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Not the way I see plans written. If you find the definition of the Year of Service the 12 month period is just the period you look to see if the person worked 1,000 hours. Here is an example: The term "Year of Service" means, with respect to any provision of the Plan in which service is determined by the Counting of Hours Method, a 12-consecutive month computation period during which an Employee is credited with at least a specified number of Hours of Service with the Employer.. So the 12 months is the period you ask did they work 1,000 hours. It doesn't require you to work all 12 of the months. It is a computation period as it says. I typically explain it to my clients this way: We just look to see if 1,000 hours was worked during that time frame we don't need them to work all 12 months. Check some of your client's documents and see if that isn't how it is defined.

Luke is asking the right questions here - specifically, I think, whether the closing agreement addressed minimum funding. If it said that the plan is not subject to the minimum funding standard, then that's all you need to tell the IRS to bug off. If it wasn't addressed, then I think you still have an argument, but you might have to convince them. IRC 6059(a) requires an actuarial report (i.e. schedule SB) for each plan to which section 412 applies. IRC 412(e)(1) says that section 412 applies to a plan which was qualified under section 401(a). If the closing agreement provided that the plan was not considered to be qualified under 401(a) for the year in question, then I think you can point to this to say that it was not subject to 412 and consequently not required to file a schedule SB. Hopefully you answered the question on the 5500 about whether the plan is subject to 412 (line 11 on the 5500-SF, or part II on the schedule R) as "no." If you indicated on the 5500 that the plan was subject to 412, that would explain why the IRS thinks you owe them a schedule SB. You might consider filing an amended 5500 in that case.

Most likely the answer is "yes". But read the base document if it is a prototype or volume submitter. I am willing to bet it tells you exactly how to work out when such a person comes into the plan. I don't really see a good path to keeping this person out but the document rules and if it is at all written well it tells you what happens to a person who met the eligibility requirement, termed and is rehired.

Part of the problem with your question is you don't say where the sinking fund is. Is the sinking fund on the company's books and a corporate asset(s) or is it inside the ESOP? If it is on the corporate books and their balance sheet the Qualified Plan rules don't apply. There can be corporate issues like is management running the business in a prudent manner..... But the ESOP gets no say and the ESOP rules get no say. If the sinking fund is in the ESOP than the rules for investing the funds is no different than any other qualified plan. It has to be prudent, for the exclusive benefit of the participants all those fiduciary obligations you have with a balance forward profit sharing plan or a DB pension plan. The one issue that is different is timing of payments. A DB plan knows some of its benefits wont' be paid for decades so buying a 30 year bond with some of the assets can make sense. If the ESOP knows it will need all the cash in the next 5 years is it prudent to be 100% stocks or crypto? I would tend to think that is too much volatility for that time frame. You go to ESOP conferences and you can get a pretty good debate over if an ESOP can stick to money market funds and maybe a little balanced fund since they are using some of the cash each year. I think you aren't find guidance because it doesn't exist. The rules here are the same as any other balance forward qualified plan . I would add if they are trying to out grow their repurchase obligation using crypto that could be questioned if the investment is for the exclusive benefit of the participants or is it in part for the benefit of the company. In a balance forward environment I don't see how you put something that volatile in the plan. Look at some years at how different the value at the prior 12/31 was compared to when they would be most likely be paying a person's cash balance out later in the year. It isn't too bad in a year like 2023 where it went up by a fair amount but in a 2022 where much of the crypto crashed late in the year could be sticking the remaining people with a lot of losses.

PensionPro, does the plan have a minimum funding deficiency? Did the closing agreement address funding? Is the plan covered by ERISA, i.e. by its terms covered someone other than a sole proprietor, partner, or sole owner of corporation, or their spouses?

Setting aside money for repurchase obligations or future contributions is a separate corporate financial matter and relates to corporate accounts. Because it is not an obligation related to the plan, or legally connected with the plan, ERISA and tax qualification rules do not apply, other than standard corporate tax rules having to do with accumulation and disposition of corporate assets. The ESOP’s interest is that of a corporate shareholder. The corporation and its Board of Directors have corporate fiduciary duties to shareholders with respect to operation of the corporation and management of corporate assets. Also, if the corporation is majority or 100% owned by the ESOP, those circumstances are considered in determining the corporate fiduciary to the ESOP as shareholder. Investing in crypto currency may be a breach of corporate fiduciary duty to shareholders — I have no views to share on that point. Your post implies at one point that it is an ESOP trustee that is funding or managing the sinking account for the sake of the ESOP. A sinking fund may be prudent for ESOP maintenance, but it is not a plan asset concern that would be the responsibility of a plan fiduciary. It is a corporate financing concern. The repurchase obligation is a corporate obligation.

We received a copy of the penalty notice from a client whose 8955 was FIREd on 6/26/2023. That's more than a month before the filing deadline (calendar year plan). Is this a harbinger of how the electronic 5558 filing is going to work? We just started receiving IRS letters admitting their 2021 5558 denials were incorrect, and now these 8955 letters start. Geez.

