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Thanks all. This is something that would never come up in actual practice but arises when someone thinks that buying software is a replacement for knowledge. And the proposal software isn't doing the same testing as the compliance software so it's all a bit wacky.

If it's a direct rollover, then the taxable amount is clearly known - it would be zero. That said, there are other issues at play here. For one, I don't think your client has a qualified Roth contribution program at all. The statute under 402A(b)(2) is clear that separate accounting is required for the Roth portion of the employee's account. Second, since the distribution is bifurcated into Roth and non-Roth portions, you will need to know how much of the account is attributable to Roth and non-Roth contributions. This is true regardless of how the rollover is being done. If the non-Roth portion is being rolled over into a traditional IRA, then you need to know how much is being sent to that account. If the non-Roth portion is being rolled over into a Roth account, then you need to know the amount since it will be taxable in the year of the distribution (note that the taxable amount shown on the 1099-R would not be zero in this case, even though it is a direct rollover). Note that a Roth account in a qualified plan may only be rolled over to a Roth IRA or to a Roth account in another plan. It can not be rolled over into a traditional IRA. See the IRS rollover chart here: https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

I'm not sure I would be willing to prepare a 1099-R when I didn't know what to put on it. I think that devolves to either not doing it at all, or going back and figuring it out.

agreed - and you cannot do the 401(k) term/SIMPLE start-up in same year.

The requirement for the 60-day notice of intent to terminate is found under ERISA sec. 4041(a)(2). This section only applies to plans subject to Title IV, in other words, PBGC-covered DB plans.

A key employee began RMDs in 2021. We have the calculated RMD due 12/31/23. Before it was taken, the employee passed away. His spouse is his beneficiary. Is the spouse required to take the RMD by 12/31/23? Reading the document below, I interpret this to mean that an RMD is now not due by 12/31/23, but will be due in the year following, or in 2024 (12/31/24). Does this sound correct? Plus we would need to calculate a new RMD amount based on the spouse DOB compared to that of the deceased's DOB. Hoping to get a comment on whether others come to the same conclusion. Thank you Death On or After Date Distributions Begin. (i) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant's designated Beneficiary...

I mean the same langauge shows up for each code so I assume this is relatively simple to program for. For me the bigger problem is the SAR will now be two pages!

You still have a 2023 required RMD. Personally I'd pay it to the beneficiary and be done but other threads on this if you search this cite are of the opinion that it should be paid to the decedents estate since it was an RMD due the participant.

Santo Gold, you are still in the year of death. The decedent's RMD, or whatever portion of it has not been paid already, should be distributed to his beneficiary, not as beneficiary's RMD, but decedent's.

FTWillams has a 457(b) plan document under non-qualified plans.

I won't go into the could have should have scenarios as it wasn't your client at the time. What we have often done is have the Plan Administrator write a letter to the claimant saying that the letter from Social Security indicates that you may have a benefit due from the plan, not that you do indeed have a benefit due from the plan. Our records indicate that the plan had been terminated (add year) and all remaining benefits due were paid out at termination with no further benefits due. If you did not receive your benefit at that time, you likely elected to receive it earlier or it may have been involuntarily paid as mandated by the plan if it was a small account balance. We have no record of you having a current account in the plan and ask you to review our historical bank, IRA, brokerage and other financial records for your payment. Sometimes this is enough to jog their memory or otherwise make them go away satisfied that they did some time ago get their money. If not, then things can get tedious, trying to secure prior bank records, old 5500's and the like to figure out when the person might have been paid and chasing down the proof it was paid. Good luck, these are not fun to deal with.

