirement plan and the law governing the retirement plan. It’s not about fearing the IRS; it’s about opening business-planning opportunities. This is for situations in which the startup is successful and the individual expects the business to grow. If the retirement plan holds the employer securities, carefully limit the scope of each provider’s services. That would be especially important for a registered (or not-required-to-be-registered) investment adviser. But remember, an agreement cannot rid a plan’s fiduciary of an ERISA § 405(a) co-fiduciary responsibility. A certified public accountant who provides nonaudit tax services should follow her professional standards, including the AICPA’s Statement on Standards for Tax Services. In my experience, some CPAs feel extra steps made necessary by employer securities in the retirement plan, even if those steps are only within the CPA firm, push the time on an engagement past the budget the firm assumed for the fixed fee quoted or estimated.

Read ERISA § 206(h), 29 U.S.C. § 1056(h) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1056%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1056)&f=treesort&edition=prelim&num=0&jumpTo=true Read Internal Revenue Code of 1986 (26 U.S.C.) § 414(aa) http://uscode.house.gov/view.xhtml?req=(title:26%20section:414%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section414)&f=treesort&edition=prelim&num=0&jumpTo=true One or more of the plan’s fiduciaries might want advice about: whether the failure was inadvertent; whether the participant’s survivor was culpable; whether some portion of the unprovided allocations was contrary to an IRC § 415 limit; and whether a loyal, prudent, and impartial fiduciary might make an informed and thoughtfully considered decision not to recoup some portion of the overpayment.

As long as the plan document allows it, why not?

Swimmingetc., I wouldn't place any reliance on an IRS compliance program for ROBS, one way or the other. As far as I can tell they never really figured out what they thought of these, at least those that were executed properly. What I mean by that is that even if the ROBS investments are made in the right sequence with the right documents and parties, there is a basic "conflict of interest" prohibited transaction issue that remains under IRC sec. 4975(c)(1)(E). But it seems like the IRS just decided not to go after that issue. You note that new employees are becoming eligible. Some ROBS companies take the position that if the company is not offering any more stock to sell to the plan, the new employees do not have to be able to have stock in their account, and that this is a corporate decision having nothing to do with the plan. IOW, the plan can't force the employer to sell it stock. The IRS notice that placed ROBS plans under scrutiny mentioned this issue but never took a stand on it, and as far as I know the IRS still has not. Just a guess, but I doubt they've been successful enough yet to take Peter's otherwise very sound advice. An alternative approach would be to make clear in your agreement that you are not advising on any aspect of a participant account's investment in employer stock, but only on investments in other publicly available assets.

Is that a question or a statement? FWIW, I believe the participant can choose any combination of Traditional or ROTH to satisfy the RMD requirement inside a Plan prior to 2024 as the Plan has the RMD requirement and there is no mention of individual sources having to independently satisfy the RMD requirements in the regulations. Just that after 2023, ROTH is excluded from the calculation. I'm not sure if it is address if a participant can take from the ROTH source to satisfy RMD after 2023 but my guess is that distributions from ROTH will no longer satisfy RMD requirements after 2023.

Lines c(9) through c(12) on Schedule are used to report the value of each type of DFE ( MTIA, CCT, PSA, or 103-12 IE) as of the beginning and ending of the plan year. A plan has to report on Schedule D if the plan had investments in a DFE at any time during the year. The implication is you cannot rely solely on having a zero beginning and ending balance on these lines to determine if the plan needs to file Schedule D. DFEs are supposed to provide reporting relief to plans. They do, unless they don't. The DOL publishes a user guide and notes: "Private pension plans participating in DFEs do not have to fully report investment amounts on the Schedule H if the DFE in which the plan is investing files a Form 5500 Annual Return/Report along with all required schedules. In that case, the participating plans need only complete Part I c(9) through c(12) describing the value of their interests in the DFEs. All MTIAs are required to file Form 5500, while CCTs, PSAs, and 103-12 IEs may choose to file in order to provide the investing pension plans the reporting relief described above. All DFEs that file the Form 5500 are required to file a Schedule H. Pension plans investing in filing DFEs are afforded reporting relief through decreased reporting on Schedules A, C, and H; however, they must file a Schedule D, outlining the specific investments in each filing DFE. Plans investing in DFEs will enter the value of their investment in all DFEs of a certain type (MTIAs, CCTs, PSAs, or 103-12 IEs) on the corresponding Schedule H line item." This is great except only MTIAs are required to file 5500s. The other types of DFEs can choose to file or not file a 5500. Most do, but some don't. The plan may be investing in a DFE that does not file a Schedule H. In this case, the plan has to apportion the funds assets into the other categories listed on the Schedule H. Not all a fun job. The investment fund is required to notify each plan each that invests in the fund whether the investment fund will file a 5500 as a DFE. If the plan sponsor did not save the notification, then the plan sponsor or financial advisor (or you if you are so inclined) can contact the fund and ask. The filings are public so there is no reason for a fund not to respond.

Swimming, you mention: “The [plan-owned] company so far has been quite successful[.]” If the participant who has employer securities allocated to her plan account believes the corporation’s business will continue to grow, she might prefer to own the corporation’s shares outside the plan so she can get capital-gains tax treatment for future growth. Likewise, she might prefer that ownership of the shares become unburdened by ERISA and other constraints that govern the retirement plan. The plan’s fiduciaries might prefer to unwind, before the beginning of the first plan year for which the plan’s administrator must engage an independent qualified public accountant to audit the plan’s financial statements and related reporting, anything an IQPA might view as possibly a nonexempt prohibited transaction. If you are, or your investment-adviser firm is, or might become a fiduciary regarding the retirement plan, you might prefer to steer clear of potential situations in which you might have a cofiduciary responsibility to remedy another fiduciary’s breach. ERISA § 405(a)(3), 29 U.S.C. § 1105(a)(3) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1105%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1105)&f=treesort&edition=prelim&num=0&jumpTo=true None of these observations is advice. I have substantial experience in unwinding ROBS transactions. If the ROBS-capitalized business is successful, a carefully designed unwind often improves the owner’s business planning and personal financial planning, including tax treatment.

When you have a Controlled Group or Affiliated Service Group, there is a sponsoring employer and adopting employer(s). The 5500 is prepared under the name of the Sponsoring Employer, and the filing is treated as a single employer filing, even though it may be covering more than one employer. This goes for EZs as well. If there are no common-law employees in either entity and the only employees are spouses or partners, you can file an EZ. Code 3H in the Characteristics codes identifies this as a Controlled Group or Affiliated Service Group. If combined assets are under $250K, there is no filing requirement.