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Here's the thing i suggest we all think about before using employment hours (ever, not just in the LTPT situation). If you have any significant number of participants (and I leave it to you to identify what is "significant" in your circumstances), you end up with needing hours for these employees all on different years. Not so hard to get in the first year, but if you had 20 employees and you had to follow their hours for two or three years of employment based on anniversary dates, it might be challenging to do. I imagine this is sensitive to the vagaries of a company's payroll system, but it's something to consider. And, then, you need compare the hassle of watching hours this way for a longer time to the hassle of enrolling a LTPT in the plan. What a Hobson's Choice!

Congratulations on gaining new business! Technically, the Plan Administrator should make the decision and the PA likely will ask for guidance. Generally, the plan wants to be consistent in its basis for reporting, can make the change. The plan can change to reporting on an accrual basis which usually is a good idea if the plan needs or soon will need an independent audit. The auditors have to report on an accrual basis. Sometimes, full accrual accounting can be challenging particularly when the financial information is not reported to the plan on an accrual basis. Keep in mind that there is a third alternative to cash or accrual accounting and that is modified cash accounting. Under modified cash accounting, typically the assets are reported on a cash basis, but items like contributions made after the close of the plan year or distributions checks were cashed after the closed of the plan year are reported on an accrual basis. If this is a calendar year plan, you have 11 days to get the filings done. You may want to consider using cash basis for 2022 if you have to rely on data from the prior service providers, and then make the switch to accrual or modified cash basis for next year's filings.

Read the plan document and the loan policy carefully to understand who is and who is not eligible to take out a new loan. It sounds like this individual is an active employee who is on the company's payroll, and the individual has an account balance which makes him a participant in the plan. Do the plan and policy say a union employee cannot have a loan? If yes, you likely would not be asking the question. Do the plan and policy say to take a loan an individual must be an active employee and must make repayments by payroll deduction? If yes, then this employee meets those criteria. Do the plan and policy say to take a loan and an individual must be an active participant (defined as they are eligible to make or receive contributions into the plan)? If yes, then this individual does not meet these criteria and cannot take a loan. Keep going until the path from the plan document and loan policy to the answer to your question is clear. How the participant happens to be coded in the plan records does not supersede the official plan documents.

If the spouse has no compensation, there is nothing to defer. If the spouse has not worked 1000 hours in an eligibility computation period, the spouse has not met the eligibility requirements. The owner must follow the plan provisions. If the owner wants to have more liberal eligibility, they can amend the plan and apply the new liberal eligibility to all employees.

Wow, what a needless over complicated provision for such a small amount. Couldn't they just say - If you have an emergency you can take up to $1,000. If you do so you can not do so again from the same plan for 3 years. All the extra stuff is just screaming to mess something up somewhere.

If you are the Plan Administrator and you have "qualified" the DRO, thereby making it a QDRO, then you should do nothing until you receive an Amended DRO from the Court. It is not your job as Plan Administrator to look behind the QDRO. See attached DoL Advisory Opinions. And it is not prudent or legal to take any actions not authorized by the QDRO based on the agreement of parties unless that agreement is set forth in an Amended QDRO. It might be possible for the court to order that the payments, if they are in pay status, be deposited into the Registry of the Court, or if your attorney is concerned he/she can file an Interpleader action asking the Court to rule on the dispute. But you haven't set forth the nature of the dispute or the possible dispute. It is not clear if you desire is to vacate the QDRO or to amend it. If you are going to vacate it, there is no reason to wait. Submit an appropriate Order by Consent ASAP and be done with it. Why would you want to "lock in" the benefit for any period of time. The QDRO is already "locked in" because you have Qualified it. The Plan Administrator needs to follow the terms of the QDRO until ordered otherwise. You need to be more detailed about the status of the case and the timeline. Has the divorce judgment been entered? Was the QDRO entered after the divorce judgment was entered? Had the Participant retired prior to the divorce, in which event ERISA would have required a QJSA and a QPSA and at the happening of the divorce that election would have been locked it and the validity of a separate interest allocation would be in doubt? If the Participant is in pay status and the Alternate Payee is not, or vice versa, who benefits are you freezing? If you plan to submit a shared interest QDRO, will that even be possible if the separate interest QDRO is in place or in place and in pay status to one or both of the parties. For what reason should it "never have been filed"? What exactly is the problem? You need to be specific. Is sounds like the Participant has buyer's remorse. And you need to be careful of matters that can occur unexpectedly and cause problems. Like the death of the Participant, or the Participant retiring and entering pay status if he not already in pay status, or the Participant terminating his employment but deferring retirement, or the Participant remarrying and then retiring at a time after the separate interest QDRO is vacated but before a new QDRO is submitted and approved, in which sequence of events the Participant's new spouse will vest in the survivor annuity benefit and the former spouse will be SOL. More details needed. Keep in mind that in all of these cases you have to deal with Federal laws and regulations, state law and regulations that are normally preempted by Federal law, the written or dictated and transcribed agreement of the parties if there is one, the divorce judgment or the divorce judgment incorporating and/or not merging the agreement of the parties, the QDRO and the Plan documents. Assume nothing. David Advisory Opinion 1992-17A - duty of Plan Admin.pdf Advisory Opinion 1999-13A _ U.S - Sham Divorces.pdf