TPA Advisor, There are regulations at Section 1.414(l)-1 that describe situations when the IRS considers that there is one plan or more than one plan for purposes of the requirements for mergers, consolidations or spinoffs of plans that also generally apply for purposes of Form 5500 filing and certain other purposes. Under the facts that you describe, It seems that there is one pool of plan assets under the XYZ plan for XYZ and A, B and C. Therefore, there is only officially a single plan, even if there are separate plan documents. If all the relevant provisions of the separate plan documents are identical or nearly so in terms of eligibility, vesting, types of contributions, etc., there should be a single plan for purposes of coverage and nondiscrimination testing as well as all other qualification requirements. I know that the DOL recently revised their regulations for purposes of the audit requirement on who is counted for purposes of the 100-participant minimum requirement for an audit to accompany the Form 5500. You should consult those rules to determine whether the DOL would consider the XYZ plan for all entities would constitute a single plan for purposes of the audit requirement. If you do not do so, you may be getting a letter from DOL suggesting that the plan is a single plan for this purpose and that you need to file a full-scale 5500 and include an auditor's report. If there is no issue of whether there is a single plan or four plans (meaning that you can treat the plans as separate for plan qualification and DOL purposes), then coverage and nondiscrimination testing would be conducted using the employees who are eligible under the plan being tested in the numerator and the total number of eligible employees in the controlled group in the denominator for ratio percentage testing under coverage. If the material provisions of the plan are identical or nearly so, then there should still be no issue with passing coverage testing (in fact, you can permissively aggregate the plans, if need be, to meet coverage). Things could get more dicey is one or more of the plans are safe harbor and one or more of the remaining plans require ADP/ACP testing, for nondiscrimination testing purposes. However, the bottom line is that you should focus on retaining competent counsel to determine whether there is a single plan or four plans based on the IRS regulations and the DOL's audit requirement regulations. It may be necessary to make corrective Form 5500 filings to correct any error or to consider a voluntary compliance filing under EPCRS to merge plans if you should have maintained a single plan based on these facts -- alternatively, you could propose to amend the plans retroactively to separate the assets of each "plan" based on the their actual operation. While you can sometimes do that on a self-correction basis, you should consult the IRS Notice that was released earlier this year to determine whether the IRS will allow you to self-correct for this or whether a voluntary compliance filing would be required.

We use FT William for 5500 software. They are excellent on this type of thing, and I am hopefully anticipating that they will develop programming to appropriately populate the SAR based on the 5500 information/codes that we input. I'd hate to have to mess around with figuring it out for myself!

The rule’s form [29 C.F.R. § 2520.104b-10(d)(3)] suggests a few clues: The instruction says the description should be “brief”. The form suggests that what follows “Your plan is a” might fit one sentence. The instruction directs that the description must include (i) whether the pension plan is a defined benefit plan or an individual-account plan, and (ii) whether the plan is a multiemployer plan, a single-employer plan, a pooled-employer plan, or a multiple-employer plan other than a pooled-employer plan. The instruction suggests the description should be logically consistent with the to-be-summarized report’s plan characteristic codes. The instruction does not say the description must include all information from all plan characteristic codes. (That’s good because one individual-account pension plan might have as many as 19 codes. Expressing all that information might be more than a “brief description” the Labor department envisioned.) Here’s one illustration (for a plan with a § 401(k) arrangement, but no nonelective or matching contribution): Your plan is a single-employer individual-account retirement plan that requires participant-directed investment. That sentence meets required elements, and adds an extra fact that can be logically consistent with a few plan characteristic codes. Or here’s another illustration: Your plan is a multiple-employer association retirement plan that provides an individual account for each participant or beneficiary. BenefitsLink neighbors might have many more ideas. And I would not be surprised if software logic and constraints result in a description that chops phrases and sentences, and omits information that’s not strictly necessary.

Thanks for the cite.

It sounds like the software is not picking up that this is SH only and deemed to pass TH. In some systems, you have to indicate it is deemed to pass TH to prevent it from going into the THM calc.

kimso, you did not indicate in your question what type of qualified plan was involved. If a defined benefit plan, then the Private Letter Ruling cited by EBECatty would be applicable, (disregarding for this purpose, that private letter rulings only bind the IRS And the requesting party and cannot be cited as precedent) even after its amendment by SECURE 1.0 (which allows for in-service withdrawals after age 59 1/2 and as amended by SECURE 2.0 (which allows certain distributions after attaining age 55 (if a service requirement is also satisfied)). If this is a 401(k) plan, Code Section 401(k)(2)(B)(i)(I) prohibits distributions of the participant's account balance prior to the occurrence of certain events, including severance from employment. Under the facts you have outlined, whether a severance from employment has occurred is a question of fact, and, in all likelihood, the answer would be No. By making a distribution to the participant at the time it did, the plan has an operational compliance issue and risks disqualification. Had the distribution occurred prior to the time of his rehire, then it would have been permissible and there would have been no compliance issue, even if he resumed employment. One other issue is whether the participant has resumed participation in the plan following his reemployment.

If the participant had incorrect deferral amounts withheld, I would suggest the employer make the participant whole on their next paycheck. Paying them the amount that should not have been withheld. And also leave the excess in the participant's account. At that point the excess is an employer contribution (not a deferral), which hopefully would be allowed. If it isn't (because it exceeds something like the 415 limit, or doesn't comply with the plan's contribution formula), well then I would look to EPCRS to see what is allowed, such as the de minimis rule you mention.