Put the match, adjusted for +/- earnings, into forfeiture and offset future match contributions until used up. Remove the unintended deferral, also adjusted for +/-, and refund to the employer as mistake of fact. The mistake was calculating the deferral as a positive amount. The fact is that it should have been zero. Not even a question, clear mistake of fact, not an ounce of discretionary consideration regarding the deferrals.

What about the ones that were not filed timely? There is no correction program for a late 8955-SSA. To my knowledge, the IRS has not systematically sent out penalties on late 8955-SSAs before. If this is something they are going to start doing, we need a correction program.

How is that 80% paid to her, via a W2 with taxes withheld or a 1099 as a contractor? Since grant is paid directly to the administrator, it might be self-employment income to her in which case she may be able to do her own retirement plan on that income. Who "owns" the grant, the individual or the school? If she leaves does the grant go with her or does it pay her replacement? It seems like she owns the grant, otherwise why wouldn't it be paid to the school which then uses to fund that 80% portion of her salary? Need to know which rabbit hole we're going down first before we can get to a useful answer - and not just my questions or Peter's, all of them.

I believe the answer is yes. Distribution of excess deferrals under 401(a)(30) and 1.402(g)-1 is one of the listed acts in rev. proc. 2018-58.

I think it's one of those things where, the year is deemed complete at the end of the 12 months, as long as the hours were hit. The 12 month period has elapsed, the 1000 hours were met. The document language will govern, of course, but I think that's usually how they're phrased.

SECURE 2.0 just increased the dollar limit that appears in the code. How a plan sponsor chooses to amend the plan is up to them, or maybe up to their preapproved document vendor. I haven't seen any amendments yet, but I can imagine a vendor providing an amendment that says the involuntary distribution limit is increased to $7,000 effective 1/1/2024 only if the plan's involuntary distribution limit was $5,000 as of 12/31/2023. In that case, your plan sponsor could either amend to $5,000 as of 12/31/2023 to take advantage of the vendor's amendment, or just operationally amend on their own to $7,000 as of 1/1/2024. Either way would get them to the same place as of 1/1/2024. Since the actual amendment isn't due until 2025, I think they would have plenty of time to figure out the paperwork.

Logically (if there is one), as long as the plan is active (as of disqualification date), shouldn't the SB be done, even if for a short year? Also, what is the harm doing one other than paying an actuary? Was this plan covered by PBGC? If yes, how is PBGC taking this? As Luke said, does the plan cover and non-substantial owners? If yes, what happens to their benefits? Thinking out loud.

Is the grantor a § 501(c)(3) charitable organization? Is the grantor a supporting organization of the school? Is the grantor a part of the same § 414(c) employer as the school? For example, the school and the grantor (if both are charities) might be one employer if there is enough overlap between their governing boards. Or, the school and the grantor might be one employer if they coordinate their activities and permissively aggregate. 26 C.F.R. § 1.414(c)-5 https://www.ecfr.gov/current/title-26/section-1.414(c)-5. If the grantor is not a part of the same employer as the school, is the grantor nonetheless a participating employer under the school’s § 403(b) plan? What are the plan’s governing documents’ provisions?

Before the administrator of the PEO’s pooled-employer plan or other multiple-employer plan adopts an interpretation that one counts the wages Internal Revenue Code § 414(v)(7) refers to without counting wages paid by the participant’s former employer that now is the PEO’s service recipient, the administrator might want a written legal opinion of expert employee-benefits counsel. For that advice, a mixed question of law and fact might be affected by the particular plan’s governing documents, including provisions other than those for which SECURE 2022 permits a years-later remedial amendment. Also, the PEO and the PEO plan’s administrator each might want its lawyer’s advice about whether a failure affects the tax treatment of the whole plan, or only a portion of the plan attributable to the service recipient that brought the problem.

$12,500. It's a letter ruling request under the jurisdiction of Employee Plans - see rev. proc. 2023-04 sec. 24.01 and the fee schedule in appendix A of the same procedure.

I'm sure his first regular paycheck was for his final time worked still as an ineligible employee, and that's still typically eligible compensation (lord help you if your document got cute there). Same concept applies, that the date of payment governs, rather than the date of service. Of course, if the bonus has been paid out to the participant, it's too late to defer from it.

He can do an EZ the year after the plan was still Title I. So if all the payouts done in 2023, then 2024 would be an EZ just for the one-participant plan.

Listen to Belgarath’s reasoning. Also, consider ERISA § 404(a)(1)(D)’s command to administer a plan according to the plan’s governing documents. If the plan’s documents provide a participant a right to take a distribution after severance from employment, one has a right (legally enforceable under ERISA § 502) to take the distribution the plan provides.

Without knowing all the intricate details of plan language, investments, procedures, etc., etc... In general terms, based on what you've said, I would allow the distributions. VCP approval could take a long time, and it isn't fair to these participants to suffer for an employer error. If you assume the IRS approves, and again, based on what you've said, I assume they will, then you are good anyway. If they don't approve, either you will have overpaid them what I assume will be an insignificant amount, or if the IRS says you have to deposit more for some reason, then you make an additional payment.