A court’s order might be incorrect, or otherwise made under a mistake of fact or a mistake of law. But if a participant or other domestic-relations litigant thinks a court’s order is incorrect, one’s remedies are in the courts. An ERISA-governed retirement plan’s administrator does not evaluate whether a court’s order is fair to the participant, or fair to the would-be alternate payee. Rather, an administrator checks whether a writing submitted as a domestic-relations order seems to be a court’s order, and evaluates whether in form the order specifies a division that can be accomplished within the plan’s provisions (and states no command contrary to the plan’s provisions). A plan’s administrator might have some fiduciary responsibility to act prudently in deciding whether a submitted writing is or is not a QDRO. But that responsibility does not include considering whether a State or Tribal court’s proceeding was fair to that proceeding’s litigants.

I think so - I read it as though the participant has to "leave 1,000 behind remaining in the plan"

Counterpoint: As someone that has knowledge of a participant who had their ERISA-qualified retirement plan (improperly) attached to satisfy a money judgment via a ‘valid QDRO’ which was signed by a family court judge, I can attest as to *exactly* how something like this could happen, especially when the presumption of correctness dissuades the plan administrator from exercising their fiduciary duty with respect to the participant, including ignoring the very advice they received from this board. Biased family courts are a thing. Unethical attorneys are a thing. Fraud is a thing. The presumption of correctness that attaches to a signed court order allows them all to thrive.

Yeah, all the advice above. Just a hunch, Spidey-sense is tingling for ALL of the above commentators. Me too. It should for you as well. Something is not right.

All guidance I've seen simply requires reporting to be consistent from period to period. That shouldn’t preclude a (very) occasional change in method with good reason. That said, my question as an auditor would be why you want to introduce unnecessary complication? When I get a new plan audit on the modified cash basis, I am overjoyed to go with that. Accrual is an added hassle to reporting (and incurred time) that, really, no fiduciary I’ve ever met cares about as long as everything is correct. (I’m assuming by “cash” you already mean modified cash, which “utilizes the cash basis of accounting while carrying investments at fair value and recording investment income on the accrual basis. All other transactions are recorded on the cash basis.” True cash without investment valuation changes within a plan is too weird for me to visualize.) Plans can be audited on the modified cash basis.

I recommend this: Certified Plan Sponsor Professional It's a designation offered from the Plan Sponsor side of the industry.

If, for all or some employees, service is counted with equivalencies, an employee (or a deemed employee, such as a partner or member) who works only one time each month and does so in six months of a 12-month period would be credited with 1,140 hours. 29 C.F.R. § 2530.200b-3(e)(1)(iv) https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-3#p-2530.200b-3(e)(1)(iv).

We need to keep in mind that this is an 11(g) amendment adopted on 10/14/2022 after the close of the 2021 plan year and effective retroactively to 1/1/2021 = the beginning of the prior plan year. The OP says the amendment adds employees to the Plan that complete 1 year of service with no further clarification. The employee in question completed 1 year of service for the 2021 plan year. The fact that the employee terminated in the 2022 plan year on 3/1/2022 is not relevant with respect to the 2021 plan year. With an 11(g) amendment, we can pick and choose who gets to participate in the prior plan year and only need to add enough participants to pass coverage. The amendment could have specified additional criteria to restrict who was includable in 2021 but apparently did not do so. Unless there are more facts than have been presented such as the EBP's employee service history questions , this employee should have been included as participating in the 2021 plan year.

Just a few quick thoughts. Here's the first red flag for me! Did they have a TPA at any point prior to her involvement? Were any corrections ever made, to the defects she identified or to others? The fact that they froze the plan and then evidently did nothing else worries me. I don't know how the plan administrator or another fiduciary would explain the decision to freeze the plan (which is not a correction) to buy time to correct defects, then not take steps toward any substantive corrective action for several more years. Of course there may be more going on behind the scenes, but that's my initial reaction. I think your response to her is a good one. Find out what they want to do, then worry about how much of it is reasonable or even possible. In any case, neither "just leave it frozen" nor "terminate and hope nobody looks closely" are good options, as you know! My general sense is there is more going on with this plan than is visible to either of you at the moment. Digging in at the level required to prepare, say, a VCP filing is probably going to uncover more issues. The project could end up being considerably more involved if they'd like to keep the plan as a going concern; I think you'd need to make a strong case to the examiner that the significant operational defects have been addressed at the administrative/"process" level and that they won't be seeing a similar filing a few years from now for the same kinds of problems. Honestly, that issue is probably the least concerning part of the post to me! I'll give a "definite maybe" on this one. At a glance I think it could be fine depending on circumstances and documentation, assuming the loan satisfies the plan and IRS requirements aside from this question. There's some good, fairly recent discussion at: For what it's worth, I'd bet at least a dollar or two that this loan has other problems as well.

