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On what basis was vendor #2's deposit into the plan? They weren't reimbursing the plan for an expense it paid, partially or in total, because it was the employer that paid the expense. If the expense was paid by the plan and charged against accounts and then partially reimbursed, would that not have to be allocated back to participants? If the employer was reimbursing the plan for expenses the plan paid, and deducting as plan related administrative expenses then I think they would have to do that - they couldn't treat as contributions. Far be it from me to question a national vendor, but I didn't think that any plan-related party could just toss money into a plan and have it be used for whatever.

I wouldn't worry about a brief non-CG period. Also, Schedule SB is still used for multiple employer plans, you just need to do an SB for each employer. The MB is for multiemployer plans - a different animal. Very easy to force CG, put wife on husband's S-corp payroll, doesn't have to be material, she just needs to be an employee. I'm sure there are other easy ways as well, having husband somehow formally involved in wife's sole proprietorship. BUT - your administrative ease should not be the driving force (sorry) behind "to be (a CG) or not to be" question, it should be all the relevant issues/advantages/disadvantages with respect to their businesses and tax situations as discussed with their accountant (and attorney if necessary).

Anticipating that the Internal Revenue Service might fail to record the paper received from the US postal service, I often add “Form nnnn” on the green return-receipt card, to set up a little more evidence about what the IRS received. Do others use some method like this? If so, does a response that shows evidence of this kind help persuade the IRS that a notice is mistaken?

The new § 401(b)(2) opportunity (for plan years that begin after December 29, 2022) to make a § 401(k) cash-or-deferred election after the last day of the year to which the election would apply can be available only for the plan’s first plan year, only if the election is made by the person who owns the entirety of an unincorporated business, and only if she is the only employee (a deemed employee) of that unincorporated business. Otherwise, “a self-employed individual may not make a cash or deferred election with respect to compensation for a partnership or sole proprietorship taxable year after the last day of that year.” 26 C.F.R. § 1.401(k)-1(a)(6)(iii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-1#p-1.401(k)-1(a)(6)(iii). When such an elective contribution must or should be paid into the plan’s trust might be governed and influenced by other law. Other law might include ERISA or, for a plan ERISA does not govern, State law. And other law might include relevant tax law, including about tax returns and tax-information reporting.

We do full administration work mainly to track the different sources. This ensures we have the data to monitor when assets exceed $250,000.

What was his vested accrued benefit at 12/31/22? In the future, why not design a plan on the graded 100% upon completion of 3 years of service, and service is determined from the effective date of the plan.

Thank you for your input and confirmation, happy and healthy New Year and holidays

Correct. Yuck.

Hi Bill Thank you for the input which I assume is effective for 2024, correct? Assuming that we cannot force the CG issue, I am assuming we enter into the multiple employer arena, correct?

If they WANT to be a CG, have their atty use a method to make it happen. That can mean being involved in each other's business or using options, etc. You can force a CG.

Given the number of years and the number of participants affected by the failures, you should file a VCP. There are operational and document failures. After a closer look, you may find demographic failures, too. The DOL alone cannot address this range of issues including the document issues. The reporting of late deposits on 5500s is cumulative which means you add each year's late deposits to this year's late deposits and report them until they are fully corrected. Similarly, the 5330s are cumulative with each year added to the next year's 5330 until all the taxes are paid. Essentially, you pay each year's tax over and over again until there are no more late deposits associated with that year. Filing amended 5500s once this is cleaned up is a good idea to formally set the record straight. The 5500s are used by the agencies to identify plans with deficiencies so not amending them is inviting future agency reviews, audit or investigations. The amended returns supersede that prior filings. Note that when the plan files the VCP, the expectation is that the VCP will cover all deficiencies. Take time to look at employee census data for each year. You may find failures to implement deferral elections, missed deferral opportunities, ineligibles getting contributions, eligibles not getting contributions, unpaid benefits, unpaid RMDs, and more. The process not only will involve fixing participant accounts but will also communicating to the plan sponsor and to participants what is happening inside the plan. Be sure to prepare a service agreement documenting your fees to do this work, and include provisions for progress billing throughout the engagement. Plan remediation over a long period of time compounds the effort needed to get a plan in compliance.

This is such a great question that highlights the absurdity of the the RMD rules in that the answer is not immediately obvious. It also has the bonus of the the plan being adopted no only after the PYE but after a potential 4/1 RBD date! I really don't know what the answer to the question is but best guess is he would have an RMD for 2023 by 12/31 and future ones going forward. But the rules seem so opaque that no reasonable answer would surprise. @michael burkow, if this thread doesn't yield an answer and you find out elsewhere, please share your results here.