If you already filed, the IRS "should" figure it out and would send the same basic letter again. I had a client with the same issue - we had just finished processing his 2022 returns for signature when he got the notification that they'd assigned his new EIN, since his 2021 returns had his SSN listed as the EIN improperly. For this guy, we prepped amended returns for 2022 to show the new EIN on line 4. (Figuring, that won't cause the same IRS letter to pop up a year from now. I don't know if them getting 2 straight years with the wrong EIN would escalate their correspondence to "cut it out, stop filing with the wrong one.")

The main issues I see here are: The ERISA plan precedent; and Stop-loss coverage. As you noted, the stop-loss piece is as simple as ensuring this approach won't jeopardize the plan's stop-loss coverage for this individual. They should get written approval from the stop-loss provider to confirm. As to the precedent, ERISA requires that employers administer and maintain the plan pursuant to its written terms. Within this framework, employers should not make “exceptions” to act contrary to plan terms because doing so could be a breach of fiduciary duty. Rather, employers can exercise their discretionary authority to interpret plan terms when making a plan benefit determination. Employers that approve coverage in these situations have therefore interpreted the plan’s terms to be flexible enough to accommodate coverage for the benefit at issue. An employer’s broad interpretation of the plan’s terms beyond the standard denotation to permit coverage effectively acts in the same manner as a plan amendment because the employer must then apply that approach consistently for all similarly situated employees. In other words, a health plan benefit “exception” to approve coverage for a benefit creates an ERISA plan precedent requiring the plan to offer coverage for all employees and dependents in similar circumstances. An employee or dependent denied benefits in similar circumstances (e.g., the same type of out-of-network claim) would have a potential claim for ERISA breach of fiduciary duty or claim for benefits. How broadly or narrowly the precedent applies in practice is a matter of interpretation based on the specific facts and circumstances of the exception. Employers should keep in mind that an aggressive argument as to the narrowness of the precedent’s scope could always be challenged by the DOL or a participant lawsuit if it were unreasonable. I think they would be in a good position here to take the position that this interpretation to permit OON Rx coverage at the in-network rate applies only in the context of a drug shortage in-network. In other words, that this precedent wouldn't extend beyond that relatively limited scenario. But they might consider actually amending the plan to specify this type of OON coverage for all participants (i.e., where there's an in-network shortage) for avoidance of doubt. I've written about this issue more here if you're interested: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-ix

You don't need a 60 day notice, just 30 days for a SH plan and no time frame for a non-safe harbor plan but we try to do 15 days at least. You will need to give notice for starting the SIMPLE. At this point, I would terminate the 401(k) 12/31/2023, pay it out in 2024 and start the SIMPLE 1/1/2024.

I would not allow a distribution after rehire in 2022 under the circumstances you described. I interpret the circumstances to be that he is expected to continue employment, although on again, off again. If there were not an expectation that he would be working again, maybe. Better yet that there be a solid expectation that he would not be working again. I would still worry about stated intent and expectation compared to the contrary inference from the pattern of working.

"In addition, although there is currently some ambiguity around when this becomes effective, you will (eventually) be able to adopt an amendment retroactively to fix this under 401(b)(3) (as added by SECURE 2.0 sec. 316) without the additional restrictions of -11(g)." I do not think we know yet if this is applicable for an amendment adopted in 2024 and it is retro for 2023. At ASPPA this was still an open item, last I remember (I may be wrong in remembering). It is definitely valid for an amendment adopted in 2025 retro to 2024. 11-g will be a thing of the past. Still waiting on regulations though and see how restrictive this amendment is going to be, if any. To avoid any issues, as Corey suggested, fix it in during 2023 and be done with especially if you have any NHCEs where 11-g is not going to pass if you only provide it to HCE. Another point, if you wait till 2024 to have an 11-g amendment (assuming you cannot retroactively amend as per above) and the document has an automatic fail safe language (no document should have this IMHO), you may have issues depending on how it is written.

A corrective amendment under 1.401(a)(26)-7(c) is subject to the same requirements as a corrective amendment under 1.401(a)(4)-11(g)—in particular, the amendment must satisfy coverage and nondiscrimination testing on its own. If the individual(s) you are looking to bring in to the plan under the amendment is/are HCE, and the employer has any non-excludable non-HCEs, the amendment would not be allowed. The same is true if you are looking to satisfy the meaningful benefit portion of the test by increasing an HCE who is already benefiting at a lower level—you could not increase them on their own without also benefiting some non-HCEs. Note this is only true for a corrective amendment adopted after the end of the year. Assuming a calendar year plan, it is currently too late to fix under -7(c) for 2022, but if you are looking at 2023, then you could expand the group of participating employees in any way you like before the end of the year without the additional restrictions of -11(g). In addition, although there is currently some ambiguity around when this becomes effective, you will (eventually) be able to adopt an amendment retroactively to fix this under 401(b)(3) (as added by SECURE 2.0 sec. 316) without the additional restrictions of -11(g). One last thing—does your plan document include a 401(a)(26) fail-safe? If so, follow its terms before you start looking at corrective amendments.