The nuance on the use of investment as an adjective to modify purposes easily can be argued, particularly if we consider it from point of view of the plan versus the point of view of the participant. From the point of view of the plan, it is an investment and is earning income (which you should reasonably ask what happens to that income). From the point of view of a participant, it is not an investment in the sense that the participant cannot elect to direct the investment of the participant's account into the interest-bearing account, but it could be considered if the participant receives some of the interest earned in that account. Sometimes its entertaining to contemplate our navels, or as a motivational speaker may say, engage in a thought exercise.

I suggest asking a simple question - Who owns the account that is holding the interest-bearing cash? If it is the Trustee of the plan, then it is an asset of the plan. Otherwise, it is not an asset of the plan.

Pending any future guidance to the contrary, I do not believe you can just count calendar years (or plan years) for determining LTPT eligibility. IRC 401(k)(15)(D)(ii) and ERISA 202(c)(4) (as added by SECURE 2.0 sec. 125) both indicate that the 12-month period used to determine LTPT eligibility is determined "in the same manner" as for standard eligibility, meaning the 12-month period commencing on the employee's date of hire, and presumably with the option to switch to the plan year only after the first 12-month period. What I would like to see document providers offer - and I don't know if anyone is planning on doing this yet - is the option to keep the anniversary date measurement period for purposes of determining LTPT eligibility, but switch to plan year for purposes of standard eligibility.

I would assume you count all service unless the LTPT rule are different than the regular eligibility rules. The minimum age just keeps out someone who otherwise would have met the service condition but does yet met the age condition.

Assuming that you have a right to look behind the factual basis for his loan request, check out "bridge loan". This is a loan that a borrower may take to enable him to close the transaction prior to the time he gets permanent financing or in this case a 401(k) loan.

Does the plan’s administrator have a written claims procedure? 29 C.F.R. § 2560.503-1(b) https://www.ecfr.gov/current/title-29/part-2560/section-2560.503-1#p-2560.503-1(b). If so, what does that procedure provide about whether a claim for a principal-residence loan requires evidence beyond the participant’s statements on the claim form? If the written procedure grants the administrator discretion about whether to require or excuse supporting evidence, what has the administrator done regarding similarly situated claimants? If the claims procedure calls for evidence beyond the claimant’s statement that the participant loan is used to buy the participant’s principal residence, consider these points from the Treasury department’s rule: “The tracing rules established under section 163(h)(3)(B) apply in determining whether a loan is treated as for the acquisition of a principal residence in order to qualify as a principal residence plan loan.” 26 C.F.R. § 1.72(p)-1/Q&A-7 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR807fc2326e73cb3/section-1.72(p)-1. I.R.C. (26 U.S.C.) § 163(h)(3)(B)(i): “The term ‘acquisition indebtedness’ means any indebtedness which— (I) is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, and (II) is secured by such residence. Such term also includes any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.” http://uscode.house.gov/view.xhtml?req=(title:26%20section:163%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section163)&f=treesort&edition=prelim&num=0&jumpTo=true. And back to the § 72(p) rule: “[A] loan from a qualified employer plan used to repay a loan from a third party will qualify as a principal residence plan loan if the plan loan qualifies as a principal residence plan loan without regard to the loan from the third party. (b) Example. The following example illustrates the rules in paragraph (a) of this Q&A–8 and is based upon the assumptions described in the introductory text of this section: Example. (i) On July 1, 2003, a participant requests a $50,000 plan loan to be repaid in level monthly installments over 15 years. On August 1, 2003, the participant acquires a principal residence and pays a portion of the purchase price with a $50,000 bank loan. On September 1, 2003, the plan loans $50,000 to the participant, which the participant uses to pay the bank loan. (ii) Because the plan loan satisfies the requirements to qualify as a principal residence plan loan (taking into account the tracing rules of section 163(h)(3)(B)), the plan loan qualifies for the exception in section 72(p)(2)(B)(ii). 26 C.F.R. § 1.72(p)-1/Q&A-8 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR807fc2326e73cb3/section-1.72(p)-1.

Maybe they want to do what one of my plans is doing - have a no-show job. The owner has his wife and kids on the payroll/getting W2s/maxing out their deferrals/getting employer contributions/and none of them work there. Ever. The wife is a stay at home and the kids have their own jobs. Nice work if you can find it.