We treat these plans like any other - use our document, collect data, prepare a val, with or without tax return as needed. Yes there are some shortcuts - maybe a simple phone call to collect data, confirming no employees and income. We charge less than for a "regular" plan. But sometimes they are a timesuck because these are often people who think you can read their mind and can't be bothered to answer your data collection request. In theory, no "admin" is needed - just a simple doc and have the accountant calc the contribution and put it in, right? But we've seen accountants who think you can pay a salary of $100K to an S corp owner and max out (dollarwise) on contributions. And accountants who use their own software and don't know how 401(k) contributions work vs. profit sharing. Or we see here on the board where someone has been making Roth contributions and now wants to take a distribution but the money is all commingled and no one has been tracking it separately.

I think you need to provide more details. If you are talking about an employer prefunding an employer contribution before any allocation conditions are met, the DON'T DO IT. Period. If the funds experience a loss, who suffers? If the funds have an investment gain (even interest), is that an additional contribution when allocated? If there is money left over because too many people don't meet the allocation conditions, how do you account for the funds (and it clearly can't go back to the employer). As far as how the funds are invested, they are plan assets. I would say "prudently" but would reiterate - DON'T DO IT.

mal, your facts seem to indicated that the plan administrator is familiar with the terms of the divorce decree, but has not yet received a DRO. I think it is the estate's responsibility to understand the implications of the decedent's divorce decree to the decedent's estate, since the divorce decree and related property settlement is an asset of the estate. As I understand your question, the participant and his or her now deceased ex-spouse had a divorce action, and a court approved a property settlement that may contemplate a QDRO for the ex-spouse, but the plan has not yet received a DRO. Until the plan receives a DRO, you're just speculating. Perhaps the originally contemplated DRO contemplated a contingent alternate payee, e.g. a child or children of the couple. In that case, If the deceased putative alternate payee's attorney pursues a DRO, presumably that attorney would now simply make the person or persons who would have been the participant's ex-spouse's contingent alternate payee(s) the alternate payee(s). If a contingent alternate payee would not have made sense given the family's situation, then perhaps you will never get a DRO. This will be subject to state law and the demographics of the former couple's marriage. If the participant wants to oppose the issuance of a DRO now for a reason linked to his or her ex-spouse's death, it will be up to the participant's attorney to make a case that the DRO requested by the deceased alternate payee's attorney, or by an attorney for the ex-spouse's child or children, should not be approved by the court. If a DRO approved by the state court does ultimately come the plan's way, the plan will need to analyze it for ERISA compliance. Generally, if the alternate payee is a permitted person (e.g., a child, but there could be others) for a QDRO, you should be able to apply your normal QDRO process. There could be difficult issues if this is a DC plan and a separate interest QDRO was contemplated, since generally in that situation, had the alternate payee survived, he or she might have had the ability to name anyone he or she wanted as the beneficiary for her segregated account. I don't think there is much in the way of guidance or precedent for some of the potential situations, so again, I would let the parties first hash things out in state court.

mal: Assuming that the plan is an ERISA plan (and if a DC or DB plan makes a difference in various details), the plan might consider acknowledging that the plan has received a domestic relations order in accordance with its assumed appropriate QDRO procedures (because the divorce decree IS a DRO) and notify the parties that it has determined that the DRO does not meet the requirements for qualification. The notice should then explain what the plan will do next, based on its determination that the order is not qualified. Because I do not know what "your" plan does next after a negative determination, it is difficult to suggest what to do next within the plan's framework. However, as a matter of my interpretation of the law and preferred principles, the plan should explain that the benefit is "suspended" (I will leave what that means to the plan) for a reasonable time to allow the submission of a domestic relations order that purports to meet the requirements for qualification. That puts the former spouse (estate) in a position with reasonable time to capture whatever is actually available under 1) state law - and there may be nothing for the deceased former spouse, and 2) federal law - yes, posthumous QDROs are possible but the devil is in the details, especially under DB plans. And shame on the Department of Labor for its completely useless efforts to comply with the Congressional mandate to provide guidance concerning posthumous QDROs, especially for DB plans. When the new DRO is submitted, it will be evaluated, and then either qualified or not. Keep in mind at that point the qualification requirement that the plan cannot be required to provide an amount or benefit that the plan was not designed to provide. Honi soit qui mal y pense.

If a might-be domestic-relations order is submitted, a plan’s administrator might evaluate whether the order’s would-be payee is an alternate payee within the meaning of ERISA § 206(d)(3)(K). I am unaware of any Federal court precedent that holds for or against treating a deceased nonparticipant former spouse’s executor or similar personal representative as an alternate payee within the meaning of ERISA § 206(d)(3)(K).