Per Bill's response, 1.401(k)-3(e)(4)(i) requires, among other things, advance notice when terminating a safe-harbor plan mid-year. Note that this is purely a safe-harbor rule that must be met in order to retain the safe harbor during the short plan year in which the plan terminates; it's not an across-the-board 401(k) rule. Conversely, 1.401(k)-3(e)(4)(ii) allows a safe-harbor plan to be terminated mid-year in connection with a corporate transaction without adding the notice rule. It doesn't say that notice doesn't have to be provided; it just says the plan can be terminated mid-year (keeping the safe harbor) in connection with a corporate transaction. The notice of intent to terminate rules copied above address DB plans, but the IRS website doesn't seem to get into that level of detail.

When a plan is being terminated due to a sale, there is no requirement for a 30 day notice. I'm pretty sure it's covered in 1.401(k)-3(e)(4) but didn't have time to look and make sure that's the right cite. But it's for a 410(b)(6)(c) transaction.

A QDRO distribution now (if the plan provides it without waiting for an earliest retirement age) might meet your client’s need for money. That might be so if “about 90%” of the QDRO distribution is allocable to Roth amounts and the conditions for a Roth-qualified distribution are met. About Federal income tax generally: Even if a court order commands or an alternate payee requests an immediate distribution, a plan’s administrator first divides a participant’s account into the participant’s and the alternate payee’s separate portions, and sets up a segregated account for the alternate payee. Unless the court order specifies otherwise (and calls for nothing contrary to the plan), a division should result in the alternate payee’s segregated account getting Roth and non-Roth amounts in proportion to the participant’s before-division account. See 26 C.F.R. § 1.402A-1/Q&A-9(b) (“When the separate account is established for an alternate payee . . . , each separate account [the participant’s and the alternate payee’s] must receive a proportionate amount attributable to investment in the contract.”). See also I.R.C. (26 U.S.C.) § 72(m)(10). If an alternate payee is or was the participant’s spouse, such an alternate payee is treated as the distributee of a distribution paid or delivered from the alternate payee’s segregated account. I.R.C. (26 U.S.C.) § 402(e)(1)(A). A distribution allocable to non-Roth amounts likely is ordinary income. A distribution allocable to Roth amounts might be a qualified distribution not counted in income. I.R.C. (26 U.S.C.) §§ 402(d), 408A(d)(2)(A). (Your description of the assumed facts does not say whether the participant completed a five-taxable-year period of participation in the designated Roth account, and does not say whether the participant is dead, disabled, or reached age 59½. See https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts.) About the too-early tax: “Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1))” is an exception from the extra 10% too-early income tax that otherwise might apply to a distribution before a distributee’s age 59½. I.R.C. (26 U.S.C.) § 72(t)(2)(C). About a payer’s withholding toward Federal income tax: Whatever the withholding rate or instruction, a payer applies it to the portion of the distribution counted in income. “[A] designated distribution does not include any portion of a distribution which it is reasonable to believe is not includible in the gross income of the payee.” 26 C.F.R. § 35.3405-1T/Q&A-2(a) Hyperlinks to sources: Statute: I.R.C. (26 U.S.C.) § 72 http://uscode.house.gov/view.xhtml?req=(title:26%20section:72%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section72)&f=treesort&edition=prelim&num=0&jumpTo=true. I.R.C. (26 U.S.C.) § 402 http://uscode.house.gov/view.xhtml?req=(title:26%20section:402%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section402)&f=treesort&edition=prelim&num=0&jumpTo=true. I.R.C. (26 U.S.C.) § 402A http://uscode.house.gov/view.xhtml?req=(title:26%20section:402A%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section402A)&f=treesort&edition=prelim&num=0&jumpTo=true. I.R.C. (26 U.S.C.) § 408A http://uscode.house.gov/view.xhtml?req=(title:26%20section:408A%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section408A)&f=treesort&edition=prelim&num=0&jumpTo=true. Executive agency rules: 26 C.F.R. § 1.402A-1/Q&A-9(b) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.402A-1. 26 C.F.R. § 35.3405-1T/Q&A-2(a) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-35/section-35.3405-1T. Caution: Nothing here is advice to your client, or to you.